Rural Mortgages

[MarkV]

Thank you all for the education and sharing your experiences. Briarwood it sounds like you may have worked in the field and your history lesson on the standards cleared up many of the questions I had. I can see the logic to the standards so I guess like many government programs it’s the execution of the program that sometimes baffles me. I have a nephew that over spent on toys so much that he went bankrupt a year ago and is now buying a house he can’t afford but has loan offers coming left and right. Me I keep paying things off, have 3 or 4 times more in equity than the amount I want and have to jump through hoops or pay a higher rate to get the loan. Go figure.

Gatorboy, you are right, they always have a “special deal” for me. /forums/images/graemlins/smirk.gif

MarkV

 

[Bird]

Mark, the last couple of days the Dallas Morning News has run stories about the number of foreclosures being up because the mortgage companies are willing to loan more than their buyers can afford. According to their stories, in some cases, buyers can get a mortgage the next day after filing bankruptcy and a year after having a home repossessed. /forums/images/graemlins/shocked.gif

 

[LarryRB]

Bird,
I don't care to get into too much without causing a huge uproar, however, last year we sold our home in Mass, and bought my mother in laws which is one hundred feet over the state lines.. I being this up because in Mass, it is still a lengthy process to even apply for a mortgage.. The bank we did the mortgage with in CT, we never met the guy, talked to him on the phone and a few faxes back and forth.. While doing this process (2 weks about), he said to me on the phone one day, we are (FORCED) to write mortgages to some of those that we KNOW we will own the property in a year or less. None of this makes sense to me... We had a great downpayment, assessed values that are reasonable and pretty high in the banks eyes, and 30 plus years of mortgage track record they could go by.. He told me some people are buying in Somers CT, 425K plus for those homes, with almost no downpayment.. The monthly mortgage pymnt was way up there, I forget, about 2800 a month I think he said.. He said there are too many rules for undesirables that by law they have to loan the money knowing it will kick back on them.. And we wonder why we're the largest credit holders in the world?

 

[Briarwood]

Before conventional loans (other than VA/FHA) were easily maketed (before FNMA & FHLMC standards), banks and thrifts made loans with their own money and were more concerned with risk. Remember the old adage that you couldn't get a loan unless you didn't need one? Now, most loans are sold in the secondary market and the original lender is not so concerned about the risk. Just make the loan and sell it, then its some other investor's problem. However, the investor does not even worry too much about loss since the loan or a portion of it is usually guaranteed by a government agency such as Fannie or Freddie. Do you begin to get the picture? So, its the taxpayer that ultimately looses, you and me. The more loans a lender makes the more $$$ he makes from fees without putting his own money at risk. Today, most lenders are trying to find any way they can to help you qualify for a loan, especially if it will meet the secondary market standards and can be sold. That is why many lenders are not interested in "non-standard" loans like small farms.

The other thing that happened some years ago was the passage of a federal law known as the Community Reinvestment Act or CRA. Ask any banker about the bank's CRA rating. Lenders were accused of "redlining" i.e. refusing to lend in high risk, mostly inner city areas, where most applicants also just happended to have poor credit historys. CRA required each lender to be proactive to develop a plan to make as many loans in these high risk areas as in the other areas where the banks normally make loans. Periodically, a separate federal examination is made of each bank to determine their compliance with CRA. They must show that they are making proportionately the same number of loans in all areas the bank serves and explain why there may be more loans rejected in these identified (primarily minority) neighborhoods. Banks have bent over backwards to give minorities in these identified areas, usually by census tract, special incentives and special attention to obtain an acceptable rating from examiners. Each bank's CRA rating is published (available from their regulator) and can be used as a hammer by major minority groups to get concessions from banks. I could go on and on about this program but my comments would not be politically correct. /forums/images/graemlins/smirk.gif Lenders have been "forced" into making a lot of mortgage loans to individuals that present more than a normal risk in order to meet CRA guidelines. Also, lenders have had to spend an inordinate amount of $$$$$ and time for employees to handle CRA compliance and to compile data to show they are in compliance. These programs take a big cut into bank profits. Kind of takes some of the fun out of doing business. Most bankers (lenders) don't like the burden CRA has created but you won't hear them complain about it, at least not publicly.

Wow, that all felt good to get off my chest. You guessed it. I'm retired.

 

[LarryRB]

Years ago, I was caught up twice in a redline area,, Even though it is supposedly illegal today, there is still some of that going on... They now use more sophisticated excuses, that's all.. The bankers point was, their money, don't sell the loans but, by state law, they are issuing loans that shouldn't be issued knowing their going to eat them... Anyone buying a 425 thousand dollar plus, house, should have brains enough to put down 50 g's anyway,, Don't forget, on top of that 2800 is the taxes. I know my taxes are 540 or so a month on top of the mortgage,,, Doesn't make it easy, and yes, we have tried to live in different areas of the country where the costs are much lower,, You know what? There's still nothing like home no matter how you look at it..