Subprime Mortgage Lending – Expanded Guidance

Posted on Oct 7, 2011 in Mortgage News

Question by Matthew S: How long does it take a true no doc loan to close?
I am going to be applying for a True No Doc home loan this week. Getting approved won’t be a problem since I have a 760 credit score but I was wondering how long it will take this loan to go through assuming all title and appraisal work is accurate. Thank you for your answer. I want to close on this home quickly.

Best answer:

Answer by FakePlasticTrees
I’m wondering that myself actually. What lender are you using?

Give your answer to this question below!
Question by streetkings01: What if you are unemployed but are getting unemployment benefits and you want to refinance your FHA streamline?
Just curious. I am still employed, pills but my wife lost her job a year ago and has been collecting unemployment benefits. We have an FHA mortgage thru Chase and were looking into a streamline refinace, medical but since the guidlines have changed as of 2010…….would we still qualify?
@ Iffy – See thats the thing…….I keep reading different things.

According to one site it says – We need to show that you are employed and have income coming in. We dont need to do a full underwriting of your income.

I also spoke to a broker via email that told me the same thing. But I also read an article that said they have to verify that income is sufficient enough to pay mortgage.

My issue is this……..I have never been late on a payment in 2.2 years and my have has been unemployed going on 2 years…..that should be enough to let them know that we still are getting it done.

Best answer:

Answer by Iffy
Odds are no based on 1 income only.

What do you think? Answer below!
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by doug88888

Subprime Mortgage Lending – Expanded Guidance

In June 2007 the federal monetary regulatory agencies collectively issued a Statement on Subprime Mortgage Lending.  This statement contained references to an earlier document issued by the Comptroller Office’s for Currency, medicine the Board of Governors of the Federal Reserve Method, see the Federal Deposit Insurance coverage Corporation, order and the Office of Thrift Supervision.  The latter document, the 2001 Expanded Guidance for Subprime Lending, is advised unequivocally by the agencies as the defining document to which lenders really should turn to find the criteria for considering a borrower “subprime”.

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Even in the late 1990s, subprime lending was becoming a lot more and much more of a dilemma. The 2001 Expanded Guidance was an expansion of earlier statements about this issue. The agencies’ focus was the accountable use of subprime lending to assist subprime consumers to win back their credit ratings. Regaining lost credit would enable these folks to boost their monetary circumstances.  At the exact same time, the agencies stressed that lenders who presume a higher danger by lending to subprime people ought to also show proof of capability to sustain their duty of upholding the public’s trust in monetary matters.  It is the lender’s responsibility to assess most very carefully whether or not or not the borrower is probably to be capable to repay the debt incurred.  Painstaking effort is essential to produce strict guidelines of underwriting to assist in such assessment. Only when controls like this exist will each borrower and lender enjoy minimized danger of loss.

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This Expanded Guidance obviously defined for the initial time the criteria employed to choose whether or not a prospective borrower will be classified as “prime” or “subprime.”  It states that at least one of these troubles will characterize a borrower as subprime when the person applies for a loan:

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·  Reduced credit score

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·  Negative credit history, including

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·  collection accounts

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·  repossessions

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·  late payments of invoices

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·  bankruptcy

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·  debts that have been written off as uncollectable, referred to as “charge-offs”

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·  higher ratio of debt to income

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·  decreased capability to spend off the loan.

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Further, the document describes these attributes of the subprime borrower:

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·  has a Fair Isaac Corporation (FICO) credit score of less than 660

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·  has collection activity, liens, charge-offs, or judgments inside the previous two years

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·  within the previous year, has had two late payments

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·  within the previous two many years, has made a payment that was much more than 60 days late

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·  has a ratio of debt to revenue of at least 50%

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·  has declared bankruptcy in the previous 5 years

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·  has been assigned a score by an additional credit rating service that would equate to a FICO score of 660.

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All lenders use these specifications to determine subprime borrowers.  Bear in mind that even if you have a FICO score that is far better than 660, you will nevertheless be regarded a subprime borrower if you possess a single 1 of the attributes listed above.

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Expanded Guidance gives a clear definition of lending practices to be regarded as “predatory.” The companies in no way insinuate that predatory lending practices characterize all subprime lenders. In truth, it is their belief that positive aspects for the two the borrower and the lender come from making use of subprime loans that are administered properly.  Nonetheless, the public should be created aware that predatory lending practices do exist, and that borrowing at subprime could leave them vulnerable to this kind of practices.  In predatory lending, the exchange amongst borrower and lender is very unequal: the lender gets the borrower’s cash and the borrower gets not much of something!

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Most  predatory lending practices fall into 3 categories.

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·  Several vehicle loans and housing mortgages are created based mostly on assets pledged by the borrower as collateral, rather than on the borrower’s actual capacity to fulfill the debt.

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·  “Loan flipping” occurs when a lender coerces or talks a borrower into refinancing a mortgage, at no advantage to the homeowner, but at fantastic benefit to the lender, who could collect sizeable costs for the transaction.

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·  Failing to reveal to the borrower all the hidden charges and fees of a loan, and concealing details or delivering fraudulent information to the borrower.

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·  Quite usually, these practices are perpetrated on vulnerable borrowers, like the elderly, minority home owners, or reduced-earnings households. In a lot of circumstances, these men and women would in fact have qualified for a mortgage at prime rates but they are at a disadvantage since of their lack of expertise.

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If you are considering of borrowing at subprime for a mortgage, you ought to familiarize by yourself with the 2001 Expanded Guidance for Subprime Lending.  It is available on the World wide web, and is absolutely worthwhile reading. It laid a fine foundation for additional definition of the responsibilities of subprime lenders and the demands and rights of subprime borrowers.

Uncover the secrets behind Subprime Auto Lending and how Subprime Lending Crisis can affect you and your household when you visit number #1 internet sources on subprime mortgage lending crisis at http://www.subprimelendingcrisis.com.

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