Banks are (still) stupid
Mortgage Loans
Years ago I used to give talks to service clubs about the mortgage industry and I would give them real examples. I would ask by a show of hands how many people would approve the loan situation that I described. Here is an example.
Remember this was many years ago: Home Value $300,000 / Loan amount $125,000 for a loan to value of 41% - anything at the time below 80% was excellent. The income to outgo was 24% -- anything below 38% excellent and all credit was excellent - we did not use credit scores in those days. I asked by a show of hands how many people would approve the loan; all the hands went up. The loan was turned down by bank "A" - honestly don't remember which bank it was because "something does not seem right." I sent the loan to bank "B" and it was approved on the spot.
A couple of weeks later bank "B" turned down a loan and I sent it to bank "A" and it was approved.
Rules - OMG who the heck made them. Here is a loan I am struggling with.
Value $2,500,000 and refinance no cash out loan amount $950,000. Income $24,000 month and customer has an 800 credit score and no debt except mortgage. In 40 years customer has never had a late payment anywhere. By the way the customer has $2,700,000 cash. Of course you would make this loan and I would make this loan but the biggest (and best according to them) and friendliest (according to them) banks can't make this loan.
Is there a reason? No. Are there rules that stand in the way ? Yes - but I am determined to find a bank with brains. Problem is most banks with brains have a slightly higher rate. Somewhere in this land there is a bank that makes mortgage loans and has a brain and the best rates: I will find them. If I had only some of Warren Buffets money or Bill Gates money I would have my own bank and help people in the local community with good loans and toss the darn rules out the window. I have many banker friends but I despise what the industry has become.
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