are mortgages still too easy?
In October, the house sold at auction for $304,500, little more than half what a buyer using 100-percent subprime financing paid in 2006.
Today, 920 W. Camile has been renovated, repainted and floored with faux marble. It resold in January for $625,000, according to county records – a $125,000 down payment and a $500,000 mortgage from Wells Fargo Bank.
"I didn't pay any money down," Gomez said. "The man who sold it to me said, 'No money, no problem.' And later he told me I would get $30,000 for buying the house." It's not as if every sale is requiring 20% down and a 720 credit score. The fact that lenders are still willing to let questionable seller financed cash-back deals through show that we have a LONG way to go.
From an envelope containing his loan papers, Gomez produced a two-page document titled "Addendum to contract" signed by Praslin. The memo, mostly handwritten, said that if the purchase went through, Praslin would pay Gomez $30,000, cover the first three mortgage payments and throw in a 52-inch LCD television.
Gomez said he never got the TV. But with the other incentives and without the down payment, the cost of the home would have been closer to $460,000. And Gomez effectively got it with 100 percent financing, something almost unheard of in today's market.
http://www.ocregister.com/articles/camile-house-mortgage-2104411-fargo-wells
This article confirms my suspicion that mortgage lending is still far too loose. Yes, criterion has tightened from a few years ago, but things are still looser than they were 10 or 20 years ago. Before we hit bottom in this downturn I predict that lending will be tighter than it's been in 40 years.
Heck, you can still get some mortgage products that weren't even thought about 15 years ago!
By the way, I also predict that 2008 loan portfolios will perform even worse than the 2007 vintage.
Are there any long-term industry professionals out there who can provide a dose of long-term perspective as to the mortgage lending environment? Was it easier to get a mortgage in 1997, 1987, or 1977 than it is today? Has mortgage lending criterion reverted back to the long-term mean? I fear that our perspectives have become so warped by the bubble over the last decade (and I believe the bubble started in the '90s) that it's difficult for us to even remember what "normal" is.
UPDATE: I see that Calculated Risk has written up this issue as well.
http://calculatedrisk.blogspot.com/2008/07/fraud-in-2008-mortgage-vintage.html
Comments
And that mortgage was in January. Since January every lender has tightened up weekly on their guidelines.
At this moment top lenders i.e. Chase, Wells, B of A, etc., are only going 3% DOWN, 3 Months reserves, full doc only.
So, does this mean it is harder to get a mortgage today than in 1987?
Interesting... Does this gentleman offer any insights on how the lending environment compares to decades past? We know that it is tighter than a few years ago, but what would really help us get perspective is to know how things have been historically.
Some banks still do, and ironically those are the banks that are doing well right now, because they have underwriters who actually assess risk and try to see if it makes sense for their investors or not.
Washington Federal here in our state is a good example of this.