Minneapolis, MN: Not much of a shocker here, but weak, and bad credit loans are down dramatically since the lending correction of 2007.
Part of the reason for the housing collapse was an immense community desire to allow everyone to have a home. Clearly, that experiment failed miserably. Simply put, not everyone who wants a home loan deserves a loan, regardless of what liberal community activists say.
Mortgage loans written today, have some of the highest "quality" seen in underwriting history. New mortgage regulations pretend to provide important protections to borrowers, but have also lead to a permanent increase in the cost of originating loans to all borrowers, and a dramatic decrease in loans to those with poor credit.
Between 2007 and 2012
- Home buyers with credit scores higher than 780 declined by 30 percent
- Home buyers with credit scores between 620 and 680 declined by 90 percent
- Home buyer with credit scores below 620 were virtually non-existent
Loans harder to get with no incentive
All mortgage loans are much more difficult to originate, process, and underwrite. But small loan amounts, and especially small loan amounts combined with credit challenges require a huge amount of time and effort that loan officers can no longer be compensated correctly to work on.
In the past, the Loan Officer and their company were rewarded and compensated for their extra efforts with problem clients.
Today, loan officer walk away from them because there simply is no reward or incentive to help challenging clients. Simply put, if you worked on a project for 10-hours, and got paid the exact same amount as you do on a 1-hour project, would anyone ever work on the 10-hour projects anymore? Of course not...
The government and community activists may disagree, but Loan Officers and lenders are in this business to make a living, not work for free.