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Underwriting guidelines are tight, but banks still making home loans

Despite gloomy news on the economic and real estate fronts, banks in Mississippi are making home mortgage loans. As a sign of the times, however, underwriting guidelines have changed concerning credit scores, loan-to-value ratios, appraisals and down payments. Bankers say they are taking a closer look at potential borrowers, but it is a good time to purchase a home or refinance an existing mortgage.

Hancock Bank is seeing a strong refinancing volume with most applicants being approved, according to Daniel J. Zoble, mortgage division manager. He sees refinancing and lowering payments and/or total costs as a good survival strategy for tough economic times.

“The uncertainty of the current economic environment is definitely causing many people to refrain from spending, particularly on big-ticket purchases such as houses and automobiles,” he said. “It doesn’t really matter what the qualifying parameters are if you are concerned about your employment in the future.”

While the qualifying parameters are more restrictive, they are not much different from 10 years ago. “In other words, if as a lender you did not make subprime loans, then the tighter lending criteria are not affecting your customer base that much,” he added. “Conventional and FHA loan products are attainable for most borrowers just as they were before subprime lending made such a mess of things.”

The Gulfport-based bank helps home buyers by eliminating the upfront application fees for potential borrowers. “If an individual is unsure whether or not they will qualify, at Hancock Bank it won’t cost a dime to find out,” Zoble said. “We’re also working with other local banks and non-profit organizations to find ways of making workforce housing more affordable on the Coast.”

Cadence Bank encourages potential borrowers by offering a wide variety of traditional mortgage programs through national lenders as well as some portfolio loans.

“Our mortgage loan officers always try to offer at least two financial options to each customer to make sure they realize they still have financing options available,” said Nancy Morton, mortgage division manager and senior vice president. “We work up scenarios for customers to determine if it is in their best interest to refinance. If customers do not qualify due to credit, we counsel with them on how to improve their credit situations and apply again when they’re ready.”

Morton points out that Fannie Mae and Freddie Mac automated underwriting systems have been adjusted for more conservative credit standards along with adjusted appraisal guidelines.

“Mortgage insurance credit standards are much tighter, so we’re seeing many of those customers choose FHA financing,” she said. “We can not just take the automated approval for Fannie Mae and Freddie Mac. We are back to underwriting loans for credit quality.”

Tupelo-based Renasant Bank is another financial institution that is busy making home loans while adhering to tighter credit criteria. “If individuals have good credit scores and a steady stream of income or the appropriate amount of collateral, depending on the type of loan requested, most banks, including Renasant, will consider providing credit,” says Scott Cochran, president of Renasant’s Mississippi Division.

He acknowledges the stagnation in the credit markets and real estate sectors but is seeing an increase in mortgage refinancing. “As rates have been lowered over the past few weeks, many are taking advantage by refinancing to save money on their interest payments,” Cochran said. “If a person has an interest rate at 5.5 percent or above, now might be a great time to refinance.”

Mike Staten, senior vice president of BNA (formerly Bank of New Albany), has not seen a big dip in home values in Northeast Mississippi, but he checks with local Realtors on a regular basis.

Contact MBJ contributing writer Lynn Lofton at llofton656@aol.com.

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