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According to the Urban Institute, a Washington DC based “think tank”, the current low mortgage default rates could indicate the current credit standards make it too difficult for many consumers to get their shot at the American Dream. (Mortgages)
Why is it that lenders are the ones to get the blame when the homeownership rate is not where it is determined by some study that it should be? BTW, Lenders were also blamed for the crash of 2007/2008, when homeownership rates were at their peak.
Based on a comparison of the loans originated in what is now considered a “normal lending period” (between 1999 and 2003), and the loans originated post the “2008 crash,” (between 2011 and 2015) the post-crash loans have much lower default rates.
Maybe that’s because Congress placed such stringent laws on lenders, while the Agencies, FHA, and DOJ, wacked lenders pretty good for inconsistencies in the loans created between 2004 and 2009. Could it be that some lenders are still a gun shy?
Some of the problems experienced in 2008 were the direct result of the quest by Congress and the Agencies to increase homeownership rates, especially among minorities and low to moderate income borrowers. A noble cause but one that ended up with many consumers getting homes and loans they ultimately couldn’t afford.
Was that all the lender’s fault? Maybe some, but not all. Some of the blame falls squarely on the Agencies, who, at the direction of Congress, kept pushing the envelope to expand the credit box to approve more loans. When it backfired, everyone began pointing fingers and the lenders ended up holding the bag.
So, here we go again. The call to ease the credit standards for more credit challenged and low to moderate income consumers to get approved for home financing. Why should lenders take the bait again?
The push is coming, if not already here. Lenders will be expected to come up with ways to qualify more people to buy homes; increase that homeownership rate. That’s needed so the economy will look good and the politicians can once again boast of all they’re doing to help more people own a home.
This time around, lenders need to be a little more careful. In the end, if things don’t go so well, who do you think will get blamed? It won’t be the think tanks or the politicians.
When originating loans, Lenders must be very careful to follow all the guidelines, rules and regulations. Review loans with an eye toward any potential for defects or deficiencies that can lead to indemnifications, buy-backs, fines and/or penalties.
Loans need to be perfect. You may not get a second chance. Have ample ammunition (documentation) to defend the decision to approve the loan if it defaults down-the-road.
Let’s face it, Lenders want homeownership rates to rise as well. That provides them with more opportunities to lend and make money. That’s why they’re in business.
Congress can’t expect to have lenders provide more financing to those with marginal credit and/or at the low to moderate income level while placing legal and regulatory roadblocks in their way. Why take the risk?
Has anyone thought that the current homeownership might be right where it should be and that defaults are down because only qualified buyers are getting the financing that they need?
Nah…
Well stated.