The Challenges Facing Today’s Mortgage
Market
Presented by Lori Stillwell
Presentation Overview
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Yesterday
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Today
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Qualification Changes
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“New” Products
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Relocation Policy and Procedure
Yesterday…
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Strong appetite for investors to buy mortgage
backed securities
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Low down payments
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Low credit score options
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Limited documentation; even on high balance loans
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Speculators: Lenders and consumers jumped into
the real estate market
Today…
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Private securities still not selling; investors continue to consider (this makes
conventional jumbo loans difficult to originate)
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Significantly tightened underwriting standards
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Transactions more complex for lenders and consumers
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Government business consists of 13% (YTD 2008) vs. 3% (2007) of
originations in overall mortgage market
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New FHA guidelines as well as Freddie & Fannie Conforming loan limits
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Mortgage companies and brokers continue to exit the market
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Lenders working with consumers to avoid foreclosure
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Increased loss on sale; reluctance to move
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Great market for first time home buyers
Qualification Changes
General Tightening of Underwriting
Guidelines
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Increased minimum FICO Score
Increased down payment requirements
Increased documentation requirements
Enhanced Appraisal Review
What is “new”…again?
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Fixed Rate Products
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FHA Financing – increased loan limits

Fannie Mae/Freddie Mac – conforming
loan limit increases
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VA Financing

Private Mortgage Insurance (PMI)
FHA Financing
increased loan limits

FHA created in 1934 – became part of HUD in 1965
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Go to www.hud.gov for more information on FHA

FHA often viewed as a first time homeowner program – it’s more than that!

FHA loan limit increases available through 12/31/2008
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$271,050 - $729,750 – varies based on location (higher for multi-unit dwellings)
Lenders acceptance will vary and will likely overlay their policies into FHA guidelines

FHA now a solid alternative to subprime

FHA still allows low down payment options

Down Payment can be gifted from family, government source or a non-profit
agency

Lenders are beginning to leverage FHA flexibility in order to serve customer
needs

Currently, LTV is not impacted by declining markets
VA Loans
Home financing for: Active and previously active
military personnel Reservists & Surviving spouses
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Certificate of eligibility required for each customer
100% financing available
VA funding fee can be rolled into the mortgage
VA funding fee waived for disabled veteran
VA appraisal requires an in-depth property inspection with
work orders to be completed by the seller prior to closing
Expanded maximum loan amount to $417,000 ($625,500 in
designated high cost areas)
Seller concessions allowed up to 4% of the appraised value
PMI and
Lender Paid Mortgage Insurance

Required when customer’s down payment is less than 20%

Utilization dropped as a result of increase in blended loans (80-10-10,
etc.)
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Blended loan guidelines have tightened across industry
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Home equity has reduced due to declining property values resulting in
smaller down payments
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Borrower paid PMI
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Low upfront paid at closing = higher monthly PMI cost
High upfront paid at closing = lower monthly PMI cost
Moderate upfront paid at closing = moderate monthly PMI
Lender paid PMI – lender covers cost of PMI through increased
interest rate
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No upfront cost
Relocation Policy and Procedure

Tighten policy language around
reimbursement of VA funding fee

Tighten policy language around PMI
up-front fee reimbursement

Down Payment Assistance
 Wells
Fargo Recommendation: Consider
Corporate Second Guarantee Program
Overcoming Payment Challenges