Why Is It So Difficult to get a Loan?

I get a lot of questions from clients on why it is so hard to get a loan right now.  The short answer is that these is a shortage of investors to buy closed loans.  The better answer has to do with who is buying the funded and closed loans.  Remember that almost all lenders sell their closed loans on  the secondary market to investors and in return get more money to make more loans.  Most of the investors who purchased these closed loans in the past are now struggling to survive.  The major buyer of closed loans right now is the government.  FNMA (Fannie Mae) and FHLMC (Freddie Mac) were taken over by the government last year and tasked with buying closed loans to keep the flow of mortgage money going.  Lenders who sell to Fannie Mae and Freddie Mac are being inundated with closed loans that these government entities are sending back or refus­ing to buy due to documentation problems.  As a result the lenders are over documenting their files in an effort to satisfy the auditors at Fannie Mae and Freddie Mac.

  How Does This Affect Us As Agents ? Underwriters and funders are continually asking for more current paystubs or another bank statement or other documentation that appears to be redundant.  I tell all my clients that right now the lending environment is tough and to be prepared for all kinds of requests and hoops to jump through.  The flip side of course is that interest rates are the lowest they have been in 30 years.  Be happy that somebody is buying closed loans as the alternative would not be good.