Posted by Mitch_MD on 3/1/06 4:27pm
Msg #101067

More lenders pull out over ‘vague’ Maryland county law

This article made the front page of the local weekly paper today.

"More than 20 mortgage lending companies have suspended doing business in Montgomery County because of the county’s new lending discrimination law, which they criticize as vague and unnecessary."

Read more here: http://www.gazette.net/stories/030106/montcou152003_31949.shtml

Companies already gone as of yesterday:
=============================
Accredited Home Lenders
Aurora Loan
Bear Stearns
Bear⁄EMC
BNC
Credit Suisse
Crescent Mortgage
Decision One
Emigrant Mortgage
First Franklin
First Horizon
First Magnus
Greenpoint Mortgage
Mortgage IT
National City Home Equity
National City Mortgage
Nations One
National Wholesale Funding
Nomura
US Bank Home Mortgage

Companies in the process of suing:
=========================
AMC Mortgage Corp.
Apex Home Loans
Legacy Financial Corp.
Legend Mortgage Corp.
The Mortgage Link Inc.
Nationwide Home Mortgage Inc.
Vision Mortgage Inc.

I'm not certain that Montgomery County really thought this issue out. The law as it stands is expected to protect the folks with low or poor credit. It may actually force them out of the county and enforce the preception that Montgomery County is only for well-to-do folks.

From my own experience as a signing agent, the borrowers with low or poor credit have been getting a raw deal from the subprime lenders. As a neutral party, I've never said anything to them, but have really had to bite my tongue at times.

I'm waiting to see how all this plays out, but have already seen my incoming business volume fall off a cliff since the first week of February. I've already begun to pursue other options, but if the drought continues much longer, I'll have to seek employment in the regular workforce again.

Reply by Ilona_OH on 3/1/06 4:42pm
Msg #101070

Where are u in relation to Baltimore? n/m

Reply by Mitch_MD on 3/1/06 8:19pm
Msg #101159

Re: Where are u in relation to Baltimore?

Western Montgomery County.

Reply by Charles_Ca on 3/1/06 4:49pm
Msg #101071

Interesting development. Let me ask you Mitch however...

will the borrowers who can not qualify for a good loan but can qualify for a substandard loan be better off with no loan whatsoever. Lenders have been able to cover their risks by charging more for substandard loans to cover the differences in losses. The borrowers who have bad credit are not necessarily poor or disadvantaged. They usually have poor credit because the have poor discipline for the most part. I know that is not a PC statement but if lenders have to cover bad debt losses out of their income the interest rates will go up on the standard loans. Would you give a loan to some one who does not pay it back as promised? Probably not and neither should other lenders. Subprime loans are a product and as such the cost of the product should be borne by those who benefit from the product. I've always believed that costs should be borne by the user.

Reply by MelissaCT on 3/1/06 5:18pm
Msg #101079

Re: Interesting development. Let me ask you Mitch however...

In speaking about subprime loans, I take exception to your assessment. The conventional lenders go strictly by city records, even though they show my home being 1/3 the size it really is. The appraiser saw & photographed my home, but because that differs from city records, I am in a subprime situation. BTW, I have excellent credit. It's not only credit rating that affects prime or subprime situations.

Reply by Charles_Ca on 3/1/06 6:25pm
Msg #101104

Re: Interesting development. Melissa, you may take all the

exceptions you want but at least in California redlining is against the law. As a loan officer I can lock a rate with a borrower based upon the borrowers FICO. The adjustment in the amount of the loan comes from the value of the appraisal. If the property is in a rundown area the value is not as high as a the value would be in a nice neighborhood and therefore the borrower can borrow a greater amount becasue of the LTV ratio if all other factors are the same.. It has nothing to do with being a subprime loan. I am surprised to hear this, are you a loan originator in Connecticut? You should not take exception to what one says if you don't know all the facts!

Reply by Mitch_MD on 3/1/06 8:25pm
Msg #101168

Re: Interesting development. Let me ask you Mitch however..

Charles, I see both sides of the coin in this case, and the article brings up the point that some sole-proprietors get sub-prime loans simply because they cannot provide adequate documentation of their income for prime loans.

Reply by Victoria Moate on 3/1/06 5:10pm
Msg #101074

Mitch,

We had the same thing happen here, in NJ, in 2004, statewide. The NJ legislators signed in a anti-preditory law that capped the subprime loans up to $350K as to the points, broker fees, etc. that could be charged on a loan.

Everything came to a screetching halt for about 2 months as the lenders figured out how to approach it. Eventually it was "business as usual". The only thing we really saw happen was a fall out of the loan brokers who were making 3-6% in points on refi's. They disappeared when they couldn't charge $15K in broker fees.

I can't say I hated to see them go. It is a shame when those kinds of fees are being charged to folks who can't figure out how to pay their credit card bills.

I am sure that there will be a hicccup in business for several weeks and then it will be biz as usual.

Reply by Mitch_MD on 3/1/06 8:27pm
Msg #101172

The subprime loans here have gone as high as $750K on some of the loans I've been involved with. Also, the article says the law increases the fine for predatory lending from $5,000 to $500,000.

Reply by Rick_NY on 3/1/06 5:15pm
Msg #101077

Mitch, I feel for you, buddy. We are all taking a lot of lumps these days and I am sure you need this like a hole in the head. Hang in there!!

Reply by LilyMD on 3/1/06 5:50pm
Msg #101087

I feel this will probably slow things down in Montegomery County for a while. I'm curious to see if other counties will entertain the idea.

Reply by Mitch_MD on 3/1/06 8:30pm
Msg #101176

Me, too. n/m

Reply by Mitch_MD on 3/1/06 8:30pm
Msg #101175

Yup, needed this like a hole in the head.

My business was doing real well and growing at a good clip. This past January was my best month yet, and then the bottom fell out around the first week of February.

Reply by LilyMD on 3/1/06 9:12pm
Msg #101199

Re: Yup, needed this like a hole in the head.

February was a fantastic month for me. I'm hoping March will be just as good.