WOW! This is getting quite scary, do not you think?
Have you been seeing all the Lenders that, ummm let just say, have "cut back" on their sub-prime production laTely? I heard a figure that over 50 companies have "cut back". (ok, yes I know some may no longer be in existence, but I'm trying to be nice about it). I also heard a figure that within the next year, there will be over 1 million new foreclosures because of all this sub-prime stuff.
Well, if you've been reading my post for while, you'll know that my belief is the Pay Option Arm is not a sub-prime product and should not be sold as one.
I will also say this, if you only present the POA to sub-prime borrowers you are really missing the boat at the potential of this product. I'm not saying to only present it to the "A" clients, I'm saying present it to EVERYONE that qualifies.
Now, when I say everyone that qualifies, I'm saying generally speaking an 80% LTV borrower with half way decent credit. More often than not, that kind of borrower leans more towards the "A-paper" side of the lending scale.
I personally have sold this product to more 700+ score borrowers than below 700 score borrowers. This type of clientele is usually not the ones that fall into the foreclosure arena, would not you agree? Yes, I understand there are exceptions to this statement, so let's not get nit-picky about this.
Now, I'll give you this much, there are brokers out there that misrepresented the POA (maybe purposefully, maybe not) and have sold it to the client that could not afford the fully indexed payment but thought the minimum payment is all that mattered. Hello ….. did you forget that the minimum payment increases each year?
So I say, sell the Pay Option Arm like it's supposedly to be sold and you will not have to worry about the whole sub-prime thing going on.