The changes to the mortgage industry during the last couple of years have created turmoil at all points of the value chain, from the borrower to the secondary investors to the global economy. These changes have included credit tightening and the disappearance of loan programs. Part of that credit tightening has focused on collateral located in real estate markets that have been identified as “Declining Markets”. This article provides some suggestions for originating in such markets.
First, if your Metropolitan Statistical Area (MSA) is considered a declining market, search out miniature stable markets and focus on those. In other words, look for pockets or neighborhoods where values are stable or increasing. Even though the surrounding MSA is considered a declining market, data from the appraiser stating that the home is not in a declining area may convince your lender to underwrite the loan outside of declining market guidelines.
Now, target borrowers located in those stable markets. Create and execute marketing campaigns for those borrowers. Examples of marketing campaigns include operating a lemonade stand at crowded parks, softball games, etc. Offer lemonade for a quarter in a big cup if the person does a 60-sec mortgage analysis with you. There is also telemarketing or direct mail.
Third, expand the type of loans you can provide. If you aren’t already able to provide FHA or VA loans, find a sponsor immediately and begin the process of becoming approved. FHA loans can be used for refinances, purchases, and cash out refinances. More expensive homes that were once ineligible for FHA loans are now eligible thanks to the temporarily expanded loan limits and the FHA high-balance loans.
Another good choice for more expensive homes is agency jumbo loans. These loans do not charge the mortgage insurance premium (MIP) found with FHA loans, can go up to 125% of the median housing value and allow a higher debt-to-income ratio than FHA loans.
Submitting appropriate appraisals can help your loans receive an “Accept” status with your lender. Be sure to submit appraisals and comparable that are recent, as these present less risk. For best results, submit two (2) Comparables dated within 90 days AND two (2) Active listings (pending sales).
Following these suggestions can help you be a successful mortgage broker in spite of current market conditions.
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