TO MANY REGULATIONS AND RESTRICTIVE UNDERWRITING GUIDELINES

By
Mortgage and Lending with Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 NMLS # 6869

“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.

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Joe Petrowsky, NMLS #6869

Right Trac Financial Group, Inc. NMLS #2709

110 Main St.

Manchester, Ct. 06042

Office: 860 647-7701 x116

Fax: 860 647-8940

Cell: 860 836-9294

Email: joe@righttracfg.com

www.righttracfg.com

www.joepetrowsky.com

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Joe Petrowsky does not guarantee nor is in any way responsible for the accuracy of the information provided herein, and provides said information without warranties of any kind, either expressed or implied.

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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Todd & Devona Garrigus 09/28/2011 03:57 AM
Topic:
ActiveRain Community
Location:
Connecticut
Groups:
All About Mortgages/Mortgage Networking
Mortgage Solutions
Connecticut Professionals
Mortgage Brokers Loan Placement
Tags:
realtors
underwriting guidelines

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Ambassador
1,024,730
Margaret Woda
Long & Foster Real Estate, Inc. - Crofton, MD
Maryland Real Estate & Military Relocation

We're all drowning in regulations, and it's not likely to get better any time soon, I'm afraid.

Sep 28, 2011 05:15 AM #14
Rainmaker
718,163
Ruthmarie Hicks
Keller Williams NY Realty - 120 Bloomingdale Road #101, White Plains NY 10605 - White Plains, NY

The banks are being ALLOWED to do this.  They are being coddled - they are "too big to fail" or whatever.  They need to be held accountable but we have lost the ability to deal with these issues.  The banking system works just fine - for the banks.  It's the governments inability to bring them up short and into line that is broken.  NOTHING self-regulates, but we have lost the ability to do it for them.

Sep 28, 2011 05:32 AM #15
Rainmaker
1,155,228
Paula McDonald, Ph.D.
Beam & Branch Realty - Granbury, TX
Granbury, TX 936-203-0279

A no-win situation and another catastrophic result if it continues.  Every deal that I have been working on has been met with unbelievable demands, delays and headaches.

Sep 28, 2011 05:38 AM #16
Rainmaker
2,336,623
Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

Great comments guys. Each one of us have to do our part to stop much of this crazy stuff. We have a wonderful opportunity to speak to candidates to get their positions on thes matter that are so important to the public. Much of the public doesn't realize tge problems, we do, so we need to do our part.

Thank for all the imput.

Sep 28, 2011 06:29 AM #17
Rainer
284,468
Steven Cook
No Longer Processing Mortgages. - Tacoma, WA

Joe - thank you for your comments and for posting suzanne's comments as well.

What a lot of people do not realize is that there is nothing in the loan modification law that requires the homeowner to be behind.  That is purely a bank procedure -- for which I think they should be penalized.

I know of person who is now nearly $100,000 underwater, his house payments are at 9+% interest - and about half his income is going to making the house payments.  His bank is giving him the don't make payments program, but he refuses to go that route - since they won't guarantee the modification, or that they will not report it on his credit.

 

Sep 28, 2011 06:52 AM #18
Rainer
161,857
Jim Poole
Tampa, FL
Zero Down, USDA Purchase Loans, FHA 203(K) Rehab & VA Streamline Loans

Great points Joe, I wish I had the time to go into each and every issue you touched on here but I will keep it at I couldn't agree with you more. It's not the way I was brought up and it is not the way I brought my kids up either.

Sep 28, 2011 07:07 AM #19
Rainmaker
776,542
Olga Simoncelli
Veritas Prime, LLC dba Veritas Prime Real Estate - New Fairfield, CT
CONSULTANT, Real Estate Services & Risk Management

Any process that requires that a borrower start missing payments in order to get results is misguided, unethical, counterintuitive and just plain wrong. The possible results are as you described them, Joe. I don't believe we can legislate the issues away as the problem lies in the rigidity of the banks' approval processes (speaking as a former banker) and each bank has its own. Individually, banks need to listen and streamline their modification and short sale procedures. While lease-to-own proposals sound good in theory, administering them would be a huge challenge either for more central or local authorities.

Sep 28, 2011 07:53 AM #20
Rainer
158,244
Anthony Daniels
Coldwell Banker - San Francisco, CA
SF Bay Area REO Specialist

Two problems, affecting too many and going from bad to worse.

Good stuph, thanks for sharing it.

Sep 28, 2011 08:10 AM #21
Rainer
77,960
Mike Morrison
Will & Will Real Estate Brokers, The Woodlands, Texas - Houston, TX

Take off the permanently affixed rose colored glasses. The economy is NOT OPERATING under NORMAL circumstances. WE'RE IN A BALANCE SHEET RECESSION which = DEFLATION... for the life of me what don't you people get???? We're in a period of DELEVERAGING and FALLING ASSET PRICES. The Fed's have locked us into perminate low interest rates thru 2012. How's that working out??? The Gun is EMPTY for the fed. sorry, no silver bullet to re-inflate the housing market.

Since lenders don't have to play by the accounting rules, they have NO CLUE how DEEP and LONG their Balance Sheet RISK really is...now you tell me WHO & WHY would any sane lender loan money Long-Term, 15 or 30 years, at 4.5% or less with relaxed underwriting standards and have a glimmer of hope to stay in business past lunch time. PLEASE,PLEASE,oh PLEASE TELL ME WHO WOULD DO THAT?????? Wait,Iknow...I know FHA!!! But, I did say sane lender.

I am by no means a defender of the TBTF's. We need to loose this pipe dream of relaxed underwriting & low down payments & low interest rates will make the housing market A-OK. This plan is wearing very thin and intellectually at zero. We can do better than this there are sane business people that have a solution. We just need to listen.

 

 

  

Sep 28, 2011 08:10 AM #22
Rainmaker
1,412,327
Michael Setunsky
Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

Joe, that is criminal to tell someone to miss three payments, ruin their credit and then turn them down.

Sep 28, 2011 08:18 AM #23
Rainer
62,831
Scotti Jowers
CENTURY 21 Shackelford French, Search West Monroe Homes - West Monroe, LA
Realtor - West Monroe, Louisiana Homes for Sale

Joe,

The state of the lending industry today is just an embarrassment. Those at the top are to blame and should be held accountable for their actions. Thanks for posting.

Sep 28, 2011 09:04 AM #24
Ambassador
2,011,177
Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M

Joe - Too many guidelines and not enough that make sense.  Once the bank gathered together to make its decisions on knowledge and common sense, and now we have these guidelines . . .

Sep 28, 2011 11:50 AM #25
Rainmaker
2,336,623
Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

Thank you for all the comments. It is so great to see so much knowledge and common sense. To bad some of the large institutions and political folks can't come up with the same common sense.

Sep 28, 2011 02:30 PM #26
Rainmaker
192,049
Gregory Bain
Mezzina Real Estate & Insurance - Little Egg Harbor, NJ
For Homes on the Jersey Shore

we got what we asked for --- just go back and look at all the blogs demanding the government do something about the bad loans that were being handed out.

 

funny. no one wrote a blog about how they profited from selling homes with those bad loans.

Sep 28, 2011 03:51 PM #27
Rainer
113,913
David A. Weaver
Peoples Bank & Trust Co. - Scottsdale, AZ
24 years helping folks finance their dreams.

The plans formulated by our government under the Hope for Homeowners program and others REQUIRED the home owner to miss their house payments to qualify.  Anyone who went to the official websites and read the material could come to the conclusion that to get assistance you had to be late.  This was and still is the guideline.  The whole thing is a farce.  The greed of the banks coupled with Fraud for Profit and Fraud in the Inducement (Look up the definitions) contributed greatly to the mess we find ourselves in today. 

Sep 28, 2011 06:14 PM #28
Rainmaker
3,186,452
Scott Godzyk
Godzyk Real Estate Services - Manchester, NH
One of the Manchester NH's area Leading Agents

I hear this 2 to 3 times a week meeting with home owners who are forced to sell. The easiest way to a recovery would be to have the banks start loaning money to quailified buyers and abandon this practice of over regulation and unreasonable restrictions

Sep 29, 2011 01:17 AM #29
Rainmaker
271,554
Dave Roberts
Healdsburg Sotheby's International Realty - Healdsburg, CA

I don't think anyone here would call for unrestricted loans and lax underwriting standards. We've just swung way too far to the other extreme with the perils of liar loans still holding the attention of the underwriters. I'm sure we've all seen highly qualified people denied credit and other people being victimized by the "just miss three payments" instructions. We can do better.

Sep 29, 2011 01:53 AM #30
Ambassador
920,701
Missy Caulk
Missy Caulk TEAM - Ann Arbor, MI
Savvy Realtor - Ann Arbor Real Estate

I hear this all the time, loan modifications are just not working in MI, only know of one successful one. Best to go to short sale if they need to sell. 

 

Sep 29, 2011 02:11 AM #31
Rainmaker
2,559,706
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

Loan mods wont work and everyone knows this...It is like postponing your own execution. If the house is underwater, it has been sentenced to a type of Real Estate death or at the very least..life without equity. Dragging it out makes no sense I'm afraid

Sep 29, 2011 04:38 AM #32
Rainmaker
2,336,623
Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

As I read the comments it continues to be clear, for the most part every time the Federal Government gets involved with any program, it has a rare chance of success. I wish they would stay out of the mortgage and real estate business.

Sep 29, 2011 08:42 AM #33
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