Subprime Loans – Should You Take the Risk?

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Subprime Loans are Back

Since the housing crisis began over a decade ago, subprime mortgage loans basically disappeared – thanks to regulatory actions from government and self-preservation for both lenders and borrowers. The effects of borrowing more than you could safely afford to repay became obvious to all parties.

Subprime mortgage loans have been making a slow comeback over the last decade, driven by years of pent-up consumer demand and lending institutions competing for more business.

If you have borderline or poor credit (credit scores in the 580-669 range or below), lenders are devising new ways to offer you a mortgage loan. Are you ready to take advantage of these offers – and, even if you are, is a subprime loan the best choice for you?

Increased Risk But Greater Scrutiny

Data from the Mortgage Bankers Association (MBA) shows that during the first quarter of 2007, approximately 13% of all residential mortgage loans we…

Video: Which Type Of Mortgage Lender Should You Use?

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What is the difference between a mortgage broker and a loan officer? Which should you use for your mortgage? Casey Fleming, Mortgage Advisor at C2 Financial, explains in which situation to consult each of these lender types in our exclusive video above.

MoneyTips is happy to help you get free mortgage and refinance quotes from top lenders.

1 Out Of 5 Borrowers Unhappy With Their Mortgage Lender

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“I could have done better.” With respect to mortgage lenders, approximately one-fifth of homebuyers felt this way last year, according to the 2016 J.D. Power US Primary Mortgage Origination Satisfaction Study.

The study found that 21% of all homebuyers and 27% of first-time homebuyers regretted their choice of mortgage lender. Discontent fell into two general categories: lack of communication and being steered toward a specific mortgage product.

A full 72% of those regretting their choice noted pressure to choose a specific product, leading some consumers who received a good deal to report “happy buyer’s remorse.” A perception of unclear choices or lack of control dissipated the satisfaction of a good deal. The common thread in both sources of discontent is that customers can feel disengaged, with their interests being placed well below the bank’s interests.

How c…

Banks Now Provide Fewer Than Half Of U.S. Mortgages

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Recent research shows that as banks step back from offering risky loans, non-banking lenders have stepped in to fill the breach. Though banks once ruled the mortgage sector in the U.S, they now have less than a 50 percent share.

According to the latest figures, the amount of mortgage dollars offered by traditional banking institutions dropped in the third quarter of 2016. With many non-banking lenders willing to take on potentially riskier loans, these newer facilities provided 51 percent of the home loan lending.

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Lower Mortgage Rates Accessible With Consistent Employment

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Buying property is one of the largest purchases and biggest financial commitment that most Americans will make. With real estate values rising beyond inflation rates, this has become truer since the late 1990s. For borrowers, it’s important to take control of homeownership, including the costs involved.

One of the most important factors lenders look at is a borrower’s financial history. Perks are available for those who have worked in the same place for many years, or who have been growing their annual income at a consistent rate. …

New Mortgage Programs Give Hope To Homebuyers

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The past few years have been tough for prospective homebuyers, with many finding it almost impossible to qualify for mortgages. However, several new programs have come into effect, helping creditworthy borrowers get on the property ladder.

Over recent months, things have begun to ease. For example, some new terms now include a down payment of between 1 and 3 percent. These come without monthly home loan insurance charges, which makes taking out a mortgage more affordable. Debt-to-income (DTI) levels have also been stretched towards 50 percent while definitions of what qualifies as income have been loosened. Underwriting has become more flexible, accepting that there are often multiple earners in a household who can contribute to expenses.

Government Ordered To Release Documents To Mortgage Investors

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Federal Judge Margaret M. Sweeney has ruled that the U.S. government acted improperly when it failed to release over 12,000 documents specific documents to investors in Freddie Mac and Fannie Mae. These investors sued the government in 2013, following the seizure of profits from the two mortgage companies. Sweeney ordered the government to release the documents immediately.

Investors filed the lawsuit four years after the government took direct control of Freddie Mac and Fannie Mae, following the financial crisis that left the mortgage industry close to collapse. In 2012, however, the government began removing funds from the two ent…

Banks Cut Mortgage Servicing Employees

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The Fitch Group has recently released its U.S. RMBS Servicer Handbook for the most recent quarter. The handbook shows that many banks offering mortgages have halved the number of staff in their mortgage servicing departments during the last two years. The decision to downsize these departments is primarily the result of these lenders seeing their portfolios shrink.

Another reason relates to the number of foreclosures. According to CoreLogic’s National Foreclosure Report released in July 2016, there was a significant decrease in the number of active and completed foreclosures from 2015. With fewer foreclosures to manage, banks no longer needed as many staff.

Freddie Mac Announces New Risk-Sharing Program

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Freddie Mac announced on Monday, September 26, that it would launch a new program to help reduce the risk it takes on various mortgages. The program will transfer backing to several private mortgage insurance companies. The loans included in this pilot program are those that were acquired by Freddie Mac starting September 1, 2016, and ending February 28, 2017. These loans must meet specific criteria to be shared among the private mortgage insurers (PMI).

The program aims to share $100 million of financial backing on mortgages worth almost $4 billion. This amount is less than what many PMI companies had expected. Since discussion of the program, many PMI executives petitioned the Federal Housing Finance Agency (