Mortgage Refinance Information Mortgage Refinance Information: The Best Articles, News & Resources
 
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Mortgage Lending "A through D"

by Martin Lukac

What was once a small segment of residential lending is now becoming one of the fastest growing areas in mortgage banking. Nearly every major institution is entering the non-traditional lending market. These lenders are providing loans to borrowers that do not meet the traditional credit criteria of secondary market investors such as the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC). Some issues preventing borrowers from meeting these criteria are bankruptcies, defaults, foreclosures and chronic late payments on credit obligations. This article will review the salient points of non- traditional mortgage lending.

Credit Grades. Non-traditional mortgage lending is categorized into credit grade categories based upon credit and capacity to repay the mortgage loan. Those categories are A-, B, C and D. The more serious the credit problems, the further the grade decreases. As the grade on loans decreases, lenders generally assess higher rates and fees.

Several factors contribute to the credit grade on non-traditional lending such as past consumer credit history and mortgage payment history. Generally, lenders review the credit history for the past 12- 24 months.

Income Ratios. Besides credit considerations, non-traditional lenders review the capacity of the borrowers to repay the mortgage obligation. Lenders calculate a ratio (debt ratio) using the total monthly debts and the total monthly income. For example if a borrower has a monthly income of $6,000 and a total monthly debt obligation (including housing expenses and other consumer debt) of $2,000, the debt ratio would be 33%. If a borrower has a low debt ratio, the grade will be higher. Conversely, if a borrower has a high debt ratio, the grade will be lower.

Income Documentation. Non-traditional lenders use three approaches in documenting a borrower's income: Full documentation, easy doc/simple doc and no income.

1. Full Documentation: Borrowers provide pay stubs, W-2s or federal tax returns for self-employed. Generally lenders require a two-year history to substantiate the borrower's income.

2. Easy Doc/Simple Doc: Borrowers provide bank statements to substantiate monthly income.

3. No Income: Lenders use the stated income from the loan application and the borrowers do not have to provide any documentation to substantiate the income. This type of loan is known as the "No Income Qualifier".

Lenders will assess a lower grade on loans when little or no documentation is provided to substantiate the borrower's income.

Loan-to-Value. Non-traditional lenders adjust the loan-to-value ratio as a method to reduce the risk of financial loss if a borrower defaults and there is a loan foreclosure. Most lenders believe borrowers with a low loan-to-value ratio have a lower probability of a foreclosure than a borrower with a high loan-to-value ratio. In cases where a borrower has a low credit grade and/or little income documentation, lenders may reduce the loan amount.

Loan Programs. There is little difference in the loan programs provided by traditional and non-traditional lenders. There are 30 and 15 year fixed mortgages, balloon mortgages, and Adjustable Rate Mortgages (ARM's). Non-traditional lenders assess higher rates and fees when there is a lower credit grade, a lack of income documentation or a high loan-to-value ratio.

Some industry experts believe one out of eight loans are non-traditional. As this market expands, competition in the non-traditional mortgage market will produce better rates, loan programs and terms.


About the Author

#1 Loans USA (1LoansUSA.com) offers variety of mortgage information. Mortgage rates for any loan program from various lenders, mortgage rate predictions, bond rates, CD rates and more.



::: Mortgage Refinance Information News :::

Mortgage Refinance Information - Google News
Mortgage Refinance Information - Google News
Mortgage Refinance Information - Google News

We Need Fundamental Mortgage Reform - Wall Street Journal
7 Sep 2008 at 10:00pm

ABC News

We Need Fundamental Mortgage Reform
Wall Street Journal - 9 hours ago
Even though the essence of a mortgage refinance is simply to reduce the mortgage interest rate, that can be accomplishe...



The Homeowners Consumer Center Announces A Win-Win Honest Mortgage ... - PR W...
8 Sep 2008 at 1:06am

The Homeowners Consumer Center Announces A Win-Win Honest Mortgage ...
PR Web (press release), WA - 6 hours ago
Monthly in state press releases that will recommend individuals wishing to refin...



Mortgage Refinancing Points to Consider - Corsavoo.com
6 Sep 2008 at 1:14pm

Mortgage Refinancing Points to Consider
Corsavoo.com, France - Sep 6, 2008
The most important thing to consider before getting into refinancing your home mortgage is information. You can neve...



US stock futures surge on plan for mortgage giants - The Associated Press
8 Sep 2008 at 7:20am

US stock futures surge on plan for mortgage giants
The Associated Press - 22 minutes ago
The plan could help banks feel more open to write new mortgages and to refinance existing mortgages at lower...



Fannie, Freddie deal helps some borrowers, not all - The Associated Press
7 Sep 2008 at 5:01pm

The Associated Press

Fannie, Freddie deal helps some borrowers, not all
The Associated Press - 14 hours ago
If fees were eliminated, we would see more qualified borrowers being able to refinance or ...



AP Executive Morning Briefing - The Associated Press
8 Sep 2008 at 4:01am

BBC News

AP Executive Morning Briefing
The Associated Press - 3 hours ago
___ US Government takes over mortgage giants WASHINGTON (AP) ? The Bush administration's seizure of troubled mortgage g...



Troubles spread to prime Md. mortgages - Baltimore Sun
6 Sep 2008 at 1:23am

San Diego Union Tribune

Troubles spread to prime Md. mortgages
Baltimore Sun, United States - Sep 6, 2008
The rate kept rising until it was just too much, and he was told he couldn't refina...



Five reasons the Fannie/Freddie bailout should not happen -- and ... - Bloggi...
7 Sep 2008 at 9:19am

Irish Independent

Five reasons the Fannie/Freddie bailout should not happen -- and ...
BloggingStocks - 22 hours ago
High cost to refinance monthly debt. Bloomberg writes that as of "mid-August...




::: Mortgage Refinance Information Blogs :::

Mortgage Refinance Information - Google Blog Search
Google Blog Search Results: 66,049 results for Mortgage Refinance Information - showing 1 through 10

California Mortgage Refinance Loan
8 Sep 2008 at 8:39am
Most lenders have online websites that enable borrowers to discuss the mortgage, submit an application and also compare the various options. Their sites also have easy-to-use home mortgage calculators...

Mortgage Refinancing Helpful Hints
7 Sep 2008 at 10:01pm
Information is the right-a-way to success in various fields of activity and also a very significant factor when discussing mortgage refinancing tips, second mortgages, first mortgages and so forth. T...

Fnm and Fre Takeover: Happy Days Are Here Again?
8 Sep 2008 at 4:41am
The need for the events of yesterday morning to re-open the mortgage markets for home purchases and refinance was discussed in this blog on August 27th. This morning an announcement was made by the S...

Understanding Mortgage Refinance Rates
8 Sep 2008 at 10:12am
Mortgage Refinancing Loan.

Tucson Refinance - Colorado Springs Refinance - Portland Refinance 443
8 Sep 2008 at 11:51am
Your Bank may seem like a convenient way of refinancing your mortgage loan; however, Banks have secret when it comes to disclosing information about their fees and markup. The Real Estate Settlement P...

Tampa Home Mortgages - Low Mortgage Rate - Refinance Second ...
8 Sep 2008 at 11:51am
A home fair play mortgage refinance may be a magnificent way to go nondiscriminatory now, before rates go up. Over the last few an age every man jack has heard about friends and everyday refinancing t...

Knowing About Mortgage Refinance Rates
7 Sep 2008 at 1:16pm
Although this is not really linked to mortgage refinance rates, but it is truly the case. Change is something that most people are unwilling to do which is why you would generally not like to change ...

Home Mortgage Refinance Quote No Equity Mortgage Rates
6 Sep 2008 at 11:41pm
With the mortgage crisis, it may not be the best time to try to refinance your home mortgage unless you have great credit in which case, your mortgage refinance efforts may pay off. Getting mortgage l...

Denver Home Mortgage - 2nd Mortgages - Bad Credit Home Loan ...
7 Sep 2008 at 11:51am
A home fair play mortgage refinance may be a grand way to go reasonable now, before go up. Over the last few an inordinate length of time Dick has heard about network and domestic refinancing their ho...

RP Datas Range Of Property Reports
8 Sep 2008 at 11:08am
Got the Mortgage Blues and looking to refinance? First, better understand the market value of your assets by purchasing a myRPData Refinance Pack for just $59-95 An RP Estimate report delivers an ele...


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