May 16, 2008

Ahhh, the return to sanity. Banks checking over home appraisals and verifying the buyer's income and ability to pay before making the mortgage.


Seems like the good ol' days again, eh? You know, before everyone lost their minds, anyone could get a loan, and homes became lottery tickets...

Lenders tighten loan rules, demand more money down

"The days of simply stating your income are over," said B.J. Perez, mortgage broker and owner of Monarch Mortage in Sparks. "You have to be able to prove income and prove that you have money in the bank."

"Banks are just picking apart the appraisals on houses right now," Wiseman said. "I've seen several cases where the bank doesn't accept the appraisal and the loan just tanks."

"Now, lenders want proof of income, proof of how much money you have and proof of where that money is coming from. Now, they're only making loans that make sense."

26 comments:

Illegal immigrant said...

How am I supposed to get a mortgage now? Oh no!

Anonymous said...

It's a controlled tightening of standards. It's still got a ways to go just like the prices still have a ways to fall.

Paul E. Math said...

This is great news. Now when I go to low-ball there is not some 30k millionaire bidding up the price.

Prudent lending standards will go a long way to bringing prices back to their natural level.

My only worry is that a bailout would negate the motivation for prudent lending standards - why would the bank care that you can't make the payment when the FHA will take the loan off their hands?Fahking Barney fahking Frank. What the fahk kind of a name is 'Barney' anyway??

eric in vegas said...

How dare they stop people from achieving the American dream!

Anonymous said...

This is nothing new. Banks have been picking apart appraisals, verifing source & seasoning of funds to close, and canning stated loans for 18 months now.

The media is brainless.

Anonymous said...

So my question is...what is going to happen to all the NEG AM stated income loans that are adjusting? How is the bank going to handle them? Are they going to be automatically converted to a fixed loan or is that person going to have to prove they should have qualified in the first place? Interesting...

Anonymous said...

Keith, front page link to This American Life PRI radio broacast, on the "Giant Pool of Money", please. Includes an interview with a broker, hired off the street with no RE knowledge, who was earning $100k per month, now facing foreclosure who describes the boiler room atmosphere and how the lenders group think got them into trouble. At least tell me you listened to it.

Ohio Loan Officer said...

Banks are picking apart appraisals like I've never seen!
They are checking Zillow for a comparison, looking at satelite images on Google, and in many cases asking for "Review Appraisals" where another appraiser is asked to scrutinize the work of the first appraiser.

I don't blame them, but what a knee-jerk reaction.

AZDavidPhx said...

Verification of income. The greatest thing since creative financing.

Anonymous said...

Maybe Herb Sandler and his wife can come back and think up some new loan that will fix this mess since they claim to have "invented the neg am loan

yu been skooled said...

FLASH:
Fannie Mae reduces down payment requirements to " help resuscitate the flagging mortgage market".

In other news:
HPers become apoplectic. Seizures imminent.

devestment said...

I am in play on REO that has been in escrow THREE TIMES IN SIX MONTHS! It’s a good deal in a great area. It has deferred maintenance galore and is practically uninhabitable. It just won’t appraise and the banks don’t want it as collateral. The banks seem to be waiting on the sideline for a bail out while they hope to hook an all cash offer.

Over half the buyers just got blown out of the market. The only hope for sustaining the bubble is FHA prop up. The next few months will tell as the prop up won’t happen in the next administration.

Anonymous said...

Who checks the finances and ability to pay of the USA?

You got the government lying about every economic indicator and Bernanke and the Fed running their counterfeiting presses daya and night.

It's quite a scheme.

Peter T said...

A return to traditional lending is the first precondition for me to buy a house. The return, however, is imcomplete still - Fannie just scrapped the rule of requiring 5% more down in areas with declining values. The political pressures of its "allies" became too strong, and Fannie knows that it will need these allies to be bailed out by the government.

Alpine the Realist said...

Nice try bitter renters, but once again you are misleading people. Fannie Mae just announced today that they will NOT require larger downpayments in "declining marekts."

Frank@Scottsdale-Sucks.com said...

ABOUT TIME!

That's the death knell for phony communities like Scottsdale that were built on liar's loans.

VP said...

Documents that should be required to get a loan:

1. Copy of Social Security Card and Driver's License/State ID
(We don't want ILLEGAL immigrants applying for loans, only honest gainfully employed people.)
2. A few recent pay-stubs.
3. Form W-2 and/or other proofs of income, e.g. last year's tax returns.
4. Bank statement to show that you're saving.
5. Letter of reference from the employer. If you do a shitty job and are about to lose it, the lender has the right to know.

Remember, if you can't see yourself repaying the loan fully and on time, you shouldn't be able to get one.

FYI: Pretty much the same documentation is required by landlords when you go out to rent an apartment, so if you think asking for this is ruining the American dream, get lost!

Anonymous said...

Thank God. No more $10 per hour workers buying $500K homes.

No the dummmies that did not read the payment amount on the lending papers will be weeded out as a homebuyers.

Refuse to buy overpriced said...

What about the most toxic loan product of all, the no-recourse loan?

It is no accident that California has had 3 major boom/bust cycles in the past 3 decades. How many more till they learn their lesson and end the "jingle-mail" phenomenon once and for all?

bearmaster said...

There is a loophole at the FHA big enough to drive a moving truck through.

FHA still making risky loans

The FHA is just as stupid as every other government entity in this mess.

Anonymous said...

Now, when are the lenders going to start looking at the failing and failed mortgages and forcing district attorneys to press criminal charges against borrowers who lied on applications (can either charge under general fraud statutes or specific statutes related to the federal nature of the fraud). They can even do this in non-recourse states like Calif in order to get money out of the people walking away from houses. Then they should look at the non-failing mortgages and raise interest rates (even on fixed rate loans) to people who lied on mort applications. Can do this because if the borrowers refuse, can charge with criminal penalties or file civil suits. If the lenders and note holders started using real muscle (get the state or fed government to put people in jail) the number of bad loans, especially by people with cash income, would fall.

Flic said...

I was flipping the channels late last night and came across a show on HGTV (a channel which I never watch). It was some show about buying houses and there was a first time homebuyer couple in Toronto. They apparantly had been approved for a $400k loan w/$35k down. They actually said to the host (Realtor??) that even though they got approved for that amount, they did not want to spend that much as they will not have money to do much else. They were thinking more high $200's to $300. The host laughs and scoffs at them claiming that since the bank "approved" them, they can definitely afford it. She goes on to say banks do not want to repossess properties so they make sure it's affordable and they have "metrics" so they won't loan you too much. I stopped watching at that point...good grief. I would give them the benefit of doubt the show was taped in 1996 when banks actually did have "metrics" but I get the feeling it was very recent. I'm sure the couple ended up spending $400k+ for a house....

Paul E. Math said...

Anon 2:17, I just listened to the full NPR bit on Big Pool of Money - awesome. Thanks for the recommendation.

Seriously Keith, you have to link to it or make at a full post. It explains perfectly the financial component that enabled the housing bubble.

a.creampuff said...

Paul, my man!

Felt sorry for Ira Glass - his voice was totally shot. Think I'll tune in this week just to see if he managed to recover. (yes, I was anon above)

Anonymous said...

Bearmaster, interesting. Big question is whether there still a market for the bundled bad loans - I suspect not. Hypothetically, is there ever an instance where someone cannot put together the downpayment, but if they could, they'd be able to handle the mortgage no problem?

This happened to my father when he was a young man, on a beautiful property (a farmette with a substantial house on it, I think) that he had to pass on. Gramps wouldn't pony up a relatively small amount of money to put him over.
Of course the article is about a complete perversion of that scenario (where the parents are willing and able to help).

Anonymous said...

IF I recall correctly, FHA loans are full doc only - no stated BS. So even if the borrower can get in with 0-3% down, how are they going to prove they can make the payment on something they truly can't afford?

-AF