Credit Counselor: With Economy Cooling Off, Lenders Tighten Standards.(Brief Article)

While defaults and delinquencies are inherent in the mortgage industry, they are a special concern for those dealing with subprime loans.

In the last two years, in the subprime market, there have been fewer programs that allow for borrowing beyond 100% loan-to-value, said Jeffrey Briggs, an executive vice president of Wendover Financial Services, a Greensboro, N.C. subservicer for the subprime residential and Alt-A market.

Mr. Briggs attributes the fewer programs to "the terrible loss experience that lenders realized with those High LTV programs. All of our clients over the last two years have tightened their credit quality standards," he said.

Roger Rizner, executive vice president of lending operations at Option One Mortgage Corp., an Irvine, Calif. originator, servicer and subservicer of residential subprime loans has seen slightly different results.

"Based on our production last year, LTVs have gone up only very slightly. Roughly, the average has gone up about half a percent," he said.

Mr. Briggs added, "There are high volumes of loans being made up-to-over 80% LTV without mortgage insurance being required as by some of those nonconforming participants.

"I think their success with those kinds of loans up to 100% LTV, (is) in areas where properties are appreciating, and produce a risk result that is acceptable to them and they view that as profitable."