- This topic has 105 replies, 12 voices, and was last updated 15 years, 4 months ago by
cantab.
-
AuthorPosts
-
October 6, 2009 at 4:28 PM #465669October 6, 2009 at 5:22 PM #464889
sdrealtor
ParticipantI’m far from a mortgage guy but what I see missing is earned income. The banks want to see actual earned income coming in not passive income or assets.
Why they want to do it is cash flow. Income down (temporarily they hope) and they want to hold onto what assets they have in case the unemployment picture goes longer than they hope. Rates are lower so why not take advantage of tehm if they can. It’s free money to them if they can.
October 6, 2009 at 5:22 PM #465078sdrealtor
ParticipantI’m far from a mortgage guy but what I see missing is earned income. The banks want to see actual earned income coming in not passive income or assets.
Why they want to do it is cash flow. Income down (temporarily they hope) and they want to hold onto what assets they have in case the unemployment picture goes longer than they hope. Rates are lower so why not take advantage of tehm if they can. It’s free money to them if they can.
October 6, 2009 at 5:22 PM #465424sdrealtor
ParticipantI’m far from a mortgage guy but what I see missing is earned income. The banks want to see actual earned income coming in not passive income or assets.
Why they want to do it is cash flow. Income down (temporarily they hope) and they want to hold onto what assets they have in case the unemployment picture goes longer than they hope. Rates are lower so why not take advantage of tehm if they can. It’s free money to them if they can.
October 6, 2009 at 5:22 PM #465496sdrealtor
ParticipantI’m far from a mortgage guy but what I see missing is earned income. The banks want to see actual earned income coming in not passive income or assets.
Why they want to do it is cash flow. Income down (temporarily they hope) and they want to hold onto what assets they have in case the unemployment picture goes longer than they hope. Rates are lower so why not take advantage of tehm if they can. It’s free money to them if they can.
October 6, 2009 at 5:22 PM #465704sdrealtor
ParticipantI’m far from a mortgage guy but what I see missing is earned income. The banks want to see actual earned income coming in not passive income or assets.
Why they want to do it is cash flow. Income down (temporarily they hope) and they want to hold onto what assets they have in case the unemployment picture goes longer than they hope. Rates are lower so why not take advantage of tehm if they can. It’s free money to them if they can.
October 7, 2009 at 9:36 AM #465144briansd1
Guest[quote=EconProf]I’ve never understood why banks put so much stress on current income, and so little on net worth. It takes discipline to save and accumulate assets, which ought to be the best indicator of default probability.
I’d suggest this couple keep on looking to refinance. Lenders cannot all be that stupid.[/quote]Because net worth is useless to the bank. The cannot seize the net worth if the borrower decides to walk.
The law is either or. For example, if the borrower deposits $10,000 with BofA which gives them a mortgage. If the bank seizes the $10,000 deposit for non-payment on the mortgage, they forfeit the right to foreclose.
It’s been litigated before and it’s well established in case law.
The bank cannot go after the assets. Their only recourse is foreclosure.
October 7, 2009 at 9:36 AM #465329briansd1
Guest[quote=EconProf]I’ve never understood why banks put so much stress on current income, and so little on net worth. It takes discipline to save and accumulate assets, which ought to be the best indicator of default probability.
I’d suggest this couple keep on looking to refinance. Lenders cannot all be that stupid.[/quote]Because net worth is useless to the bank. The cannot seize the net worth if the borrower decides to walk.
The law is either or. For example, if the borrower deposits $10,000 with BofA which gives them a mortgage. If the bank seizes the $10,000 deposit for non-payment on the mortgage, they forfeit the right to foreclose.
It’s been litigated before and it’s well established in case law.
The bank cannot go after the assets. Their only recourse is foreclosure.
October 7, 2009 at 9:36 AM #465682briansd1
Guest[quote=EconProf]I’ve never understood why banks put so much stress on current income, and so little on net worth. It takes discipline to save and accumulate assets, which ought to be the best indicator of default probability.
I’d suggest this couple keep on looking to refinance. Lenders cannot all be that stupid.[/quote]Because net worth is useless to the bank. The cannot seize the net worth if the borrower decides to walk.
The law is either or. For example, if the borrower deposits $10,000 with BofA which gives them a mortgage. If the bank seizes the $10,000 deposit for non-payment on the mortgage, they forfeit the right to foreclose.
It’s been litigated before and it’s well established in case law.
The bank cannot go after the assets. Their only recourse is foreclosure.
October 7, 2009 at 9:36 AM #465754briansd1
Guest[quote=EconProf]I’ve never understood why banks put so much stress on current income, and so little on net worth. It takes discipline to save and accumulate assets, which ought to be the best indicator of default probability.
I’d suggest this couple keep on looking to refinance. Lenders cannot all be that stupid.[/quote]Because net worth is useless to the bank. The cannot seize the net worth if the borrower decides to walk.
The law is either or. For example, if the borrower deposits $10,000 with BofA which gives them a mortgage. If the bank seizes the $10,000 deposit for non-payment on the mortgage, they forfeit the right to foreclose.
It’s been litigated before and it’s well established in case law.
The bank cannot go after the assets. Their only recourse is foreclosure.
October 7, 2009 at 9:36 AM #465965briansd1
Guest[quote=EconProf]I’ve never understood why banks put so much stress on current income, and so little on net worth. It takes discipline to save and accumulate assets, which ought to be the best indicator of default probability.
I’d suggest this couple keep on looking to refinance. Lenders cannot all be that stupid.[/quote]Because net worth is useless to the bank. The cannot seize the net worth if the borrower decides to walk.
The law is either or. For example, if the borrower deposits $10,000 with BofA which gives them a mortgage. If the bank seizes the $10,000 deposit for non-payment on the mortgage, they forfeit the right to foreclose.
It’s been litigated before and it’s well established in case law.
The bank cannot go after the assets. Their only recourse is foreclosure.
October 7, 2009 at 6:49 PM #465402EconProf
ParticipantPermit me to elaborate. A person with a high income but zero net worth–let’s say a hot-shot salesman with a few years of good income, but lots of credit card debt could easily get a loan. Someone with the same credit score, lower income but good net worth from a history of spending less than their income for many years would be less likely to get a bank loan.
Yet the salesman’s income could drop for a variety of reasons while the frugal guy could handle adversity better–has liquidity, spends modestly, etc. Where’s the justice?October 7, 2009 at 6:49 PM #465589EconProf
ParticipantPermit me to elaborate. A person with a high income but zero net worth–let’s say a hot-shot salesman with a few years of good income, but lots of credit card debt could easily get a loan. Someone with the same credit score, lower income but good net worth from a history of spending less than their income for many years would be less likely to get a bank loan.
Yet the salesman’s income could drop for a variety of reasons while the frugal guy could handle adversity better–has liquidity, spends modestly, etc. Where’s the justice?October 7, 2009 at 6:49 PM #465945EconProf
ParticipantPermit me to elaborate. A person with a high income but zero net worth–let’s say a hot-shot salesman with a few years of good income, but lots of credit card debt could easily get a loan. Someone with the same credit score, lower income but good net worth from a history of spending less than their income for many years would be less likely to get a bank loan.
Yet the salesman’s income could drop for a variety of reasons while the frugal guy could handle adversity better–has liquidity, spends modestly, etc. Where’s the justice?October 7, 2009 at 6:49 PM #466018EconProf
ParticipantPermit me to elaborate. A person with a high income but zero net worth–let’s say a hot-shot salesman with a few years of good income, but lots of credit card debt could easily get a loan. Someone with the same credit score, lower income but good net worth from a history of spending less than their income for many years would be less likely to get a bank loan.
Yet the salesman’s income could drop for a variety of reasons while the frugal guy could handle adversity better–has liquidity, spends modestly, etc. Where’s the justice? -
AuthorPosts
- You must be logged in to reply to this topic.