[quote=davelj] . . . OK, let’s assume that the lenders are the American tax payers. Are you suggesting that We the People should have less strict underwriting standards than the typical private enterprise? That’s absurd. That’s how We the People ended up with the GSEs. So, contrary to your position, I think that if We the People’s money is at stake, the underwriting standards should be among the highest in the industry. I remain unsympathetic. . .[/quote]
Understand what you’re saying here, davelj. I received all my RE loans after being fully qualified and properly underwritten. I haven’t borrowed any mortgage money during the “loose lending” craze. And I DID have a Fannie Mae loan in the 80’s (10% down with PMI canceled after 14 mos). The rest of my RE purchase-money loans were made at 70-80% LTV.
I don’t recall ever being asked to supply more than one year of tax returns or any checking statements. If I WAS asked to provide bank statements, it was only for the balance. I could redact all the details before submitting. Of course, my/our employers were called before my/our pre-approval was issued (signed by an underwriter) and ALSO AGAIN on closing week. I have NEVER been asked the “source” of any funds I/we had on deposit and I have never had to resubmit any (previously “lost”) documents. I have always used a “direct” lender.
Of course, I have never applied for any mortgages after receiving gifts and have never received gifts in escrow. Most all of my RE loans were kept in the bank’s portfolio, though, and they usually paid for their own appraisals and sent out their own in-house appraisers. I don’t recall ever being allowed to view the appraisal as it was the bank’s property. Since FICO has been in use, I qualified with a score of 804.
Perhaps FICO is a flawed criteria to use but what else do we have, davelj? If YOU were making a mortgage loan from your own personal funds, or an OCB loan, what criteria would YOU use to qualify a potential borrower? If a borrower is 40-70 years old and has a 775+ FICO score, doesn’t past performance predict future success here?
I’m going to guess here that what you are really intimating is that many borrowers, even though having a great FICO score, aren’t contributing enough skin to the transaction to avoid strategic default. If this is the case, I wholeheartedly agree. I believe charging PMI in conjunction with making <20% downpayments should be abolished. I have always felt that the (0 down) VA Program is a ripoff to our active and retired servicemen and women. The FHA program is becoming a colossal ripoff as we speak. I have posted before that I believe Fannie and Freddie should also be abolished. I believe the actual lender with the funds should make the ultimate underwriting decision based upon their local RE knowledge and the 3C’s of the borrower, including FICO score, if available.
There’s nothing wrong with using the three C’s of credit (character, capacity and collateral) as lending criteria. That’s the way its always been.
If a borrower can’t save 20% down, they don’t want to buy a property bad enough. If saving a downpayment requires sacrifice in other areas, (such as living below or far below their means for a few years), then so be it. If this criteria were in place, the housing stock will be in the best “ownership” hands. The rest will rent and there’s nothing wrong with that.
