It's the economy. As housing begins to slow, all companies are looking at asset preservation, and minimizing risk, and that includes some banks that make mortgage loans to less credit-worth customers.

The number three bank holding company, Bank of America Corp., announced yesterday that it will liquidate its $26.3 billion sub-prime real estate portfolio, over the next three quarters. That means customers with spotty credit don't need to knock on their doors.

Does this signal a trend in home financing? Will buyers have a harder time getting credit? Your buyers with mixed credit histories may be affected if other banks follow Bank of America's lead.

The timing couldn't be worse for Realtors who are trying to move aging inventory that is accelerating in price and declining in affordability.

And that means agents need to brush up on their creative loan ideas. Here are a few to get started:

Assess the situation. The only way to know is to ask questions. If the buyer has a credit problem, it will come out in ordinary customer prequalifications as you determine what range homes to show. Run the buyer through a few of the typical questions that a loan officer will ask and write down responses. For first-time buyers, offer to assist them in filling out a loan application if you are representing them in the transaction. Have a team of loan professionals available for you to work with so that you can save the buyer time by putting him or her with the right loan officer from the getgo. If you don't have credit information on the buyer, let your instincts be your guide.

Don't judge a book by its cover. Sometimes it is the most fashionably dressed couple with the luxury car who are the most overextended. Also, some self-employed people don't meet conventional lending guidelines. Ditto for people who have just changed jobs. Some people have simply had bad things happen to them, and are sincere about stabilizing their lives with a home purchase. So don't be discouraged when you learn that your customer has had a reversal.

Work with serious buyers only. Don't let desperation cause you to work with people who will ultimately waste your time. Save yourself headaches by only working with buyers who are willing to prequalify with a lender and go under contract with you so that you can represent them properly.

Research financing options. A buyer with poor credit can always pay a high interest rate, and should be encouraged to apply with a mortgage broker who specializes in higher risk loans. A side-by-side comparison can protect the borrower from succumbing to a predatory loan. Some loans such as those offered by Countrywide actually work to help the borrower repair credit. They work like a hybrid adjustable rate mortgage that converts to a fixed rate after a term. This rewards customers who are meeting payments on time with a competitive fixed rate after their probationary period has ended. Lenders such as e-Loan, among others, offer special mortgages for credit-troubled borrowers.

Become your own lender. Two companies actually train you to be a mortgage loan originator. You get paid, if you want to, for much of the work you would be doing to assure that your deal closes anyway. You have to disclose that you may get fees for performing such duties, but some agents choose to waive the fees or rebate them to their buyers. Check out Computer Mortgages of America, Inc. or Onepipeline.com.

Find out if the seller's loan is assumable. If the home has been mortgaged under an FHA loan made before December 14,1989, it may be assumable, and the remainder of the purchase price can be financed with a lender or in a loan from the homeowner, also known as a seller take-back.

Offer a seller take-back. Owner financing could satisfy both your buyer and the seller. If the seller has been sitting on the property without many offers, or doesn't need the proceeds from the sale all at once, seller financing could be the answer for buyers who either don't meet conventional borrowing guidelines or who may have credit trouble. The seller can set the terms and acts as the banker, but retains title to the property in case of default. Buyers, sellers and agents can get more details at Noteworld.com, a seller financing resource center on the Web.

Help buyers make it through closing. Closings are routine for agents, but buyers may not understand how their behavior can affect their credit. Remind buyers when they get a loan to rein in their spending. No new cars, furniture, or other debts should go on their credit cards or new accounts until after the home is closed.

Published: August 16, 2001

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