“To Many Regulations and Restrictive Underwriting Guidelines”
The National Association of Realtors has called for more lending. Here is the problem, there is no lack of money, programs and low interest rates. The big problem are the regulations, stricter and unreasonable underwriting guidelines.
Here is an example of the system being broken.
These folks purchased a home 3 years ago. They did a conventional loan, putting 10% down, the interest rate was 5.75%. The home decreased in value, they spoke to the company servicing their mortgage to do a modification. They were basically told they have to miss three payments before they would be considered.
Being able to save $275 per month, they decided it was in their best interest to go for it. They missed the three payments and then applied, you guessed it, after a 7 month process they were denied. Even though they were told they qualify for the modification program. Their complaints to the banking commission have had no results.
Shortly after they were denied, I met with them, am now coaching them on getting their credit repaired. Once 12 months has gone by, since the mortgage was brought current, I will be able to assist them.
I run into this kind of story every day. It is criminal for any institution or any loan officer to advise anyone not to make their mortgage payments to be able to qualify for any program.
REALTORS® Call for Increased Lending
Posted By susanne In Consumer News and Advice, Home Owner News,Real Estate Information, Real Estate News, Real Estate Trends
Increased lending to creditworthy homebuyers and more loan modifications and short sales are necessary to reduce the rising inventory of foreclosed homes and help stabilize and revitalize the housing industry and economy, according to the National Association of REALTORS®.
That was the message delivered recently by Allan Dechert, 2011 president of the New Jersey Association of REALTORS®, who testified on NAR’s behalf before the Senate Banking, Housing and Urban Affairs Subcommittee on Housing, Transportation, and Community Development regarding new ideas to address foreclosures.
“As the leading advocate for homeownership, NAR knows that foreclosures don’t just affect the families that lose their homes—communities, the housing market and the economy all suffer,” says Dechert, broker-owner of Ferguson Dechert Real Estate in Avalon, N.J. “Ensuring credit availability to qualified buyers and helping more distressed homeowners with loan modifications and short sales will help reduce the growing inventory of foreclosed homes and ensure that housing leads the way out of today’s economic struggles.”
Dechert says that creditworthy consumers continue to have difficulties securing fair and affordable loans despite their proven ability to afford the monthly payment. He said that NAR supports responsible lending standards; however, unnecessarily tight credit restrictions are putting downward pressure on home values, increasing the number of homeowners whose mortgage exceeds the value of their home, and adding to the number of foreclosures.
“Increased fees, higher down payments and reduced loan limits are making it harder for borrowers to obtain safe and sound mortgage financing products. Greater access to financing for qualified borrowers and investors could help absorb the excess inventory of foreclosed properties,” says Dechert.
In testimony, NAR also urged the lending industry to take greater action to keep struggling families in their homes through loan modifications that reduce the probability of default and prevent further increases to the large inventory of foreclosed properties. Helping more families remain current on their mortgage by significantly reducing their monthly mortgage payment will allow them to remain in the home that they worked so hard to obtain and reduce the impact of foreclosures on local home prices.
Dechert says that continued short sale delays are also contributing to foreclosures and urged lenders and servicers to quickly approve reasonable short sale offers that would allow homeowners to avoid foreclosure. The current short sale process can be time-consuming and inefficient, and many would-be buyers end up walking away from a sale that could have saved a homeowner from foreclosure.
“Loan modifications—and short sales for those unable to meet their mortgage obligations—help stabilize home values and neighborhoods, and limit the losses incurred by lenders, the federal government and taxpayers,” says Dechert. “More must be done to streamline short sale transactions, since many potential home buyers are simply choosing to walk away from transactions due to the length of time it takes for lenders to approve and complete these sales.”
Dechert also testified about the pooling and disposition of foreclosure inventories held by the Federal Housing Administration and Fannie Mae and Freddie Mac. NAR is concerned that, although bulk sales may quickly alleviate the large inventory of homes held by the agencies, those sales would likely result in larger losses than necessary. REALTORS® strongly believe that every effort should be made to incentivize individual versus bulk sales because individual sales maximize asset recovery and minimize the impact on housing values.
Regarding another proposed option to combine foreclosure disposition with affordable rentals through lease-to-own programs, Dechert testified that the focus should be on keeping families in their homes whenever possible. He recommended that any lease-to-own programs be privately administered by local entities that understand the needs and challenges of their local communities.