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Posted by: Kim_Hamilton on 02/06/2008 08:41 AM Updated by: Kim_Hamilton on 02/07/2008 12:11 AM
Expires: 01/01/2013 12:00 AM

What is a Soft market Policy?~By One of Our Newest Sponsors, Michelle Young of Michelle Young Financial

We would like express our deepest thanks to Michelle Young of Michelle Young Financial for joining our Family of Advertisers! "Choosing a mortgage broker in today's world means not just receiving an expert mentor through the complex mortgage lending process, but a trusted advisor for life. I am proud to be able to offer you extensive choices and access to information while continuously weighing and balancing your financial interests and goals....

throughout your changing life. I am more than an mortgage loan originator, or broker, rather think of me as your Home Asset Advisor, or your Mortgage Planner.

The world of mortgage finance is a world of constant change. I am dedicated to keeping up with this change to provide the maximum professional service to my clients. This dedication is based on the belief that professionalism is only achieved by having the correct blend of product knowledge, and an intense commitment to customer satisfaction.

As part of my commitment, I represent many of the Nations largest wholesale lenders, offering you hundreds of loan programs as well as competitive rates and fees. I know that each customer has specific needs, and I strive to met those needs with quality service and individual attention. With a variety of loan programs and an established network of lenders behind me, I'm confident that I will find the loan that best suits your needs, at a the most competitive rate, or I wouldn't expect you to do business with me! Just a few of my services include

* 100% Financing options
* Construction Loans
* Commercial Financing
* Second Homes
* Investment Properties
* 1031 Exchange Expert
* Low Interest Rates and Closing Costs
* Equity Lines & Fixed Rate Second Mortgages
* Fast Approvals
* Free Pre-Qualification & Pre-Approvals
* Manufactured Homes & Condos
* Reverse Mortgages
* Interest Rate Buydowns
* First Time Homebuyer
* Graduated Payment Mortgages
* Mortgage Planning
* Free mortgage and financial analysis
* Free Credit Score Analysis and Repair Tips"

You can contact Michelle at (209) 753-7222 or (209) 728-2275
or visit her on the web at

"Ok, Ok -- I know it's time to address this issue! Many of you have asked questions concerning the soft or declining market policy announcements being made by lenders the past few months, and how that policy affects us in Calaveras County. I've been trying to decipher all the policy statements myself and believe me, it hasn't been easy....

What is a Soft Market Policy? Simply put, it's a policy put in place by all lenders to address financing homes in areas where market values are declining. Understandably, lenders do not want to end up with a foreclosure on their hands that won't sell for the outstanding loan balance. Contrary to what you have been hearing on the news, people do not generally stop making their mortgage payments because of interest rate factors, they stop paying their mortgage when their loan balance exceeds their market value.

Are we considered to be in a declining market? That is the $64,000 question indeed. The short answer is "it depends on who you talk to"... You are an expert in market values in our area, let me ask you, (and be honest) have prices come down? .....Well, there may be your answer.

How does a lender determine whether the house you just sold is in a Soft Market? Ahhh, that's an interesting question. Let me TRY to answer because it is very important. They generally consider a number of factors including the results of the automated underwriting system (D.O./D.U) which is updated frequently to include warning messages in areas of sharp decline, the appraisal, an in-house system of the lenders creation (as with Countrywide's LARA), The Office of Federal Housing Enterprise Oversight website which monitors the markets countrywide, and PMI companies. Some lenders have established that the entire state of California is a Soft Market, regardless of any of the above.

DO/DU - to my knowledge Fannie Mae is not reporting our county as declining, nor have any errors been generated in AU engines as yet.

APPRAISAL - Does the appraiser check the box "Declining Market" on the appraisal report? This is a dead giveaway! The other red flag on the appraisal is the box that indicates an "oversupply of listings" (meaning more than 6 months) ...this number cannot be fudged because it is a simply product of how many active listings are in the marketplace, and the current average market time... anyone can do the math and figure this out! As of this week, most of the appraisers that I've spoken to agree that the answer is "YES" to both boxes in all areas of Calaveras County except perhaps Murphys.

OFHEO - is not currently reporting our county as declining, however, their information is compiled quarterly, and the last quarter completed is Q32007. 4th Quarter figures are due out any day. By the way, this is a very interesting website to peruse. Office of Federal Housing Enterprise Oversight (OFHEO) House Price Index (HPI). To learn more click on this link:

PMI - Most lenders rely in part on the results obtained from this website, which is sponsored by GMAC, one of the largest PMI companies in the US. I've put in virtually every zip code in Calaveras, Tuolumne and Amador Counties, and come up with the same result. Properties located in "D" markets are considered to be in a Declining Market unless the appraiser demonstrates why the property and its immediate market neighborhood are not affected

What is the bottom line?? If a home is, or has been, in a declining market within the past 12 months, they are reducing their maximum LTV allowance on a given program by 5%. This means if the maximum LTV allowed on a cash out refinance for example, is 90%... in a Soft Market, they would only allow 85% LTV. For 100% loans, 95% is the most that can be done. Stated Income borrowers -- 85% max LTV. It's important to understand that this policy affects every single transaction you are involved in where conventional financing is being placed. In addition, more and more lenders are tightening their guidelines regarding down payment requirements outside any soft market policy - and these changes will affect you. As a side note, an addition to the new credit requirements discussed a few weeks back, many lenders are now requiring that a borrower's credit report be dated within 45 days of funding. The old rule was 120 days.

Once again, as you can see, it is becoming more an more crucial that you control your buyer's financing as much as possible. Have all your borrowers pre-qualified and get it in writing! Better yet, insist that the prequalification include a statement that the borrowers credit history has been thoroughly evaluated. Even sellers can insist that the buyer be pre-qualified by YOUR trusted lender as a pre-caution. -- as hard as it is to find a buyer in the market, the worst possible scenario is to lose the deal at the last minute because the borrower does not qualify.

Lastly, but not least in importance -- you can help the situation by eliminating sellers who are not motivated from your inventory of listings. This will certainly help speed the recovery process."


Michelle Young
Michelle Young Financial

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