I didn’t see this one coming. National City is a very conservative lender. Even back in 2005 they didn’ t offer a lot of aggressive loan programs as others did, so I am very surprised this is happening now. Wow. This really makes you wonder who will survive this liquidity crunch.

According to Marketwatch:

National City Corporation said on Monday that its National City Home Equity unit has suspended approvals of addition loans or lines of credit in response to market conditions. “This is one of a number of steps National City has taken in recent weeks to help ensure that originations are in line with existing and anticipated market conditions,” the bank said in a statement that was e-mailed to MarketWatch. “We are continuing to closely monitor the market and take the appropriate steps to best navigate market conditions.”

If you’re in the process of buying a home or if you’re a real estate agent working with a buyer then there are a few things you need to know about the imploding loan marketplace. Basically, the stated income party is over. In fact the party has been over for a while for a great number of folks but things just turned nasty for those still hanging around. I’ll leave the explanation of why and how to others.

All I can say is a lot of the stated income, no ratio, and no documentation loans will be gone by the end of the week. If you’re pre-qualified on any of these doc types with anything over 90% loan to value then you need to call your lender immediately. Ask them if the loan is still available. This is especially true if the loan has not been locked.

If you have sufficiently good credit then ask your lender if any of the agency loans (Fannie, Freddie) would work. Otherwise your only choice is to go full documentation with complete income verification or save up 10% for a down payment. Dad and mom just came home and we’re back to old school.