‘Why I can’t get a mortgage’ (From economist and pundit Stephen Moore)

Image: Jack Miller Center
Image: Jack Miller Center

25% down. “Below average credit,” but which is below average because of $300 in unpaid parking tickets. Additionally Moore is a famous economist who could never walk away from a property. And he can’t get a loan? That just seems weird. I used to look at (insurance not mortgage) risk for a living and Moore sounds like an excellent risk to me.

No doubt unpaid tickets weigh heavily in credit scores because they supposedly reflect some sort of “moral” issue. I used to look at credit models pretty closely. They can be extremely arbitrary and often make little sense at all for people who fall outside of employment/housing/money management norms.

Saying that there are times when you just have to pay the bastards, even if they are in the government of DC (I assume that is likely.) and they don’t deserve a dime. I can relate to that. Many of us can. (Especially those of us who drive in Washington DC.)

(From The Washington Times)

All the bankers told me the same thing: “Steve, if you’d walked in our bank eight years ago with this mortgage application, we would have rubber stamped it in five minutes and you would have walked out with a bag of money.” But those were the go-go days of the real estate frenzy when people who worked at McDonald’s could walk into a Countrywide and get a $600,000 mortgage. Back then underwriting standards were tossed out the window.

Now, thanks in part to new federal regulations like Dodd Frank with its anti-predatory lending rules, the pendulum has swung to the other extreme and underwriting standards (for those without federal insurance) are absurdly tight. Here we are with the lowest interest rates in 50 years, but many businesses and aspiring homeowners can’t qualify. Water, water everywhere and not a drop to drink.

My situation was doubly frustrating because I’m making a 25 percent down payment on the house. Researchers have examined huge samples of the portfolio of defaulted loans during the 2007-09 housing crisis. Virtually all of the defaulted loans had a low down payment with many less than 5 percent down thanks to government “affordable housing” mandates. Almost no loans with 25 percent down payment went into default because it’s simple economics: If you’ve paid for 25 percent of the house and you suddenly can’t make your mortgage payment, you sell the house or refinance the loan. You don’t walk away from your equity stake. Duh.

Click here for the article.