Unfortunately, this is an all too-common story (experienced by yours truly among others). The fact of the matter is that there are several things working against good, honest citizens trying to secure a new mortgage:
1) Recent transgressions have swung the pendulum to the opposite extreme (moving from "Liar Loans" in 2004-2007, banks now want minutia details that rational thinking human beings would realize should have no bearing on the credit risk an individual poses to the bank)
2) Banks have had to reallocate resources to deal with foreclosures - meaning that you may get the B-team on originations
3) Banks have no incentive to make loans right now -- with interest rates (and specifically mortgage rates) at all-time lows, why would a bank want to make a 30-year loan, when there is nowhere to go but up from an interest rate perspective -- they may as well wait a couple of years and get more yield. Furthermore, with all of the bad debts still on the books (and possibly coming back on the books in the form of foreclosures that were improperly made), they need to be extra careful when it comes to making new loans (of any type) so as to not violate the Tier 1 Capital Ratio guidelines set by the FDIC.
4) Depending on your local market, we may not have hit bottom yet -- Shiller came out today with his expectation that residential real estate will drop another 20% before we hit bottom... that puts traditional 80/20 loans made today at 100% LTV when the bottom is finally found -- not a comforting thought for bankers.
What is truly frustrating though are the deadbeats who are not paying their mortgage and essentially living rent-free for 18+ months while the foreclosure machine grinds along. Now there's talk about bailing these people out (again)? Why not pay honest hard-working citizens to take over these properties and loans (at a discount -- there's your use of bailout funds) and punish the transgressors by kicking them out on the street?
Unintended Consequences:
Unintended Consequences:
- Immediate Interests: There is a current school of thought that the government should fix everything and save people from being kicked out on the street. This ignores the long-term effect of individuals ceasing to care about the consequences of their actions because no one ever gets punished for mistakes/bad behavior. Look at Greece today -- that is where the U.S. is headed in the next 50 years unless we do something to correct course now.
- Basic Values: The American Dream has been sold for multiple generations as home ownership. People may not buy into that anymore after this debacle.
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