The Myth That Mortgage Credit Is Really Tight

Real Clear Markets ^ | 29 April 2015 | Stephen Oliner

[Lorianne]

The claim that mortgage credit is very tight for all but pristine borrowers has been repeated so often by respected policymakers and economists that it is now taken as fact.

This characterization of today's mortgage market, however, is misleading. The truth is that most people with a steady job and an average (or worse) credit score can get a mortgage. Many borrowers taking out home purchase loans these days have less than perfect credit. The federal government has been more than willing to guarantee higher-risk mortgages, and it's been doing a lot of business with lenders that originate the loans and then pass the credit risk to taxpayers.

Since the financial crisis, the federal government has nearly monopolized home mortgage lending in the United States. Even now, more than six years after the crisis began, 80 percent of the mortgage loans originated to purchase homes have a federal government guarantee. That's an astounding statistic in a supposedly free-market economy like the United States. The upshot is that the standards imposed by the various guarantee programs largely determine the availability of mortgage credit.

[safeasthebanks]

I work for a medium sized regional homebuilder and this article is generally correct. It seems many people (even those that should know better), have made the ridiculous leap in logic that, just because things aren't as flippin' crazy as they were before the crash, this automatically equals "credit is really tight".

It's not.

[iowacornman]

This is beyond belief. They are so hell bent to transfer wealth,they are doing the samr thing that wrecked our economy before. I think that is criminal,

[Cyman]

But what is not stated is the GINORMOUS amount of paperwork demanded of borrowers, especially small business owners. The finance process was soooo long that I had to file the same papers with updates as they claimed they couldn't rely on info that was over 3 months long. Came to a girlfriends plea not to walk away from the entire process. In 2004 I was amazed at the minuscule amount of paperwork necessary to obtain my 5th or 6th home loan, now the boat has almost tipped over in the other direction.

BTW my FICO score was 825

[Jewbacca]

I refinanced my NYC house recently because I bought out my brother.

I applied on the Internet. They had an optional section that asked about race. I love screwing up that kind of record so I checked “black.”

I got the lowest rate you can get on a mortgage. They explained it was because they were forces to give mortgages to people of color and because I had excellent credit, I was a huge help to them.

Anyway, I encourage others to abuse this system as much as possible.

[Lorianne]

That’s outrageous.
I agree. We should practice insubordination of stupid, unequal, racist practices that should be illegal.

[MrB]

When we last tried to get an investment loan a couple of months ago, the local bank said they had to turn us down due to regulations, even though they’d love to give us the loan. Our score is over 800 as well, but since it is an investment loan they were requiring a lot tighter financial rules be applied.

They said, however, we could have a 600 credit rating and get more than 100% loan on a home if we were going to live there.

Of course, the leftists would want the rules turned upside down to punish those of responsible behavior and reward those who make bad financial choices.

[MrB]

And there’s no way they can challenge your self-defined ethnicity.

That would be “racist”, now, wouldn’t it?

[Lorianne]

You have money to invest? That makes you the evil 1%.
You must be penalized.

[MrB]

I believe that’s the assumption.
There’s also, I assert, a racial assumption that goes along with that as well.

[stephenjohnbanker]

” They had an optional section that asked about race. I love screwing up that kind of record so I checked “black.”

I got the lowest rate you can get on a mortgage.”

LOL!!!!

[faithhopecharity]

We appear to be in the last lap on the way to another housing crash soon

[puppypusher]

If I had the money I would not ale out a mortgage now.This economy is to unstable to take that gamble.

[SW6906]

Similar experience (and credit score) for me right now. I am putting down over 20% and have another 20%+ in cash in the bank and they are still requiring tons of paperwork and everything but a stool sample (so far). It’s ridiculous.

[SW6906]

The money is almost free: 30 year fixed at 2.875%.

[puppypusher]

He! the money maybe almost free now.But when this economy crashes and all money is worthless and the bank holding your mortgage comes for payment and you can’t pay what will you do?

We are in serious trouble and I don’t like the risk and I don’t trust the a Government or the Federal Reserve to get us out of this mess.

[TalBlack]

Approved for 230,000 in a market requiring 390,000 isn’t terribly meaningful.

[Jewbacca]

If money becomes worthless, holding property secured by a fixed rate mortgage is wonderful, as the debt becomes worthless.