Washington Mutual-owned Long Beach Mortgage announced yesterday that its underwriting guidelines are changing, effective Monday, January 8.
Following the lead of a host of other sub-prime lenders including large-players Fremont and New Century, Long Beach is hoping to avoid the fate of sub-prime lenders Ownit, Sebring Capital, and Mortgage Lenders Network. All three closed their doors in recent weeks.
When a mortgage lender "implements new underwriting guidelines", its pool of eligible applicants narrows This is because the rules for approving applications are now "stricter".
One area in which Long Beach is expected to get tough is in requiring borrowers to have a history of managing multiple tradelines for high LTV mortgages. Another area is to limit the combined loan-to-value for mortgage applicants for whom income is stated. Long Beach currently requires a 640 FICO score to go 100% on stated applications.
Expect to see more lenders to make headlines as the follow Long Beach’s lead in the coming months.