Gov. Wants To Pull Countrywide's License To Write Loans In Washington
POSTED: 8:50 am PDT June 25, 2008
UPDATED: 12:28 pm PDT June 25, 2008
SEATTLE — Gov. Chris Gregoire says she's asking the state to pull the license of Countrywide Home Loans to write loans in Washington and that investigators found evidence of "predatory practices" aimed at minorities.
The governor spoke at a news conference Wednesday at the Urban League of Metropolitan Seattle, revealing results of a an investigation into the nation's biggest and much embattled mortgage lender.
Earlier Wednesday, the states of California and Illinois filed lawsuits against Countrywide. The Illinois attorney general's office claims Countrywide misled borrowers.
Gregoire's office alleges that Countrywide targeted Washington's minority communities.
Shareholders from California-based Countrywide on Wednesday approved a takeover by Bank of America.
NEW MORTGAGE GUIDELINES ISSUED ON JUNE 1, 2008
With home values decreasing and foreclosure and losses on the rise, Fannie Mae has released a new set of guidelines for their Automatic Underwriting System (AUS) on June 1. The new Fannie Mae Version 7.0 Desktop Underwriting has stricter guidelines. Fannie Mae is really tightening up on the higher Loan-to-Value loans and lower credit score clients. If you have a client that may have been pre-approved a while back, it may be worthwhile to get an updated pre-approval if they fall in these categories. Below is a list of some of the changes:
Loan to values greater than 85%.
Private mortgage insurance is no longer considered a “mitigating” factor for higher loan to values. The more equity in the property, the more Fannie Mae smiles upon you (this is a not a change, the pmi factor is). Higher LTV loans will have a higher risk and will more than likely be approved as an expanded approval loan. Expanded Approval is being pumped up. Fannie Mae is anticipating more EA approvals. An EA approval means that the borrower’s scenario is “less than perfect” or some prefer to say “A Minus”. There are different levels of EA approvals (such as EA-1, EA-2, etc.). Expanded approval also come with higher rates than a typical conventional mortgage as it’s risk based pricing.
“Authorized Users” on credit cards will no longer be considered.
It was not uncommon for parents to add their child to their credit accounts as an “authorized user”. This may have been done so that the child could have credit available in the event of an emergency (picture a college student away from home). Once people figured out that the timely payments made by the parent (or credit payer) was benefiting the “authorized user”, it didn’t take long for some people to actually sell their credit history on that account by allowing strangers to become “authorized users”.
Debt to income ratios tighter.
“In general, the updates to the maximum allowable total expense ration in DU (Desktop Underwriter aka Fannie Mae) Version 7.0 will be more conservative…”
Loan Type/Level of Risk.
With Version 7.0, Fannie Mae is associating levels of risk with various products (from lowest to highest):
- Fully amortized fixed rate mortgages
- Fully amortized 5, 7 and 10 year ARMs
- 6 month, 1 and 3 year ARMs and Fixed Rate Interest Only Mortgages
- Interest Only ARMs and balloon mortgages
Version 5.7 viewed fully amortized fixed rate, fixed period (3-10 year) ARMs as having the least amount of risk with balloon and interest only mortgages having moderate additional risk. Negative amortized mortgages were considered the riskiest…now they’re off the charts.
Condos are now considered a higher risk than single family detached.
Version 7.0 views one-unit properties that are not “attached condominiums” as less risk than attached condominiums and two-unit properties. Three- and four-unit properties have a higher level of risk associated than condo and duplex properties. Higher risk may mean a higher rate and tougher guidelines.
Bankruptcy, mortgage delinquencies and foreclosures.
A bankruptcy needs to be fully discharged and 24 months since the date filed.
If a borrowers credit report shows a mortgage that was reported 60 or more days delinquent in the last 6 months, they will receive a “refer”.
If the borrower has had a foreclosure reported within the last 5 years, they will also receive a “refer”. If the date of the foreclosure cannot be determined, if the foreclosure was filed within the last five years and has not been satisfied, the loan will be declined.
Self-employed borrowers will no longer be considered “an additional layer of risk”!
This is a positive change and will make it easier to self employed borrowers to obtain financing
