Comments on: How Fannie Mae is Abandoning African-American Borrowers in Cleveland http://banktalk.org/2011/10/27/how-fannie-mae-is-abandoning-african-american-borrowers-in-cleveland/ Exploring the Finances of the Unbanked Tue, 22 May 2012 19:08:56 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Adam Rust http://banktalk.org/2011/10/27/how-fannie-mae-is-abandoning-african-american-borrowers-in-cleveland/comment-page-1/#comment-14516 Adam Rust Tue, 01 Nov 2011 19:44:31 +0000 http://banktalk.org/?p=4132#comment-14516 John -- Well, we can find common ground on your comment about the decision by regulators to pull back on availability of capital. I think people need to understand that the tightness in credit markets is less about the banks and more about regulators. People tend to give banks more credit than they deserve. When it comes to mortgage lending, most banks are merely sales agents for the GSEs. John –

Well, we can find common ground on your comment about the decision by regulators to pull back on availability of capital. I think people need to understand that the tightness in credit markets is less about the banks and more about regulators. People tend to give banks more credit than they deserve. When it comes to mortgage lending, most banks are merely sales agents for the GSEs.

]]> By: John Galt http://banktalk.org/2011/10/27/how-fannie-mae-is-abandoning-african-american-borrowers-in-cleveland/comment-page-1/#comment-14514 John Galt Tue, 01 Nov 2011 16:24:35 +0000 http://banktalk.org/?p=4132#comment-14514 Adam, There are two major flaws in your response. First, there is not a lack of access to credit. All banks and financial institutions are sitting on piles of money they’d love to loan out. There is, however, a stark lack of qualified borrowers. Prudent lenders have always insisted that the borrower have equity. If the borrower has no skin in the game it exponentially increases the risk of credit loss to the bank. Otherwise, if someone cannot save enough to have a down payment, how can they argue that they have the resources and ability to manage a mortgage? Your second incorrect premise is that someone with a 780 credit score deserves a home loan. (backed by and insured by the taxpayers of the country) I can pay my light bill and cell bill and my Sears credit card like clockwork. But if I don’t have the income to service a mortgage or cannot carry enough savings to handle those unexpected expenses that come with owning a home, I don’t deserve a home mortgage. The other item that is adversely impacting many would-be borrowers is the regulatory over-reach that is taking place in this country. Many banks are fearful of making any loans that aren’t picture perfect. In the last couple of years, activist regulators have brutally punished banks for taking a chance on marginal loan applicants. Unless and until that environment changes, loan applications will be looked at under a microscope in an effort to predict what level of ire the transaction could earn from examiners. -JG Adam,
There are two major flaws in your response. First, there is not a lack of access to credit. All banks and financial institutions are sitting on piles of money they’d love to loan out. There is, however, a stark lack of qualified borrowers. Prudent lenders have always insisted that the borrower have equity. If the borrower has no skin in the game it exponentially increases the risk of credit loss to the bank. Otherwise, if someone cannot save enough to have a down payment, how can they argue that they have the resources and ability to manage a mortgage? Your second incorrect premise is that someone with a 780 credit score deserves a home loan. (backed by and insured by the taxpayers of the country) I can pay my light bill and cell bill and my Sears credit card like clockwork. But if I don’t have the income to service a mortgage or cannot carry enough savings to handle those unexpected expenses that come with owning a home, I don’t deserve a home mortgage.
The other item that is adversely impacting many would-be borrowers is the regulatory over-reach that is taking place in this country. Many banks are fearful of making any loans that aren’t picture perfect. In the last couple of years, activist regulators have brutally punished banks for taking a chance on marginal loan applicants. Unless and until that environment changes, loan applications will be looked at under a microscope in an effort to predict what level of ire the transaction could earn from examiners.
-JG

]]> By: Adam Rust http://banktalk.org/2011/10/27/how-fannie-mae-is-abandoning-african-american-borrowers-in-cleveland/comment-page-1/#comment-14492 Adam Rust Mon, 31 Oct 2011 15:29:43 +0000 http://banktalk.org/?p=4132#comment-14492 John - I have no disagreement with the notion that the "leaders" of this community should be involved in addressing why there is a lack of access to credit for their constituency. The key thing in my mind with the situation in Cleveland is that part of it is driven by factors that should not prevent a borrower from getting a loan. The current GSE policies emphasize loan-to-value. Lower wealth borrowers are largely excluded from conventional loans. It is worth acknowledging that because it differs from the notion that borrowers get turned down because they have bad credit. Fannie will not buy a loan, even if you have 780 credit, if the loan to value is above 85. So, even if you have paid all of your bills, you won't be able to get a mortgage. Moreover, if you happen to live in a place like Cleveland, where housing prices have dropped significantly, it will be that much harder to ever drop your loan-to-value. People should engage in a discussion when these kind of numbers are out there. John -

I have no disagreement with the notion that the “leaders” of this community should be involved in addressing why there is a lack of access to credit for their constituency.
The key thing in my mind with the situation in Cleveland is that part of it is driven by factors that should not prevent a borrower from getting a loan. The current GSE policies emphasize loan-to-value. Lower wealth borrowers are largely excluded from conventional loans. It is worth acknowledging that because it differs from the notion that borrowers get turned down because they have bad credit. Fannie will not buy a loan, even if you have 780 credit, if the loan to value is above 85. So, even if you have paid all of your bills, you won’t be able to get a mortgage. Moreover, if you happen to live in a place like Cleveland, where housing prices have dropped significantly, it will be that much harder to ever drop your loan-to-value.
People should engage in a discussion when these kind of numbers are out there.

]]> By: John Galt http://banktalk.org/2011/10/27/how-fannie-mae-is-abandoning-african-american-borrowers-in-cleveland/comment-page-1/#comment-14464 John Galt Fri, 28 Oct 2011 13:06:25 +0000 http://banktalk.org/?p=4132#comment-14464 Really? Are you serious? The one thing your can point to in all of this housing mess is that the housing bubble was created entirely by Freddie and Fannie when they began lowering the standards. (thank you Barney Frank) Had they kept the higher underwriting standards, there would have been a market correction instead of a market crash. Not everybody deserves or can handle a home mortgage. If statistics show that there is a stonger impact within certain parts of our society, that doesn't mean that there is some underlying racism going on. It does, however, stand as a wake-up call to the 'leaders' of the folks who find themselves lacking. Those leaders should be encouraging and educating their followers to pull themselves up. They should not be pressuring politicians to lower standards to even up the columns on the chart. Really? Are you serious? The one thing your can point to in all of this housing mess is that the housing bubble was created entirely by Freddie and Fannie when they began lowering the standards. (thank you Barney Frank) Had they kept the higher underwriting standards, there would have been a market correction instead of a market crash. Not everybody deserves or can handle a home mortgage. If statistics show that there is a stonger impact within certain parts of our society, that doesn’t mean that there is some underlying racism going on. It does, however, stand as a wake-up call to the ‘leaders’ of the folks who find themselves lacking. Those leaders should be encouraging and educating their followers to pull themselves up. They should not be pressuring politicians to lower standards to even up the columns on the chart.

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