Lenders are too cautious, Lou Barnes, a Boulder-based mortgage banker, was quoted in a front-page story in today’s Wall Street Journal titled Tighter Lending Crimps Housing.
The WSJ analyzed activity from the 10 largest lenders and found they denied 26.8 percent of loan applications in 2010, compared with 23.5 percent in 2009. One reason lending is to tight because Fannie Mae, Freddie Mac and the Federal Housing Administration, which account for 9 out of every 10 loans made, are under pressure to avoid any losses, the paper notes. Denver had a 22.8 percent denial rate, 14.9 percent better than the national average.
Barnes told the paper that Fannie and Freddie are “behaving like a hurricane insurance company that won’t write any policies within 200 mile of an ocean.” Barnes goes on to tell the story of Amy Menell, a Realtor with a credit score above 800, no debt and is willing to put 50 percent down on an $800,000 Boulder home a divorce settlement, in order to take advantage of today’s low interest rates and depressed housing prices. However, because she didn’t sell many homes in 2009, she doesn’t have sufficient two years of documented income that the bank requires, and she can’t get the loan, even though business has picked up for her.
“Going back as far as there has been banking, if somebody walked in the door with a 50 percent down payment, good credit, cash in reserve, they’d walk out with a loan,” Barnes said.
To read the entire WSJ article, please visit this link: Tighter Lending Crimps Housing