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Author: CCinOC Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 126958  
Subject: Here's what to expect... Date: 10/6/2012 11:48 AM
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...if you're applying for a loan. From an industry newsletter.

Over the past four years, it seems that everyone has been demanding that something be done to "fix Wall Street," and Dodd-Frank and Occupy Wall Street, it would appear, have not been sufficient. The Justice Department hasn't actually convicted any of the high-profile bankers who played a large part in the financial crisis, and data from the IMF suggests that the capital markets are no less vulnerable to crash and fraud than they were in 2008. Despite aggressive rhetoric from the White House, the Obama Administration has opted to go after institutions rather than individuals. This method has prompted criticism due to the fact that such settlements don't involve any actual admission of wrongdoing and the dollar amounts they cost banks are really not all that significant. Take, for instance the $25 billion foreclosure abuses settlement with Wells, Ally Financial, Citibank, BofA, and Chase. There's also the issue of time, money, and expertise. It's much more expensive and logistically difficult to go after a plethora of individuals. In the post-9/11 era, the FBI and Justice Department have been focused mainly on counter-terrorism, a whole other can of worms. In addition, insiders cite pure and simple fear of financial institutions failing if they were indicted and the resulting effects on the already-precarious global markets.

Wall Street often points to lenders offering lax guidelines, or not underwriting loans to published criteria. There is some argument there. But in the halcyon days of pre-2007, it was possible to be given a mortgage loan with little more than a credit score--no verification of income or assets required. To make a gross understatement, things have changed since then, and many borrowers are having difficulty qualifying for loans due to "hyper-strict" lender underwriting standards. With 30-year mortgage rates at historic lows, some are hopeful that banks might be relaxing those standards, but industry data actually points in the other direction. The average credit score on new loans closed in August 2012 was 750, nine points higher than August 2011. When analyzing a sample from Fannie Mae and Freddie Mac, which dominate the conventional loan market, the average score is 763, a point higher than it was a year ago. For reference, less than 22% of consumers have credit scores over 749. A sizeable chunk of the population are therefore unlikely to qualify for a mortgage should they want to purchase a home, long touted as part of the American Dream.

Data on down payments reflects a trend towards tighter requirements as well. Back in 2005, the median down payment percentage for American borrowers was a mere 2%, and 43% of borrowers put down nothing at all. Compare this to the most recent numbers from Fannie Mae and Freddie Mac borrowers, who on average put down 21% and had clean debt-to-income ratios. The actual time it takes to process a mortgage loan has also increased. The more checks in place, after all, the more time it takes to review them. Underwriters doing 6-8 loans per day have turned into auditors doing 2-3 files per day. From August 2011 to August 2012, the average time it took a loan to close from its application date increased from 40 to 49 days. The time it took to process a refinance increased from 37 to 51 days. Indeed, frustrated would-be buyers are saying, "but when will lenders start to loosen their standards?" Eventually, lenders will probably relax a bit about potential regulatory requirements*, have fewer fears about expensive "buyback" demands from Fannie Mae and Freddie Mac, and remove some of the fees associated with extra credit risk. For the time being, however, don't count on anything.

* As of the second quarter of 2012, only one third of the regulations contained in the Dodd-Frank Act have actually been implemented. Mitt Romney alluded to the business-strangling nature of Dodd-Frank during the recent presidential debate.

http://www.ibtimes.com/dodd-frank-rules-nearly-9000-pages-it...
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Author: Gingko100 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124348 of 126958
Subject: Re: Here's what to expect... Date: 10/6/2012 7:30 PM
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I refinanced in 2010 and it took me just under 3 weeks. Less time than it took me to buy the house, which closed in 22 days.

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Author: Gingko100 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124349 of 126958
Subject: Re: Here's what to expect... Date: 10/6/2012 7:33 PM
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Indeed, frustrated would-be buyers are saying, "but when will lenders start to loosen their standards?"
I firmly believe that most of these people would be better off not buying, and the fact that things were so loose before is mostly what got us in trouble.

Buying a house is only really a good thing if you have a cushion and aren't stretching to do it. Nothing wrong with renting.

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Author: CCinOC Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124350 of 126958
Subject: Re: Here's what to expect... Date: 10/6/2012 10:48 PM
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Well, bully for you. That was two years ago, pre-snarl.

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Author: Gingko100 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124351 of 126958
Subject: Re: Here's what to expect... Date: 10/6/2012 11:10 PM
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Yes, two years ago - was 2010 better than 2012 for lending?

I have a friend who re-fi'd last month and it took her just over a month. Seems to me if you have decent equity and can supply records it all goes pretty fast still.

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Author: Globetraveler Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124352 of 126958
Subject: Re: Here's what to expect... Date: 10/7/2012 4:09 AM
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Well, bully for you. That was two years ago, pre-snarl.

35 days for refinance for me - Oct 2012
25 Day refinance for my Dad - Sept 2012
28 day refinance for co-worker Aug 2012

Two other co-workers expect to close in the next two weeks, which would be right around the 30 day mark. I haven't heard anyone having major delays.

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Author: inparadise Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124353 of 126958
Subject: Re: Here's what to expect... Date: 10/7/2012 7:56 AM
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I have a friend who re-fi'd last month and it took her just over a month. Seems to me if you have decent equity and can supply records it all goes pretty fast still.

Took us almost two months last summer. Had all the requested docs in the day we applied, over 50% equity, and all the records you could possibly want, scanned and faxed the day they were requested, and requested, and requested. Seemed as though even with DH's well documented work for the man career, where we were only using his salary to qualify and no inconsistent things like bonuses, they constantly wanted something more. Oh yeah, fabulous credit as well. What a PITA.

Our purchase mortgage in 1/2004 on the other hand took about two weeks for a full doc mortgage.

Thankfully we have the option to to seller finance when we go to sell this house, or simply rent it out. I have doubts about the liquidity of the housing market going forward if it doesn't get easier to get a mortgage.

IP

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Author: CCinOC Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124354 of 126958
Subject: Re: Here's what to expect... Date: 10/7/2012 10:15 AM
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Gingko wrote: was 2010 better than 2012 for lending?

Yes. The article said that processing time has INCREASED.

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Author: CCinOC Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124355 of 126958
Subject: Re: Here's what to expect... Date: 10/7/2012 10:17 AM
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inparadise wrote: I have doubts about the liquidity of the housing market going forward if it doesn't get easier to get a mortgage.


Exactly. That was the point of the article as well, notwithstanding individual Fools' experience. I guess if Gingko's refinance went swiftly, that's all that matters.

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Author: reallyalldone Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124356 of 126958
Subject: Re: Here's what to expect... Date: 10/7/2012 1:28 PM
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My only recent experience was my daughter buying a house - 1 month from first contract to close and she's in England closing on a house in Aurora, CO.

I bought a short sale townhouse in the spring and since it was to be a rental, it didn't matter to me how long it took.

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Author: CCinOC Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124357 of 126958
Subject: Re: Here's what to expect... Date: 10/7/2012 8:53 PM
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I'm working on a short sale now. Been at it for four months with no end in sight. The property has 22 liens against it.

I'm in minimum wage territory. That ought to make you happy, Gingko.

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Author: MetroChick Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124358 of 126958
Subject: Re: Here's what to expect... Date: 10/7/2012 10:02 PM
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I bought end of January 2012. Now that I'm a homeowner, since I'm not looking to leave the area I live and don't see changing houses in the forseeable future, I'm more interested in a stable housing market than I am in crazy appreciation. I'm not looking to pull equity out, and increased prices will just increase my property tax bill. So IMO lending standards need to strike a balance in a way to keep neighborhoods stable, while also allowing enough buyers in the market for those who need/want to sell and move on. But where that balance lies is anyone's guess. I would say in my area it's certainly NOT at the 25% YOY appreciation the DC area saw in the mid '00's.

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Author: Gingko100 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124359 of 126958
Subject: Re: Here's what to expect... Date: 10/7/2012 11:23 PM
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I'm in minimum wage territory. That ought to make you happy, Gingko.
I have less than no idea what you mean by this.

And personal snark towards me is totally uncalled for. I have never insulted you - and I would expect you would at least try to keep the discussion here away from personal jabs. It's not cool.

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124360 of 126958
Subject: Re: Here's what to expect... Date: 10/7/2012 11:33 PM
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I'm working on a short sale now. Been at it for four months with no end in sight.

Are the delays on the short sale in getting the loan approved, or in getting the sale of the property approved by the bank, or something else?

AJ

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Author: CCinOC Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124361 of 126958
Subject: Re: Here's what to expect... Date: 10/8/2012 10:38 AM
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The property is usually the problem. We received lender approval for the short sale quickly, but the file then had to be sent to the investor for its approval. Now we must deal with...

-- IRS
-- California Franchise Tax Board
-- California property taxes
-- A civil judgment
-- Delinquent HOA dues

Why the listing agent didn't deal with all these liens concurrently with other activities is a mystery.

Gingko, you're right. I apologize.

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124362 of 126958
Subject: Re: Here's what to expect... Date: 10/8/2012 12:20 PM
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The property is usually the problem. We received lender approval for the short sale quickly, but the file then had to be sent to the investor for its approval.

Since you got the lender approval quickly, I'm not understanding why you are using this example in this thread, that you started with:

Here's what to expect...

...if you're applying for a loan.


The delay that you mention seems completely irrelevant to those who aren't buying a short sale or a foreclosure, and are just applying for a loan for a traditional sale or a refinance.

And for those who are buying short sales or foreclosures, they should know what they are getting into. The delays are common enough knowledge that even HGTV shows mention them when talking about dealing with the banks.

AJ

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Author: CCinOC Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124363 of 126958
Subject: Re: Here's what to expect... Date: 10/8/2012 5:56 PM
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You're right, Gingko and aj, it's easy peasy out there. Forget I mentioned the article altogether.

It's all good!

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Author: inparadise Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124364 of 126958
Subject: Re: Here's what to expect... Date: 10/8/2012 6:27 PM
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The property is usually the problem. We received lender approval for the short sale quickly, but the file then had to be sent to the investor for its approval.
...
Since you got the lender approval quickly, I'm not understanding why you are using this example in this thread, that you started with:


Or in this case is the "lender approval" simply the current lender approving the price on the short sale, and perhaps the investor is the one lending the money for the purchase? That is how I interpreted it anyway. Seems like mortgage brokers often refer to those putting up the money to lend as "investors."

IP

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Author: Goofyhoofy Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124365 of 126958
Subject: Re: Here's what to expect... Date: 10/8/2012 6:51 PM
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Two nieces & one nephew have purchased houses in the past 18 months. One niece is a teacher with a low-wage employed husband, the other is a STHM with a husband in school (military paying tuition); the nephew works at a bank and wife is a special-ed teacher.

None have encountered any problems or delays. One niece & nephew were already "homeowners", although of less than two years "ownership" and had no difficulty selling, either. The other niece is a first time home buyer. Two in Massachusetts, one in Pennsylvania. These are all 20-somethings.

My brother bought a house in western MA about 20 months ago. Also no problems. <shrug>
 


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Author: KKoleto Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124366 of 126958
Subject: Re: Here's what to expect... Date: 10/8/2012 9:55 PM
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DW and I did a re-fi on a second home in January of this year. Closed in 4 weeks. We are both retired.

DD bought her first house a couple of months ago. Closed in three weeks.

I guess it's just "YMMV". Good wishes to all who are still in the process.

Best,
Ken, Fool

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Author: CCinOC Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124367 of 126958
Subject: Re: Here's what to expect... Date: 10/8/2012 10:20 PM
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IP wrote: Or in this case is the "lender approval" simply the current lender approving the price on the short sale,

That's what I meant.

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124401 of 126958
Subject: Re: Here's what to expect... Date: 10/13/2012 11:13 AM
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and perhaps the investor is the one lending the money for the purchase?

The "investor" is the entity that is owed money on the current loan. The investor in the current loan on the property being sold has to approve a short sale because they are not going to be getting the entire amount promised to them (i.e. the payment will be 'short').

The approval by the investor is often where short sales get hung up and have delays. Because this approval is part of the selling process to settle the old loan, and not part of the lending process for the new loan, I still fail to see why this was cited as an example to show delays in "applying for a loan". And if time to settle short sales and foreclosures is included in the averages cited in the article, I would say that those averages are not a good measure on what to expect, since the distribution is probably at least a bi-modal distribution - one distribution peak for those with traditional sales/refinances and another distribution peak (probably much shorter and wider) for those who are buying short sales or foreclosures.

AJ

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Author: CCinOC Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124402 of 126958
Subject: Re: Here's what to expect... Date: 10/13/2012 1:04 PM
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Hey, AJ, believe the anecdotal evidence coming from the trenches or don't believe it, as you wish.

From today's industry newsletter:

As 30-year rates hit historic lows, some borrowers are hoping that lenders will be loosening their underwriting standards and that it will be easier to qualify for a mortgage. They're hoping in vain: industry data shows that controls have gotten even tighter. I don't remember where I saw the stat, but the average credit score on new loans closed in August 2012 was 750, nine points higher than a year prior. Fannie and Freddie borrowers' scores averaged 763 for that same period, and considering that fewer than 22% of Americans have credit scores over 749, there are a lot of people out there who are highly unlikely to qualify for a loan. Lenders also appear to be requiring larger down payments, with the average Fannie and Freddie borrower putting down 21% (to put that in context, the median down payment in 2005 was 2%.) Originators hope that eventually lenders probably will relax about upcoming regulation, be less fearful about costly buyback demands from the GSEs, and strip away some of their extra credit-risk fees. The key word here, though, is "eventually."

I continue to hear that the underwriting pendulum has swung too far, excluding common sense borrowers, self-employed borrowers, and loans being held up for requests on explanations for a $100 deposit four months ago. And borrowers are in a tough spot. An individual living on a fixed income over the last 20 years (i.e., from the end of 1991 to the end of 2011) would have suffered a 39% loss of purchasing power over the 2 decades using the CPI as a gauge of his/her inflation.

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Author: inparadise Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124403 of 126958
Subject: Re: Here's what to expect... Date: 10/13/2012 1:07 PM
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The "investor" is the entity that is owed money on the current loan.


Current investor perhaps, but there is also an investor into the new mortgage.

The approval by the investor is often where short sales get hung up and have delays. Because this approval is part of the selling process to settle the old loan, and not part of the lending process for the new loan, I still fail to see why this was cited as an example to show delays in "applying for a loan"...

From the OP: We received lender approval for the short sale quickly, but the file then had to be sent to the investor for its approval.

So the approval by the initial investor was quick, the holdup with the new investor looking to fund the purchase mortgage on this short sale.

IP

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Author: CCinOC Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124404 of 126958
Subject: Re: Here's what to expect... Date: 10/13/2012 1:22 PM
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IP wrote: So the approval by the initial investor was quick, the holdup with the new investor looking to fund the purchase mortgage on this short sale.

No. The incoming LENDER'S approval was relatively quick--after all, I merely ran a DU and met the listed conditions--but the outgoing INVESTOR that stands to lose money took several weeks to approve the short sale price. Now comes clearance of the 22 liens.

No approval by the incoming INVESTOR is required.

A short sale shouldn't even be part of this discussion. It's an anomaly--albeit a frequent one in the current real estate environment.

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Author: inparadise Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124405 of 126958
Subject: Re: Here's what to expect... Date: 10/13/2012 1:25 PM
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Ahhh, I agree with AJ then.

IP

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Author: CCinOC Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124406 of 126958
Subject: Re: Here's what to expect... Date: 10/13/2012 8:21 PM
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Of course you do.

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124410 of 126958
Subject: Re: Here's what to expect... Date: 10/14/2012 8:14 AM
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Hey, AJ, believe the anecdotal evidence coming from the trenches or don't believe it, as you wish.

My personal anecdotal information from the trenches (1 recent refi of my current loan, 1 traditional purchase in progress for me, and 1 traditional purchase in progress for my BF, all at least 20% equity/down payment) tells me that for those who are well-qualified, getting a loan can still be pretty quick and easy. In fact, my BF asked to have his closing a week before originally specified in the contract, and the lender was easily able to accomodate that request. Heck, I don't even have to have my current house on the market or under contract, much less sold, in order to qualify for my new, significantly larger mortgage, because even with both mortgage payments (and no other debt), I'm still below 25% DTI (gotta love the low interest rates). And that's even with the processor only counting my easily documented monthly salary income, not the income from bonuses at my job, or my investment income, because she said it would be easier if we didn't count that and it wasn't needed for me to qualify.

And we haven't had to supply any more information than I've previously had to supply for prior full doc loans, although it is more documentation than I had to supply for loans received during the bubble. In fact, in some ways I've had to supply less documentation - I don't have to supply evidence of my 401(k) or IRA assets, for instance, and I've had to supply that for some full doc loans in the past.

As 30-year rates hit historic lows, some borrowers are hoping that lenders will be loosening their underwriting standards and that it will be easier to qualify for a mortgage. They're hoping in vain: industry data shows that controls have gotten even tighter. I don't remember where I saw the stat, but the average credit score on new loans closed in August 2012 was 750, nine points higher than a year prior. Fannie and Freddie borrowers' scores averaged 763 for that same period, and considering that fewer than 22% of Americans have credit scores over 749, there are a lot of people out there who are highly unlikely to qualify for a loan. Lenders also appear to be requiring larger down payments, with the average Fannie and Freddie borrower putting down 21% (to put that in context, the median down payment in 2005 was 2%.) Originators hope that eventually lenders probably will relax about upcoming regulation, be less fearful about costly buyback demands from the GSEs, and strip away some of their extra credit-risk fees. The key word here, though, is "eventually."

Well, this information is much more relevant to the discussion of "What to expect when applying for a loan" than the discussion of the length of time a short sale is taking. Which was my point, when saying that the short sale example wasn't relevant.

I do agree that lending standards have tightened significantly, and in some cases, the pendulum seems to have swung too far toward the 'tight' side. But that's what always happens when credit markets suffer shocks. Happens in the credit card market, the auto finance market, the auto leasing market, the small business lending market and the student loan market. And because the swing in the mortgage market during the bubble was so far to the 'loose' side and stayed there so long, I'm not surprised that there has been a very significant swing to the 'tight' side, and that it's staying there for a long time. In order to revert to the mean, there has to be some offset of the bubble.

There has been some evidence in other credit markets that lenders are starting to loosen up http://blogs.wsj.com/deals/2012/06/28/lenders-loosen-up-on-c... http://www.bizjournals.com/phoenix/print-edition/2012/09/14/... and http://articles.marketwatch.com/2012-06-27/finance/32426285_... I would expect that the mortgage lending standards will also loosen up again, but that it will take a while because many lenders/investors in that space are still dealing with the consequences of the bubble, so they aren't willing to take more risk on yet.

AJ

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Author: inparadise Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 124412 of 126958
Subject: Re: Here's what to expect... Date: 10/14/2012 8:41 AM
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My personal anecdotal information from the trenches (1 recent refi of my current loan, 1 traditional purchase in progress for me, and 1 traditional purchase in progress for my BF, all at least 20% equity/down payment) tells me that for those who are well-qualified, getting a loan can still be pretty quick and easy. In fact, my BF asked to have his closing a week before originally specified in the contract, and the lender was easily able to accomodate that request. Heck, I don't even have to have my current house on the market or under contract, much less sold, in order to qualify for my new, significantly larger mortgage, because even with both mortgage payments (and no other debt), I'm still below 25% DTI (gotta love the low interest rates). And that's even with the processor only counting my easily documented monthly salary income, not the income from bonuses at my job, or my investment income, because she said it would be easier if we didn't count that and it wasn't needed for me to qualify.

Same financials for us, except looking only for 50% of value on a refi in a great area, with no problem with appraisal, no debt beyond this mortgage, and plenty of cash in the bank to pay off the mortgage if we preferred. Still was a PITA. Perhaps it boils down to who you use. The guy we used at Amerisave was basically a salesman who did little more than push our docs to the people who actually looked at them.

IP

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