[quote=SD Realtor]Like CAR has said all along, simply make people put large downpayments down, perhaps 30% or more and you would be amazed how many problems would go away. Additionally you would be amazed at the affordability factor . . . The govt wouldn’t have to watch out for people because that 30% would immediately filter out those who should not buy anyway.[/quote]
SDR, I agree with this to the extent that this is the MAIN reason why I insist on a portfolio lender. I can’t stand government regulation, red tape, having to produce meaningless voluminous documentation and exorbitant up-front and monthly MI premiums (as well as the MI cos. own set of “regulations.”) Not only is there serious privacy issues involved with excessive documentation, it turns a simple property-purchase transaction into an odyssey of lost paperwork, missed lock-ins, surprises at closing, and the borrower paying quadruple the amount they should for closing costs.
I feel the portfolio lender ALONE (whether or not the loan they are peddling is government backed or not but preferably NOT) is smart enough to decide if their prospective borrower has enough “skin in the game” (20-25% is probably enough) and whether their credit is acceptable and they have been making timely payments in the past (this isn’t rocket science). Based upon these factors, they can issue a commitment letter. Based upon their own prudent appraisal, they should be able to fund if all contingencies are removed. End of story.
I do NOT believe in the FHA program and had the VA program available to me most of my life and never used it. The entitlement (belonging to an ex-spouse) is still unused today. I think the FHA “MMI” and VA “funding fees” are exorbitant and take advantage of middle and lower income folks who could have saved up a little more and put those many thousands towards equity in the form of a bigger down payment. These two programs together create a huge amount of foreclosures which are managed by, you guessed it, government-employee oversight and government contractors.
Fannie has been bailed out by the government and Freddie is headed that direction, if it hasn’t already been declared insolvent. Both quasi-government “organizations” are run by career bureaucrats.
I DO, however, think it would take awhile for properties to become more affordable if larger down payments were required. Lenders are still suffering from their self-inflicted “overlending fallout” and want/need to recover as much as they can from their carefully-positioned and debuted-by-calculated-interval “shadow inventory.”
Existing property owners and potential buyers are now paying for past lending mistakes in the form of reduced property values and reduced inventory.
