Monday, July 11, 2011

Fannie mae lenders continues to tighten guidelines

  Whenever I experience something at my job that I sense will have a major impact on borrowers moving forward, I feel the urge to let you know about it.  I recently closed a loan with a Fannie Mae lender that asked my borrower to do something that I have not seen before and when 1 lender starts to do it, it is inevitable that others will follow.  Before discussing exactly what it is, I think a little background would certainly help:

  For most Americans right now, the job market is a scary place.  Companies are not hiring.  Bonuses are down or non existent.  Unemployment continues to hover around 9%.  People are just plain scared of losing their jobs.  But, the one thing that never stops are the bills.  Like clockwork, they come every month and they need to get paid.  For many, credit card debt continues to pile up.  One way to battle that debt is to pull equity out of your home at a much lower percentage that you are paying the credit card companies.  It's a valid and good way to pay off debt in a sound and reasonable manner.  I have had many clients do it and they would call me afterward and say that what I helped them do "changed their lives".  It's a really good feeling. 

   It's fairly simple to understand.  Let's say you have $30,000 worth of credit card debt at 12% and you currently have a 30 year fixed loan with a balance of $120,000 at 6%.  You can refinance, take out a new loan at $150,000, and pay off the credit card debt at closing.  You now are paying all your debts at 6%, you have instantaneously improved your credit and you have some breathing room.  Your credit card balances are now at zero.  Here is how it's changed:

If the credit cards being paid at closing are revolving lines of credit, the credit card must be closed in order to close the loan.

   You can no longer pay off the debt and keep those credit cards.  Is that something you would want to do?  For some, they would have no choice.  Again, not every bank is doing this but I bet we see it more and more.  The economy continues to flounder and people need choices to keep themselves going but many of those choices are disappearing.

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