As you are well aware, 2008 is forecasted to be a challenging year for the mortgage industry, characterized by a declining Housing Price Index in a wide variety of metropolitan markets. In the context of the prominent threat to our industry of collateral values falling below outstanding loan balances, mortgage professionals must strive to ensure that borrowers do not take on loans that they do not have the ability or economic interest to repay. Because of these market conditions, as well as policies implemented by Government Sponsored Enterprises and Mortgage Insurance agencies, Countrywide®, America's Wholesale Lender® is adopting new Soft Market policies designed to help serve qualified borrowers in markets which are either declining or projected to decline in 2008. Impacted markets across the nation have been categorized, with Category 5 being the highest risk for declining market value and Category 1 markets currently demonstrating more stable market values. Those counties in a higher risk category are subject to additional guideline restrictions as described below. Click here to view a list of the counties currently attributed* to Soft Market categories 1-5. The following Soft Market policy became effective January 18, 2008: Conforming, Non-Conforming, Expanded Approval (EA), and Conventional Bond loans:
Soft Market Category 4-5 loans
Maximum financing will be reduced by 5%Example: Maximum financing per Countrywide's Loan Program Guide allows for 95% LTV. Loans in Category 4-5 will be limited to a new max LTV of 90%.
Soft Market Category 1-3 loans
Maximum financing will be reduced by 5%, only if the appraisal or appraisal review indicates any of the following:
Declining Market
Oversupply
Marketing time over 6 months For the above categories, if the loan is already 5% below the maximum allowable financing, no further reduction is required. Home Equity**
Soft Market Category 5 loans
Maximum financing will be reduced by 10%, unless the loan is already 10% below the maximum allowable financing
Soft Market Category 4 loans
Maximum financing will be reduced by 5%, unless the loan is already 5% below the maximum allowable financing
Soft Market Category 1-3 loans
Maximum financing will be reduced by 5% (unless the loan is already 5% below the maximum allowable financing) if the appraisal or appraisal review indicates any of the following:
Declining Market
Oversupply
Marketing time over 6 months
Products / Programs Not Impacted
FHA / VA
Rural Housing
Bond programs using government or Rural Housing loan programs
Reverse Mortgages Pipeline ProtectionThe new Soft Market Policy is effective on all loans locked after Friday, January 18, 2008. Loans locked prior to the end of day on Friday, January 18, 2008 are not subject to the new policy. Those loans must meet all pre-existing Soft Market Policy requirements and must fund by March 18, 2008. Lock extensions may be granted as long as the loan funds by March 18, 2008 and meets all other pipeline protection rules.