Alt-A Availability Erratic

Superior Mortgage, citing “extreme volatility in the Alt-A market,” decided late last week to not lock-in pricing for wholesale Alt-A loans until confirmed with investors, according to an e-mail message sent to brokers and confirmed by the company.

“We will take the lock, but cannot guarantee the rate until our position is confirmed,” the message read.

Late last week, Wachovia Mortgage discontinued Alt-A mortgages in the wholesale market altogether and its wholesale subsidiary, Vertice, temporarily suspended Alt-A product, Wachovia said in an e-mail to MortgageDaily.com.

“Although these mortgages are approximately two percent of our overall wholesale volume, it’s becoming more difficult to sell these mortgages in the secondary market as the financial markets continue to tighten,” the e-mail read.

And while Wachovia will continue to provide the Pick-a-Payment ARM product through all sales channels, Vertice has temporarily suspended its own option ARM products and “will continue to monitor the market and re-introduce products as conditions become more favorable,” it continued.

National City Home Equity has suspended approvals of additional loans or lines of credit, the company stated in an e-mail to MortgageDaily.com.

“This is one of a number of steps National City has taken in recent weeks to help ensure that originations are in line with existing and anticipated market conditions,” the lender added. “We are continuing to closely monitor the market and take the appropriate steps to best navigate market conditions.“

Secondary market disruptions also led NovaStar to stop taking new wholesale loans on Friday, the company announced today.

However, based on a re-evaluation of current conditions in the secondary market, the Kansas City, Mo.-based lender said it is adjusting its pricing and guidelines and expects to resume funding new wholesale loans tomorrow.

“Meanwhile, NovaStar has continued to honor all existing commitments and fund all loans that have already been approved and committed for closing,” today’s announcement said.

On Saturday, Option One Mortgage Corp. decided to reprice loans in the pipeline to rates effective that day. Loans in “Docs Request Out” status, purchase transaction types in “Conditional Approval” status, and any loan in a “Commitment State” will be exempt from repricing. Those in the pipeline from a Commitment State will be honored through the rate expiration date, the company said in an announcement to brokers.

Option One also made several loan eligibility requirement changes, as well as product and process changes.

The nonprime lender said it will only originate full doc loans secured by owner-occupied properties. Wholesale loans in the pipeline that are not owner occupied full doc must fund by Aug. 17.

Loans of correspondent channel CorOne that are in the pipeline and are not full doc owner occupied must fund by Aug. 17 as well and be delivered by Aug. 31, according to the announcement.

“Like other lenders, Option One has further tightened underwriting guidelines, and made product and pricing changes to adapt to the realities of the current market,” Option One said in an e-mailed statement to MortgageDaily.com.

Amongst other changes, Option One has also decided to increase disposable income requirements on debt ratios greater than 50 percent to $3,000 from $2,000 and eliminate refinance submissions for vacant properties and any property listed for sale in the last three months. Plus, appraisals for all new submissions must contain one comparable sale less than three months old, one current listing, and all others provided on the appraisal report must be less than six months old. Appraisals over 90 days old will not be accepted.

Furthermore, effective Friday, the Irvine, Calif.-based company reportedly cut the 3-year ARM loan from its product menu and automatically transitioned all 3-year ARM loans in the pipeline into 5-year ARMs at no cost to the borrower.

Option One additionally said it would begin calling all wholesale loan borrowers to confirm critical contact information and review loan terms prior to the loan going to docs and proceeding to closing.

The latest wholesale activity follows IndyMac’s shift from Alt-A to conforming; National City’s and SunTrust’s elimination of riskier Alt-A products; and Wells Fargo’s withdrawal — at least temporarily — from wholesale Alt-A loans.