American Home Mortgage facing BK---what does this mean? Get your clients loans locked!

The headlines today read "American Home Mortgage facing bankruptcy."

http://www.usatoday.com/money/industries/banking/2007-07-31-american-home-mortgage_N.htm?csp=34

What does this mean to you and me?   Agents and their lenders?

The first wave saw the subprime lenders go out of business.  This next wave will be the companies that are heavy in ALT-A lending. 

"Alt-A" or alternative loans are nontraditional mortgages, like those with stated income, no ratio, or no income documenation.  The credit scores are usually below 700 and these products include most interest-only loans and option ARMs.

Many of these investors are hanging on by a string and our reps tell us many more will follow American Home Mortgage.  

With millons of ARMs adjusting and homes depreciating in many markets, more big names from Wall Street will be out of the mortgage business before the end of the year.

If you are a real estate agent, it is more important than ever to get your clients pre-qualified by your preferred lender, get them in for a loan application, and get their programs and loans locked immediately.   Do not delay or think you have "plenty of time" for that.

I would ask your preferrred lender for proof that your client's loan has been locked.   Get a committment letter.  If he refuses, find a different lender.

Many loan officers, even experienced ones, "play" the market.  They may wait until the 11th hour to lock loans to get better pricing on shorter delivery committments or to shop the loan between as many banks as possible to find the best pricing for them.   

In today's market, this delay of even a few days could mean the program is no longer available or the rate has changed dramatically.

This advice won't help you if the company goes out of business, like AHM seems to be, but in today's marketplace, the game lenders play could cost you your commission.  Protect yourself and your client.