Countrywide Eliminates Interest Only Qualification

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Countrywide sent out a notice today that as of the 19th of November any loan that is requested as an interest only loan must still be qualified at the full monthly payment for debt to income purposes. This is a major blow for many people living in high-cost areas who used interest only loans to qualify for larger loan amounts (even on fixed loans). This removes another option for people in over their heads on adjustable rate mortgages who were using fixed-rate interest only loans as an escape route out of exploding adjustable rate mortgages.

This single handedly will increase the speed of price declines in areas like California where interest only loans and other exotic mortgages make up more than 40% of the total loans written on real estate in the area.

Here’s the email:

To all business partners.

–> As of the 11/19/2007 we will not longer be qualifying off IO payments on IO first trust deeds.
–> DTI’s calculated on IO payments must be locked and fully underwritten and approved by the 19th and fund under the lock date.
–>There will be no extensions on locks after the 19th in regards to DTI being an issue.
–>There will be no exceptions to this policy.