Fifth Third Makes Wholesale Changes

Get it?  Wholesale and wholesale?  I kill me sometimes.  Fifth Third, a large mid-western-based bank has made some significant changes to its wholesale programs.  (h/t Chris)  You may recognize Fifth Third as the employer of Tom, one of our erstwhile contributors and frequent commenter.  These changes apply only to the wholesale channel, so I’m sure Tom can let us know if they’ve been made on the retail side of the game as well.

From the Fifth Third flyer (PDF):

Effective with Mortgage Commitments dated on or after March 31, 2008, Mortgage Insurance FICO requirements:

Expanded Approval loans ““ Minimum FICO has been established

· Purchase and Rate/Term Refinances 660 FICO

· Cash-out Refinances 680 FICO

Be sure to obtain Mortgage Insurance commitments prior to 3/28/08 for loans not meeting these new established FICO minimums.

Effective - April 1st Fifth Third will no longer be accepting registrations for the following products: 5/3 100, 80/20 & 75/25

All loans in the pipeline under these products must be closed/funded by April 30 ! No extensions will be granted!

Additionally, registrations for My Community and Home Possible > 97% LTV will no longer be eligible.

MI commitments for LTV?s > 97% must be obtained on or before March 31!

The interesting parts of these changes are the fact that Fannie and Freddie-backed My Community programs, which are designed to “foster homeownership” by providing 100% financing and sundry other underwriting compromises are being pared back by the banks that are supposed to facilitate this type of lending.

Further, mortgage insurance is required on any cash-out refinance for a borrower utilizing expanded-approval with less than a 680 FICO score, I imagine regardless of LTV, which is an indication of just how cautious refinance lending has become out there.  

Update: So check the comments for my ass-chewing.  I wrote this post in about 3 minutes totally distracted and it shows.  The point I was hoping to make is that Fannie and Freddie can offer all the products they want, all the liquidity they want, and they are still limited.  It doesn’t matter that Fannie and Freddie will buy 100% loans if no one wants to underwrite them.  That is the interesting part of this announcement.  You can put all the cash on the table you want but it does no good if no one is willing to back it.  The classic “pushing on a string” in action.  

Apologies for the poorly-executed post.  I didn’t expect this to end up on the Implode-O-Meter, half-assed it and got called on it.  Glad to take the punishment, just don’t a complete a-hole when calling me to the mat. - Morgan

For more on Expanded Approval loans:

Expanded Approval helps borrowers with less-than-perfect credit buy or refinance a home at a competitive interest rate. By taking a comprehensive view of the borrower’s creditworthiness Expanded Approval allows lenders to offer conventional financing to borrowers who would otherwise rely on higher-cost nonprime loans.

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