She also likes to be called the Money Honey, but she’ll answer to either.  Her name?  Pam Gatlin.  Her trade?  Loaning money and getting you into the home of your dreams.  Her claim to fame?  Mortgage Genie.

Today’s Mortgage Genie is Pam Gatlin, of NationsPlus Home Mortgage.  I asked Pam to talk a little about this whole subprime mess, as it’s the water cooler topic of the week and we’ll likely be hearing about it for quite some time.  So without further adieu, the Genie speaks …

"Federal Reserve Chairman, Ben Bernanke, in prepared testimony before Congress on Wednesday, explained why policymakers opted to hold interest rates steady at their meeting last week.  The economy appears likely to continue to expand at a moderate pace and no recession is likely.  The greatest concern of the policymakers continues to be inflation.  While the core rate of inflation remains high, Bernanke estimates that it will moderate gradually over time.  However, at the first up tick of inflationary pressures, look for the Fed to increase rates to tame those pressures.

Barring any economic surprises, rates are projected to remain steady, in the 6% range, with no points. 

So what’s all this mess with sub-prime lending?  Sub-Prime lenders provide mortgage financing for borrowers with “less than perfect” credit.  These borrowers have been denied credit by conventional mortgage lenders.  While the sub-prime lenders provide these borrowers with more flexible criteria so they, too, can participate in the great American dream of homeownership, it doesn’t come cheap.  The terms, rates, and conditions of these loans are not as attractive as prime mortgages.  Typically, rates are significantly higher with rate adjustments during the life of the loan.  Most also have prepayment penalties.  Rates are risk-based – the higher the risk, the higher the rate.

So, why would a borrower opt to take this route?  If the priority is “just get me in the house right now,” borrowers theorize they can suffer for a couple of years with the terms and conditions.  Then, with a couple of years of good payment history on the mortgage as well as the consumer debt, their credit scores will go up and they can refinance to a lower rate on a conforming loan.

This is where theory meets reality.  Rates on these loans go up and borrowers find it difficult to keep pace with the payment increases.  Defaults on sub-prime loans have skyrocketed over the last few months.  These defaults have fueled the recent pandemonium in the sub-prime market. Mortgage investors are howling. Several large sub-prime lenders have simply folded their tents and are no longer in business.  Federal investigations abound amid reports of rampant fraud, mismanagement, and predatory lending."

There are so many conventional loan programs out there just perfect for all types of buyers, make sure to exhaust those options first with lenders like the Money Honey – I guarantee you’ll be better off.  Call Pam at NationsPlus Mortgage in Blacksburg, 540-552-2228, or email her today.