Are the new old loan products coming back again?

     So, I hear. A few lenders have lowered the fico score requirements back down to 620 (for a full doc loan) and have increased the CLTV to 95% starting next week (again, full doc).

     This makes me happy, because many of my clients want to do 5% down payments on purchases. I also have several people that need to refinance their mortgages, but have a little bit of equity there.

     I have a client, Brian S., whom we have refinanced numerous times to get him out of trouble and consolidate his debt. In June, he asked me to do it again. We run his credit and shocking there is an income tax lien on him; which lowers his score below 600. (This is something you should not do, especially if the tax is only $2,500 dollars and you make 400k a year!)

      Anyway, we make him pay it off, send over a sat to the credit bureau, get it removed, wait 60 days and rerun his credit. Oops!! Judgment against him from cablevision!! 180 bucks a month to watch NOTHING, when you should be working. Pay it off, wait 30 days rerun his credit on august 2nd. We get a 633 FICO score. BOOM! The mortgage world collapses and the fico score for 95% cltv pops up to 640. NO can do.

     So, instead of him refinancing and getting a rate in the low 6 percent range, we cannot even do the loan. I send that loan to five lenders and nobody can do the loan.

     Last week, I get an email from one of my sub prime lenders that they can now do CLTV loans at 95% again. I price it out and we get a rate of 9% (30 year fixed). OUCH! Another lender comes into my office yesterday, and he tells me that he will be able to do the loan next week at a rate in the low 7% range. I think we will wait a little longer, because I have a feeling that all the lenders will be coming back soon.

Maybe you should wait too.

– Dale Siegel