Many distress homeowners tell me that they are hoping to refinance their way out of their adjustable rate mortgages. USA Today reported this weekend that lenders are already raising the bar for prospective borrowers. In other words, it is not nearly as easy to refinance as people may need it to be.
To stem their losses, lenders nationwide are notifying mortgage brokers to cancel loan programs. Many of them are:
•Reducing loans for 100% of the purchase price.
•Reducing the number of “piggyback” loans, whereby a lender makes one loan for 80% of the purchase price and a second loan for the remaining 20% of the price at a higher interest rate.
•Raising the required credit score.
•Requiring more documentation of a borrower’s income and scrutinizing the appraisal and comparable-home sales data.
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None of this bodes well for distressed homeowners.
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