Mortgage standards rising to absurd levels, choking off sales.
“The credit pendulum is stuck at ‘stupid,’” said Lou S. Barnes, an owner of Boulder West Financial Services, a Colorado mortgage bank. “I am turning down loans every day that my grandfather in his Ponca City, Okla., savings and loan in 1935 would have been happy to make. And he was tough.”
I’m not necessarily convinced, because the article profiles people with one year earning histories or those who feel put out when 10% down is deemed insufficient, but it’s interesting, and if housing people were counting on buyers like these to bail out the market, they just lost.
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Common sense suggests any well-run bank exists to generate maximal profits by lending as much as possible via rational, risk-adjusted terms to likely creditworthy borrowers
Cheap credit is not a birthright, despite illusions of consumer credit bubble of past ~25 yrs
Suspect many businesses or consumers don’t deserve credit or should pay proper, risk-adjusted rates for any credit, rather than having other, creditworthy borrowers implicitly subsidize lesser borrowers
Much like insurance risk pools; a claim-free, low-risk, responsible driver wouldn’t want to pay auto ins premia reflecting presence of high-risk, DUI and accident-prone drivers in same risk pool….Risk Pricing 101
It seems like the Jumbos are the hardest to get. We were told we would have to put down 40% cash and show we had at least 6 months worth of payments in the bank…. and have excellent credit. That’s tough for a lot of people when you are looking at homes in Greenwich.
I feel the longer credit is tight the better it is as people like Dr. Komarovskaya have a juvenile sense of entitlement to credit as she makes the point in her quote.
“Everyone says this is a buyer’s market, but they wouldn’t let me buy,” said Dr. Komarovskaya, 30. “It’s not fair.”
Lending money is a business decision not a child like game based on what she wants.
People like Dr. Komarovskaya need to grow up.