Lately, the lending industry has been putting the “mort” in Mortgage with a bevy of bewildering rule changes that are leaving some buyers unable to secure loans. OK, here’s the thing: last year some bad stuff went down with the sub-prime market. Rather messy – and it really put the damper on what might have been a better market last spring. Lenders got slapped around a bit and told to shape up. So, you’d think they would actually think about things a bit and come up with a plan. Spend a couple months brainstorming about how this tangle all started and what to do in the future to prevent a similar snarl.
However, the way things are now the lending industry reminds me of a 3-year old that’s pouting because mom and dad gave them a spanking. Look, when it comes to holding buyers more responsible for the loans they take out, I’m first in line for the fan club. However, denying loans to people that can easily afford them for stupid reasons is not helping anyone. Over the past three weeks, I had 2 deals fall apart – one because, at the last minute, the lender decided that the home the buyers wanted to purchase was too close to train tracks and a feed supply store and that made it “unacceptable” to the lender. Who cares about what the buyer wants to buy, right?
The second deal fell apart because the government doesn’t trust individual condo owners to pay for their own flood insurance – never mind that they’re fine with single family home or even townhome owners doing the same. I guess the fact that it’s a condo and not one of those others really makes a difference.
The silly part of it is I ALMOST had a third deal fall apart, apparently because the underwriter mis-read one of the “new” rules. And this, my friends, is at the heart of my beef. Rules are great. Legislation and oversight and regulation and all that. But for god’s sake, if you make rules, be smart about them and don’t keep changing them. The way it is now, lenders don’t know what the heck is going on. People that got approved two weeks ago can’t get a loan today because things are changing all day every day. What we’re seeing in the lending industry is going too far in the oposite direction. Make buyers responsible but don’t restrict the people who can buy and can afford to buy the ability to buy.
What we might see this spring is a unique situation where buyers have the desire and ability to buy, yet things are so messed up with the lending industry that those same buyers might not be able to get a loan. Yet another “side effect” of this whole mess we find ourselves in.