As nearly a third of all would-be homebuyers are denied financing, they are giving up on the conventional mortgage[1]. According to the Federal Financial Institutions Examination Council (FFIEC), more than 2 million people (30 percent of buyers) were turned down for mortgages last year, leading them to drop out of the buying process. The Mortgage Bankers Association (MBA) blames “stringent lender requirements or incomplete applications” for most rejections, although the New York Times reports that “insufficient income, bad credit…and low appraisals” are also playing a role[2].
Additionally, many people have lost or changed jobs in the past two years, which creates problems when applying for a mortgage because they have gaps in their employment history. Erin Lantz, Zillow’s Mortgage Marketplace director, says “it’s common” to be denied a loan if you have a gap in employment history in the past two years. Also, FFIEC reports, nearly 12 percent of new mortgage applications are denied simply because the information provided is incomplete or deliberately misleading. An example would be if you rented out your house in order to make payments, but then attempted to refinance using an owner-occupied loan.
Do you think that lenders need to loosen up, or are they right to hold on to their money in today’s uncertain times?
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[1] http://realtormag.realtor.org/daily-news/2011/10/07/30-buyers-denied-give-up-getting-mortgage
[2] http://www.nytimes.com/2011/10/09/realestate/mortgages-triggers-for-rejection.html
Banks should use competent underwriting, but HVCC and other recent government regulations should be repealed. Government lawsuits and oversight caused the real estate meltdown.
Stop shooting the messenger!
At least 90% of the “low appraisals” are because homes similar to the property in question — similar in age, style, size, quality and condition — in the same market area sold for less than the contract price of the property in question. Greedy sellers and dream-merchant agents are not helping the market.
And the HVCC was cancelled by Dude-Fink, I mean Dodd-Frank.
If one looks at the global economy, and the outlook for the global economy, it is bleak! For banks/lenders to loosen their requirements at this time is suicide down the road. The government is close to taking over the banking industry, not legally mind you but then when has that stopped this administration from doing anything?
So for people to whine about the banks/lenders being tighter with the money, is stupidity and harkens back the idiocy, and entitlement behavior that brought to our current situation!
Also the new regulation, like Dodd-Frank are killing the consumer, and squeezing the banks. It is not a crime to charge what the market will bear to make revenue! Isn’t that what the housing bubble was about??
If we can every get back to Free Market Capitalism we will quickly have a recovery in all of our economic sectors. If not we are quickly going to become Ireland!
If we pass The FairTax, we would see a surge in confidence, in consmer spending, and an achievable equilibrium in housing. What we experienced in the “aughts” was not real..it happened yes, but it really shouldn’t have for the health of the US economy, and thus the world economy. What we’re experiencing now, shouldn’t be happening either, but it is a direct response to the economic pressure we applied in the “aughts”. For every pressure there is a release. We are experiencing the release. If we have equilibrium, there is never too much pressure, nor too drastic a release. Pass The FairTax, and housing will recover, because of natural market conditions. The working class, and the “muddle” classes, will still need to borrow money, but they will have more to save, and more to spend. The rich may not need their jumbos anymore, but then their spending would be an offset. The people who wouldn’t like this reform are the lenders. But we would see a new era of prosperity. Read the book…find out why. “The Fair Tax, The Truth”
While the Dodd-Frank financial reform law did a lot to ensure that a repeat of the 2008 financial crisis won’t occur — through regulation of derivatives, a new consumer protection agency, and new powers for the government to dismantle failing banks — the biggest banks still have a firm grip on the financial system, even more so than before the 2008 financial crisis.
Here are eleven facts that you need to know about the nation’s biggest banks:
1. – Bank profits are highest since before the recession…: According to the Federal Deposit Insurance Corp., bank profits in the first quarter of this year were “the best for the industry since the $36.8 billion earned in the second quarter of 2007.” JP Morgan Chase is currently pulling in record profits.
2. – …even as the banks plan thousands of layoffs: Banks, including Bank of America, Barclays, Goldman Sachs, and Credit Suisse, are planning to lay off tens of thousands of workers.
3. – Banks make nearly one-third of total corporate profits: The financial sector accounts for about 30 percent of total corporate profits, which is actually downfrom before the financial crisis, when they made closer to 40 percent.
4. – Since 2008, the biggest banks have gotten bigger: Due to the failure of small competitors and mergers facilitated during the 2008 crisis, the nation’s biggest banks — including Bank of America, JP Morgan Chase, and Wells Fargo — are now bigger than they were pre-recession. Pre-crisis, the four biggest banks held 32 percent of total deposits; now they hold nearly 40 percent.
5. – The four biggest banks issue 50 percent of mortgages and 66 percent of credit cards: Bank of America, JP Morgan Chase, Wells Fargo and Citigroup issue one out of every two mortgages and nearly two out of every three credit cards in America.
6. – The 10 biggest banks hold 60 percent of bank assets: In the 1980s, the 10 biggest banks controlled 22 percent of total bank assets. Today, they control 60 percent.
7. – The six biggest banks hold assets equal to 63 percent of the country’s GDP: In 1995, the six biggest banks in the country held assets equal to about 17 percent of the country’s Gross Domestic Product. Now their assets equal 63 percent of GDP.
8. – The five biggest banks hold 95 percent of derivatives: Nearly the entire market in derivatives — the credit instruments that helped blow up some of the nation’s biggest banks as well as mega-insurer AIG — is dominated by just five firms: JP Morgan Chase, Goldman Sachs, Bank of America, Citibank, and Wells Fargo.
9. – Banks cost households nearly $20 trillion in wealth: Almost $20 trillion in wealth was destroyed by the Great Recession, and total family wealth is still down “$12.8 trillion (in 2011 dollars) from June 2007 — its last peak.”
10. – Big banks don’t lend to small businesses: The New Rules Project notes that the country’s 20 biggest banks “devote only 18 percent of their commercial loan portfolios to small business.”
11. – Big banks paid 5,000 bonuses of at least $1 million in 2008: According to the New York Attorney General’s office, “nine of the financial firms that were among the largest recipients of federal bailout money paid about 5,000 of their traders and bankers bonuses of more than $1 million apiece for 2008.”
In the last few decades, regulations on the biggest banks have been systematically eliminated, while those banks engineered more and more ways to both rip off customers and turn ever-more complex trading instruments into ever-higher profits. It makes perfect sense, then, that a movement calling for an economy that works for everyone would center its efforts on an industry that exemplifies the opposite.