Lenders are too cautious, Lou Barnes, a Boulder-based mortgage banker, was quoted in a front-page story in today’s Wall Street Journal titled Tighter Lending Crimps Housing.
The WSJ analyzed activity from the 10 largest lenders and found they denied 26.8 percent of loan applications in 2010, compared with 23.5 percent in 2009. One reason lending is to tight because Fannie Mae, Freddie Mac and the Federal Housing Administration, which account for 9 out of every 10 loans made, are under pressure to avoid any losses, the paper notes. Denver had a 22.8 percent denial rate, 14.9 percent better than the national average.
Realtor suffers
Barnes told the paper that Fannie and Freddie are “behaving like a hurricane insurance company that won’t write any policies within 200 mile of an ocean.” Barnes goes on to tell the story of Amy Menell, a Realtor with a credit score above 800, no debt and is willing to put 50 percent down on an $800,000 Boulder home a divorce settlement, in order to take advantage of today’s low interest rates and depressed housing prices. However, because she didn’t sell many homes in 2009, she doesn’t have sufficient two years of documented income that the bank requires, and she can’t get the loan, even though business has picked up for her.
“Going back as far as there has been banking, if somebody walked in the door with a 50 percent down payment, good credit, cash in reserve, they’d walk out with a loan,” Barnes said.
To read the entire WSJ article, please visit this link: Tighter Lending Crimps Housing
Contact John Rebchook at JRCHOOK@gmail.com
“Going back as far as there has been banking, if somebody walked in the door with a 50 percent down payment, good credit, cash in reserve, they’d walk out with a loan,” Barnes said.
Yes, it was called a stated income loan, used for self employed borrowers. In years past, Lou would have been able to inflate this woman’s income, basically committing loan fraud. Lou, do you miss the good old days?
Joe M., with all due respect, rather than a Stated Income loan this would be much more akin to a No Income loan. As such it is not remotely bank fraud. Such a loan is a ‘make sense’ loan with a 50% down payment and excellent credit.
Unfortunately there is no allowance today within the GSEs for common sense underwriting, such underwriting would certainly help free up the housing market and allow the financial healing to begin.
Joe M., with all due respect, rather than a Stated Income loan this would be much more akin to a No Income loan. As such it is not remotely bank fraud. Such a loan is a ‘make sense’ loan with a 50% down payment and excellent credit.
Unfortunately there is no allowance today within the GSEs for common sense underwriting, such underwriting would certainly help free up the housing market and allow the financial healing to begin.
If this loan makes such perfect sense, let the private sector make the loan. It obviously does not make enough sense, or she would get the loan. Get the government out of the lending business.
And with all due respect, how on God’s green earth do suppose we will ever get out of this housing fiasco if credit is not reasonably restored to people? Shall we burn the surplus homes and wait til the population numbers balance out the law of supply and demand? Yah sure the good ol’ argument let unbrideled capitalism work it’s miracles. We see what the greedy capitalist did for us and we are still rocking in the outhouse basement. Just as successful as “Trickle Down Economics” – NOT.
Ye who is with out the first stone — I really dislike people who have to punish other people because their own philosophy fails. Everything is always make it harder and harder so these “little” power hungry people can control others. Of course, one of the first things I noticed in your story is that the person is a woman and divorced, that of course makes her trash and incapable of make any intelligent decisions. She’s already failed and she has only been victimized buy Joe M. and other people who are more interested in dollars than people, lives, civilization and our county.
Loretta- She is a “victim” not because she is a woman or divorced. She was denied a loan because her adjusted gross income for 2009 and 2010 was under $30,000 yearly. Basically, she was unable to sell at least one average priced boulder home a quarter for two years. The same outcome would be true for a married man.