For the previous 15 years I originated $750 million in construction & mortgage loans. At least 25% of my borrowers needed to go low doc, no doc, NINA, stated income, no income, etc. Now the goverment has told all banks they cannot make a mortgage loan without proving the borrowers income. Even my banker buddies agree, as they understand it, a potential buyer/homeowner could have a financial statement worth millions, but if they can't prove their income, no mortgage loan!
What does all this mean? It means we've taken thousands of potential buyers/homeowners and made them renters!
Yeah, it always bugged me making loans to individuals who said "my tax returns don't reflect all of my income, I deal a lot in cash", but the fact is, there are thousands out there who do not report all of their income, but they have assets & perfect credit. DO WE REALLY WANT TO STOP LENDING THEM MONEY TO BUY A HOME?
I think not? It was the true subprime lenders would give anybody that could breathe & had a social security number a loan, but they're pretty much history now.
Let's continue loaning mortgage money for the no doc, stated income, etc. borrowers, but put some requirements on them. A previous good or excellent mortgage history, 20% down, 725 FICO scores, etc. We can vary the down payment based on FICO scores just like Fannie Mae does on the rate.
It's just nuts to take all of these borrowers out of the market because of a few bad apples, i.e. those that got 100% financing and had never owned a home.
I'm my neighborhood outside of Dallas a mortgage company took a home that sold for $700,000 4 years ago, and worth it, and sold it for $500,000. Another that sold 2 years ago for $650,000 went for $465,000 in 9 days. No doubt, some of these mortgage servicers are giving homes away. Why would you buy a new home when you can buy a 2-4 year old pre-owned for $150,000 under market? This is what's killing the home builder!
If the government can't say yes to some of the no doc, stated income, etc. mortgage loan applicants perhaps they should have the mortgage companies come up with some type of lease purchase arrangement for some of the foreclosed homes for these potential borrowers. Make 36 payments with no late payments, and we'll finance you.
Being a W2 taxpayer all my life, it really bugged me when I was making loans to these borrowers who didn't pay their fair share of taxes (like me), but the question is, do we want them as homeowners or renters?
In the long run, perhaps they will report more of their income to qualify for a mortgage loan, but in the short term (now) do we not find a way to put them in a home with the potential of owning it.
I say we go with one or both of the options I've outlined above.
Your thoughts please!
David - texasexpressrealty.com