High Loan To Value Ohio Mortgage Lending Defined

A small part of HLTV Ohio home mortgage lending is geared toward Ohio subprime (high-risk) borrowers. For most HLTV borrowers, however, default risk is low. Lenders thus gain from increased assurance that loans will be repaid, while borrowers gain lower interest rates on their restructured credit card debt, plus tax-deductibility on some of their Ohio home equity loan interest.

The use of the word subprime to characterize HLTV lending has produced some confusion regarding its nature and risks and has led some observers to regard the practice as requiring specialized skills. In fact, the profitability and low average risk of HLTV lending have been among the industrys best-kept secrets. Some banks entering HLTV lending are surprised by the profitable low-risk lending opportunities it can offer. Banks like City Holding Company (Charleston, West Virginia) and Community West Bancshares (Goleta, California) are among those that until recently had been reluctant to enter the HLTV arena. After they began offering HLTV loans in 1997, bank executives soon realized that the business is not as complex as they initially believed and is similar to the Title I lending they had done for years (Talley 1998, 7).

The confusion has largely come from semantic difficulties. Before HLTV lending, the vast majority of loans outside the specifications of Fannie Mae and Freddie Mac went to borrowers with less than excellent credit.

That is no longer the case, but the connection between failing to conform to Fannie Mae and Freddie Mac standards and Ohio subprime branding lives on. The subprime brand (or B and C ratings) is often still applied to all loans that have been rejected by Freddie Mac or Fannie Mae because [the loans] dont meet their underwriting criteria (Bush 1997, 34). Freddie Mac defines the subprime Ohio home mortgage market as a niche that finances mortgages that do not meet traditional underwriting standards. Ohio Subprime mortgages are made to borrowers who have a variety of past credit problems of varying severity or to people with unconventional borrowing needs, including those that exceed 100 percent of the underlying propertys value. (Roche 1998)

The implications of Freddie Macs characterization are important: references to Ohio subprime mortgages may arise because of borrower characteristics or Ohio mortgage product characteristics. This confusion was evident in the November 1996 conflict between Greentree Financial, a leader in manufactured housing loans, and Faulkner & Gray, a publisher of industry statistics on theOhio subprime lending industry. Before November 1996, Faulkner & Grays Inside B&C Lending was reporting Greentree Financial as the number 2 servicer in B and C (or subprime) loans.

However, this ranking was based on the inclusion of [Greentrees] manufactured housing loans and Greentree did not want these loans to be reported as subprime. Consequently, its ranking fell to No. 28 (Froass 1997, 99).

The confusion has progressed to the point where the Ohio Mortgage Bankers Association of America now favors the term nonconforming credit for all such lending in this area. With this distinction the MBA has cautioned that a lender referred to as a home equity lender cannot [therefore] be assumed to lend solely to Ohio subprime borrowers.

Even the term nonconforming can be confusing: HLTV loans fail to conform only to the traditional (rather than the current) standards set by government-sponsored enterprises such as Freddie Mac. Experts estimate that only about 30 percent of home equity Ohio mortgages are made to Ohio subprime borrowers (Froass 1997, 100).

Furthermore, HLTV Ohio mortgages are generally A- to Aminusgrade credits and are categorized as nonconforming credits only because of their size relative to the value of Ohio mortgage collateral (which is only part of the lenders protection against default). The real protection enjoyed by lenders extends to the other assets and income of borrowers and to the nonpecuniary losses that borrowers would suffer from foreclosure.

Robert Grosser, chief executive, Cityscape Financial, commented that theres a real misconception [regarding HLTV lending], because people marketing and selling these loans usually have a subprime division. Its not a subprime loan (Timmons 1997a, 13). Similarly, industry leaders such as Gordon Monsen, formerly of Paine Webber; Jeff Moore, chief executive of Mego Mortgage of Atlanta; and Dan Phillips, chief executive of FirstPlus Financial, insist that the HLTV business is not properly categorized as Ohio subprime lending (Bary 1997; Timmons 1997; Muolo 1997).

For more information about Ohio mortgages or to speak to an Ohio mortgage representative from Union Savings Bank visit http://www.localmortgagecompanyohio.com

Ohio Home Mortgage Loans - 3 Things To Watch Out For
Interest rates are still up on Ohio home mortgage loans, but they are lower than they were even eight or nine months ago. Now...

When Is A Second Mortgage Loan A Good Idea?
A second mortgage loan is a loan taken after the first mortgage, with the property used in the first mortgage as collateral. ...

Mortgage Loan: Annual Percentage Rate (APR) and the Truth in Lending Act
If you are in the market for a mortgage it is important to understand what the Annual Percentage Rate means and what you need...

Mortgages Loans: Home Equity Basics
As interest rates rise more homeowners are turning to home equity loans to payoff other high interest debt. Equity in your h...

Maryland Home Mortgage Loans - Beware of These 3 Things
Mortgages continue to be in demand in Maryland as more people enter the housing market. What was once a sellers market has tu...

Home Mortgage Refinance Loan How to Find the Best Mortgage Loan
If you are in the market for a home mortgage refinance loan with a good interest rate, favorable terms, and good service, you...

Illinois Home Mortgage Loans - 3 Ways To Find The Best Lender
The best mortgage lenders in Illinois continue to remain busy, even as the housing market cools. With a surplus of homes on t...

Mortgage Loan Process for a New Home
You have seen a lot of real estate homes and very much interested, so now you are planning to make a purchase.The first thing...

New Hampshire Home Mortgage Loans — Beware of These 3 Things
The average price of a home in New Hampshire is approximately $130,000, and homes in New Hampshire have recently been appreci...

California Mortgage Loans
California mortgage loans help home buyers and home owners residing in California raise cash for their personal, business or ...

Mortgage Loans Online: What Are Sub-Prime Mortgage Loans
If you are an individual with a poor credit rating, you probably have heard about sub-prime mortgages and bad credit lenders....

Reverse Mortgage Loans: What You Need to Know
If you are a senior considering a reverse mortgage to boost your income there are several things you need to know. Here is a...

North Carolina Home Mortgage Loans - How To Find The Best Broker For You
North Carolina is a state that has a growing population. In fact, from 2000-2005, the Tar Heel states population increased by...

Mortgage Refinancing Three Questions to Ask Your Loan Representative
Mortgage refinancing can save you a lot of money if you go about it correctly. In order to avoid overpaying for you new loan...

Second Mortgage Loans After Bankruptcy
The purpose of bankruptcy is to give the debtor a new start in his life by repaying creditors in a systematic way. Thus, bank...

A Mortgage Primer to Help You Find an Ideal Loan
Mortgage can be defined as a legal process of transferring ownership of property from one person (mortgagor) to another (mort...

First Time Home Owner Mortgage Loans
First time home owners are sometimes surprised at the complexity of the mortgage lending process. If you are searching for a ...

Pennsylvania Home Mortgage Loans - 3 Things You Should Know About Mortgage Loans
Home mortgage loans in the Commonwealth of Pennsylvania can be had for a variety of locations. When choosing a home in the Ke...

Getting a Second Mortgage Loan in California
Second mortgages can be great sources of money for home improvements, but they come at a price. A second mortgage uses your h...

Maine Mortgage Loan Companies
Maine mortgage companies are expert moneylenders that offer various kinds of mortgage loans and others services. These mortga...