Will New Loans Get Easier or Harder?
A week doesn’t go by without a new article in a major publication touting the administration’s commitment to make new loans kinder and gentler and easier to qualify for by prospective homeowners. A week doesn’t go by without a new article in a major publication warning that new mortgages will require larger down payments and become more difficult to qualify for by prospective homeowners.
“The survey is based on responses from 73 domestic banks and 22 U.S. branches and agencies of foreign banks” . . . . and the consensus seems to be that . . . . . “while overall demand may be spiking, lending standards have become somewhat tighter than the average since 2005.”
In a recent address to the Mortgage Bankers of America, President Obama provided the somewhat uncharacteristic explanation that perhaps free market economics could fix the mortgage underwriting problems in America and make affordable loans easier for qualified Americans to obtain. Of course, there has always been a sub-prime lending market which is somewhat like a free market system for mortgages, and the demand for those ‘sub-prime’ or ‘Alt-A’ loans is increasing, at least in part due to the restrictions on the availability of non-free market or government backed loan products. The laxed lending standards of ‘sub-prime’ and ‘no-doc’ or ‘low-doc’ loans are often blamed for causing the current real estate recession or hole out of which we are currently climbing at ever so feeble a pace. Washington’s answer was to give loans to those banks whose massive sub-prime losses caused the mantra: “too big to fail.” The irony was that most of those bailed out banks were able to look out for themselves just fine, thank you very much, and wanted to pay back the loans faster than than scheduled.
Perhaps such a safety net is assumed to be there for the future as well and that supports the revival of ‘Alt A’ lending. But the most obvious drag on the current recovery is not the bail out, regulation or lack thereof toward sub-prime lending BUT IT IS TREATING TRADITIONAL LENDING AS IF IT CAUSED THE REAL ESTATE RECESSION AND THEREFORE TRADITIONAL LENDING SHOULD BE MICRO-MANAGED BY THE CFPB TO KEEP IT FROM DOING TO THE U.S. ECONOMY THAT WHICH THE SUB-PRIME MORTGAGE SECTOR MAY HAVE DONE IN THE YEARS FOLLOWING 2007. If traditional lending shared the blame for the recession at all, many blame Congress for using the CRA (Community Reinvestment Act) for pressuring traditional lending to lend high risk mortgage money without high risk mortgage expertise!
Now the blogosphere is in dire need of a moment of prayer : “God help our legislators and administrators fix that which is broken and to leave alone that which is not and grant them the wisdom to know the difference.”
From the blogosphere to you personally . . . if you are one of those persons who can’t find financing, and our firm seems to be inundated recently with requests for leads to hard money lenders, don’t give up on the dream of home ownership. We are always available to help you make sure you have considered all options for financing. Also, it is no secret that not all lenders are created equal! Last month five different Bank of America executives quit and came forward to confirm that which many of us in the mortgage loan modification and short sale industries have long suspected: namely that their former employer often created or concocted fanciful reasons to deny modifications for otherwise qualified applicants while giving modifications or HAMP refinances to less needy (unqualified) applicants with higher credit scores just to make their compliance statistics with government programs look better.
The average homeowner needs an advocate to level the playing field when negotiating with their mortgage lender. Similarly, the right mortgage lender can make all the difference in purchasing a new home. Let us help you find the lenders who seem to be able to find a way to make the current regulatory environment work best for you. Don’t give up on the home buying process just because one lender sees you as unqualified. In addition to traditional lender, our firm also helps to protect buyers with “land contracts”, leases with options to purchase, land trusts, “subject tos”, assumptions, owner-financing, hard money investing, and other creative vehicles to help purchase real estate.