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arasner
this isnt my 'niche' .
I also have a rule that i use with my clients. There has to be a substantial benefit to the borrower, which we weigh the closing costs, yield spread, prepay and other balony to the monthly savings and time to recoup those costs.
We must remember that the HOMEOWNER needs a good deal, not US as brokers. Cutting their interest rate from 9% to 7% isnt enough quite often.
I have had to turn down deals with sub prime clients because the 6k in closing costs + the 7k prepay was not worth the $150 bucks per month he was going to save. Even 300 per month, it takes YEARS to break even.
Unless the guy is literally GOING UNDER and he cant get a family loan or some other kind of help -refinancing someone using sub prime is NEVER in the interest of the homeower because of the closing costs, and their probable need to refinance 2 years from now, soaking a new chunk of their equity.
The 'band aid' loan works great in the 20% appreciation universe. However, those days are LONG GONE for the next 10 years.
Like greg says, if you can get these guys into FHA so they NEVER have to refi again, then its WORTH IT.
you may find it DIFFICULT to do so however, given the problems of the target client you are going after.
We cant just 'do a loan' to 'do a loan' . You must ask yourself, would you give up 6 , 8 ,10 k or more in equity to save $200 per month? Whatever the case may be, even if its worth it, do you now have to refi 2 years from now to get away from the now adjusting arm?
If you wouldnt do it -then you cant sell it to your client.
This is why i have decided to let subprime go......unless there i a substantial savings to the client.
I believe the 'gun to your head' remark is something you may understand one day. I fear you have no idea what i was really trying to say.
However, if you feel good with it, good luck and God Speed.
cheers
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