The Current condition of the Subprime Industry
The number one question I've been getting for the last 60 days is regarding the Subprime industry and how that is affecting my business. Much of my business is subprime, but most of my clients come to me early enough that I can help them raise their FICO score to a level that get's them out of the "subprime lending" category. It has definitely been scary watching some of the biggest subprime lenders, including New Century, Ameriquest/Argent, Fremont, etc. either file for bankruptcy or completely pull out of the lending business. The programs that are disappearing are the high loan to value, low FICO, programs. Especially the Stated Income high LTV, low FICO. Borrowers who are sitting at between 95% and 100% loan to value will have a difficult time refinancing if their FICO score is not over 680.
On the flip side, if a borrower has good credit, there are still some very good high LTV programs available. I have recently closed 100% purchase and refinance loans for clients with FICO scores in the 700's. Of course, the lower the FICO, the more equity in the property is needed to get the loan done, especially at a low interest rate.
The best course of action for somebody who is planning to refinance in the next few months is to run your credit and check the FICO scores from all 3 bureaus (Experian, Equifax, and Transunion). We use a service that can actually suggest corrections that should be made and then estimates the increase in the FICO score using a simulation model. Sometimes correcting 1 error can raise a score more than 60 points. That goes a long way in getting a better loan. Stay on top of your credit, and know your score.
Certified Mortgage Planning Specialist
On the flip side, if a borrower has good credit, there are still some very good high LTV programs available. I have recently closed 100% purchase and refinance loans for clients with FICO scores in the 700's. Of course, the lower the FICO, the more equity in the property is needed to get the loan done, especially at a low interest rate.
The best course of action for somebody who is planning to refinance in the next few months is to run your credit and check the FICO scores from all 3 bureaus (Experian, Equifax, and Transunion). We use a service that can actually suggest corrections that should be made and then estimates the increase in the FICO score using a simulation model. Sometimes correcting 1 error can raise a score more than 60 points. That goes a long way in getting a better loan. Stay on top of your credit, and know your score.
Certified Mortgage Planning Specialist
Comments