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Loan guidelines may tightenRising mortgage defaults by subprime borrowers may add more than 500,000 homes to a residential real estate market already beset by slumping prices, according to CreditSights Inc.New Century Financial, the nation's second-biggest subprime mortgage lender, is no longer writing new loans and may be looking at bankruptcy in the future. Subprime loans are those made to borrowers with poor or less-than-perfect credit. Other mortgage companies have also caused shaky nerves on Wall Street over the bill that is coming due on homes financed to subprime borrowers over the past several years of the housing boom. Locally, that could mean that an already stagnating housing market may see even fewer buyers in the future because lenders will be tightening loan guidelines, or in cases like New Century Financial, not writing new loans. Warren Herman, senior lending officer with Premier Mortgage Funding Inc. in Bradenton and Sarasota, believes the subprime fallout will be limited, although his company is suggesting caution for the time being. "They're suggesting we hold back on these loans right now and see how the fallout happens," Herman said. "It will stabilize and it would be an opportunity for banks to make money on people who are recovering. There's always good that comes out of something that is seemingly bad." Patrice Yamato, president of the Florida Association of Mortgage Brokers, fears the impact tighter loan guidelines will have on Florida. "I'm afraid we're going to take a lot of people out of the market here in Florida," Yamato said. "I'm also afraid we're going to be prevented from helping folks keep their homes who could have been helped through these loan programs." Although stories abound like the one in a recent Forbes article involving an hourly Target worker who was able to finagle financing on a $696,000 home, some subprime loans can actually help homeowners get out of trouble, Yamato said. Often, existing homeowners can refinance with such loans as a "correctional" measure during a tough financial time, Yamato said. Through such loans, borrowers make interest-only or low principal payments while getting back on their feet, she said. Homeowners needing to sell their home visit 888SOLDin9 to talk with our Jacksonville FL partner about their personal financial situation. Our Jacksonville FL partner, Jim Tallent buys, sells, renovates and rents homes and properties in Jacksonville FL, Duval County FL and surrounding areas. click here for article |