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Tight Mortgage Rules Exclude Even Good Risks

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http://www.nytimes.com/2009/07/11/business...mp;ref=business

BOSTON — Inna Komarovskaya was ready to do her part to revive the economy: She found a “really cute†condo to buy.

Despite a good credit score, a six-figure income and an ample down payment, Dr. Komarovskaya, a recent dental school graduate, could not get a loan. Her mortgage broker told her she ran afoul of new rules requiring two years of sufficient tax returns from some home buyers, instead of only one.

“Everyone says this is a buyer’s market, but they wouldn’t let me buy,†said Dr. Komarovskaya, 30. “It’s not fair.â€

Not fair, perhaps, but far from unique, brokers and agents say. The readiness of banks to sell foreclosed properties has led to rising home sales in some areas. But the traditional housing market, the one that involves willing buyers and sellers, is still dead, with transactions lower than they have been for decades.

The recession is the major reason sales are dragging, of course, but it is not the only one. As Dr. Komarovskaya found, buyers once viewed as perfectly qualified are being denied mortgages.

Brokers and bankers say that in past decades, the credit markets would almost certainly have accommodated many of these people.

“The credit pendulum is stuck at ‘stupid,’†said Lou S. Barnes, an owner of Boulder West Financial Services, a Colorado mortgage bank. “I am turning down loans every day that my grandfather in his Ponca City, Okla., savings and loan in 1935 would have been happy to make. And he was tough.â€

The denials are occurring for a wide array of reasons: the buyers’ incomes are adequate but irregular; they are self-employed and take many deductions, reducing the taxable income on which lenders focus; their credit scores are below the cut-off point, which has been raised drastically; their down payments are less than 20 percent.

Housing usually leads the country into a recession, which certainly happened this time, and also leads it out — which will not happen in 2010, the real estate industry contends, without stronger efforts to thaw the market.

No one is advocating a return to the lax lending standards of 2006, when buyers with no income or documentation could get loans. But many people say they believe lenders and the government, in correcting the excesses of that era, have gone too far in the other direction.

Fannie Mae, the government-controlled company that buys mortgages, is so dominant in the lending market that its rules set the standard. It recently toughened its policies, saying it would count only 70 percent of the value of stocks and mutual funds when calculating a buyer’s assets. Previously, that figure was 100 percent.

A Fannie spokesman, Brian Faith, said tighter regulations screened out those unprepared to be owners.

“One of the important lessons learned in the past few years is that it is not enough to help a borrower own a home,†Mr. Faith said. “We must also help ensure that they will be able to stay in the home over the long term.â€

Mortgage brokers say those who are being rejected for loans are often entrepreneurs who are used to taking risks. “They are chomping at the bit to get into this market, but are forced to the sidelines,†said Stuart Fraass of Guaranteed Rate Inc. “If you’re self-employed, you have virtually no chance of getting a mortgage now.â€

Memo to professional economists, the banks do not want to lend. They are rationing what money they have by making borrowers jump though as many hoops as possible.

Rationing is here and here to stay for a while.

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A Fannie spokesman, Brian Faith, said tighter regulations screened out those unprepared to be owners.

“One of the important lessons learned in the past few years is that it is not enough to help a borrower own a home,†Mr. Faith said. “We must also help ensure that they will be able to stay in the home over the long term.â€

<_<:o:blink:

Meanwhile over in the HPC enclave the medics are increasing the Valium dosage

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memo to recently qualified dental school whatevers.

save a third of your 6 figure income and buy outright in 3 years.

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memo to recently qualified dental school whatevers.

save a third of your 6 figure income and buy outright in 3 years.

Quite so,

Why should someone at the beginning of their earning career (presumably already with student debts) feel the need to buy when renting is so easy in the US and provides the flexibility to move to where the work is.

Someone has done her a favour

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memo to recently qualified dental school whatevers.

save a third of your 6 figure income and buy outright in 3 years.

Erm ... I doubt Boston prices are that cheap, even now. Ten years might just get you something dilapidated in a rough suburb, but by then prices could ... um ... be on the rise again.

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Erm ... I doubt Boston prices are that cheap, even now. Ten years might just get you something dilapidated in a rough suburb, but by then prices could ... um ... be on the rise again.

try googling boston condos for sale.

found one with 10 pages of foreclosures.

there is no subprime in the US.

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Guest anorthosite
there is no subprime in the US.

That would require a "prime" to be sub to.

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"A Fannie spokesman, Brian Faith..."

I know, I know, but please allow me a giggle at his business card

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"A Fannie spokesman, Brian Faith..."

I know, I know, but please allow me a giggle at his business card

you should read the cliterature.

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Guest anorthosite
you should read the cliterature.

I've never been able to find any.

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I've never been able to find any.

try the index, near the G.

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