In August, the Federal Reserve released a report that reported demand for loans had increased and that lending standards have “continued” easing in many loan categories, including mortgages. The report influenced mortgage industry participants to believe a housing and mortgage-lending recovery was just around the corner.
Unfortunately, mortgage industry professionals have seen virtually no change in lending conditions. And now a research report from Bank of America/Merrill Lynch has validated industry sentiment, verifying that any improvement in credit availability has been so miniscule, it hasn’t had much impact at all.
Home construction organizations and several homebuilders continue to report potential buyers still having trouble qualifying for mortgages. Jeffrey Mezger, president of KB Home, reported that credit still remains tight, particularly for first-time buyers. And Larry Sorsby, CEO of Hovnanian Enterprises said, “We haven’t seen any significant easing.” Any loosening of credit has been “on the fringes and hasn’t had much impact on underwriting for the entry-level buyer.” And the percentage of loans denied by the ‘Big Box Banks’ continues to far exceed those of local companies.
According to a report issued by Bank of America/Merrill Lynch Global Research, it’s likely that the over-burdensome post-crisis mortgage regulations and massive mortgage litigation has permanently changed lenders perceptions on lending and their ability to collect on residential mortgage debt. Chris Flanagan, head of U.S. Mortgages and Structured Finance for B of A/Merrill, said there’s this “persistent myth of loosening mortgage credit.” He noted that in response to the housing crisis, lenders tightened credit so much that any loosening now has been miniscule. “There is no evidence really of any changes at this point,” he reported. Flanagan is concerned that the current level of credit availability will not improve anytime soon. He believes, due to the overwhelming post-crisis regulatory environment, there has been a “paradigm shift” in lending and that “This level now is pretty much the new normal.”
With these continued glum reports, what should Realtors and home-buyers do to compensate?
Early Preparation Is The Key:
- Don’t wait until you’ve found a home before talking to a True Mortgage Professional. Make sure you complete a full and detailed financial analysis and pre-approval process before you even start your home search!
- With the benefit of time, a True Mortgage Professional can spot potential issues and address them before these molehills become mountains. And a True Mortgage Professional will help position you to take advantage of opportunities and ensure sellers see you as the best possible buyer.
So where do you find these True Mortgage Professionals? I’ll give you a hint: They’re NOT the smooth-talking salespeople working for the boiler-room companies and ‘Big Box Banks.’
In this crazy lending environment, it’s critical you work with the right people with a proven track record. Don’t entrust your mortgage to anyone but the most competent, qualified, and Certified Mortgage Planning Specialist®.
At Mortgage Wealth Advisors, you’ll receive accurate information, valuable advice, and a concierge experience. We’ll ensure your transaction goes smoothly, and that your mortgage matches your needs, complements your financial plans, and helps you attain your financial goals.
And guess what? The rates and fees you’ll receive are probably about the same as if you went to ‘Your Bank.’
The big difference? Your loan will actually CLOSE.
Warren Goldberg is President of Mortgage Wealth Advisors, a Certified Mortgage Planning Specialist®, and a published author. His interviews include Blog-Talk Radio, Newsday, and the Long Island Herald. Since 1992, he’s been sharing his financial knowledge and wealth-building strategies, including how to properly use your mortgage as a financial tool. His clients regularly express their trust and appreciation by recommending friends and family call when in need of mortgage, real estate, and financial guidance.