The mortgage industry has taken a pummeling for the past two or three years, some of it rightfully so. The pendulum has swung so far that guidelines and regulations exceed the early 1990s when no wiggle room for any exceptions to the guidelines existed. Determining if a loan would perform has no bearing on whether a loan will be approved or not.
If you have no job, good credit, $2 million in the bank and are looking to refinance a $200,000 loan on a $500,000 property, your application will be denied. I do not exaggerate.
Consumers have taken the brunt of the changes instituted by Washington on the banking and mortgage industries. Our Federal government wants to save us from ourselves. They have limited consumer choice from several perspectives: variety of products, sources of products and the death of the mortgage brokers. The big banks lobbies have managed to structure the new laws so that small banks and mortgage companies cannot survive.
The biggest blow came from the FHA. HUD won’t allow FHA mortgage originations from brokers. This means that as a consumer you can’t go to a broker and let them shop your FHA loan anymore. If you apply with a bank and they decide to raise their rates and you haven’t locked in, you no longer have a broker that can negotiate on your behalf or move your application elsewhere to provide an alternative for your loan.
The last time I checked, we live in a capitalist society. As part of the Financial Reform Act, mortgage loan officers’ compensation will be limited as of April 1, 2011. The caps on compensation are low enough to force many of the better loan officers out of the business. Does anyone tell Footlocker how much they can make on a pair of sneakers? Most of our legislators have no idea how these changes will affect consumers or the markets. Any time Washington interferes with free markets, bad stuff happens. Remember how expensive it was to fly when airfares were regulated?
On the positive side, rates remain extremely low. Affordability for housing remains at 40 year lows. Go buy a house!