Is this crazy topsy-turvy world of real estate, there is one thing that has always puzzled me about home loans:
Why isn’t more weight given to a borrower’s actual track record when it comes to paying a mortgage?
If a seasoned buyer had paid a mortgage religiously for twenty-five years or more without so much as a single late payment, how can this borrower possibly pose a bigger risk that a first time buyer purchasing a $100 down HUD home?
But the demands for documentation have escalated to the point of being punitive. Potential borrowers that become weary of the “third degree” are electing to just throw in the towel and cry “uncle.”
It’s disturbing to see the demographic that is least likely to encounter a foreclosure becoming disenfranchised from the home buying process. And it’s another one of those idiosyncrasies that is adding momentum to the downward spiral of the housing market.
Maybe some day soon someone will wake up and realize the stupidity of this reasoning, but until then, it’s just another obstacle to recovery.
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I have been in my home for 20 years, never late on a payment. All 3 of my FICO scores are in the 800's. I can't refinance my house because I'm on a commission basis. How much sense does that make?
Richard, you're talking about the buyers on my recent post: 750+ credit scores, excellent jobs, no credit history problems, just a dud for an underwriter
Once the govt. free money runs out my guess is banks will go back to lending money.
Unfortunately the pendulum swings to the extremes almost always when an issue arises. Is it the right approach? No, and the innocent get caught up in it...
It's really unfortunate that the lending standards got so tight that they are actually hurting strong buyers.
Cynthia...
That is EXACTLY what I am talking about. I pay a premium interest rate because I am self-employed, despite the fact that I have NEVER been late on a payment. Thanks.
Ed...
I read you post and had three similar experiences this week! It's absolutely insane. Thanks for the comment.
Doug...
I think I mentioned that to a processor this week! Thanks so much.
Richard- it seems the pendulum has swung back the other way. Over compensating for the past loose and easy lending environment where all a borrower had to do was "fog a mirror" !
Hi Richard, it's getting to the point where lenders what DNA samples before giving a mortgage. Will be interesting to see what happens when the tax credit ends.
Richard...Right now I believe that as long as the Government is involved and the give aways continue...This maddness will also.
Richard,
I have sellers who thought about an addition to their home on which they made a substantial down payment years ago. Stellar credit. Not overextended on credit cards. Long-term job stability. They couldn't get enough of a home-equity loan for the addition.
The potential buyers all are FHA with minimum 3.5% down but need a $7,000 seller concession for closing.
You're right. There is something screwy with this system!
We are still-in turmoil.. .correcting the over-correcting . .after everything settles. . even US REALTORS
( in commissions )should be able to get loans
Good morning Richard,
The environment of lending is still over-correcting you are exactly right! Until the pendulum swings back to the middle of the road there are many caught in a vice grip and can't move! The government needs to get out of the lending business!
Richard,
This is an important subject in theReal Estate industry...
Dorie...Good point!
As Real Estate professionals we should first try to help and educate people facing hard times and Foreclosure how to KEEP their property., which in a Commission driven industry is sometimes hard to do. Especially for those folks, whose bank is forcing them to Short Sell or face a public Foreclose Auction in the community where they live and their children attend school.
Short Sales = Commissions...
however, it should be only be with a consumer's consent and KNOWLEDGE of their legal rights when they don't qualify for or other options fail.
http://www.oag.state.md.us/Consumer/foreclose.htm
http://www.mdhope.org/
http://www.995hope.org/
http://www.peoples-law.org/finding/legal-help/finding_legal_help.htm
https://www.hopenow.com/
Let us not become blind, callous and indifferent to our country's ever growing displaced families and children who are suffering the devastation of the current economic times far more than the Foreclosure, Bankruptcy, Divorce, and Unemployment satistics show.
As the largest society of democratic people and leader in the free world our children are our greatest asset and we will not fully know the impact on families and the long term affects of these tough economic times on the ever growing 25% of our "Upside Down" society until years down the road...
Let us not loose sight of these facts...
1) Banks & the Mortgage Industry made HUGE profits selling & refinancing people into these toxic products until the market crash.
2) Consumers did not seek out these products, but rather were bomb barded daily with dozens of PREDATORY phone calls how wonderfully benefical it would be to refinance out of a current 30 year "Fixed" interest rate into a LOWER (intial) payment with a "Flex" product. They were told they could use the money for whatever they needed with a possible tax deduction, like purchase or pay-off that car loan. It was how Americans lived! Oh yes, could this be why noone buys an "annual" new car anymore and the collapse of the auto- industry?
The CONSUMER left holding the bag gets LIFE... the BANK gets BAILED by the Govern'ment & WALKS!
1) The CONSUMER loses his life savings trying to hold on to the house.
2) The CONSUMER loses the house anyway (Foreclosure/Short Sale)
3) The CONSUMER loses his credit.
4) The CONSUMER financially ruined and homeless is becomes a social and economic leper.
NOW the same BANKS don't want to do business with this "VILE CREATURE" once a good American CONSUMER...because there are more coming up the pike to be SOLD down the river without a paddle.
Let us all pause for a moment and reflect upon this PROPHETIC thought from our fore-father and help others KEEP their properties when we can...
This is getting crazier and crazier. I'm finding it easier to get a loan for a 600 credit score with debt and dings, than an 800+ with no debt and 30 years credit history.
Richard, it's getting crazier and crazier as the banks are making their problems get worse and worse. I guess they think they will always be bailed out from their stupidity,
Richard, I have been telling my buyers ...congratulations your offer has been accepted, now comes the hard part getting the loan - through the bank process.
Richard, it is rather like locking the barn door AFTER all the cows got out.
And guess what, WE didn't let those cows out.
This is too much, really.
Richard, we have a long way to go and things are going to be tough to change because the ones making the decisions right now are getting paid for it. They know what their doing and don't want to change probably any time soon. This subject needs a really 360 degree turn around
The pendulum has swung the other way to an absurd degree. If they exercised 1/10 of this caution 5 years ago we'd be in far better shape.
It is the normal cycle... not just business, but government, too. Not a good place to be, but normal...
I agree Richard, I have had many solid individuals declined for loans lately, I hope they loosen it up a little.
Remember Richard most of those banks got millions of interest free loans and are making 3-4% not taking any risks.
Richard - If we get buyers to put more skin in the game and base it on understanding qualifications our market will correct itself. Not all people "deserve" to buy a house