This article analyzes the recent Federal Reserve survey of Big Banks and allows readers to share their own experiences with lenders.
Demand for housing
The Senior Loan Officer Opinion Survey for the first quarter of 2012 has been released by the Federal Reserve. Banks were asked to give their opinions on their lending policies and loan demand.
The demand for home loans, as measured by loan originations, is rising.
The demand for prime residential mortgages (mortgages up to the securitization standards of Fannie Mae and Freddie Mac) was stronger in the first quarter, according to 38% of those surveyed, while just over half claimed demand remained about the same.
The demand for nontraditional residential mortgages (subprime mortgages, adjustable rate mortgages or mortgages with little to no downpayment) grew stronger according to 31%, remaining the same for 62% of those surveyed.
What do you think?
Do you think the demand for home loans is:
- rising; (52%, 28 Votes)
- staying the same? (31%, 17 Votes)
- falling; or (17%, 9 Votes)
Total Voters: 54
Homeowner loan qualifications
Qualifications for loan approvals granted to a homebuyer in the first quarter of 2012 compared to 2006 (before the recession) have become stricter.
It is less likely a borrower with a 620 Fair Isaac Corporation (FICO) score and a 10% downpayment would receive a home loan today, according to 83% of those surveyed.
It is less likely a borrower with a FICO score of 680 and a 10% downpayment would receive a home loan, according to about half of those surveyed, while the other half believe it has remained the same.
It is about the same likelihood for a borrower with a 720 FICO score and a 10% downpayment to receive a home loan, according to 71% of those surveyed, while 23% consider it less likely.
Weigh in:
Compared to before the recession, do you think loan approvals are:
- stricter; (94%, 49 Votes)
- about the same? (4%, 2 Votes)
- more relaxed; or (2%, 1 Votes)
Total Voters: 52
Lender ability to originate home loans
A bank’s ability to originate home loans is negatively affected by high volume periods of loan applications, exceeding processing capacity, according to 70% of respondents. 57% believed lender origination delays were attributable to difficultly completing timely, accurate appraisals and underwriting.
60% of those surveyed attributed difficulty completing loan originations to their inability to hire sufficient staff to service or process loans.
80% of those surveyed claimed receiving assistance servicing and processing loans from outside companies was not an issue.
Do you agree?
In your experience, what is the main cause of slow processing times for home loans?
- insufficient underwriting capacity; (49%, 22 Votes)
- difficulty in obtaining timely, accurate appraisals; (24%, 11 Votes)
- high loan application volume exceeding the bank’s resources; (22%, 10 Votes)
- home loan application processing time is quick. (4%, 2 Votes)
Total Voters: 45
Lender participation in HARP 2.0
70% of banks report little participation in the revised Home Affordable Refinance Program (HARP 2.0). Those who do not actively participate in HARP 2.0 identify the risk that Frannie may putback, or refuse to purchase, the refinanced mortgage as the most important factor.
In your experience:
How many banks have you witnessed participating in HARP 2.0?
- less than 25%; (85%, 34 Votes)
- 25 – 50%; (8%, 3 Votes)
- 50 – 75%; or (5%, 2 Votes)
- more than 75%. (3%, 1 Votes)
Total Voters: 40
first tuesday’s loan origination survey
Corporate cut backs at the Big Banks has destroyed staff with no end in sight. The result: most anyone can be approved if they shop around.
In this Fed survey, nothing indicates that 100% of bankers interviewed would say no to the worst credit situations they might encounter.
Dear readers, please recall that lenders must lend to survive as the sole conduit between the Fed printing money and we getting to it, unless of course they are allowed to engage in other profit centers in the use of these Fed Funds, which of course they should not. Until then, all talk and few loans
The first tuesday editorial staff recently undertook their own periodic survey in loan originations, polling various Big Banks and credit unions to discover how strict their policies are.
The editorial staff found the main obstacles to approval for a loan were previous debt (particularly in the form of student loans), and lack of a credit history. It also became quickly apparent that loan representatives trained and experienced to answer mortgage questions were few and far between.
Our staff interviews for loan approval certainly were not a scientific test, but compared to the days when loan approval by staff members was as easy as walking to the local branch and guessing on some numbers, it’s fair to say lending has gotten stricter.
The editorial staff did confirm that even though most loans are being sold to Fannie/Freddie, not all loans are originated equally: encourage buyers to shop around for a loan, as debt-to-income allowances and rates vary from bank to bank.
Better luck with credit unions
Don’t let your clients limit their search to Big Banks. Encourage them to check out their local credit union, as they may be pleasantly surprised with approval.
California buyers receive lower rates on home loans from credit unions than banks on average, according to the National Association of Federal Credit Unions and DataTrac.
Further, at least in our recent experiment, the local credit union rep was far more knowledgeable and accessible than the reps encountered (or not encountered, in some cases) at the Big Banks. Also, they are not paper-disclosure paranoid as a rule, and thus more receptive.
Related articles:
Homebuyer purchasing power pushes the recovery
Homebuyers feel ready and willing to buy, but not financially able
I’m a believer in the “follow the money” technique to explain destructive economic and social effects.
Wall Street and various financial institutions who over the last half dozen years CAUSED the apparent “loss” of trillions of dollars worth of little peoples’ assets in stocks and related investments, have ended up GAINING even more UNEARNED wealth by being PAID by the same people (taxpayers) who they had fleeced because our trusty GOVERNMENT said that they were “too big to fail”. Of course, they’re even bigger now. But unfortunately, there isn’t too much little people’s wealth left up for grabs in the financial markets anymore.
Now as a result of the economic chaos and financial institutions CRIMINAL lending practices, these lucky lenders have COINCIDENTALLY ended up owning a very large part of the little peoples’ LAST remaining valuable asset, HOMES. Primarily because our trusty GOVERNMENT accidentally failed to properly regulate them.
And COINCIDENTALLY, as First Tuesday recently reported, our trusty GOVERNMENT has altered regulations so that these lucky lenders do NOT have to liquidate these properties for 5-10 YEARS. Thereby allowing them to become massively profitable LANDLORDS until prices have risen such that the REOs can be very profitably sold. Of course, by that time, at the rate things are going, it may be STANDARD for little people to ONLY rent, not “own” SFHs.
Needless to say, once the rental market is as thoroughly controlled by “regulated” big players as is communications (phones, internet etc.) and utilities (energy, water etc.), these lucky landlords can be expected to squeeze as much remaining wealth out of their not-so-lucky tenants as our trusty GOVERNMENT allows.
So, if you were a lucky lender, with virtually unlimited cost-free funds provided by the trusty GOVERNMENT and your trapped depositors, would you rather make it EASY for little people to take this valuable inventory off your hands, or would you be HAPPY and THANKFUL that the trusty GOVERNMENT has coincidentally saddled you with so many inane and ridiculous requirements that the little people market is as minimal as possible?
Demand for loans is rising as home prices continue to be unstable. In San Bernardino, you could get a condo for $35K!!! (and rent it for $900) In the same complex some are listed for $45K. You could get a 4 unit in Los Angeles for $250K mean while there are some listed as high as $400K with in a block on the MLS. Price instability leads to bargains! Leads to a run on loans?