Monday, March 18, 2013

More can afford a home, but lenders remain tight-fisted

Nearly half of all California households can now afford the median-priced home in the state – but that’s no help if they can’t get mortgages.
Making sense of the story
  • Six years after the subprime mortgage meltdown, banks remain tight-fisted, even with solid borrowers – a fact they attribute to shifts in government regulation and demands that they buy back bad loans.
  • Mortgage credit has not eased much since 2007, according to Federal Reserve surveys of loan officers, even while low rates and the housing recovery have borrowers lined up seeking financing.
  • First-time buyers and self-employed borrowers must jump through especially complex hoops. Even gold-plated applicants must justify the smallest quirks in their finances in excruciating detail. And, processing applications can take months.
  • Lenders say their cautions stems in part from uncertainty over a tougher new regulatory environment, along with unrelenting demands from government-sponsored mortgage buyers that the banks repurchase soured loans.
  • Salaried professionals with credit scores in the high 700s have the best shot at being approved for a mortgage loan in this environment, along with borrowers who have never missed a payment and want to refinance.
  • However, even these borrowers may face stiff documentation demands, including having to explain any bank deposit other than a regular paycheck.
Source: L.A. Times March 2013