Jun 13
Lending Loss Backlash
The National Association of Realtors has come to the conclusion that the home buying market is depressed, not because people don’t want to buy, but because the lenders don’t want to hand out the money. Stung by the sub-prime debacle, lenders are tightening the purse strings and raising the requirements for mortgages, effectively dropping back to 1975 standards. There are low interest mortgages out there, yes, but the lenders are looking for higher credit scores and bigger down payments, as well as higher standards for appraisals on properties sold or refinanced.
This article paints a somewhat gloomy picture for the future of real estate sales, placing the blame on gun shy lenders who are turning down even those potential borrowers who have stellar credit scores and histories. They’re basing their refusals on second opinion appraisals that, if they come in below certain set standards – such as more than $20,000 below low prices homes in the neighborhood – the credit score doesn’t count for much. In fact, lenders are looking much more closely at those criteria they probably should have been looking at the past 10 or so years – trends in house sales, age of inventory, debt-to-income ratio, and so forth – these days. Condominiums seem to be a particularly sore point with them, also.
The bottom line here is, with the housing inventory at a 20-plus year high, and with lenders adopting these far – some say unrealistic – sets of standards for approval criteria, it doesn’t seem as if the state of the real estate market will improve any time soon.