So you’ve read that rates are at historic lows. You have paid your loan on time for many years straight, proving that you can afford to keep your home. However, when you speak to a professional, they ask you some great questions: How much equity do you have? What is your income? Do you still qualify for a refinance?
Greg Viti, Prudential Rubloff
Common sense would tell you that if you have made years of payments on time at the higher rate, you should be able to pay a lower amount without a problem. If you are trying to get money back on your refinance, that should throw up red flags. I know many borrowers have taken out loans, then stopped paying their loans back; this has made the lending institutions overly conservative.
How about this new rule: if a borrower is still employed and has not had a late payment in four years, their current lender can adjust the loans to the lower rate as long as the loan amount remains the same?
The bank would make less over the life of the loan. However, they will have clients that should be loyal and will perhaps do more business with them. The practice of getting the loan, packaging it and selling it fast has gotten us to where we are: a big mess! Many foreclosures are on hold because the paperwork from the lenders is incomplete or they don’t even know who the original lender is.
There is no easy fix in sight, this is true. How about our fine politicians in Washington help us out a bit? We can tell that the banks are unwilling to make major changes without being regulated or legislated to do so.
It is time that smart laws make it easier for lenders to work out their clients’ troubles be put into place. When borrowers speak of being underwater on their loans (when borrowers owe more than what the property is worth), the first thing the loan therapist will tell you is, “The banks will not work with you unless you quit paying your loan.” Really? So, the system wants you to ruin your credit and the chance of improving credit for a long time because you are underwater? Wow, that is a great help. When you talk with short sale experts, it amazes me how all the old ways of doing business go out the window. It’s such a sad state to have to convince people who are already on shaky financial ground to dig their problems deeper. “Don’t worry, we will drop down a step once you get really deep!”
Please respond to this with some good ideas for the lenders and the legislators to get us out of the quicksand that our current home lending policies have gotten us into. The banks need to be part of the solution; we know they are a big part of the problem.
I think that the problem stems from the perverse incentives to make a profit regardless of the consequences. The lack of oversight and lack of prosecution for signing off on loans which were given to people who could not afford to repay in the first place, led to a casino culture where the expectation was that real estate prices would always go up and no one would default. Unscrupulous bankers and loan officers only had incentive to make loans, regardless of ability to pay. Since these loans would be bundled and resold to unwitting investers, they did not care whether or not they were “good” loans.Our recent Supreme Court ruling that allows Corporations to be treated as “people” will ensure that more of this kind of fraud will continue. As long as Corporations and their employees are mandated to make a profit at any cost, the cost will continue to be the integrity of our financial system.