Nov 17 2007
A Change in Plans
With all the troubles surrounding subprime mortgages these days and multi billion dollar losses being declared by mortgage loan originators, some are starting to change the way they do business. If you have a subprime loan, it means that your lender took a bigger risk on lending you money than she did lending to a customer with a fixed rate mortgage. This risk means the risk of you not being able to pay back the loan due to job loss, poor planning, etc.
Many consumers caught in the middle of the subprime financial crisis are already feeling the pinch; many are looking into refinancing the loans they recived. This just got harder. As reported by Blownmortgage.com, Countrywide and WaMu have changed their tones as far as who can get loans. At Countrywide, requirements to get and Interest Only loan now match the requirements to qualify for a fixed rate mortgage.
This means that some consumers that wanted to refinance cannot because of the stricter standards. I think we can expect other companies to begin to follow suit with similar adjustments to get rid of some more risk. I see this as a move to protect credit ratings with a lower risk of default.