A sub prime lender is one that will lend mortgage money to the unconventional borrower. The borrower with weak or no credit, income too low to truly carry the housing expense without suffering or has little or no money for a down payment on a home. In others words, someone who should not have a mortgage in the first placeOwnIt Mortgage Solutions (California) and Sebring Loans (Texas) have both closed their doors this week. They were two of the many sub prime lenders in mortgage industry. Both choosing to close due to the “unfavorable conditions in the industry”. In other words, business sucked! H and R Block is considering selling their mortgage lending subsidiary, Option One. They are closing a third of their branches and consolidating the California based company’s work force. This company has suffered due to higher rates and most importantly, higher default rates

     Although the word is not out yet, default rates are slowly increasing and foreclosures are on the rise According to RealtyTrac, a foreclosure online site out of Irvine, California, there has been a 25 percent increase in foreclosure activity in the last year. The site’s Foreclosure Market Report states the nearly 850,000 properties entered some state of foreclosure last year – up 25 percent from the previous year. This is going to cause a shake down in the industry and there will be much fall out of lenders and loan officers alike.

     My question is what happens to your loan if it is being processed or serviced by a lender that closes? If it is being processed by a sub-prime lender that closes, do not try to call them and see if your loan will be approved and closed. It will not. Do not believe the loan officer when he assures you he will take your loan and get it done somewhere else. He might, but is now busy looking for a job. You will get calls from five other lenders trying to convince you to do your loan with them. Please do not wait for someone to take action. Even if they promise and sound very convincing. Take charge of your loan and start shopping all over again. Make sure that you use someone who was referred to you. Ask your realtor, lawyer accountant and co workers for references. Keep copies of all documents you sent to your lender and ask for a copy of your loan application, credit report and appraisal (you are entitled by law for copies). If you ever run into a problem like this, you can hit the ground running and not miss too much time. Be mad, but ultimately you will wind up with something better than you would have before.