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Could it be any harder to get a mortgage? Oh, yes it can..Don't get pregnant it could cost you that loan

By
Title Insurance with Key Title Corporation 63078

I guess we saw this coming but for some reason I was surprised by this article written in The New York Times by Tara Siegel Barnard.

http://www.nytimes.com/2010/07/20/your-money/mortgages/20mortgage.html?_r=2

Curiously enough I was talking to a Realtor today in my area who specializes in short sale transactions and he was telling me that a pregnancy or birth of a new child can qualify as a "hardship" as it relates to getting a bank to approve a short sale. His statement somewhat surprised me, but I  agree that the birth of a child is certainly a life changing experience.  And then I happened upon this article today. As pointed out in Ms. Barnard's article 

"Lenders are taking a harder look at prospective borrowers whose income has temporarily fallen while they are on leave, including new parents at home taking care of a baby. Even if a parent plans on returning to work within weeks, some lenders are balking at approving the loans"  The article went on to state that banks are only looking at guaranteed income these days. 

So, if you are pregnant and if you intend to go back to work the lenders are not going to look at your "intent".  Intent is great but it is conceivable that upon the birth of the child you will make a decision not to return to the work force.  There are of course any number of reasons why you may not return to work.  There is certainly a chance that you determine that after paying for child care expenses it is not cost effective, there is a possibility that the child will require you to be at home with them longer than is allowed by your company's paid maternity leave program and so on.

The lenders' new attitude can be traced, in part, to new loan quality-control measures that went into effect earlier this year. Fannie Mae and Freddie Mac, the two quasi-governmental mortgage giants that buy the bulk of conventional loans from lenders, have not changed their rules for qualifying for a mortgage. But the system of checks and balances has been tightened, making lenders increasingly skittish.

Fannie, for instance, now requires lenders to recheck a borrower's financial situation right before the loan closes. That includes calling an employer to verify employment. Before, lenders required only a statement in writing. Fannie's new rules went into effect on June 1. Freddie's similar rule took effect in January.

Coupled with new rules relating to minimum credit scores, smaller seller allowed closing costs assistance etc. is there a snowballs chance in hell that anyone will be able to get a loan in the foreseeable future. 

As the housing market continues it's steep decline, lenders, with some validity, have gone to extremes to insure that their investors won't be takking a hit. Mortgage insures like Fannie Mae and Freddie Mac have been requiring more and more lenders to 'buy back' loans that have fallen into default because of less than stringent underwriting during the processing of the loan. I cannot disagree with their mindset, but I don't think that now is the time to necessarily initiate a whole new set of rules that will keep the market from gaining any strength.

We must remember too that both Fannie Mae and Freddie Mac have been and continue to be bailed out by those very same taxpayers who now can't get loans backed by these mortgage giants.

Posted by

Charlene Perry
Key Title, Inc. 
35 Fulford Avenue
Bel Air, MD 20104
410-803-4800

Comments (1)

Doris C. Monticone
Keller Williams Realty - Palm Beach, FL
CRS., GRI.

Your absolutely right, not only do we need to consult our Buyer's not to make any huge purchases during a contract but not too procreate! They pretty much want their first born as it is!!!

I agree the pendulum has swung so far now to the opposite side with good reason but, we need Buyer's and good products out there!

Jul 20, 2010 08:22 AM