Franklin Financial Group Blog

Whether you work in the mortgage or mortgage-related industry, or have recently undergone the mortgage process you are probably now aware of the dramatic changes that have happened and are still going on in the mortgage industry.  Recently there is news of large mortgage companies struggling to stay in business, or unfortunately for some either filing bankruptcy or literally going out of business. Almost daily I receive notifications of guideline changes and/or removal of entire loan programs altogether.  For a while the subprime market was the center of conversation, while now the Alt-A and even Prime mortgage markets are hitting the headlines.  Investors are pulling back or halting their interests in many pools of mortgage funds, and thus lenders are forced to react.  Basic economics teaches us the relationship of supply and demand.  If there is no demand for certain mortgage products due to their past, present and future performance they will no longer be offered, or in supply. 

What does this all mean to consumers? I think it means that consumers may have to change their perspective as to what they may or may not be able to do.  With lending guidelines tightening up, consumers need to take a much more proactive approach at their current situations.  Now more than ever, if you want to receive the best possible programs available, you need to take the proper steps to maximize your borrowing potential.  The very first place that begins is your credit history.  If you haven't looked at your credit in a while, now may be a good time to do so.  Find out if there are any derogatory items reporting on your credit, and if so, take action to correct those immediately.  Do not wait!  One of the primary factors when deciding whether or not to lend to a borrower is their WILLINGNESS to pay back debt.  The better your credit report, the better the reflection is of your willingness to pay back your debt.

Next, I would start some sort of savings plan if one is already not in place.  The more money you have saved, the better off you will be financially now and in the future.  Lenders are offering the best programs to those who can demonstrate not only the willingness to pay, but to those who demonstrate the ABILITY to pay back debt.  Your income may show enough ability to pay back your debts, but if you have some money saved up, you show that you have reserves to further your ability to pay in case of any unforseen occurrences.

Regardless of whether you are looking to purchase or refinance a property, you might be facing some tougher issues borrowing money now than you may have in the recent past.  If you have modest and realistic expectations as to the current lending environment, you are less likely to experience disappointment.

We often hear that history tends to repeat itself.  What we are going through now in the mortgage industry has happened before.  It is going to take some time for those factors contributing to today's tough market to pass.  As a consumer, you should focus on aligning yourself with professionals who understand these changes and who can offer you guidance on how to best position yourself during these times of change.  I am confident things will get better.  Some of the responsibility to help the mortgage environment improve lies with lenders and the programs they offer, which we all know has, and is continually being addressed.  Additionally, mortgage brokers are responsible to educate borrowers on loan programs and market conditions, and work to originate an honest and beneficial loan that meets the borrower's needs. Consumers also need to take responsibility for their part in the mortgage process.  When looking at the financing of a property, borrowers need to be realistic as to whether or not they can truly afford the debt.  Just because you qualify for something, does not always mean you should proceed with it. As we are seeing now, every type of borrower can be affected when times turn towards a more conservative approach.

We must all realize that we cannot change the future, but we can do our best to prepare for and live with it.  Positive attitude, honesty, integrity, professionalism and realistic expectations go a long way. Remember, you can do anything, it just make take a little longer to do it.  Patience IS a virtue, so embrace it, and stop to reflect on what you have to be happy with along the way!