I was asked the other day by one of my home mortgage clients, why he did not qualify for the new loan that he had applied for. He was having a great deal of trouble understanding why he could not qualify for a mortgage payment that was less that he'd been paying in rent for the last 10 years.
I explained to him that the government had certain loan-to-value ratios and credit-to-debt ratios that he did not meet in order to get a loan that would be insured under one of the Federally guaranteed home loan programs. As he walked away looking quite forlorn, I could not help but feel bad for the gentleman because, in truth, he very probably could have afforded to make the payments.
He had simply fallen into the trap of the "powers that be" when they decided to make residential home lending homogeneous. A semi-arbitrary set of statistics regarding loan-to-debt and value ratios versus loan defaults were instituted to provide a standardization of debt packages so that they could be traded as securities in the financial markets.
I have seen this happen more times than I care to recap here and wish there were some reasonable solution for it. It appears that as the markets have expanded nationally and globally, the hometown Savings and Loan, that knew its customers and made personalized decisions, has fallen by the wayside.
These days, many times, you can get better interest rates, easier qualification, faster service, and lower closing costs with the Online Lenders and Banks for Mortgages and Equity Loans than with local Lenders.
It is likely that only a grassroots campaign soliciting Congress to revamp the system will make any noticeable difference. I think I will go and write my Congressman.
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1 comment:
you have hit the nail on the head
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