WatchHi folks - I'm a reporter at Bloomberg, where I cover economic issues, including housing.
We all know how tough it's been to get a purchase loan since the meltdown. But I'm getting the impression that it's getting even tougher as of late. One reason, I think, is new lender anxiety about regulations being put in place in Washington. Then there's continued falling home prices etc. People here in DC say lending standards are preventing a housing rebound. Banks are loosening consumer and business lending, but not mortgage lending. What do you think?
Has anyone with good credit failed to get a purchase loan recently? Would love to hear your stories, either off the record here in the forum or on the record by phone or email.
Thanks,
Lorraine Woellert
Bloomberg
202 624 1963
lwoellert@bloomberg.net
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Pleasanton, CA
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Watch your comments around here Lorraine. Many on this site don't think housing prices are continuing to fall. Phoenix is a meca for housing appreciation right now apparently and the BA is just on fire. Low inventory, coupled with wage inflation, low unemployment, foreign investors, students with none to little debt being first time home buyers, and don't forget about the high test score schools causing prices to explode.
Yah, I know, I live on a different planet as well. Just passing on the news before you get attacked by the PatN forces around here.
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RentingForHalfTheCost says
What does any of this have to do with mortgage financing? What does any of this have to do with finding people who were denied credit?
That chip is getting awfully heavy isn't it.
I completed three new mortgage refinances a few months ago and all went smoothly. I will say that without the four mortgage conforming loan limit, I'd probably have bought more houses by now.
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Los Angeles, CA
I heard you are required to have a job now to get a mortgage. That is outrageous. And self employed people who only report half thier income can't do 'liar loans' to get 1.5m zero down cash back at close mortgages anymore. Also an outrage!
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We also recently refi'd. They required a decent amount of paperwork and asked for an explanation of some recent deposits, but no issues whatsoever. A co-worker also refi'd a couple of months ago - no issues.
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lwoellert says
A credit card issuer asked for my 1040 numbers just to issue a cc - this after my credit report showed zero debt and stellar credit. I am sure it is much tougher for mortgage. That is why you see much activity in low end properties - the only comfortable zone for banks to issue a mortgage while minimizing risk,and the only comfortable zone for cash investors. Mid to high end market is snoozing.
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They're checking to make sure people have a pulse before they get a mortgage.
What the fuck is up with that?
Doesn't anybody understand that the economy is based on unemployables and dead people flipping condos?
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Ross, CA
Yes it is harder - with very thorough and detailed investigations of where the down payment money came from and what the long term income potential is.
In the BA where most loans are jumbo, PITI* reserves of 6 - 12 months must be liquid as well as down payment and closing costs.
So, for a $mil dollar property with 20% down you'll need about 250 - 280k liquid, a 720+ credit score, 2-3 years 1040s, a year or two of bank statements and a job that does not seem to be at risk.
These stringent requirements are loosening a bit in some zip codes now that homes are going quicker and at over asking.
*Principle Interest Taxes Insurance ~ about 5k per month on a 1mil property
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We decided to buy a parent's house last year to help them out when they fell on hard times and to make sure they wouldn't be homeless. Despite six-figure salaries, 750+ credit scores and 20% down we could not get a loan from our bank on what would be considered an "investment property". Eventually we found another bank that agreed to lend but the appraisal came in so low because of so many foreclosures that the loan fell through (appraisal was less than the purchase price in 2000). However, my credit card companies had no problem giving me 0% for 18 months on three different cards so we ended up purchasing the house using cash and some balance transfer checks. I guess the upside to this is that we'll own the house outright in another 8 months or so and all we'll have to worry about then are taxes.
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Ross, CA
bubblesitter says
Not in the BA. It's awake.
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Ross, CA
JonnyDanger says
True. Investment properties need much more down. Most are all cash.
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rowemoore says
Uh,BA is in its own world,if you think it is hot then live with your assumption.
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I think it would be quite refreshing if you did an article on, even though interest rates are at historical lows. They aren't actually at historical lows.
With the added fees and semi annual MIP premium increases over the past two years. I would call the lows at November 2010 when the rate was 4.50%. But MIP was a paltry $70. It is now tipple that, also there are FHA monthly fees that are for the life of the Mortgage, that didn't exist in 2010.
Reports talk about the virtues of 3.70% interest, but by numbers I've crunched. I would have to refinance at 2% just to pay the same I'm paying my 4.75% mortgage I got in 2010.
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The solution is simple. Just don't pay MIP fees. Instead of signing a contract for a ridiculous new car you don't need, save up 20% for a down payment and avoid it all together.
Interest rates are at historic lows. Mortgage Insurance is a separate topic.
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What if she really is a reporter? Go Patrick!
RentingForHalfTheCost I thought your first comment was hysterical, thanks for the laugh.
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David9 says
Lorraine really is a reporter for Bloomberg. I've conversed with her by email and she's got a Bloomberg email address.
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Thanks for saving me from the wolves, David! :-) I am a longtime lurker but have never posted before.
I really liked the observation about MI - if you look at other fees, such as LLPAs and increased FHA premiums, the current low rates do look a lot less attractive. Might be a good time for us to do that story.
But has anyone had troubles with purchase loans in particular? Talking heads in DC and economists who study this say that looser purchase money is the only way out of this mess. Are they right?
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Patrick says
Do you think Lorraine would be interested in my ideas about throwing bankers and Realtor®s out of helicopters as a policy mechanism to reduce financial crime?
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lwoellert says
No, current standards are fine. The problem is that credit jail is 4-5 years following a repo, short sale, or bankruptcy so "victims" of the housing crash in 2007 are just starting to see their eligibility return. People who hit their crisis from 2008 to 2011 are still ineligible.
The future of borrowing by consumers will roughly track bankruptcy and foreclosure curves (inversely) at +5 years.
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Tarzana, CA
lwoellert says
You're welcome. :-)
I personally have not filled out a loan application yet because coupled with this site and my own Real Estate analysis prices have been dropping for the last 3 years in the Los Angeles area.
Had I purchased a property at any time before now, I would just be another upside down mortgage statistic.
Surely, looser purchase money will have an effect on the Real Estate Market as with the previous interventions.
But isn't the problem more complex than that?
* Fannie and Freddie still operating with taxpayer funds and have not repaid the TARP funds.
* The incredibly illusive shadow inventory count that is just not available to the public.
* Surely, over 50% of all sales now are Bank owned, Fannie or Freddie, or a short sale.
* How many people are still in their homes that have not paid a mortgage payment in years and are not even counted in the shadow inventory?
* The systemic process that got us in this mess in the first place is still in effect to my knowledge, mortgages are still packaged off to investors.
* It's better for the bank to keep a bad asset on the books than to sell it.
* The generally slow economy itself.
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Ross, CA
bubblesitter says
What is the "uh" for at the start of your sentence? Is it like "doy" or perhaps "duh"? Could it be that you meant to type "umm"?
Anyway, I did not say it was hot -- that is merely your fear. I said it was awake. That means it is no longer dormant, or as you put it, snoozing.
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Los Angeles, CA
One new twist to push up prices is that rates have been so low for so long that REITs, calpers, etc, mom and pop, hedge funds are commoditizin SFR rentals big time mostly buying with cash at trustee sale. These homes will mostly never ever be for sale again.
They commoditized the MBS as part of the process which ramped up prices to 2006 highs - now the actual homes themselves are being put into portfolios to sell to investors. But the % return has to compare favorably to bonds and CD's.
Get used to the 'neverending intervention' in RE. The bankers are running this place like China.
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jvolstad's website
No problem at all getting a loan if I wanted one. I'm debt free, have six figures in savings, retired military and now working as a software developer.
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jvolstad says
Savings. Mmmmm.
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APOCALYPSEFUCK is Tony Manero says
Your ideas are intriguing to me and I wish to subscribe to your newsletter.
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I just closed on a house with Wells Fargo for the first time in Jan. It was much easier than we thought. We sort of fell into the house really - we weren't planning on buying anything but then we stumbled upon our dream home. (I may get beat up on this board for this) We didn't really have our financial house in order the way we would have wanted but the loan went through without a hitch.
I think the reason houses are falling out of escrow and loans are being denied has a lot to do with the appraisals. If the property values are headed south in a neighborhood the bank won't lend to you for it no matter how good your finances are.
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lwoellert says
I think the economy is preventing a housing rebound. "Unemployment" at 8.1% which is a suspect number to begin with. Then you have a housing market that has shown no signs whatsoever of stabilizing. On top of a growing number of homeowners waiting to sell for when the market recovers (Pent up supply waiting to flood market, and the baby boomers waiting to unload their house to retire on), everyone who was/is foreclosed on and is ineligible for a mortgage for x number of years after that event, new graduates burdened with student loans and a new perspective on what owning a home means, the continued government intervention in the economy preventing the markets from being rational, so that even with low interest rates housing prices are still falling showing just how weak the market actually is...so no I don't think it's a lack of loose lending practices that is preventing a housing recovery. There are so many larger issues at play here that the banks are just waiting this thing out, just like the majority of the people on this board. There are better places to put your money right now. And if I were a bank, business lending and consumer lending to all the new renters with better cashflows because they don't own a home makes more sense.
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Let’s look on mortgage market from this perspective:
Real Estate market is a combination of micro markets. BA definitely belongs to this category with its own specifics; majority of housing being above $500K, great weather, high salary, highly restricted development but… state financial problems, weak business climate plus high unemployment/underemployment. From bank perspective, they pay handsomely to institution predicting market trends in micro markets. If local market is poison to go down, they request more documentation and effectively mortgage is more difficult to obtain. (Activity in all cash purchases have partially they own reflection to local mortgage market). If local market reach bottom and begin go up, and then mortgage qualification tend to be loosen.
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Mountain View, CA
Will let you know, applying for a loan right now.
Main proble - people with all cash are coming in and overbidding big time. I can't compete with that :-(
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rowemoore says
Sounds pretty reasonable to me...
Lorraine - if you write about this it would be very interesting and valuable to put the present situation in a larger historical context. No doubt banks are stricter now than they were during the bubble years when "anybody with a pulse" could get a loan. But is it an overreaction or is it just a "return to normal"? Are banks stricter today than they were say 15-20 years ago?
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lwoellert says
Btw Lorraine, like many in this forum I reject the notion that a "housing rebound" is something desirable. We have just gone through an incredible housing bubble. This was not a good thing, it was terribly costly for banks, for tax payers, for individuals. We don't want it back. If banks return to traditional lending standards and house prices return to historical norms, that would be the best outcome in my opinion. For many parts of the Bay Area that would mean further price declines.
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Patrick says
You're moving up in the world.
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Lorraine, my wife and I closed on our home in Danville about two months ago and we didn't have any problem at all qualifying. Several caveats here: we bought a fixer, i.e., a home in the very low sixes in a neighborhood where most everything is in the sevens and eights and we had excellent credit and low ratios but other than that we're just two people who work for a living.
I think most of the issues with qualification tend to be in what these people call "the fortress" where ~2000 sq ft homes go for $1M or more.
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We had a tough time buying a primary residence we could more than afford. Our underwriter was new and questioned everything down to an $18 deposit into my checking account. Supplying information was a full-time job in itself. An acquaintance of mine is a VP with the bank and she had to get involved. We closed a day late. It was a huge hassle. Owning two rental houses complicated things.
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Seattle, WA
If you have a decent job with an income that supports the loan, and your credit score is not in the sub 630 then getting a mortgage should not be a problem.
And yes, the lender will want to see all supporting documents as evidence of what you earn, W2, bank statements (6 months) and references from work about employment history etc.
If you have all of the above, then its no problem.
Gone are the good old days of NINJA, Illegals, anybody who could sign their name getting a loan.
Which is how it should be..
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I've been watching the BA for a few years now and gotten know the situation of a lot of friends. If you got a stable job, 20% down and decent credit history getting a loan is about as easy as it ever has been.
If you perceive that getting a loan is harder you are ignoring the actual problem. The problem of course are lack of available jobs, sinking wages and too much accumulated debt in the middle class. With the economic policies we have today and had for the last 30 years this trend is likely to continue. Along with dropping house prices which will finally start to match what's really happening to average American families.
Personally I placed an offer on a home 9 days ago which was accepted the next day and got my loan approved today. With most personal banking information being available electronically and electronic signing you can get through the paperwork pipeline faster than ever. You just have to be organized and responsive. The appraiser took the longest to get the appraisal out: 4 days.
What's for sure though is that you have to disclose _everything_ about your financial situation if you are a first time buyer. They will double check everything, including calling your banks, employer, previous landlords etc. Lenders pretty much know what brand of toilet paper you buy.
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RentingForHalfTheCost says
Duh.
RentingForHalfTheCost says
Whachoo talkin' about, Willis? You made no sense, which is why whatever it is you attempted to say didn't translate into our language. You know, the languages on planet Earth.
Since I haven't tried to refi or buy in the past 5 years, I've got nuthin' for Lorraine. Just snotty comments about snotty comments, as usual.
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iwog says
Great. So the same fools that get a piece of my tax money so they can live mortgage/rent free for years can get back in the game and do it all again. God bless America!
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RentingForHalfTheCost says
Amen.
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iwog says
And will keep going lower because of the lack of buyers and the need to keep prices from collapsing. The day you say on this site
"buy now cause interest rates are rising"
Will be the day that the BA is in whole lot of mess. Cash will be king as always. Credit is for the weak.
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CREDIT IS FOR ASSHOLES who want to lick the sweaty gonads of the financial crimes industry!
It's CASH or FUCK YOU, America!
Die, Bankster Fucks, DIE!