Newspaper article THE JOURNAL RECORD

Mortgage Lenders Seek Business from Credit-Scarred Consumers

Newspaper article THE JOURNAL RECORD

Mortgage Lenders Seek Business from Credit-Scarred Consumers

Article excerpt

Scrambling to find new borrowers in a time of rising interest rates and moribund loan demand, mortgage lenders are increasingly accommodating to credit-scarred consumers who once would have been turned away.

In the past few months several companies have launched loan programs geared specifically to prospective home buyers who have had credit woes, ranging from late payments to bankruptcies and foreclosures. And even lenders without formal programs say they're ready to be flexible _ particularly if the borrower's credit woes stemmed from a job loss or recession-related issues largely out of his or her control.

All this spells opportunity for wanna-be homeowners _ even if they've been rejected for a mortgage in the fairly recent past. Although there have always been a handful of lenders willing to make mortgages to so-called "sub-standard" risks _ for a price _ the number of lenders in this market has recently started to boom. And that's resulted in greater loan availability and more reasonable interest rates and fees, experts maintain.

"The whole lender community is looking at this," said Robert M. Rosenblatt, director of surveys and statistics at the Mortgage Bankers Association in Washington, D.C. "They're looking for growth opportunities. And this is an area that they may have overlooked before."

Notably, the push to second-tier risks is major departure for mortgage lenders that had become increasingly strict after back-to-back years of record loan demand in 1992 and 1993. But it's no coincidence.

Interest rate hikes that started in February have decimated loan demand. Currently, experts estimate that loan volume is down by 40 percent or 50 percent from year-ago levels. For the year, largely thanks to a strong first quarter, mortgage originations are expected to drop by about 30 percent to roughly $700 billion from more than $1 trillion a year ago.

As mortgage volume began to dive, lenders started to scramble to find new business opportunities. That's led to rapid development of new mortgage products, including the programs geared to individuals with checkered credit histories.

St. Louis-based Prudential Home Mortgage, for example, launched a "flexible home financing program" last month, which drastically lowered the hurdles to qualify for a mortgage. Specifically, Prudential said it will overlook past credit problems if the consumer now has steady income and readily pays debts. It won't hold minor charge-offs or collection accounts against you, and it will try to create a credit history for those who have none by tracking rent or utility payments.

ARCS Mortgage goes a step farther. You can have a home foreclosure or even a bankruptcy in your not-too-distant past and still qualify for a loan, said John Lucas, vice president and manager of ARCS Van Nuys (Calif. …

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