New restrictions on financing

Cap,

This is still too new....give it a couple of weeks to a month--then the "fit will hit the shan."


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Cap,

This is still too new....give it a couple of weeks to a month--then the "fit will hit the shan."


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The fit will hit the fan for Option One is more like it. What they are doing is absolutely illegal. It's called redlining. You can say we will not do loans in the State of Florida, Nevada or anywhere you please.

"You can not say"we will not do condo loans in Florida" which is what they are doing.

What they should have done was changed their underwriting guidelines for condos like lowered the LTV, lower the amount of investor units allowed, not taken a loan that had any owners in arrears, bkcy or foreclosure.
This would have eliminated most loans with an Alt-A lender without redlining a whole State. :roll:

Why do they care what type of housing you are investing in if the person is a good risk?

I can see making the requirements more stringent - actually checking if people have the money they say they do, requiring a % down payment for example.

How come not lending in specific areas is illegal, but not writing insurance coverage isn't?

It is perfectly legal to refuse to lend or to charge higher rates in condo buildings that do not have X% of the units owner-occupied. Such lending practices were very common beore the boom.

I'm familiar w/ banks wanting a certain % of units presold before construction starts, (seems like good sense) but I thought the article said they are just refusing to loan money for condo purchases - period.

sheet meet fan

It is because of "no red lining" that it applies to all of Florida rather
than the most over-built areas (i.e. Miami et. al.)

While the main problem is the East coast ( and not necessaily
Walton County, at least to the same extent) ALL of Florida
will suffer.

And Option one is probably just the first. You can be
sure that other lenders will follow suit.

Just within the past one to two weeks lender after
lender has been tightening their rules.

The mortgage brokers are squealing:
http://forum.brokeroutpost.com/loans/forum/active.asp

What was possible even just a week ago is no longer possible.

The name of the game is liquidity: if you have cash, your time has
come. If you rely on credit, you're toast.

So the banks/lenders are tightening their rules so you have to be able to afford/pay off your loan ................ works for me!

I'm Scotch/German, so I was raised that if you have to finance it (with the exception of a house) or go into debt for it, you don't need it.

So the banks/lenders are tightening their rules so you have to be able to afford/pay off your loan ................ works for me!

I'm Scotch/German, so I was raised that if you have to finance it (with the exception of a house) or go into debt for it, you don't need it.

...there's that dammm common sense and logic again!!!!

Why do they care what type of housing you are investing in if the person is a good risk?

I can see making the requirements more stringent - actually checking if people have the money they say they do, requiring a % down payment for example.

How come not lending in specific areas is illegal, but not writing insurance coverage isn't?

[ame="http://en.wikipedia.org/wiki/Redlining"]Redlining[/ame] is also illegal in the insurance industry. I've included a link to wiki, not the best possible but gives a decent explanation.

Banks/ Lenders are audited yearly via HMDA reports that take neighborhood area codes and what the minority populations where, as well as info is taken as to the amount of minorities loans were made to as well.

Let's just say that if a minority made application to Option One for a condo loan in Florida, and they are licensed to procure mortgages there, Option 1 has to send them a denial letter by law saying they do not make mortgage loans in Florida or they would check a box on said Denial letter that references the collateral, (which woul dbe the chicken poo method)

If said minority meets condo guidelines, Option 1 could be fined by the Regulators for redlining or discrimination.

It is perfectly legal to refuse to lend or to charge higher rates in condo buildings that do not have X% of the units owner-occupied. Such lending practices were very common beore the boom.

This is true. Option One should have just underwritten themselves out of the market instead instead of excluding a whole State.

I'm familiar w/ banks wanting a certain % of units presold before construction starts, (seems like good sense) but I thought the article said they are just refusing to loan money for condo purchases - period.

You read it right. That's exactly what they said.

There are different guidelines for condos like Beachmouse said above. They have been around pre-melt down. Some Banks have made loans to unwarrantable condos at higher rates and still do if the Borrowers credit profile is solid, making a large DP, and other compenasating factors.
They simply portfolio the loans in lieu of selling them on the secondary market.
Option 1 could have just have just changed their guidelines on condos period or eliminated the program nationwide. They didn't, they said none in Florida period.

I would be somewhat suprised if the lender did not run this past their
legal council prior to making the announcement.

I am equally sure that the secondary market (or lack there of) for
debt is dictating this move, which means it will most likely not
be an isolated case.

I would be somewhat suprised if the lender did not run this past their
legal council prior to making the announcement.

I am equally sure that the secondary market (or lack there of) for
debt is dictating this move, which means it will most likely not
be an isolated case.

It will be interesting to see where this goes. :scratch:

I have a feeling that FNMA and FHLMC condo guidelines may be given a squeeze eventually.
All Lenders consult their legal dept. on issues such as these, but IMO, there legal advice or lack of, was wrong in this instance.
I've seen it happen many times.
But in this instance with a Alt A borderline subprime lender, they probably figured they would take the lesser of two evils. Take a fine or continue trying to sell risky condo deals in Florida. I'm betting they would rather be fined for redlining.

The mortgage brokers are squealing:
http://forum.brokeroutpost.com/loans/forum/active.asp

What was possible even just a week ago is no longer possible.

Anytime I go to those subprimate mortgage brokers' message boards I have to jump in the shower to rinse off the slime. Their days are numbered...I see paper hats and deep fat fryers in their future.



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It is because of "no red lining" that it applies to all of Florida rather
than the most over-built areas (i.e. Miami et. al.)

While the main problem is the East coast ( and not necessaily
Walton County, at least to the same extent) ALL of Florida
will suffer.

And Option one is probably just the first. You can be
sure that other lenders will follow suit.

Just within the past one to two weeks lender after
lender has been tightening their rules.

The mortgage brokers are squealing:
http://forum.brokeroutpost.com/loans/forum/active.asp

What was possible even just a week ago is no longer possible.

The name of the game is liquidity: if you have cash, your time has
come. If you rely on credit, you're toast.

Not sure if you have ever sat through an audit with Regulators, but I have in 20 yrs. in the business, and they would most likely ask why other States were not included.
NYC alone is primarily condos and coops.

Liquidity will be for investor purchases, and you're right, many lenders have been tightening their belts, but it's about high time.

Is not redlining referencing small geographic areas within a city? Option One is restricting an asset subgroup within a state, not discriminating racially. I see it no differently than not lending on, say, condotels.

Anytime I go to those subprimate mortgage brokers' message boards I have to jump in the shower to rinse off the slime. Their days are numbered...I see paper hats and deep fat fryers in their future.



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I say sue them. They sue the home owners.

Is not redlining referencing small geographic areas within a city? Option One is restricting an asset subgroup within a state, not discriminating racially. I see it no differently than not lending on, say, condotels.

True dat Bob.

It depends on who is regulating Option One. (State, federal agency, both?) I can't keep up anymore. I know H and R Block tried to open bank branches, and Option One is a subsidiary. I don't think they were allowed to, but if they did, they would be managed by the OCC (Federal).
On a State level, then an examiner doesn't give a rats arse what they are doing elsewhere. On a Federal level, it could be an issue. Depends on the examiner and how he/she would view the move. In all likelihood, they have bigger axes to grind and this will be a non issue.

I can tell you that I have never seen it done before like that. There are many Banks/Lenders that are national that never wanted to do loans in TX due to foreclosure laws, so they don't get licensed there, period.
I have never seen a move where an entire State was eliminated from a Lenders product line.

The only time I have seen limitations on what States a certain product line was limited is for cooperative loans, and this is because they are not the "norm" for other States other than New York and some parts of New Jersey.

Frankly if OP1 and many other subprime zoos had tightened their underwriting belts earlier, we wouldn't be in such an economic quandry.

"...Frankly if OP1 and many other subprime zoos had tightened their underwriting belts earlier, we wouldn't be in such an economic quandry...."


Or maybe if the general public was a little smarter.

"...Frankly if OP1 and many other subprime zoos had tightened their underwriting belts earlier, we wouldn't be in such an economic quandry...."


Or maybe if the general public was a little smarter.

Oh Shelly? I won't steal your thunder on this one.

Reportedly Countrywide tightened lending requirements yesterday.


Don't know all the details

Oh Shelly? I won't steal your thunder on this one.

There are not only "predatory lenders:"


There are also "predatory borrowers"


Many who claim to be "victims" are victims only
of their own greed and stupidity.


Does everything have to be "stupid-proof?"

Probably because it's a credit union, but my lender gets away with writing mortgages in an extremely limited geographic area:

"Maximum Loan Amount and Restrictions

Loans range from $25,000 to $417,000 with 80% Loan-to-Value (90% on refinances & 95% on purchases with Private Mortgage Insurance) for single-family primary residences in the following Florida counties: Escambia, Santa Rosa, Okaloosa, Walton, Bay, Washington, and Holmes. Rates are subject to change at any time. Additional fees may apply for cash-out transactions and transactions with secondary financing."

I consider myself a reasonably intelligent & financially savvy person, but a mortage/loan is not set up to be easy to understand! On a good day there are a variety of fees, clauses, and legalese, and the bank is quite happy to lend you more than you can easily pay, despite all of the data you supply to them so they can "calculate" your loan. I had some great people explaining the process/walking me through it and patiently answering my questions and I still had more questions later!

I think that people got in over their heads from a combo of greed/materialism, lack of understanding of the true cost of a loan, and shady lenders. My sympathies do NOT go out to those who were financing their "lifestyle", trying to make a quick buck flipping, or these banks/credit companies who are now in trouble because of their lax standards.

I consider myself a reasonably intelligent & financially savvy person, but a mortage/loan is not set up to be easy to understand! On a good day there are a variety of fees, clauses, and legalese, and the bank is quite happy to lend you more than you can easily pay, despite all of the data you supply to them so they can "calculate" your loan. I had some great people explaining the process/walking me through it and patiently answering my questions and I still had more questions later!

I think that people got in over their heads from a combo of greed/materialism, lack of understanding of the true cost of a loan, and shady lenders. My sympathies do NOT go out to those who were financing their "lifestyle", trying to make a quick buck flipping, or these banks/credit companies who are now in trouble because of their lax standards.

I agree there are some shady lenders/brokers but the bottom line is if you are going to play grown up and borrow 100, 200, 300 THOUSAND DOLLARS, you better make damn sure you understand what you are signing. The bad ones may bait and switch you but no one is at the closing holding a gun to your head. The bank does not decide what you can pay. The bank decides what they are willing to risk lending you. You don't have to take it. You decide what payment you are willing to take on.

Woe is me to the people who say 'My house payment is too high, it adjusted on me and I was lied to, yadda yadda yadda'. Then you see they have not one but TWO car payments of 600 or 700 dollars per month. Sell your car buddy - or live in it.

Just saying I could see how some COULD honestly & legitimately not have fully understood the consequences/intricacies of the clear as mud documents they signed.

The stories of banks loaning money w/ 0% from the borrower, not even bothering to verify financials etc. make me feel that those groups got what they deserved!