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.”
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on Aug 7th, 2007 at 11:37 am
Its a credit squeeze at this time. It will be a credit crunch in the coming days and weeks. There is a lot of liquidity on the street right now… too much.
on Aug 8th, 2007 at 5:14 pm
Shailesh,
Don’t worry about National City, they are sound I am sure. It is just that they rely on a secondary market to purchase the significant volume of 2nd mortgage loans that they originate. The secondary market for 2nd mortgage loans has dried up just as it has for sub-prime and Alt-A.
I am not sure I understand what the previous commenter is saying but there is NO liquidity (secondary markets) for sub-prime, Alt-A, and second mortgage loans right now.
The wise mortgage broker is going to brush up on niche’ programs from Fannie/Freddie and FHA. You are likely to see a big rush back to PMI loans because of the drying up 2nd mortgage market.
Those lenders (Mortgage Bankers) who are not banks are going to continue to have a VERY rough go. Their margin calls are putting them out of business.
on Aug 8th, 2007 at 6:37 pm
David,
Thank you for your thoughtful comments. It does appear that PMI loans will be making a return. Considering the fact that PMI is now also tax deductible and the recent proliferation of lender paid MI - second loan programs would have been facing stiff competition anyway.
I guess I am just surprised at how fast the secondary market has dried up.
Thanks,
Shailesh
on Aug 9th, 2007 at 12:42 pm
[...] sense to do an 80/20 loan instead of paying PMI. However, with the liquidity crisis spreading to second lien holders, obtaining a second loan instead of paying for PMI is no longer a slam [...]