In my post just a few minutes ago I outlined how capacity would dictate defaults and not credit score – anticipating that the subprime weakness would move in to the prime market because of this. I just received an email from Countrywide which I can’t republish in its entirety here, but the jist of it is:
- Defaults associated with the subprime market are spreading upward in to Alt-A
- Because of the incresed default risk the value of these mortgage backed securities on wall street is near zero (and in some cases unsellable)
- Wall Street investors of these securities are refusing to buy them if they contain 100% financed loans and loans with credit scores under 660
- Countrywide is going to change its guidelines and is increasing pricing to mitigate loss risks
There you have it. 100% financing causing trouble to even people with good credit.
Full disclosure: My company sells loans to Countrywide.Click to See the Latest Mortgage Rates»