Nevada Home Loan Officers Worry About Subprime Mortgages
While Southern Nevada loan officers believe the local housing market will improve in the coming months, no one is sure what’s going to happen to the subprime lending industry.
Subprime loans are typically made to borrowers with less-than-perfect credit or those without proper documentation. It’s a big part of business for Southern Nevada mortgage companies that deal with many customers who don’t qualify for prime (or A-plus) paper. These include people who don’t have traditional jobs, immigrants and even some who make their living from casinos.
Jose Sanchez (pictured) is a loan officer at American Natinwide Mortgage located at 720 South Jones. “Money is tight right now,” he says.
“For us, B paper (bad credit home loans) are more than 50 percent,” added Sanchez. “A lot of our customers are Hispanic and many of them don’t have the proper documentation for A-paper loans. They’re hard workers and they pay their bills - so it’s tough.”
And it’s getting tougher. In recent weeks, the nation’s subprime lending industry has imploded, as rising home values and interest rates have driven up monthly mortgage payments on adjustable loans, as well as defaults and foreclosures.
Accredited Home Lenders Holding Co. and New Century Financial are among subprime lenders teetering on the edge of bankruptcy. Fremont General Corp. has told “significant numbers” of its 2,400 home loan employees to expect pink slips in two months. Ameriquest Mortgage, which also plans layoffs, announced March 19 its name was coming off the Texas Rangers’ baseball stadium in Arlington.
NO DOOMSDAY ON HORIZON
Still, mortgage experts in the Nevada housing market believe the crisis will abate. “There are still many unanswered questions but I don’t have a doomsday sense,” said Reno-based mortgage lender Paul Havas, former president of the Northern Nevada Mortgage Brokers Association.
Havas believes other companies will snap up beleaguered subprime lenders at bargain basement rates, and eventually conduct business as usual … or almost as usual. “We’re going to see some consolidations but there will probably be some changes,” he said. “I imagine the new companies will be more careful and take out some of the risk.”
One who agrees is Bill Ochs, owner of Las Vegas-based Nevada Mortgage, a mortgage company that has been in operation for nearly 30 years. “These companies that are in trouble will probably become absorbed by larger entities but there will be changes down the road,” said Ochs, who believes greed and escalating real estate values have contributed to the problem.
“As houses went up in value, there were a lot of deals made with no money down,” he continued. “There were speculators who said, ‘I’m going to occupy the house’ — wink, wink — and the plan was to flip the house, and make a profit and move on. It’s fine until the market flattens and the investor can’t make the payment.”
Those who are hurt are the honest subprime customers. “Money is tight right now,” Sanchez said. “I have a Latino couple who have saved 5 percent to buy a $200,000 house and their FICO (credit) score is 600. I don’t know if they’re going to qualify. They want to hear assurances and all we can tell them is, ‘We are going to try.’ Do you know how long it took this family to save 10 grand?”
SOURCE: Las Vegas Business Press