State of the Credit Markets

I was reading an article from RSI Media and the Chief Economist for the National Association of Realtors chief economist, Lawrence Yun said, “We’d be seeing greater numbers of traditional home buyers if mortgage credit conditions return to normal.”

Well folks I’ve got news for you – reluctantly I’ll use the phrase that “this is the new normal.” Mortgage credit conditions are going to stay right where they are, and that’s very tight. As any of our very qualified borrowers have learned about the only thing underwriter’s don’t ask for is your first born.

I’m of the opinion had they been asking for all of these items from the poorly-qualified borrowers that have never demonstrated personal responsibly then our clients with great credit wouldn’t be being put through the ringer right now.

Unfortunately the sins of the bad are usually paid for by the good.

What can you do to prepare for the loan application process? First realize that your mortgage consultant is doing their best to minimize the hassle factor. The problem is that the bureaucrats now running Fannie-Mae & Freddie Mac are looking for any reason not to purchase loans from lenders. They are requiring everything to be in your loan file including the kitchen sink, before they’ll buy it.

As they say it runs downhill from there so underwriters to cover themselves ask of everything and thus we have to ask you for it. We’ve gone from almost nothing in a loan file to sever over-documentation.

But as they say, “he who has the gold makes the rules”. So if borrowers want the low rates available from Fannie-Mae & Freddie –Mac everyone is going to have to “play by the rules” no matter how silly they may seem.

The even better news – they may even get tighter if the government has its way with the definition of a Qualified Residential Mortgage or QRM.

Oh you haven’t heard of that – yet. But it’s just around the corner and we’ll save it for another discussion.

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