If you want to buy a house in this still strong housing market, know that it’s hard to get a mortgage nowadays. The lending market is incredibly tight and only borrowers with the best credit are getting the best rates. Further, mortgage rates have risen substantially since the beginning of 2022, making affordability more difficult as well.
Personally, I’ve got over an 820 credit score and have over $10 million in investable assets. Even still, I’ve had rough times getting a great mortgage.
I shared with you my most recent painful journey in qualifying for a mortgage. It’s not over yet as the underwriter now wants a signed copy from my CPA on his company letterhead of all my company’s financials.
My CPA said he charges $3,800 for a thorough audit, so I told him to go jump in a lake. Instead, I sent off my company’s financials with my signature and told my bank to take it or leave it. I think they’ll take it because I’ve fulfilled every single item on their 21 point check list. We shall see.
My mortgage pain post was shared around the web and I ended up having a good dialogue with a loan officer. He shared with me some frank insights as to why it’s so hard to get a mortgage nowadays.
If you are easily offended, I suggest skipping this post. But if you can handle the truth, and if you want to gain some perspective from someone who controls millions of dollars in loans to satisfy property buyer’s wishes, then read on.
WHY IT’S SO HARD TO GET A MORTGAGE NOWADAYS
I’ve paraphrased the mortgage officer’s feedback in order to make our dialogue a readable post. Here is why it’s so hard to get a mortgage today according to a mortgage officer.
1) The government is clamping down hard.
Since 2009, the government has created enormous regulation for banks in order to not repeat the housing crisis again. For example, the CPA letterhead and signature requirement was introduced recently in Feb, 2014, and it’s causing massive headache for tons of small business owners in America. CPAs are charging usurious fees to audit because they can. Meanwhile, the government makes us send a new 7-10 page Good Faith Estimate every single time we change a single number.
The rules were created by the Consumer Finance Protection Bureau and were mandated under the Dodd-Frank Act to ban many of the loose practices during the housing bubble e.g. NINJA loans. To be considered a qualified mortgage, a loan amount cannot exceed a total debt-to-income ratio of 43%. In the past, plenty of borrowers were up to 70%+ . Average mortgage refinance or new mortgage lengths have doubled in the past four years as a result.
2) We don’t want to get burned again by liars.
Borrowers signed a contract stating they’d pay their mortgages on time if we lent them the money and many didn’t. If everybody just paid their damn mortgage, this economic downturn wouldn’t have happened in the first place!
Where I come from, if you don’t pay back your debts, you get beaten up, shamed, and thrown in jail. Only in America do people save so little, borrow so much, and have the audacity not to pay back a person or institution who lent them money in good faith.
Just think about the responsible homeowner who paid her mortgage every month during the downturn. Why should she suffer because her neighbor decided to welch on her promise? Good and honest people got screwed and they should be angry at their neighbors, not the banks who also got screwed.
Borrowers who lied to us got bailed out with mortgage debt forgiveness programs by the government. Borrowers like to point out banks got bailed out too. But guess what? I’m a person, not a bank.
3) We hate ungrateful borrowers who don’t take responsibility.
Nothing pisses loan officers off more than an ungrateful borrower who defaults on his mortgage and turns around and blames us for not paying his mortgage! We’re already getting blamed by our managers for approving bad creditors.
Blaming loan officers for why you can’t pay your mortgage is like blaming your university for you not paying back your student loans. Imagine suing your company for letting you go because you no longer wanted to work. We’re infected with this entitlement mentality that must be squashed. Borrowers should own up to their financial mistakes and stop blaming others.
Borrowers who defaulted already punched us in the gut by causing mortgage departments to lose money. Loan officers were laid off in droves as a result. We have families to feed and bills to pay too.
My income got cut in half, and I was let go in 2010 due to the downturn. It wasn’t until 2012 when I found a similar job again that paid 25% less. Now in 2022, mortgage applications have plummeted and the industry will once again go through cuts. Thanks a lot.
4) We laugh at anybody who doesn’t have at least 20% down.
The biggest joke is when borrowers start getting all pompous with us about why we should lend them money – as if it was our privilege. Then they tell us how they can only put down 5% and we laugh and laugh and laugh at the craziness.
Borrowers who can’t put down at least 20% have no business buying a home. One job loss or economic downturn and they are finished. Go get a first time home loan from the government and milk them for all they are worth instead. The 30/30/3 home buying rule by putting 20% down and having a 10% buffer is very wise. I hope more people follow it!
Paying private mortgage insurance (PMI) is stupid. They might as well borrow money from a friend to borrow more money from us and never take ownership of their financial lives. It’s as if nobody learned their financial lesson from the past five years.
Most will turn out OK in the end, but there are enough people who can put over 20% down that we don’t bother with the rest. Save more money people.
5) Owning a home is not a right, but a privilege.
I don’t know where people got it in their heads that owning a home is their birth right, but it’s not. The people who keep paying their mortgages through hell or high water are the ones who understand their privilege. They saved up, ran the numbers, and committed to a long term arrangement.
They view their home as a home first and not as an investment. If everybody can view their home as a home first, there would be much less volatility in the housing market.
Some of the people who haven’t paid rent in 18+ months make us sick. They are screwing the small mom and pop landlord who continue to have to pay their mortgage and maintenance expenses.
Is it any wonder why well-qualified buyers are getting the best rates? Of course we’re only going to lend to those who have the best credit scores and the least amount of debt.
If you want to refinance a mortgage or take out a loan today, it’s best to pay a small mortgage fee than receive a large credit. But not, so many borrowers think we’re evil for earning a fee. Yet, they don’t understand the financials of mortgage lending and are hurting themselves in the process.
THE FUNDAMENTAL QUESTION FOR LENDER AND BORROWER
“If you lent someone money in good faith and they decided to NOT pay you back, and then they decided to tell everybody what a crook you are for lending them money in the first place, would you ever lend them money again?”
OF COURSE NOT!
We no longer want to lend money to the average Joe or Jane because the average Joe or Jane screwed us BIG TIME. Anybody who went through a short-sale or a foreclosure are permanently on our blacklist. We won’t tell them this out of courtesy, but that’s just the way things are now.
We’re only going to lend money to people who don’t need to borrow money. They’ve got plenty of liquid assets to pay cash and high incomes, but they don’t want to pay cash because they want to remain diversified and borrow money for cheap.
IMPLICATIONS FOR TIGHTER LENDING STANDARDS
If we only lend money to people who don’t need money, then we decrease our non-performing loans, decrease our chances of getting a pay cut, and decrease our chances of losing our jobs. Furthermore, we don’t have to listen to backlash from the public for why we caused people to default on their mortgages.
We think it’s a good thing to populate the housing market with people who can actually really afford their homes. The downturns will be less severe, and less people who’ve been paying their loans will be hurt by those who don’t.
I asked this one borrower why he decided not to pay his mortgage for a whole year since he had a steady six figure job. He said, “Because my home is under water, so why waste money?”
He then turned around and said, “Banks are evil anyway.” I wanted to punch that guy in the face. Just because he lived in a non-recourse state doesn’t mean he should just walk away and screw everyone else in the process.
Maybe America will be at risk of being a nation of renters, as stated by Wells Fargo CEO, Richard Kovacevich. But is that so bad if the alternative is a nation of homeowners who are at high risk of defaulting on their loans and causing everybody massive financial pain?
I would much rather have only responsible people borrow money, not entitled and irresponsible people who stretch to buy way more home than they can afford.
DON’T BLAME LENDERS FOR THE HOUSING CRISIS
We loan officers have empathy for people who lost their jobs or experienced extreme loss during the last downturn because we lost our jobs. If it’s between feeding your family and paying your mortgage, feed your family. Just don’t blame us for the housing crisis if you can’t pay your bills.
Blame yourself and other people who promised to pay their bills and didn’t. We did the best we could with the information we had at the time to make your dreams of homeownership a reality.
You think just because you make this much money and have that much in assets that you deserve a loan? News flash. This is OUR money, not yours. If you want to borrow our money, then do what we ask. If you can’t, go somewhere else.
Some of those who leveraged up to buy real estate during the pandemic mania will likely lose their homes. That’s the nature of the beast. We just don’t want to lend to those people.
Recommendations To Build More Wealth
Explore real estate crowdsourcing opportunities. If you don’t have the downpayment to buy a property, don’t want to deal with the hassle of managing real estate, or don’t want to tie up your liquidity in physical real estate, take a look at Fundrise, one of the largest real estate crowdsourcing companies today.
Real estate is a key component of a diversified portfolio. Real estate crowdsourcing allows you to be more flexible in your real estate investments by investing beyond just where you live for the best returns possible. For example, cap rates are around 3% in San Francisco and New York City, but over 10% in the Midwest if you’re looking for strictly investing income returns.
Sign up and take a look at all the residential and commercial investment opportunities around the country Fundrise has to offer. It’s free to look.
Shop around for the latest mortgage rate. Check the latest mortgage rates online. You’ll get real quotes from pre-vetted, qualified lenders in under three minutes. The more free mortgage rate quotes you can get, the better. This way, you feel confident knowing you’re getting the lowest rate for your situation. Further, you can make lenders compete for your business.
Why It’s So Hard To Get A Mortgage Nowadays is a Financial Samurai original post.
Pick up a copy of my latest book with Penguin Random House entitled, Buy This, Not That: How To Spend Your Way To Wealth And Freedom. Not only will the book help you build more wealth, but it will also help you make more optimal decisions going forward.
Why can’t this country just collapse…… We really need survival of the fittest for at least five years so we can purge this country of idiots that make are life’s harder…..and more expensive
There was predatory lending. I was told by them that I could not buy a house smaller than the one I was selling. They wouldn’t allow it. Unbelievable. I had reasonable credit, yet every lender I talked to wanted me to sign for a balloon loan. Of course I did not, because I could see by the balloon payments that I would not be able to pay them in the future and refinancing is not a guarantee. So I held out. It took years to get a conventional loan. I did end up being coerced into buying a slightly larger home, even though I didn’t need it or want it. When I think of how many lenders tried to ruin my credit by trying to coerce me into balloon loans, I get really angry. Shame on them. Most people in my position would have given in, and many did. Millions of Americans’ credit was ruined and they lost their homes because they could not pay the outrageous balloon payments. Now I know that like you said, some borrowers took advantage and got an attitude with lenders and didn’t pay back. But, I just want you see how gamed the system was.
Also, banks were bailed out well. I hear you saying that people are not banks, but why should banks be treated more humanely than individuals? Most people who had foreclosures between 2008-2014 did it because they had no choice. You say some withheld payments as an attitude, but that would only shoot themselves in the foot by ruining their own credit, so I don’t think there were very many like that. Those kind wouldn’t necessarily need to borrow in the first place. Just my opinion. It was a very embittering time, lives and livelihoods were sorely ravaged. So I’m sure there are many different opinions on this.
I remember back in the day, a tribe or village would come together and help build a home for a newly married couple and their family to be. These people would then contribute to the tribe or village in some way — maybe farm or make things. No one called it a privilege to have a place for your family, your possessions and shelter against animals and bad weather.
Nowadays, you’ll never become as rich as your loan officer who treats you like a dirty peasant to afford that astronomical prices of land/shelter.
Well, the one good thing is you can become a loan officer and then you too, can dangle “privileges” above the heads of dirty peasants while getting rich off of mortgage rates and interest.
Just so you know, I don’t think loan officers make that much money. It is an hourly position, at least at the credit union where I worked long ago. My dad used to say no one gets rich in banking. Other careers are more lucrative.
Thank you Nancy Pelosi and the dems for saying home ownership is a right not a privilege and creating the housing bubble by mandating that the banks give a loan to anyone with a pulse. We are trying to get a HLOC on our house now, just for an emergency. We are not small business owners, we work for a fortune 20 company. And make 5 times the average household income with ZERO debt including 2 homes. You would think we work part time at Walmart the way they are treating us. It is going on 6 weeks and every week it is a new demand. And many times it is the lack of knowledge from the officer that causes the problem, for when I call the manager they say, “oh you don’t need that” or here is a very simple document to sign you do not need to send us your life story starting at the age of 6. It is a joke. I would get it if we did not have a near perfect credit score, zero debt and large accounts.
It’s good to know that to qualify for a mortgage, the loan amount can’t exceed a debt-to-income ratio of 43%. My wife and I would like to purchase a home so that we can start our family, and to do so we’ll need a loan. We’ll be sure to look further into our options for loans that won’t push us beyond a 43% debt-to-income ratio so that we can get approved for a mortgage.
My recommendations is to go through your local credit unions before banks. Save money for a decent down payment.
This post has good points to consider but it definitely screams childish and makes the banks and lending agents seem like they didn’t have any fault in the housing crisis. While I do agree that people were borrowing out of their means, that shouldn’t take away from the responsibility of the bank to know that they are one catastrophe away from defaulting if they give them a mortgage that consumes most of their income.
Borrowing the same analogy this dude used with universities, schools are responsible with the classes you take. They don’t let you sign up for theoretical physics before you’ve taken a basic math course. They prepare you. They are being responsible in that matter. Banks knew this would happen but the downside of a homeowner defaulting is that the bank keeps the home. Doesn’t sound so terrible for them, does it? Not much of a risk there for the banks.
I personally know of a loan officer who walked away during the crisis because they knew what they were being asked to do was wrong. In the same manner that this post asks for clients to be more responsible, they should be too. Loans are tougher now as a result to protect the consumer from the banks. Think about that. Save up for your down payment, treat it as a home like they mentioned. Those are good points. Most important, live within your means.
On another related note, fix the FHA program. First time home buyers will want to buy a cheaper home, many of which will need some sweat equity. Having rules for homes that prevents FHA borrowers from buying a home in not perfect condition further prevents clients from getting homes within their budgets. Condos can’t be purchased using FHA if half of the complex is rentals. Why is that? What does that matter to a first time home buyer? And why do they have to be vacant for 90 days? Most homes sell within that time frame. Then this guy laughs at people who try to use government programs to buy a home when the programs themselves are extremely limiting.
I’ll answer a few of your questions. Condo projects that are >50% rental incur more costs for the condo association, and as a general rule renters don’t take care of properties as well as owners. So there are risks to the association (and thus the lender) as well as to the overall property value stability.
Second, the bank getting the home after a default (especially in a non-recourse state, which you should look up if you’re unfamiliar with the term) is not a good deal. Banks are in the business of lending money and other financial services, not asset management and real estate. They very often take a loss when foreclosure happens even after taking possession of the home, often the homes are trashed, they are also subject to market downturns, they have to pay a significant cost to own the property (taxes, lawn, insurance, utilities, etc.), and they pay significant costs to sell the property.
FHA loans, like VA loans, have more stringent property condition requirements because again, the government isn’t in the business of managing property and they are not there to help people with financial gain, but to provide housing. So to them, lending on a property at 3.5% down, if that property isn’t good collateral, is a terrible risk to take (and the government isn’t supposed to take those risks…that’s WHY the private sector does). Further, lower down payment mortgages have higher monthly costs, leading to higher default risk. Sorry, but that’s how the world works.
I don’t know what you mean that FHA properties have to be vacant for 90 days, so I can’t address that.
Forget buying is too much hassel, and your chamcea get approved is minimal to zero. So many people just renting with option to buy. Soo much easier and quicker, and not deal with the shadyness.
Trying to get a mortgage is ridiculous. You can’t get the lender’s to call you back, they wait 30 days and then have to pull your credit again, tell you if you live in the house you are purchasing it will cost you more money on a down payment. You can walk on a car lot and ride off in a $60k car that depreciates as soon as you drive off and they don’t blink an eye about giving you a loan, but on a 60k mortgage, you have to offer your first born child, give blood, and it is utterly ridiculous. They tell you to apply to more than one bank, it will not hurt your credit, the credit companies know you are searching for a good deal…….RIGHT! Also, why are there three credit companies with three different scores and they want to find out which one they want to use to screw you over. I am so over banks. It is pretty evident others are too, many are closing!
I can’t believe these people. Democrats pushed this loans should be given to the poor even if they can’t qualify, many of them like Mad Maxine Waters were getting rich of of these risky loans and were told it was serious problem and they laughed. Now they are telling us all it is a privilege? So after the this mess went down. Mad Maxine and Pelosi made millions, and are still creating bad policy and who’d they blame? Small business. This is an absolute joke. They have created a huge housing bubble. A loan should not be so hard or so untransparent. It should be clear and understandable but I can’t make heads or tells of FICO nor the loan industry. I think once people stop buying into the bs the banks will have to start changing their tune or face bankruptcy.
CREATIVE MORTGAGE MINDS HELP HERE. WILL PAY YOU.
I found the perfect home, new construction, affordable housing program, and it’s 210K. Not much!
Lender will only give about $165K as taxes are about 4400/year and HOA is 135/month and HO insurance is only $50/month.
I can finagle another $1,000 income per month but don’t how best to formerly prove it in documents. I can also show that I earn more under esteemed professional means but since it’s across state lines — not sure how best to proceed. My agent is willing to do whatever I need.
Help me figure this out!
Well, let me tell you about my nightmare experience, and this is recent. Since December of 2017 up until 5/19/2018. I been working on getting a foreclosed condo for only 37,900 with final loan of 36,000. This is not the first time I tried to buy a home, so with all the knowledge I gained about mortgage industry….seriously….damn joke. Firstly, I did own a home before market crashed. Made payments on time for at least a year to show my worthiness because me of course, I always find ways to save money, I am a bargain individual, so I decided to call another bank, and refinance for lower payment with better rate. I went from $660 a month down to $515. Not bad. Ok I take it and be happy. I decided to move to Florida because my job was moving company overseas, so I put the house up for sale quick, and sold in less than 2 months. After, I have not owned another home for over 10 years, and yes, it was much smoother to buy a home. Me: I do my due diligence. Lots of research only because I refuse to let loan officers, realtors, and lenders screw me over and over. Remind you what you read if from my personal experience, and not just once, but like 3-4 times. Just that this last try really did it for me to stay away from lender, and any other relations to housing.
Lenders, many realtors, and loan officers are sneaky, and deceitful in their own ways from experience, and what I witnessed as well as hearing from people.
Anyhow, back to my nightmare:
LENDERS – Are 80% misleading people trying to own a home. My experience, quicken loans got me pre-qualified then was told to make the loan work I would have to pay off a CC. Me: Okay I can do that, which one will help me? It was one of my capital one card with balance of $1300 which I paid off. In the end, come to find out from an email that he cannot get me approved after I paid off a CC. Very misleading info. Horrible. I was livid.
SELLERS – Of the property you are pursuing. My experience with the first bank which was a credit union bank in December 2017. Got pre-qualified, did all the paperwork, and submitted everything getting ready for the appraisal to be scheduled. Was nearly close to my closing date, and pay all the fees until my lender got a letter back stating that the condo is not FHA approved, and expired in 2011. My loan was setup for FHA; seller has the property listed as FHA, conventional, and cash approved. Guess what? Because seller is too fkg lazy to stay up-to-date, my loan got all screwed up, and had to terminate the contract after all the headaches, and stress I went through. I was so fkg livid, and foul mood.
PRE-QUALIFICATION – Is a joke, should not even exist because loan most likely DECLINED then a home inspection has been done, guess what? you just lost that money, and many times also lose the earnest money. The PRE gets you nowhere, but anti-depressant pills, stress, sleepless nights, disappointments, health issues, and a waste of your time. Basically, puts dark clouds over you. Def not worth it. Ones health is more important. I was pre-qualified about 6x, and at the end, loan never came through even with a cosigner….What a damn shame.
PMI – Who’s bright idea was this? Seriously, my experience when I got pre-qualified loan officer tell me if it was 40 less, it will work. Me: Are you serious? Based on what exactly? Brought up PMI and everything else. Me: So lets remove the PMI since is just extra money being thrown in for no good reason causing us good honest, and payer extra difficult to get approved. I said PMI should only be mandated to those with little credit history/no credit, and low score, and not for someone like me that has 20yrs or more credit history with no negatives, and payments always on time, and good score along with a stable job for 4yrs or more with stable income, but hey lets hit her with PMI because her credit is so perfect, and has discover/AMEX CCs, and many accounts paid off, and could become a risk factor in making on time payments. I call total BS on that….did I over qualify? Hm who the fk knows.
UNDERWRITERS – They are so overrated lol & so overlooking their due diligence lol with a naked eye…damn shame. They are backwards. My experience: I was here it is…once again pre-qualified for conventional loan for condo. Nothing but back and forth with a bank that supposedly they focus on helping their community_______EH! BS. After submitting everything then got to underwriters, they requested I write a letter explaining about consumer debts, ok fine, I do that, and also wanted my moms bankruptcy packet from nearly 8 yrs go which that took some work because I had to track it down, and get it emailed. Guess what? All that for nothing. Underwriter damn well knew what her final decision was, and still fked with my emotions. Pretty much toying me.
I should be an underwriter, I think I do better job. One thing I noticed about underwriters, they prefer to approve people who worked for at least 2 yrs non-stable income with a credit score of 740 or more, and little debt with short credit history to prove their worthiness. Me: I rather approve someone with long credit history with high balances, and some paid in full accounts with a credit score of 640, and some debts, and shows their worthiness with nothing negative showing, and all payments on time. This forces to think man, this person could have their last $50 in their pocket, or bank account, and still use it to pay their bill because this person proves that. If all lenders do this, I think they will be a lot more successful, and process be painless & quick. Im telling you, I can be good at this because I think out of the box. Anyone can have a good high score, but show me proof of your long history of worthiness, and stable income. Underwriters nowadays are def overlooking everything, and quick to judge. No one is perfect, people do lose their jobs, and file bankruptcy, this does not mean they wont be able to make their payments. banks & loan officers are the main key factors; they have the power to not people thru this kaos instantly once they see they wont get approved, but instead, I am going to qualify this person because you never know, it may go through. Underwriters have the final power, but should not even get to underwriter unless loan officer knows if that person can easily get approved….simple as that.
So yes, loan officers & lenders are the ones to point fingers because these people who want to buy has no knowledge of the rules & regulation when it comes to mortgages, they are relying on the so-called professionals to guide them, but unfortunately, guided to the wrong path. Why? Because they are not looking after no one but themselves. Now, there are some trustworthy loan officers that will put their customer before themselves, but very low percentage on that from experience if I may add.
REALTORS – Many realtors are shady as fk. They will do whatever it takes to assist in the closing on a home even if they know the roof will fall in a year, or so. Why? Once again looking after their interest instead. If they refer you to someone they know home inspector, and convinces you to call, and schedule. WARNING!! This is a sign that inspector is favoring the realtor to help close the loan even though inspector found many issues with home that need attention asap, or not worth buying. I know someone who was buying a home, found they loved, got inspected by their own inspector they went with, inspector happen to be someone I know for many years, and he is good guy very thorough, took his time, checked everything til he got to the basement, and found major foundation problem. Guess what…realtor was not having it, decided to do another inspection by realtor referral, and inspector made loan go through. 2 yrs later my friend was sad and called my friend home inspector the person she hired at first to let him know that he was right, and how they believed him, and now having problems with home. This all because realtor was more concerned with his pockets getting heavier. What a shame. Cannot trust no one. thinking they looking out for you.
CLOSING COSTS – “Overpriced.” “Rip-Off.” OH MY GOSH! BABY JESUS. Like seriously, how hard is it to press a button then charge borrower $200 or more just to do that button press, and this is just one fee. For crying out loud…already at bank making money. Is it bonus money or something. I do not argue about research on property like taxes etc, but shit when you just pressing a button. Come on now. No wonder no one can afford to buy a home. Closing costs fees, and PMI is def key factors why is difficult for some to get approved. If up to me, I make closing costs flat fees, should not be based on how much you purchase home. I call huge BS on that because is the same amount of work, and same process. Reminds me of auto insurance which is the number 1 scam. Mortgage Industry is right there with auto insurance.
To end this with some tips:
Many banks do not loan out for mortgages below 50,000. I figured out ways to get around loop holes without the stupid hassle from lenders and loan officers. Did my research, and made phone calls to ask questions. I said hmmm how about if I take out a personal loan for 36,000 tp buy condo cash, and own it instantly without the hassle and headaches, and close a lot faster for 60-84 term with a bank that offers home equity line….see where I am getting with this lol get personal loan then turn around, and do a home equity line of credit for the amount of what I owe on personal loan then pay it off, and now have a better interest rate, and better payment. Guess what…got my condo. Sometimes you have to be smarter, and think out of the box to get what you really want. There is always a way. Just have to look for it.
I see there is more and more people just renting or rent-to-own because they say is easier than buying. So many people getting denied from all directions possible. I was one of them, and lost $500 plus home inspection money. All because loan officers suck. So do not waste their time, and submit to underwriter for denial please!! Do your job right the first time, and prevent any further disappointments. Remember, y’all have the power to end it before it gets to far, and money being lost for nothing. Many of us work hard to earn that money, and can put to good use than wasting it on a home that we would not own.
I do understand some people are irresponsible, but again you have the power to stop it. Is not my fault lenders gave out bad loans, why should I be punished, I can prove how worthy I am, but guess, does not matter lol People with great long history of payments with high balances, paid in full balances should have diff rules apart from others. Someone like me should not have to put down 20% on a home. I did 100% on my first mortgage. Never defaulted. Only certain people should pay that much down. should be harder to finance for a car than a home because you can always drive away with the car, and not pay. I would not be able to pick up a home and vanish if I was not making payments. This country is backwards, and fked up fill with corruption.
Mortgage industry rules & regulations need to be re-visited & re-viewed for many corrections. I would like to know what the percentage is for folks who got approved for a home as supposed to folks who got declined.
I screwed over and over and over again. 6 months, and could never get a loan for mortgage. If it takes 6 months than something is def wrong. Wish I would had thought of personal loan a lot sooner.
Better believe I am educating many people about this horrible mortgage industry, and how is not worth it. I tell them better renting, or rent-to-own, or personal loan. Save them some headaches, stress, and disappointments. I let everyone know even people I barely talk to in public.
Note: I only posted this because I figured y’all needed someone on here who actually been through a lot in the process for only 37,900 with amazing credit history, good score, 4yrs stable job and income, and still never got a loan. This is how fked up the mortgage industry is.
Loan officers on here talking about how they laugh at who cannot put down 20% on a home. I be the one laughing with my corona watching the news when banks go down again, but this time not for people defaulting, but from not having enough business because people keep getting denied….hahahahaha! I crack myself up:) then hear loan officers and lenders finding ways to justify smh! Damn shame!
Honestly, this is the worst experience I have encountered; never been through so much hassle and stress. It was actually making me sick. Never again for me.
OK Good night. I am restless. I do not mean to offend anyone. Just speaking the truth because I went through it all, and witnessed it.
I started to realize how corrupted the real estate market is when the real estate agent asked us if we had cash. Big read flag. Now we had an FHA specialist call he did a soft credit and said we were good to go. Now he is looking at our self employed tax forms for the last two years. I was told not to take too many deductions or we won’t get approved. I said well then why does the government give the deductions? I am taking them and if the government says well you can’t get a loan because you took too many deductions then screw them, I will be a permanent renter until I can save the cash. And pay cash for it. My son who is just out of college working at a pizza delivery job got a mortage right away and we are having to go through this making 140,000 a year?
Wow. good read, when you said corona, I was thinking you wrote this in 2020.
I agree with a lot of the things you said. Sorry we have been through so much of that. I have a question: Why did the lender want to see a relative’s bankruptcy file? Were you and the relative signing together? I’m concerned they dragged your family into it unethically. I once had a lender tell me that if I lost my job or became unable to earn well, my family would inherit my debt. Yet, in the United States sons and daughter are not responsible for their parents’ debts after death.
“Save more money people!”
This sort of “advice” ignores that fact that most families are now being charged rents that are well over 50% of their monthly income. Kind of hard to save money when every spare penny goes to bills and necessities, not to mention that with home prices rising exponentially, 20% is a lot harder to get to than it used to be.
I wish mortgages still worked like they did when my parents bought their home. Now, even though I have a great credit score and pay more than I would for an average mortgage in rent each month, I can’t qualify because of the new criteria that loans can’t exceed 43% of debt-to-income ratio. I would be willing to pay more interest and refinance at a better rate down the line if I could just get the damned mortgage in the first place!
I will try posting this again: you deserve for you commission to be clawed back.
Wow, Mortgage Loan Officers are such stand up people according to this article. Nice, wholesome people who just wanted to do their jobs and provide service/value for their community….. right? What a load of BS! Any and all mortgage loan officers, or most American banks in general are greedy, money-whoring and uttterly without any compunction about shady practices. Saying the banking crisis is the fault of consumers and borrowers is like saying you arent responsible for putting a bottle of vodka in front of a drunk and mayhem occuring. You/we all know human nature, heck banks count on it for things like gouging low income customers on overdraft fees time and again. You knew the person working at walmart couldnt afford a $275k home but lent it to them full well knowing they would pay for awhile then fall behind, then rack up late charges and fees, then lose the house back to the bank and the bank would end up out ahead again…..at that loint the “friendly loan officers” would have their commissions already and not care about these aftermaths but to continue to pump loans out to unworthy customers….and somehow do it with a straight face. And you want to claim to be innocent and blame consumers?? How about you are part of a system that encourages, supports and profits off GREED? All these fees, costs, prices built into applications of mortgages are designed to dffect maximum profit to the banks. What ever happened to just giving someone money and telling them they owe you back at a certain percent? Why the extra thousands in costs? Mortgage Loan Officers knew this is their bread and butter, that poor/low income people were their target demographic….now have the nerve to blame these same folks for the mortgage crisis instead of admitting culpability along with the banks, if you had such a moral crisis you should have quit, as far as I am concerned you all are like the street thugs for the big mob bosses, carrying out orders for the bosses just as guilty. Everything you own is paid for with dirty money, wringed from the bones of poor customers. American Greed is surely going to ruin the US eventually.
It was a two way street, and both parties were to blame. If you don’t know how much you can afford and you can’t do basic math it was partly your fault too. Don’t act like the people making little money and taking out big loans are victims here. I know personal responsibility has all but disappeared in this country, but come on…
Don’t be willfully ignorant. You should know that many Americans are so innumerate they just don’t understand things like ARM and high rate loans…. I bet you also support school vouchers.
Wow… That’s pretty unfortunate. As a Veteran, a father of 4, and a young, simple kinda guy looking to retire soon, this is disheartening to learn, and a pretty jagged pill to swallow. I found a wonderful opportunity. Spanish ranch style home on 3 acres of wooded land. Home had been foreclosed on and vandalized. Owner wanted a cash only sale because the net worth of the house was overshadowed by repair costs and was not financable. They wanted near 87.5 for the whole shabang. I couldn’t afford it, so I had to let it go. Now I see no point in saving for retirement or for a mortgage/ rent and would be better off living in a refridgerator box or suicide, because I would have to work until I drop to provide for my wife and kids with no chance of retirement as it is due to the impending economic collapse that’s looming over our heads these days. I know I sound a bit dark and melodramatic, but it is a reality we are all forced to face. Nothing is free, and responsibility does not come without consequence.
Loan officers are cockroaches. They make more money than their pitiful IQs should ever allow. Go back to bagging groceries or selling used cars. The mortgage industry is run by a combination of corrupt sleazeballs and blatant morons. Regulation in this industry is a joke. There is ZERO accountability and just as many REAL consequences. Stay in school kids, don’t end up as a real estate agent, roach, or loan officer.
I can’t recall when the last time was that I read such a pile of BS. What borrower sold mortgage backed securities? None. What borrower leveraged their bank 70% or more. None To blame the mortgage crisis on the borrowers is to say there was no culpability of the large financial institutions. Absolute BS my friends. Only 2% of all defaulted loans were the result of borrowers misrepresentation. 90% were due to job losses caused by the economic failure of business due to the failure of the large BANKS. Not the other way around. Go ahead and keep telling your lies and there will be people (stupid people) who believe you. Even an idiot can see that it is the BANKS that have been charged and that have paid huge fines for their misdeeds. Not mortgage holders. Greedy banks, greedy real estate brokers (property pimps), greedy loan originators are what caused this crisis. And by the way, Yes, people are entitled to a place to live. In many places owning is far cheaper than renting but outsized requirements for down payments have all but closed the market to people who actually work for a living. Again, greed keeps these people from having wage increases that actually keep up with the cost of living. The CEO gets rich, everyone else just gets older and falls further behind. Go ahead and peddle your greedy right wing screwhead way of thinking, but anyone with a brain knows that what you are selling is just a pile of damned lies. (That someone told you to spread no doubt.)
All of this is a load of crap and just another way that America is becoming a socialist state. Mortgage lenders were lazy and greedy in the mid 2000 and they gave everybody a loan. They didn’t verify income, employment and assets. They got bit. And when they got bit, they came running to the federal government with their tail between their legs and asked for a bailout from all the bad loans they wrote. Now there’s so many regulations, nobody can get a loan. Does it work? Not in your wildest dreams.
Nowadays the mortgage industry is the TSA of the financial world. They’re choked with all kinds of regulations. Just like gun-control laws, TSA regulations, and laws against things like drugs and prostitution these regulations will prove to be ineffective, just like many of these laws are. What is needed is to put the discretion and common-sense back into enforcing the laws, rules and regulations that we already have. This is my story.
I am 60, retired and derive part of my income from Social Security disability. I also own a house in Arizona. A very nice home that is paid for. It’s worth about $325,000. In addition I have a very nice investment portfolio, an inherited IRA, an inherited Roth IRA and a credit score, that at the moment is hovering around 800.
I decided to move to North Carolina. Not only is the cost of living less there, but I find that I fit in better there. My original plan was to rent an apartment in North Carolina, move there and then purchase a house with the proceeds of the sale from the house in Arizona. When I went there this February, I decided that it would be much easier to just buy a house instead of moving to an apartment and then moving again to a new home in less than a year. I contacted my financial planner who also agreed that this was a good move. In addition, at his behest, that I should get a mortgage to purchase my new home in North Carolina. This way I could re-invest the proceeds from the sale of my house in Arizona in my portfolio. Doing the numbers, the return on the investment would pay for the cost of my new home in North Carolina in about ten years time and still leave me with the principal. In addition, I could buy a lot nicer home. And so the nightmare started.
I started the mortgage application process with a mortgage company located in Cary, North Carolina. My financial planner arranged for me to start taking a distribution from my inherited IRA to show that I had income. He also advised me to write a check from my brokerage access to pay down the balance on my credit cards. Of course this made no difference at all, since once the reviewed my credit report, according to them, that is they only time that they would do so. In a couple of weeks time, I had a pre-approval and returned to North Carolina and found a house. I made an offer on it and it was accepted. And so you would think it was a done deal. Far from the truth. Here’s just some of the highlights.
1. Even though the home was listed as an asset, because it is paid for, the loan processor asked for the fully executed HUD1 form on the home. Once again I had to explain to them that the home was paid for and that the sale of my existing home was not a contingency for the purchase or a mortgage on my new home. I provided them copied of the deed to the house, which shows no liens or mortgage, along with the successor trustee form which shows that I have ever legal right to do whatever I wish with the property. Additionally, today, some 6, yes 6 weeks after I started this loan process, I received a call from my insurance agent in Arizona. He told me that someone from the mortgage company in North Carolina called and wanted to know if there were any loss payees on my insurance policy. I called the manager of the loan company and he told me the underwriters wanted to make sure that there was not some kind of a “secret mortgage” that was not recorded on the deed. I called my insurance agent back and he told me it was the loan processor that asked for the information, not the underwriter. I am not so believing since according to one of the first correspondences I got from the loan company, they were bragging about how thorough they were in verifying everything before they submitted it to the underwriter.
2. As I mentioned above, I gave them not only my successor trustee form, but a copy of the death certificate of the individual who held the trust. Then they wanted the entire copy of the trust. Thinking I was one step ahead of them, I also included copies of the receipt and release forms that the other beneficiaries had signed in the presence of a notary public. Sure enough, two days later, I received a call from the manager of the mortgage company. He told me that the underwriter wanted to see proof that the beneficiaries were paid out of the trust. I told him to check his e-mail. He told me this was the last thing the underwriters wanted, but that was a lie, because the whole thing about the “secret mortgage” came up today.
3. The loan processor requested some documents. I sent them to him and then he was gone for a week on medical leave. While he was gone, I submitted everything, not only to him, but the manager as well. Sure enough, when he came back the next week, I receive an em-mail requesting the same things I sent him the week before. One of the things, are you ready for this was a statement for a money market account.
4. The bank where I had the money market account never sent me statements. When the mortgage company requested them, I looked online, talked to a representative and then went to a branch. All they could give me was a computer printout of the transactions. What’s even more stupid was that I had zeroed the balance on the account and used those funds as well to pay down the balances on my credit cards. That was not good enough for them and so last Tuesday I had to go back to the bank again and with the manager on speakerphone telling the representative of my bank that unless i got statements that I could not get a mortgage. Statements on an account that has a zero balance. That day, last Tuesday, March 24, 2015, I spent an entire day, yes a full 8 hours, trying to get something from the bank with an official stamp, but also re-submitting forms and papers that I already submitted maybe two or three times.
4. Because of the trust and beneficiary distributions, I was looking at a huge tax liability for 2014, since the trust stipulated that beneficiary distributions be made tax-free, which basically means that I was liable for them. So, lo and behold, a month after I started this whole fiasco, they not only wanted my 2012,2013 tax returns, but now they wanted my 2014 tax return. I was planning on filing an extension and using some of the proceeds from the sale of my home to pay for them. But the mortgage underwriting Nazis had a different idea. Not only did I have to scramble to find a CPA, but I also had to come up with and additional $35,000 to pay my federal and state income taxes, which was beyond the $50,000 down payment for my new home. Not only that, I have to pay taxes on whatever gains were made on assets that I had to use to come up with the $35000, so it’s a lose, lose for me.
This is the best part. The manager of the mortgage company told me last Friday that the underwriters might ask me to close some of my credit card accounts. Socialism at its finest. But the question remains is how is it that they can check my credit to verify that they were close, but they cannot check my credit again to see that it has gone up to almost 800 and get me a better rate on my loan.
I have the three C’s in spades. Collateral, Credit and Cash for the down payment. What I don’t have is a mortgage company that believes any part of my existence. I’ve been planning on packing, cleaning and doing repairs on my house to get it ready for sale. That’s not happening. There’s usually a daily mortgage surprise. It’s hard to get motivated to do anything. Aside from the enormous amount of stress it’s caused me, I just don’t care anymore. The excitement of finding a new home in a new state and starting a new life is a distant memory. What I try to survive everyday is the rage and frustration that I feel from all of this.
My financial planner and the manager of the mortgage company tell me that this happens to everyone. That does nothing to make me feel better. It does nothing to address the issue that the loan processor does not read e-mails or even look at the documentation that he was provided. I’m six weeks into the mortgage process and it doesn’t’ look like it’s going to happen. Like I said this is socialism at it’s finest. You would think that they would voice an objection to try to make this better for people.
On the contrary, it is Capitalism at its finest.
How is it capitalism for a bank to not lend money and not earn interest?
I’ve scanned all the comments to see if anyone mentioned loss of jobs and income as a reason for not paying mortgages? It’s not like all defaults on loans were due to “not wanting” to pay them back. We have been job hunting since we had to give up our home in 2009, and have found jobs at Target and the local grocery store at minimum wage. Both of us are professionals with Masters degrees. At present there are simply no jobs where we live.
That is very unfortunate, and I assume others are also in your situation. Did both of you lose your jobs 5 years ago and get part time work quickly? Or have you guys been getting unemployment or other benefits? Do the benefits help at all or are they pretty worthless? What about relocating, is that a possibility?
Hi, Ken,
Yes, we were small business owners and lost the biz. No, we didn’t draw unemployment or seek financial help.
We got seasonal work as cashiers at Target. Two of our former customers have saved our rears: one offered for us to come rent his coffee shack and to pay part of the rent in groundskeeping. We are doing that. The other offered for us to manage her store, and then two years ago decided to lease the biz to us so she could get her life back. We are doing that. It’s been hand-to-mouth so far, with ends not quite meeting. We live on an island, which is both expensive and prohibitive for moving costs. I am actually looking at how we might just up and move ourselves and start completely over.
The Samurai website gave me some insights: I’ve been licking my wounds from a hard fall and staying down too long. Time to get back up and play. And, while there are explanations (to some commenters above they may sound like excuses), I am simply afraid to try again. So, the crux is: am I willing to be afraid and to try again anyway?! Yes.
Let the games resume.
Well kudos to you guys for not giving up. Which island? We have friends that just moved from the USVI to Alaska.
The Big Island of Hawaii
I agree with every word–so refreshing! I was raised to believe your word is your bond and promises are not to be broken. It disgusts me when people don’t take responsibility, leaving those of us who are responsible holding the bag. I plan to raise my son with the same values, but we have a definite issue these days with folks thinking they can welch because “it’s just a faceless corporation.” Guess what: corporations are made up of human beings! Thanks for a great post!
I agree with the mortgage loan officers tighter lending standards. However, the fault and responsibility for the 08 loan crisis is mostly on the banks and lending institutions. They got too loose with their standards and lent money out with a high risk of it not getting paid back. It is the banks responsibility first to assess the risk correctly. For example, my sister works for a mid-size bank in the midwest that made it through the loan crisis without any major problems and no bailouts because they kept their lending standards high. Her bank doesn’t even give out RV and boat loans, they are conservative in the lending.
This pattern will repeat itself again because the banks will start to ignore their own risk officers advice and get rid of them and try to make a quick buck again on loan commissions. We will never see the end of banks being stupid with their money and high risk.
This is a related article:
I can see cash purchases of homes as a growing trend simply due to the enormous size of the so called “baby boom” generation.
Moving from California to much lower cost of living locations is likely to become very common.
This can’t be right. The *loan amount* cannot exceed 43%??
“To be considered a qualified mortgage, a loan amount cannot exceed a total debt-to-income ratio of 43%.”
What do you think it should be Joe? You can always e-mail the government and banks to lobby for a more strict or less strict percentage.
“We no longer want to lend money to the average Joe or Jane because the average Joe or Jane screwed us BIG TIME.” Who approved these mortgages for the average Joe or Jane?
frankly, i’m not sure if you know what happened with the housing market bubble.
lenders are responsible for maintaining high standards. they failed to do this because they were making money hand over fist due to the mortgage securitization industry. THEY CHOSE TO LOWER THEIR STANDARDS.
futher, mortgage lenders are financially literate! the sad fact of the matter is that a very large percentage of consumers simply are not. they rely on lenders to maintain high standards. we can shake our finger at them for not being financially literate but it won’t help. we need to change the system to accommodate vulnerable borrowers.
read this –
Should a financially illiterate person take out huge debt to buy a house then?
This post shows WHY loan officers are so stringent with borrowers. It is a counter-point to all the anger and frustration people have been demonstrating against banks.
The way I’m changing things is to provide more perspective and teach people how to better analyze property. I think the 30/3 rule for home buying is very important too. We can all pitch in. We don’t have to write the articles to help, but if you don’t, please help spread the word.
we clearly don’t agree about what caused the financial markets to fail.
Matthew, you seem to think lending institutions did this all in lockstep, on their own initiative. I did see your link, am aware of the writers and the book in your link, and I ask you to simply google “clinton bush ownership society” You will be treated to numerous articles blaming both Clinton and Bush for “going too far” in attempting to encourage home ownership.
Nobody has mentioned this in the thread so far, largely because there is nothing left to say about it. But the idea of “home ownership” has always been encouraged, because of the “stake in society” that homeowners have. They have obligations to vote, pay taxes, have ties to the community and work at jobs; all good things for a society to flourish. Having HUD, Fannie and Freddie on board to help those on the cusp of eligibility was a noble experiment, and NOBODY was saying home ownership was a bad idea in the 1990s and 2000s. It was also a way to attempt to bring racial minorities into the “ownership society” and an attempt to give many on the cusp the opportunity to join the larger society instead of being excluded from the obligations and benefits. Unfortunately, not everybody, especially those on the financial cusp, was able or willing to follow through with the commitment a 30 year mortgage (let alone all the responsibilities of home ownership) require.
The “Ownership Society” is a George W. Bush administration term (and an extensive philosophy). And the basic concept is good.
Fannie and Freddie were also victims. They are in the business of purchasing mortgages and mortgage backed securities from the banks. In other words: buying off the risk.
Here is a link to the GW Bush White House site in regards to the “Ownership Society”:
https://georgewbush-whitehouse.archives.gov/news/releases/2004/08/20040809-9.html
It’s hard to argue that the intentions weren’t good.
the lending institutions did lower their standards (pretty much) in lockstep – because there was a competitive advantage to doing so. default risk was simply pushed down the line to whomever was holding securitized mortgages.
it was a great system until it stopped, the major players almost universally went bankrupt, and owners of securitized mortgages were left holding the bag.
@Matthew, the point is that the banks did not do this on their own initiative. The ‘lockstep’ is a descriptor, not the subject. In any case, your claim that “THEY CHOSE TO LOWER THEIR STANDARDS” is incorrect; all choices are market-driven for the Fed, for Fannie and Freddie, for borrowers and lenders. You don’t have a right to a credit card or a house. Think about that next time you need more money than you have, for something you want but can’t pay for.
@Ace, appreciate the links and want to clarify that this is not exclusive to GWB. The entire U.S. tax code was/is written for social policy (not financial policy), and to encourage behavior that benefits U.S. society. Here is Clinton’s “Homeownership Strategy” directed through HUD in 1995. https://www.globalurban.org/National_Homeownership_Strategy.pdf I can remember a Civics class from the 1970s, explaining why homeownership was a good thing for any society; young men settle down, marry, have children, build a financial and social future. If you do not have this, then you have a problem that is occurring today in Asia and the Middle East, where millions of men without education or skills have no real opportunity to marry or build a financial future. There are millions of men in China today that will never marry, and not by choice; the male/female birth rate is 1.2. https://www.forbes.com/sites/china/2011/05/13/chinas-growing-problem-of-too-many-single-men/ In the United Arab Emirates, there are 2.74 men for every 1 woman between 15-64, and this trend extends throughout the Middle East. If we could get these dudes some c00chie, they would probably calm the f*ck down, shave their beards, and stop blowing themselves up.
the banks most certainly did lower their standards on their own initiative – riskier mortgages were seen as more profitable. further, they didn’t hold the loans but sold them so they didn’t hold on to the risk.
the initiatives to expand home ownership were minor and largely ineffective in the whole system although they were used as justification for not putting the brakes on an out of control system.
I certainly agree…. One of the worst offenders was Countrywide (BOA bought them).
Many lending institutions were simply in the loan issuing business. The risk seemed low because mortgages were sold to someone else, then repackaged into CDOs and sold to other parties. The risk models seem to indicate that a bond consisting of say one thousand mortgages was low because only a few homeowners would likely default. The payment streams would supposedly remain intact.
This is fine in my opinion, as long as there is good government oversight. Which there was not.
The larger issue is the “bubble” mentality which prevailed. The fact that houses kept going up in value provided a positive (negative) reinforcement feedback loop, inspiring overconfidence in all parties involved: lenders, buyers, government, investment banks, pension funds, Fannie & Freddie, etc.
There seemed to be (and still is) an attitude that it’s ok to purchase as long the buyer qualifies at a teaser rate. The thought process seems to be to constantly refinance every few years at the new current teaser rate. This is not the norm where I live.
My observations and thoughts are far more in depth and complex than this; and far too long for this forum. But geography, culture, community, and tax policy all played into this issue (and still do).
@Matthew, it appears that you are unfamiliar with the fact that Fannie Mae and Freddie Mac guarantee almost half the mortgages in the U.S. and especially subprimes And that HUD was appointed in the 1990s to oversee those institutions, with the specific mission to increase the rate of homeownership using subprimes. And that the Glass Steagall Act, which prevented the combination of investment and commercial banking, was repealed in 1999. Over 500 banks failed in the 2007-8-9 crisis, including some of the very biggest. For future reference, asserting something (i.e. “it had a minor effect” “they chose to lower standards”) without any facts or backup isn’t something that is persuasive or gives credibility to what you say. It is one thing to feel strongly about an issue, but that is not the same thing as having a factual grasp of the issue. Who do you think bought those bundled subprimes? It always helps to ask just one more question, before making up your mind so firmly.
@Ace, your noting of government oversight problems, and disincentive for banks to qualify these loans as if they would be held to 30 year term, is appreciated. That disincentive for the banks to ‘hot-potato’ these loans is a perfect example of the “moral hazard” I noted previously, where the benefit does not correspond to the risk. I often wonder what, exactly, the outcome would have been if there were no bailouts (which removed the moral hazard consequence). Maybe the pain would have been over by 2014, instead we are still on that journey with an uncertain destination.
@JayCezzy I’m familiar with the changes that happened in the 1990s but the consequences were indirect in regards to the bubble. Fanny and Freddie lost market share during the housing bubble because they were late to the subprime game. They simply weren’t a major player in creating the bubble – countrywide was.
@Matthew, your post indicates you are “familiar with the changes” but your posts do not indicate it. Do you understand that Countrywide, at its peak, had 17% of the market share? Do you understand that Fanny(sic) and Freddie don’t make loans? That they buy them from lenders and package them into bonds? That Countrywide committed fraud, went out of business, and its succeeding entity BofA was liable for that fraud? Who do you think Fanny(sic) and Freddie “lost” market share to? Would it be a good thing to compete for market share against companies that engage in fraud? How old are you?
Hey Guys,
Countrywide was exceptionally bad!
A buddy of mine has run an appraisal business for several decades. He use to get nasty phone calls (the way he put it) if he filed appraisals which were too low.
The small local banks which he did business with: a completely different attitude.
He sometimes received e-mails suggesting that he may have overvalued a property.
Anyway…. That’s my anecdote (which on the Internet is worthless). But it certainly provided me some insight.
@Ace, not worthless. I went to school with a guy, who was a longtime friend for 30 years. He was a SVP with Countrywide, then BofA. He killed himself last year, leaving behind two teenagers and his college sweetheart wife. The damage is up and down the social and economic systems, and that doesn’t excuse a ‘bumper sticker’ understanding of the problem. This thread reminds me of a great quote (not directed at you, Ace)…
“You are not entitled to ‘your opinion.’ You are entitled to ‘your informed opinion.'”
The joke (at the time) was, Q: “What is ‘Countrywide’ spelled sideways?” A: “Really Wide C***!”
Another joke from the time…
“Countrywide is offering a new loan product. Three years at two points below prime, then it adjusts to a Foreclosure.”
Jay,
Sorry to hear about your old friend.
@JayCeezy
The worst mortgage vintage years coincided with the periods during which Government Sponsored Enterprises (specifically Fannie Mae and Freddie Mac) were at their weakest, and mortgage originators and private label securitizers were at their strongest.
https://en.wikipedia.org/wiki/Subprime_mortgage_crisis#High-risk_mortgage_loans_and_lending.2Fborrowing_practices
I don’t at all let people off the hook for signing a mortgage they cannot afford, but this is some of the most hypocritical garbage I’ve read in a long time. I guess it’s easy to look down from your horse after you were chasing ambulances for 10 years, because that’s about what the lending amounted to. The mortgage practices during the late 90’s to mid 00’s were some of the most unethical and damaging financial policies I’ve ever seen and they were perpetuated from top to bottom. I don’t really care if the government allowed it, it’s unbelievably disingenuous for someone in the business to write an unempathetic article like this as their hands are as dirty as anyone, and it’s very likely they benefited from the lax underwriting requirements during that time. Sorry but you can’t just wash your hands and take the higher road just because regulations came down hard on your own paycheck and now you’re bitter about it.
This is a complete overreaction that has targeted the wrong people. A friend of mine has the retirement paycheck of a senior retired military officer, has a job as a pilot for one of the major air carriers, and his wife is a successful and very senior nurse. Despite all of this, they still were treated like freeloaders when it came time for a new home purchase. His description to me of the process was appalling.
Maybe this is a large part of why my home’s value continues to tank. All the more reason for us to grow our net worth so I can bypass these fools when it comes time to buy our next home.
I definitely felt like a criminal going through the mortgage application process. It is very unpleasant, but I’m just going to bear it and write/speak about my experience. It’s their money after all… so, if I want their money then I have to play by their rules. Kinda like Google for those of us who have businesses online.
I would love, love, LOVE to have a frank discussion with a loan officer at my bank about their “one size fits all” lending rules. Quite frankly they can bend over and shove them you know where. I get that things got ugly with the housing collapse…but….here’s my story.
We built our current house in 2004 at the tail end of the housing bubble. We had LOADS of debt and it only got worse (by 2009 we had over $100K in credit card debt) – but our lender approved us for our mortgage. We built, we moved in, and we made our payments.
in 2009 we enrolled in a debt management plan – the payments ate up a HUGE amount of our monthly income. In fact, our mortgage plus our DMP payment accounted for over 60% of our take home income. But we continued to make our payments. I told my wife that no matter what, we would NOT lose our house. It was our fortress against everything else going on in our lives. Maybe not the best decision……it would have made things much easier to downsize – but it was our foothold and finger in the air against our debt. I did mystery shopping, we scraped and saved and everything in our power to keep making those payments.
Once we finished our DMP, we went in to our bank to refinance. We had to jump through HUGE hoops to refinance…and because of our recent past with credit counseling we had a hell of a time convincing the bank that we qualified to refinance.
Yes, that’s right…we were trying to refinance to take advantage of lower interest rates, lower our payment and make it easier to make that mortgage payment each month. Easier than the payments that we have made on time, every month for 10 years.
I understand the need for good rules and regulations. I also assert there’s a need for common sense. Mortgage lenders have NEITHER.
Travis,
To be clear, you paid your mortgage all throughout the downturn and you are still living in your house correct? If so, then all is good as you’ve paid down your credit card debt and didn’t default, hurting your neighbor’s home values in the process. If this is the case, I’m not sure what’s the problem here. The loan officer isn’t angry at people like you who fulfilled their contract promise.
Can you explain further?
thx
A snapshot of my credit report would show accounts with the text “handled by credit counseling.” They would also show a balance of zero, and a status of closed. Further investigation would show that over 55 months, my wife and I reduced our credit card debt by $109,000. Every mortgage payment (as well as every other payment on my credit report) was made on time.
Yet the words “handled by credit counseling” got us flat out denied by one lender, and excluded us from several other options at the lender we did end up going with (which is the lender we had our original mortgage with).
Yes, we had been unwise with our money – but our track record over the last 5 years, along with never being late on a mortgage payment, you would think that at that point common sense would kick in and tell them “hey, these guys have their act together.” Apparently not. The rules say “credit counseling on credit report = bad” (said in robotic voice) so, we were put in the penalty box.
Ah, gotcha. I understand where you are coming from now.
From the point of view of the loan officer, because he is already inundated with people who want to borrow money and think they deserve to borrow money who don’t have “handled by credit counseling” on their resume, he can be very picky.
Of course he won’t be as open to a prospect’s face. But that’s where a post like this comes in.
Banks are not your friend. They are there to make money. That’s it.
That being said, what the loan officer is not acknowledging is the number of subprime mortgages that were extended with terms the borrower did not understand. The reason these were approved at the time was greed. Bank profits were increasing and the pressure to keep performance in line with the rest of the industry made lending standards increasingly lax over time.
Don’t trust banks. Only trust yourself. If you need to borrow, borrow the very least you can and pay it off early. Banks are in essence another self-serving “boss” you need to answer to. Avoid them whenever possible.
I told myself “F*ck this crap, I’m just gonna pay cash” so many times during my mortgage approval process. Cash really is king…. but then again, a 2.5% interest rate is hard to beat.
The pendulum has swung to the other side! I see no reason to have audited statements, but you should be able to use your tax returns (signed, of course). After all, you are breaking federal law lying to a bank and falsifying tax returns. A CPA audit must go through a laundry list of steps to validate financial information according to GAAP, it is expensive. If you are using the same bank you have CD’s I would keep pressing that leverage and your long term relationship.
Valid points, that I disagree with the author on. To perform an audit, a large amount of resources need to be used, from time documenting the systems, performing and documenting all of the work done, to time assisting in the preparation the financial statements (for about 99% of small business owners). That means man hours, not even taking into account overhead. While most CPAs aren’t cheap, they aren’t hugely expensive either (compared to lawyers or wall street financiers).
On the flip side, like krantcents points out, an actual audit is probably overkill for the situation. As well as a lot of people don’t understand what the purpose of an audit is and that there are other levels of assurance that CPAs can attest to.