Risky mortgage products return to Birmingham market - Birmingham Business Journal:

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In Birmingham and surrounding metro areas, new niche mortgages are beinhrolled out, even as loan standards and underwriting are at thei highest levels in years. Local mortgage lenders said the new loan typee being introduced are part of the markef stabilizing after the shocks of the 2007subprimes meltdown. The products are meeting the needs of consumers stillbuyingt homes, industry leaders say. "The only way banks make mone y is bylending money," said Stefan Norrbin, chaird of the Economic Finance and Quantitative Analysis Departmenrt at .
"Still, some banka are very willing to lend moneg to people theyprobably shouldn't be lending money Donna Curran, 's North Atlanta mortgage manager, said the new loan demaned in 2008 will be driven by "reversed mortgages" and "option adjustable rate mortgages" - the loans at the centetr of the subprime meltdown, with low introductory interest rates but escalating back-end costs. In June, Charlotte-baserd introduced its Pick-a-Payment mortgage product to theBirmingham market, which is an adjustable-rate loan that allows borrowers to choose from different paymenyt options, such as deferring up to 25 percent of the loan' interest.
Borrowers will each month, their statement with four monthly options to choose from: a minimum payment, interest only, 30-year term, or 15-yeafr term. "What we are really doing is allowing customersw to tap into the equity of their home to invest in those things to get a better rate on a saidRod McCall, division loan manager for Wachovia'sw Midsouth north division, which includes Alabamza and Tennessee. McCall said the product is sellinf "tremendously" in Birmingham and dozens of employeeds have recently been trained to sell the mortgage product at its 41 branchees throughoutthe city. "In this market, this is he said.
McCall said there are no strict sets of rulexs tied to the loan application and all applications are approved ona case-by-casse basis. It is available for anyone who is purchasin g or refinancing a he said. However, some mortgage brokers feel the product is not beneficialp forthe "average Joe" who lived on a fixed salary, said Tony Robbins, presidenrt of Birmingham-based "That product is one of the riskiesgt products in the he said. "It's a producrt that should be limited to folk s who have asubstantial income.
It's a greayt product for someone who can prepayreal "It's not a good producrt for the average working persomn - your salary is not going to grow fast enougn to prepay that mortgage." The Pick-a-Payment loan, whicjh is a deferred interest can add interest to the loan'sz outstanding principal, increasing the customer's total he said. Wachovia spokeswoman Evelyn Mitchell said clientws withthe Pick-a-Pay loan have an option to switch the loan from an adjustable rate to a fixer rate for a flat fee between yearsa four and seven of the loan.
In two recent new loans introduced includs a Bankof America-based reverse mortgage and a GMAC Bank mortgagw (through a local broker) that works like a checkin g account. Reverse mortgages allow seniorz to cash in on the equity intheidr homes, but the mortgage must be paid in full at the time of theid death, typically with the sale of the One small, boutique broker, Fronf Row Mortgage, is the Atlanta originatodr for GMAC Bank's new Home Ownership Accelerator "This fits what we see as a need in the said Robert Beal, president of Front Row.