patrick.net

Strategist says

The system is fucked up.

We have a one size fits all for mortgage loans. The decision wether or not to grant a loan, and what the interest rate would be, should be based on risk. Instead it's based on silly one size fits all, rules.

This inefficiency is what hurts the lending business, and in turn ends up hurting the economy and it's recovery.

Exactly! And this one-size-fits-all lending standard is the result of bank bailouts. Banks should be allowed to make their lending decisions and eat their own crows! If the bank is too big and too bureaucratic to make those lending decisions at the local level, the bank needs to be broken up.

Straw Man says

Hmmm. Nobody prevents YOU from giving that woman a loan. The fact that GSEs won't purchase it from you doesn't mean it's prohibited.

Let's be honest: she doesn't want any loan, what she wants is a loan with a government-sponsored low APR.

As we've been enlightened on this very forum, hard money loans are available all day any day. Just not at 3.75% APR. This tells us something about "based on risk" part.

The presence of 3.75% GSE loans however severely distort asset prices. If all houses have to be bought at hard money interest level, houses would be much more affordable to people who want to buy them, and her monthly payment would be much lower (OTOH, she may not even be speculating due to lack of uptrend in housing prices, LOL)

Straw Man says

Fair? Enabling a non-working bitch in gobbling up properties and extracting rent from people who actually work for the living in not "fair" in any shape or form. Nobody prevents her from deploying her own capital. But looks like she doesn't have it. So she should get a fucking job and earn the money she needs or get a hard money loan and pay her fair share to other rent-seekers. There is no social value in government helping her.

I don't think there is any evidence that she is buying a rental property at all.

OTOH, GSE's do actually have an ongoing policy of helping small-time landlords buying multi-families. The thinking is that letting relatively credit-worthy people buying those properties and renovate them will keep more housing units in service and thereby increasing supply and driving down rental price for the less credit worthy population.

Straw Man says

Nothing bad about renting out. But it's not a "perfect match" if it requires government to for the the landlords to be viable. They should do it on their own dime.

Valid point.

"Mom-and-pop" landlords are shitty landlords anyway (compared to big companies doing the same thing) so there is no social benefits of propping them up.

Big companies wouldn't want to manage many of the existing buildings spread all over the cities and towns. Putting them out of service due to disrepair would significantly reduce housing supply and make rental price skyrocket, especially given the current large Mellinial generation exceeding in head count even the baby boomer generation. Mom-and-pop landlords in cities and towns enable diverse ownership and real competition, unlike the big companies that were known for sitting on empty houses during down turns.

I wouldn't take a risk on someone like that if I were a bank. Fishy people tend to do fishy things to everyone, why would I want to put myself into that relationship.

FortWayne says

I wouldn't take a risk on someone like that if I were a bank. Fishy people tend to do fishy things to everyone, why would I want to put myself into that relationship.

The most important consideration in determining the quality of a loan is the collateral. At 50% or so LTV on prime real estate is all that matters.
By the way, there is a loan available for that situation.
East West Bank provides that loan to anyone regardless of credit or proof of income. I think it was E-Man who mentioned that. See, you do learn something from this site.
Cathay Bank also provides these kinds of loans.
The Chinese have more brains than our government.

bgamall4 says

So here it is, Strategist, the Fed has a conspiracy going, to keep long bond rates down by securing massive demand for them that does nothing for the economy, by forcing the economy to not heat up by 1. telling banks to bet on the low floating swaps, and 2. by paying the banks interest on excess reserves so they won't lend, and then threaten the treasury with non payment of returned interest if rates go up. You are a dweeb, Strategist.

he he he.
Low rates spurs the economy.
1. News to me. No such thing.
2. Feds don't pay banks interest on excess reserves. They don't threaten the treasury with non payment.

LarryPatrickMaloney says

I don't need show income, I special case.

I love that phrase the most. I remember when everyone in our nation thought so highly of themselves with hubris that they all were special cases. All were special cases all right, until everything came down. Of course at that point everyone wished 100% of the blame was on banks, there was no such thing as personal responsibility at all.

Didn't plan for hard times, it's all someone else fault because houses always go up and economy never bell curves.

FortWayne says

I love that phrase the most. I remember when everyone in our nation thought so highly of themselves with hubris that they all were special cases. All were special cases all right, until everything came down. Of course at that point everyone wished 100% of the blame was on banks, there was no such thing as personal responsibility at all.

Didn't plan for hard times, it's all someone else fault because houses always go up and economy never bell curves.

She is a special case. 40% down makes the loan a no loss situation for the bank. Traditionally, banks would recoup 80% of the home value on a resale which is why 20% was such a staple number. 40% down, you've given them another 20% as a buffer. The problem is, Fannie/Freddie rules don't look at that at all. They also don't look at savings. They look at one thing and one thing only...income. And every bank out there, has no interest in keeping loans on their book anymore. They want to sell it to Fannie to get the risk off their books pronto.

I ran into the same issue. I was putting 35% down and had enough savings to pay for the home outright in cash. I didn't have the income at the time to match the loan...but who gave a crap? That's zero percent risk of default. I ended up having to put down 40% to bring the loan down to something within my income level. Meanwhile, some yahoo who made 5k more than me a year with 20% down and zero savings beyond that would have gotten the loan before me.

theoakman says

Meanwhile, some yahoo who made 5k more than me a year with 20% down and zero savings beyond that would have gotten the loan before me.

Did you consider refiling your tax returns for the previous couple years and voluntarily take less deductions than you legally could? I have a theory that the Agency puts are there to induce borrowers to report more income and pay more taxes than they have to in an otherwise tax-efficient way.

theoakman says

I ran into the same issue. I was putting 35% down and had enough savings to pay for the home outright in cash. I didn't have the income at the time to match the loan...but who gave a crap?

There is the exact entitlement mentality I talk about. And just so you know, everyone who wants a loan feels exactly the same way about themselves as you do. Everyone feels they are a great credit risk, there is nothing risked by the bank, and they should have a loan regardless of any underwriting standards.

FortWayne says

There is the exact entitlement mentality I talk about. And just so you know, everyone who wants a loan feels exactly the same way about themselves as you do. Everyone feels they are a great credit risk, there is nothing risked by the bank, and they should have a loan regardless of any underwriting standards.

Entitlement my ass. When someone is willing to put down 20% above what you would normally recover, the loan is automatically prudent...it's simple math. You won't take a loss on the loan. Furthermore, if someone is carrying $400k in reserves and they want to purchase a $400k home, that's essentially zero risk. You are asking them to pay off $400k over 30 years (by 2045)...meanwhile they can do it tomorrow. They could have a million in reserves and still be denied under the current system. The entire point of a loan is to be paid back. No doubt, income should play a large part. To give zero weighting to existing cash reserves is complete nonsense.

The whole point was that the so called "underwriting standards" is a bunch of crap that were written by bureaucratic hacks and are devoid of anything outside of income, which makes them flawed. The standard is crap...and should be changed.

Welcome to what's become of the Bay Area. Hipsters, Tiger Moms and Dragon Ladies.

Sheesh.

theoakman says

Entitlement my ass. When someone is willing to put down 20% above what you would normally recover, the loan is automatically prudent...it's simple math. You won't take a loss on the loan. Furthermore, if someone is carrying $400k in reserves and they want to purchase a $400k home, that's essentially zero risk. You are asking them to pay off $400k over 30 years (by 2045)...meanwhile they can do it tomorrow. They could have a million in reserves and still be denied under the current system. The entire point of a loan is to be paid back. No doubt, income should play a large part. To give zero weighting to existing cash reserves is complete nonsense.

The whole point was that the so called "underwriting standards" is a bunch of crap that were written by bureaucratic hacks and are devoid of anything outside of income, which makes them flawed. The standard is crap...and should be changed.

The standard is crap beyond belief. The most qualified loan applicants, some with millions in assets don't qualify, but those who are guaranteed to default 2 months after getting laid off can get the loan. It's bizarre and stupid.
We need to fix this.

bgamall4 says

But 20 percent down is not the issue if I read Strategist correctly. He says East West bank will give you a no money down loan with no credit check or proof of income.

Strategist said that? He must be a real jerk. If Strategist had even a shred of common sense, he would have known the down payment was 50%, not 0%.
You never can trust a Zionist.

theoakman says

Entitlement my ass. When someone is willing to put down 20% above what you would normally recover, the loan is automatically prudent...it's simple math. You won't take a loss on the loan. Furthermore, if someone is carrying $400k in reserves and they want to purchase a $400k home, that's essentially zero risk.

Well if you feel so strongly about the 0 risk, why don't you go into lending business. Clearly you think you are the expert.

And I ain't buying this silly excuse of yours that if you have a ton of money you'll be denied, because that is not true. Banks will give you money if they think you have it to pay back. If they aren't giving it to you, it's probably you doing something shady enough for them to not want to take a risk on you, regardless of number of rentals you own.

bgamall4 says

Ironman says

Strategist says

We need to fix this.

So, why don't you start the Strategist Bank and Loan. You can provide the money to all these people you feel deserve the loans that the banks turned down...

You'll be rich!!!

Only if the government guarantees the loans and the bank gets the house back. That is the way to do it. That is the way the TBTF banks did it.

I did provide some private money loans on vacant land and rental properties, during the bubble. Never lost a dime in the worst downturn because I was never greedy. Maximum LTV I ever loaned was 33% on a house, and 20% on land. The greatest protection a lender can have is low LTV, which is what the dumb government needs to understand.
It's just common sense, but try telling that to politicians.

Strategist says

The greatest protection a lender can have is low LTV, which is what the dumb government needs to understand.

You do realize that you loaning one loan is easy to manage, but banks are not in business of managing thousands of potential foreclosures and properties and LTV means absolutely nothing if prices drop or economy is in recession?

I've landed an ex-relative $300 once, all the LTV in the world didn't make him pay it back during recession.

FortWayne says

And I ain't buying this silly excuse of yours that if you have a ton of money you'll be denied, because that is not true. Banks will give you money if they think you have it to pay back. If they aren't giving it to you, it's probably you doing something shady enough for them to not want to take a risk on you, regardless of number of rentals you own.

So, essentially, you are just resorting to making crap up to try to win an argument. If you aren't willing to even look up the standards you are defending, your opinion is completely invalid.

And you are obviously having a reading problem. I got my loan. I just had to put down 40% instead of 35%. Once I did that, I fully within the existing standards and the bank could promptly unload my loan onto someone else's books.

Ironman says

So, why don't you start the Strategist Bank and Loan. You can provide the money to all these people you feel deserve the loans that the banks turned down...

You'll be rich!!!

From the people I've talked to in the industry, and it's not much...the new regulations put in place put the strangle on smaller banks because they aren't able to hire the manpower to jump through all these hoops.

Ironman says

Strategist says

We need to fix this.

So, why don't you start the Strategist Bank and Loan. You can provide the money to all these people you feel deserve the loans that the banks turned down...

You'll be rich!!!

Hey....The government did not bail me out with a $10 billion check. I guess they realize they cannot get much in campaign donations from someone with just $10,000 to invest.

LarryPatrickMaloney says

I could over hear a Chinese woman demanding a loan

He should have replied "ching ching wow wow woo".