More Press..CMG mentioned in NYSun Article

Though City Borrowers Feel Pinch, Manhattan Seen as Insulated

By BRADLEY HOPEStaff Reporter of the SunAugust 16, 2007

When a young lawyer and his fiancée came into a mortgage broker's office looking for a way to finance the purchase of an uptown apartment, the broker, Richard Bouchner, said the deal looked like a "slam dunk."
The lawyer made more than $200,000 a year with his bonus and had good credit. He had little savings, but he fit the profile of a loan applicant that banks had been supporting, albeit with a higher interest rate.
Six weeks later, Mr. Bouchner isn't sure he can find the lawyer and a dozen or so other clients the financing they need, he said.

"Banks used to like these people," Mr. Bouchner, a co-owner of Commodore Mortgage, based in Jersey City, N.J., said. In the last few weeks, "there has been a real contagion effect," he said. "One lender after another is turning off the flow."

The lawyer's case is not yet part of a widespread trend, according to brokers, but analysts and others in the real estate industry said cases such as his could become more common in coming weeks, and possibly months, until the market corrects itself.

"We're in a new world," a professor of economics at New York University's Stern School of Business, Lawrence White, said. "My guess is that things will stabilize. Lending against real estate is a good business, but we're not going to be seeing the halcyon days of the past couple of years."

The consequences of young buyers with little savings or less-than-stellar credit having difficulty affording loans is uncertain and will be a subject of scrutiny over the next several months, analysts said.
Mr. Bouchner said new developments catering to young professionals could have more difficulty filling spaces, especially in neighborhoods such as the Lower East Side, Harlem, and Williamsburg.

New York City's wider real estate market will not be intensely affected by those buyers because people with strong financial backgrounds Â-- not first-time buyers Â-- are driving sales, the chief executive and owner of Manhattan Mortgage Company, Melissa Cohn, said.

Helping insulate Manhattan is also the fact that many of its buildings are co-ops, whose buyers have long had to meet standards well above those of mortgage companies and banks.

"People are still getting loans and they are still buying in New York City," Ms. Cohn said. "We're definitely more protected than most regions in the country." Still, she added that the tightening credit market is leading to more demands from banks and higher interest rates.

A real estate lawyer for Belkin, Burden, Wenig & Goldman, Aaron Shmulewitz, said buildings in other city boroughs would likely absorb the impact of the credit market woes. "There are more subprime borrowers out there," he said.
So far, the credit crunch is primarily hurting people with credit scores below 700, an owner of 14 Apollo Associates in Brooklyn, Basil Capetenakis, said. New York buyers typically have better credit.

He said the banks had been "going overboard" with risky loans to people with bad credit before the trouble started. Now, banks are scrutinizing his applicants more closely and shutting out certain riskier groups, such as people who are self-employed.

Lender goes out of business

Well it finally happened to us...one of our lenders went under before they funded a loan a closed deal. A re-fi that closed yesterday will not fund because the lender, First Mangus, stopped funding deals. Pretty crappy if you ask me....FM should have alerted us so that there was a possibility that this could have happened. I spoke to our rep on Tues, and he never mentioned any issues....
Now we have a borrower that is a float, and we, as a firm, our out our commissions on the deal. Boy, ain't life grand....

Check this out. Gene and I are quoted at the end of the article. Let me know what you think!

Who can't get a mortgage now?
Buyers with good credit and a down payment will make out well - all others, prepare to pay.

By Steve Hargreaves, CNNMoney.com staff writer
August 10 2007: 4:05 PM EDT
NEW YORK (CNNMoney.com) -- The stock market is going crazy. Hedge funds are going under. But for the average American looking for a home loan, the crisis in the subprime mortgage market may actually be good news.
"Not only is it nothing to worry about, it's an absolute positive," said Loni Graiver, president of the Maine-based Cumberland County Mortgage. "Not only have [home] valuations come down, but [interest rates] are still historically low."

Rates on 30-year fixed loans dipped last week, to 6.41 percent, according to the Mortgage Banker's Association.

In addition, tightening lending standards stemming from the subprime crisis likely mean fewer buyers, pushing down home prices.

The one catch is this: You've got to be a buyer with good credit, a low debt to income ratio, a healthy down payment, verifiable income, and looking to finance less than $417,000 (the cutoff for so-called jumbo loans).

Those characteristics basically define someone who qualifies for a loan through a government program like Fannie Mae, which make up about 50 percent of all outstanding mortgages, according to Guy Cecala, publisher of the industry newsletter Inside Mortgage Finance.

Mortgage meltdown contagion

Graiver said to expect to pay a down payment of at least 10 percent, and have a FICO credit score of 620 or higher in order to get a rate between 6.2 and 7.5 percent. Perhaps 90 percent of home buyers qualify for that prime rate, although if you want a rate below 7 percent you probably need a FICO score above 660.

To get the best deal, "plan on coming to my office with your tax returns and a down payment," said Bob Mouton, President of the Long Island-based American Mortgage Group.
If you're among the 10 percent of the people with credit scores below 620 who need a subprime mortgage, things could get tricky.

"To a large extent, they are going to find that no one wants to lend to them," said Steve Habetz, president of Threshold Mortgage in Westport, Conn. "Those loans are being eliminated from the marketplace."

Someone with a credit score of 600 might have to pay as much as 9.5 percent, according to FICO, which provides lenders with borrowers' credit ratings.

You could also run into trouble if you're loan is for more than $417,00, the maximum amount that can be channeled through a government lender. Loans over $417,000 are considered "jumbo" mortgages, which have recently seen rates jump due to a perceived increase in risk.
Mouton said money for subprime loans is still there, but be prepared to pay interest rates of 8 or 9 percent on them, compared to just over 7 up until recently.

Eugene Choi and Rich Bouchner, owners of Commodore Mortgage Group, say they've had to scramble to get loans for clients in the New York area that didn't meet the traditional criteria.
One was a waitress who made decent money at a high end restaurant, but couldn't prove it because so much of her pay was in cash tips.

Another was a young lawyer, making nearly $200,000 in the city but who didn't have the money saved for the down payment on a $800,000 Manhattan condo.
"A lot of people who should have qualified for credit are getting squeezed out of the market," said Bouchner. "Our lenders are turning off the spigot so quickly, these loans might not be here tomorrow."

BNP Paribas - This could be a problem

French Bank BNP Paribas - the largest bank in France and second largest bank in Europe - announced it has temporarily halted withdrawals in three of its mutual funds that have exposure to US subprime credit. The problem the rapid reevaluation of what these securities are worth. And since the value has been declining so quickly in recent days, the French bank wants to see the markets settle before determining the net asset value per share of their funds prior to redemption. It is no coincidence that they are doing this on the heels of the Bear Stearns debacle, in which a similar situation occurred without any suspension of withdrawals, causing those funds to disintegrate.

What is additionally concerning about this story is that just last week BNP Paribas CEO said the bank's exposure to US subprime was "absolutely negligible''. This underscores the rapid and dramatic amount of the credit repricing, which has taken so many US mortgage companies by surprise. There may be more damage ahead where existing pipelines have exposure over the next 30 days - and it is not certain whether the credit markets themselves have stabilized.

BNP Paribas has about $400 Billion Dollars in holdings, with only $2B of that having exposure to subprime - so even this small exposure has sent shock waves through the market. In response to the BNP Paribas situation, the European Central Bank (ECB) has opened up the spigot and made $94B Euros (or $130B Dollars) available for banks to borrow, in an effort to calm fears about liquidity. As you can imagine, investors like you and I who are told that their own funds are not available for withdrawal would be quite worried - and even if they hadn't intended on withdrawing their money, the loss of confidence might prompt individuals to make a run on the bank and pull other funds out. This is why the ECB has made plenty of funds available, to keep investors confident that their investments will be liquid. And even here in the US, the Fed has just made an extra $9B Dollars available for borrowing, for similar reasons. As a follow through to our Fed injecting liquidity, it is now reasonable to assume that the Fed will indeed cut the Fed Funds Rate at the next meeting in September.

In the day’s only economic news, Initial Jobless Claims edged higher by 7,000 claims to 316,000, the highest weekly total since June 30. This is the second consecutive week with rising jobless claims and with the financial and housing sectors having issues, this could lead towards a trend for higher unemployment – a positive factor for the Bond market.
Mortgage Bonds are receiving a boost on the uncertainty and fear in the financial markets - but since this story is still developing, the picture may change quickly.

For now, we advise cautiously floating any conforming loans, but on non-conforming transactions, you should continue to lock upon application, and remind shoppers that the landscape in the non-conforming market has dramatically changed. They need to get into application and lock quickly, as guidelines and lending standards are being changed and tightened daily.