Lenders reduce loan amounts in ’soft’ markets
October 23rd, 2007, 1:31 pm · 7 Comments · posted by Mathew Padilla, Reporter
Since the credit crunch worsened in summer, dealing a blow to an already wobbly housing market, lenders have been cutting back on the total amount they will loan against the value of a home in certain soft markets, which in at least one case includes Orange County.
Tom Kelly, a spokesman for Chase Mortgage, a unit of J.P. Morgan Chase, told me the bank in August reduced to 90% the maximum it will lend against a home in California, including Orange County. It previously allowed up to 100%, if a borrower had good credit and got a straightforward loan.
“Our goal really is to try to help the homeowner avoid owning more than the home is worth,” he said.
Kelly said it’s the first time Chase has done a state-by-state look at housing markets and set policy based on the outcome. He said Chase’s 90% rule also applies to Arizona, Colorado, Florida, Michigan, New Jersey and New York. Chase will only lend 85% in Nevada; it will lend 100% in Texas and Washington; and 95% in the rest of the U.S.
I plan to write an article on how Chase and other lenders are treating Orange County, but for now the Wall Street Journal has a good national story on the topic. This isn’t exactly new news, but the Journal has done a good job in aggregating banking policies.
Here’s more from the Journal:
Citigroup this month cut the maximum amount certain borrowers in “depreciating” markets can finance through a mortgage and home-equity loan. The change applies to borrowers in seven states — including Arizona, California and Florida — who are buying a home or pulling cash out when they refinance. In most of these markets, Citi is reducing maximum financing to 85% of the home’s value. Citi is also reducing by five percentage points the maximum loan-to-value ratio in more than 80 counties in 14 states and the District of Columbia.
“We routinely review our criteria and make adjustments as appropriate according to market conditions,” a Citi spokesman says.
Wells Fargo, meanwhile, has expanded a program begun earlier this year that tightened standards in certain “declining” markets. Wells has reduced the maximum amount it will finance by 10 percentage points in markets the company has identified as “distressed.” The list includes more than 50 counties in seven states, including parts of California, Florida and Michigan. It also cut by five points maximum financing in more than 125 other counties in a total of 22 states and the District of Columbia. A spokesman says the company is monitoring credit conditions on a “day to day” basis.
In other cases, lenders are giving appraisals closer scrutiny. Bank of America Corp. says it is asking for more detailed appraisals in markets with falling prices. In many cases, appraisers are being told to drive by the property to get a better estimate of its value instead of just running information about the home through a computer model.
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October 23rd, 2007 at 2:46 pm
I am a 2nd year Law School student who had friends in this shady industry. My ex roommate was a mortgage officer. I am very glad all of this is going on. It is about time all you “mortgage professionals” go out and get real jobs. Oh wait, a majority of you are uneducated phone hustlers who will end up working as telemarketers or go back to Personal Training, sorry.
If I was the owner of Tentations I would be very nervous right now because bottle service is going to suffer due to the fact that 30 dudes named Ali cant afford to drop 3 g’s on bottle service anymore.
Many people are losing their homes due to your predatory practices. True, it takes 2 to make a loan work, but many people didn’t know what they were getting themselves into and only saw a $500/month payment (i.e. Neg Am Loans). I am studying cases of predatory lending and it surprises me how many of you can sleep at night knowing what you have done. But it is ok though, many of you are finding yourselves in similar situations with foreclosures, being in debt to the max, and no more easy 20k paychecks. Karma is sucks, doesn’t it? Keep your heads up because the job market is booming right now…oh wait, no it isn’t. Sorry : )
October 24th, 2007 at 12:35 am
Hey kenny Cudworth,
Government intervention is in full swing. Your tax dollars recently bought 15 billion dollars in defunct loans from Countrywide Criminals and Home Loans. Also, in case you missed it, Ben Bernanke and his merry band of money printing Republicans are devaluing the US Dollar faster than anytime in the history of our Country. Makes business look profitable in the real short term, but very detrimental to the consumer and middle class. In other words, you just got a massive pay cut to help bailout people who obtained loans they could not afford.
October 24th, 2007 at 11:25 am
To Ken: You are a hypocritical self righteous law STUDENT. History says your ex mtg officer has a better chance of getting another job in the industry than you do of finishing your second year of law school. And you are going to law school at some second rate OC diploma mill that probably is as accredited as your ex roomies mtg licensing. Just because you were inspired by the George Clooney lawyer movie this weekend does not mean your legal career will lead you to write constitutional amendments or civil rights proclamations. In fact, you will likely spend your days (if you graduate) proffering divorce and child custody cases. Maybe Ali from Tentation , who you are so jealous of (because he parties while you study legal precedent and rack up 100k in debt from some discredited law school) will hire you when he leaves his wife for the hot processor in his next mortgage office. You jerk!
October 24th, 2007 at 4:29 pm
Hey Ali……………. Oh I mean wholesale AE. If you leave your wife for anything you might as well send some alimony checks, paternal support and half your house with it.
But since you have no morals in home lending I guess I shouldn’t be surprised you would also cheat on your wife.
October 24th, 2007 at 4:55 pm
Wholesale AE = unemployed Mortgage broker