Where Are Lending Standards Heading?
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I found this interesting blog post recently that discussed current changes in lending and future changes: New World of Lending: 2009 Economic Forecast.
Some of the facts in this post I found to be a tad bit shocking but unfortunately very believable. One of these facts was that 40% of foreclosures are investment properties. Not a surprise.
Another fact for buyers that I found interesting was that there are 71% fewer mortgages available than a year ago.
Something I wanted to add to this was that, for the mortgages that are available, fewer and fewer people can qualify for the lower rates that are being advertised. And, mortgage companies are having to get really creative in assisting their borrowers to get into the loan programs that are still available. Processing loans takes 3+ times longer than it did a year ago because of this.
The question is, how will investors, home buyers, and banks survive the ‘New World of Lending?’
Any further thoughts on the future of lending the U.S. and/or Internationally? How will changes in lending practices in the U.S. affect lending on a global scale? Please share your insights.
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February 19th, 2009 at 6:41 pm
I remember a good mutual friend of ours, Mr. Stokes, predicting this in the PL session he taught. As creepy as this is the overall goal seems to be that in the end, no one will be able to get a mortgage that is not government backed or guaranteed in some way. Atlas is shrugging…
February 20th, 2009 at 2:16 pm
Supply and demand tell us that rates should be much higher. There is very little money available and a huge demand. The cost of money is interest. Shouldn’t rates be going up instead of down? The reason we aren’t seeing double digit rates like Alan Greenspan suggested is because the government is pumping billions of dollars into the banks. Without this money, rates would be much higher and the current housing crisis could be much worse.
These are just my thoughts
February 22nd, 2009 at 8:30 am
1 – Many of the foreclosures are investment properties. Lending in the past included no money down financing for these properties so when housing values dip it is not surprising investors bail on these homes rather than carry investments that are underwater. After all they still have a roof over thier own head.
2 – There are far fewer mortgage options than before. Given that you could get a mortgage if you could fog a mirror in the past, it is not such a bad thing that many of these mortgage options have disappeared. Likely you will see more tightening before things loosen up. Can you still get a mortgage? Sure you can. You have to have decent credit (not necessarily perfect) and possibly a down payment. I still count 4 or 5 options for zero down but not everyone qualifes for those.
3 – Loan processing takes longer. This makes me smile as I personally have not seen that. Many in the industry have seen much longer time frames but only when you don’t have the ability to have the process controlled competely in-house – but that is another long discussion in itself.
February 23rd, 2009 at 8:28 am
I tend to agree with Hank in regard to all mortgages being backed by the government. That surely seems to be looming on the horizon. What are your thoughts on this Ron?
I also agree with points 1 and 2 from Ron but I wanted to clarify something on point 3. The problem isn’t with our in-house processing. The bottle neck is with the wholesale underwriting depts. They are so inundated with refinances that they are getting backed up.
February 23rd, 2009 at 8:29 am
I am now setting up all of my banking (meaning my holding and growth monies) through Life Insurance products. Much safer, and much better returns.