Starting in January new rules are coming into play for mortgages. Many large banks have already cut down on the number of mortgages they do because they can no longer make a quick buck on a mortgage. Now, the smaller banks who have stepped in and are making more loans than the big banks are set to be hit with new regulations making it harder to approve loans.
This whole thing stems from the fact that banks have not always done a good job of qualifying a person to get a loan. Too many loan underwriters don’t look closely at the information submitted for a bank loan and when someone who shouldn’t get a loan gets one anyway, it cost everyone. Now with the new guidlelines if banks don’t review a loan package well enough then the bank may be financially penalized for making a bad loan.
This is not a big deal to the large banks because their attitude is that they will just not do as many loans. Loans are not the main bread and butter for these big banks so its not a big deal to stop. However, smaller banks need these loans to earn returns on their deposits and by making the guidleines stricker they are ultimately increasing the cost of these loans to the consumer.
I mean I get it. The government is doing what they feel is best to stop the housing market from collapsing again under the weight of bad loans. However, I don’t think this is the way to go about doing it. I think the government would have done much better if they had simply forced the originating lender to be liable for the loans they make and then sell after they sell the loan. In other words, banks made money making loans and then immediately selling the loan for a moderate profit to some outher investor. The banks stopped caring about how good the loan was because they would sell it quckly and realize their profit. But if the banks were still liable for the loan for say 5 years after they sold the loan then the banks would govern themselves and do a much better job of who they gave a loan to.
This is all just a case of the government trying to help but hurting the overall industry instead. Hopefully, these smaller banks will get some help and continue to lend. That is what will ultimately help our economy. Responsible Lending!
Till next week, Good luck and God Bless and remember… If you are facing foreclosure or can’t sell your home, visit us at www.sellonterms.com and learn about the alternative ways to sell your home in 7 days…GUARANTEED!