Welcome to the Vitus Capital Blog!
Notes to myself, possibly of interest to others.
-- Bill Northlich

Thursday, September 17, 2009

Tight and Tighter

I sent this to a Realtor friend
From Agora

“I tried to help my daughter to purchase a home with me as co-purchaser/borrower,” writes a reader, confirming our reports yesterday on what’s become a Bizarro World mortgage market.

“Look to buy with 20% down, 80% conventional loan. I was turned down because I did not meet their debt-to-income ratio even I have cash enough to pay for the house four times over, not to mention net worth in the mid-seven figures and credit score over 700. They cannot do ‘asset dissipation’ loan per new guidelines. They ONLY count ‘income.’ For a retiree like me, that means dividends/interest/rents. When did cash in the bank become an ‘unworthy’ asset?

“It got worse. The mortgage broker tried to obtain a ‘stated income’ loan (no, for me, it would not be a liar loan, since I disclosed everything fully). It was turned down because they only do liar loans of over $400,000. I asked for only $260,000. So it is more risky to provide a smaller liar loan than a bigger one? Give me a break.

“To get the house in time, I had to be the lender of last resort to my daughter. Instead of 10%, I could earn on something else, I am now earning 5.5% on her mortgage.”

She said " I do think the lenders are working toward improving this problem but it is a challenge. Until they can do a better job, many people are having problems getting loans who truly deserve them.

I said: My sense is, from this stuff and my own poking around with "lenders", that credit is getting anywhere from tighter to much tighter. What I think the short story is is that banks themselves, precarious financially, are not lending, and the loans getting done are all pass-throughs to the GSA's - Freddie, Fannie, FHA who can not absorb anywhere near the steady state demand, medium and maybe shorter term. There is no more loan Securitization, which is palliative to US financial health medium term, but, then, there is no where for the new loans to go right now. Perhaps there's a way which I don't see (impossible!) for Ben and Tim (who I like!) to fool some of the people all the time into thinking lending is going on per as normal.

However, we all know that without credit, housing, and capitalism itself, are cars without gas.


No comments:

Post a Comment