|Bernanke Echoes Local Sentiments||| Print ||
|Thursday, 29 November 2012 13:18|
By Carl Medford, CRS
Special to the Times
It’s no secret that, for some time now, we’ve believed banks have actually been holding back any significant economic recovery with their stringent lending standards, appraisal guidelines and underwriting policies.
Getting approved for a home purchase loan has become an exercise for only the strong-hearted.
Think running a marathon is tough? You haven’t applied for a loan lately. Getting through an escrow intact has also become increasingly difficult — many transactions fall out of escrow because the loan disintegrates for ridiculous reasons.
Want an escrow closed on time? Loan underwriters have made it SO difficult that “on-time” closings are becoming the stuff of urban legends.
It appears that Ben Bernanke agrees.
Martin Crutsinger of Associated Press states, “Federal Reserve Chairman Ben Bernanke said Thursday (Nov. 15) that banks’ overly tight lending standards may be holding back the U.S. economy by preventing creditworthy borrowers from buying homes.”
Speaking at Operation HOPE’s Global Financial Dignity Summit in Atlanta, Bernanke further clarified by explaining that, while credit and lending standards had to be tightened after the financial crisis of 2008, “the pendulum has swung too far the other way.” He added, “Qualified borrowers are being prevented from getting home loans.”
Couldn’t agree more.
Currently, due to a record-breaking lack of inventory, it’s become almost impossible for buyers to actually win a home in a multiple-offer bidding war. Adding insult to injury, extremely high FHA loan requirements ensures that potential buyers sporting FHA loans are viewed the same as a 1978 AMC Pacer showing up at a NASCAR event. They’re simply not contenders.
Many FHA buyers could actually qualify for normal conventional loans if the requirements were not so stringent. Additionally, even conventional buyers are discovering that ANY blemish in their loan package can cause the deal to implode. These could include past credit issues, deposits not correctly documented or seemingly insignificant items such as failure to properly obtain copies of marriage licenses or divorce documentation.
While it’s important that banks protect themselves, they seem to have completely reversed the process from just a few short years ago. While they used to look for any excuse to give you a loan… Now they seem to be looking for any potential reason to make sure you don’t get one. That’s the reality as we see it. And it really needs to change.
Carl Medford is a licensed Realtor with Prudential California Realty in Castro Valley. This article is sponsored by the Central County Marketing Association at www.ccmgtoday.com.