Morning Briefing: Remember ‘low doc’ loans? Something similar is back

by Steve Randall08 Jun 2016
Remember ‘low doc’ loans? Something similar is back
A community mortgage lender in New York has launched a product which may stir memories of the ‘low doc’ loans of the past, where borrowers needed little documentation in order to secure a loan.

CNBC reports that Quontic Bank’s offer is for “lite doc” loans which requires two month’s bank statements and proof of employment; or self-employed profit and loss accounts for a year. Borrowers can apply for 5-year ARMs with rates from 5 per cent.

The reputation of stated income loans, often marketed as “low doc” or “no doc” was tainted following the financial crisis. However, Quontic’s product comes with safeguards including a requirement for a 40 per cent downpayment and is only available for owner-occupiers, not investors.
 
Home purchase sentiment at new high
Sentiment among house buyers reached an all-time high in May according to Fannie Mae. Its Home Purchase Sentiment Index reached 85.3, rebounding from an 18-month low two months earlier.

The net share of consumers reporting that their income was significantly higher than it was 12 months ago increased 7 percentage points; net share of consumers expecting home prices to increase in the next 12 months was up 5 percentage points; and the net share of those who expect mortgage rates to go down in the next 12 months was up 3 percentage points.

However, the ‘Good Time to Buy’ figure fell 1 per cent in May to an all-time low.
 
Profits improve for independent mortgage banks
Independent mortgage banks and the mortgage subsidiaries of chartered banks reported better profits in the first quarter of 2016 compared to the end of 2015. However, the Mortgage Bankers’ Association says that year-over-year profits were lower.

Each loan originated in the first 3 months of 2016 generated a net gain of $825 up from $423 in the last quarter of 2015. The first quarter of 2015 generated $1,447 per loan though.
 

COMMENTS

  • by | 6/8/2016 8:58:12 AM

    Someone remind this bank what the definition of insanity is.

  • by Mike Murray | 6/8/2016 10:29:53 AM

    Please. If you read the article, you'll see these are not the same as the "no-doc" mortgages from about 10 years ago. They have a 40% down payment, a 700 FICO score and a 2% higher interest rate than prime. They're a 5/1 ARM and they're not interest-only. They're held by the lender (and any lender in their right mind would hold a 40% down payment mortgage with a 700 FICO score and a higher interest rate). To make a long story short, where's the risk? Only if it's in abusing this program that allows them to do it and I would hope the auditors wouldn't do that again. Now that's insanity!

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