|
How has the Mortgage Subprime Crunch in the USA Affected Mortgage Funding in Mexico…
PDC Mortgage Watch
I had a client recently ask me how has the mortgage subprime collapse in the USA affected mortgage funding in Mexico, so I would like to answer his question in this article.
(Since 2001, the USA's economic growth has been powered by the real estate industry, particularly mortgage-equity withdrawals. Now, without housing to prop it up, the economy is in trouble.
Withdrawing equity from one's home was what prompted the economy, essentially from 2001 through sometime last year. A statistic from a recent report by John Mauldin says it all: Real GDP growth, excluding mortgage-equity withdrawals, averaged less than 1% over the past six years (it averaged a little more than 2.5% a year overall). During the thick of it, the real estate industry was responsible, directly or indirectly, for 40% of all jobs created.
That 40% contribution to job creation has, in the past 18 months or so, declined to about 13% of new jobs. It will soon be responsible for the bulk of job losses. In fact, a friend in the subprime business said that WMC Mortgage, a wholly owned subsidiary of General Electric, is laying off 35% of its work force, taking a $100 million charge and cutting back on its writing of loans.
 But what's even more important, he notes: "They (WMC folks) are going to get rid of all 100% financing on all borrowers below 700 FICO. Also, (there will be a) 95% cap on first-time homebuyers. Now watch the home builders suffer."
A WMC spokeswoman declined to comment on what she called "speculation" about layoffs and said the company is currently adjusting the types of loans it makes and its guidelines for underwriting loans. As for the charge, she said there have been more requests than usual from WMC's investors asking that the company repurchase loans from those investors.)
This is a story with far greater ramifications than just for the subprime sector, and we need to keep that in mind.
However, all these subprime mortgage defaulting in the USA has had no great bearing on the funding of Mexico Mortgages. On the contrary we are seen more players coming into action, such as Scotiabank Mexico, and others more aggressively attacking the market with a variety of programs such as NO INCOME, NO ASSET VERIFICATION Programs, NO DOCS Program, LIGHT DOC. Programs, Construction to Permanent Financing, etc.
So, while GE Money is tightening their mortgage qualification terms by increasing their FICO score requirements, Scotiabank, the new kid on the block, has a 650 Credit Score requirement for both Americans or Canadians purchasing homes in Mexico.
Consequently, while some lenders will become more conservative in their underwriting guidelines based on the subprime mortgage crunch in the USA, others will want to, more aggressively, position themselves in the market.
In a nutshell, the subprime bankruptcies will decrease in the USA with the FED`s lowering of the prime interest rate, and the Mexico mortgage market will continue to grow!!!
This article courtesy of Enrique (Henry) Saldana, Mexico Mortgage & Real Estate Solutions Tel: (984) 109-2458 Cell: (984) 116-8528 http://enriquehenrysaldana.point2agent.com/,
This email address is being protected from spam bots, you need Javascript enabled to view it
http://creditoshipotecarios.point2agent.com/
|
