Earlier this week it was noted that the Third Largest FHA lender, Taylor, Bean & Whitaker was abruptly shut down. The day prior their offices were raided by the federal government looking into transactions with its warehouse lender. Both FHA and Freddie Mac suspended purchasing loans from them. Fannie Mae banned them a year of so earlier.
This abrupt closer is going to have some pretty significant ramifications to borrowers. Not just the ones who had loans waiting to be approved or funded by Taylor Bean but to those looking to shop using a Broker.
This is just another example how the once dominant mortgage brokerage operations are being squeezed. As the Third largest originator of FHA loans, which make up a large percentage of current transaction, most of their loans came from brokers. Thus brokers have fewer options now on where to place their loan. As a consumer or broker, with less competition, you will expect mortgage prices to rise. Also with fewer players in the market sorting through loans to approve you will see the borderline loan less likely to get approved as the lenders now have more to choose from.
In fact, we are seeing some lenders raise their FHA minimum credit scores to 640 for all transaction including FHA Streamline Refinances.
Remember, the deal is not done until all the checks have cleared.