No Money Down Mortgages: No More at Countrywide Financial

By now, those following the real estate market are familiar with the problems companies and lenders have had with subprime/bad credit home loans.

The latest instance of a nationwide mortgage lender pulling back on its loan policies - due to a fear of default on the part of unqualified borrowers as their mortgage rates adjust - is Countrywide Financial Corp.

On Friday, the largest U.S. mortgage lender told its home mortgage brokers to stop offering borrowers the option of a no-money-down home loan, according to a document obtained by Reuters.

Loans financing 100 percent of a home’s value - aka no money down mortgages - are among those leading to a sharp rise in delinquencies at U.S. mortgage lenders around the country. Such mortgages below “prime” quality have resulted in the closure, sale or losses at more than two dozen mortgage lenders, analysts said.

“Please get in any deals over 95 LTV [loan-to-value] today!” Countrywide said late Friday in an urgent e-mail. “Countrywide BC will no longer be offering any 100 LTV products as of Monday, March 12.”

Countrywide, along with lenders ranging from HSBC Holdings Plc, Europe’s biggest bank, to NovaStar Financial Inc. to New Century Financial Corp. have reported rising delinquencies lately.

As a result, there’s been concern for hopeful owners that possess a less than ideal credit score. They may not be approved for non-traditional home loans due a fear on behalf of banks that payments will pile up in the face of rising interest rates. It’s an important issue to follow for anyone involved in the industry.