More Stupid Banker Tricks
Question: There have been several posts recently about “stupid” things required with regard to new and refinanced mortgages. I would like to know (rhetorically) why with my own income in a 34/40 income test program I can qualify for a $170K mortgage, but if I could go out and get some BS job for my wife at Mickey D’s paying 15K, and put my kid in day care, pay extra commuting expenses, and have a NEGATIVE contribution from her job after taxes (or nearly so), that I could qualify for a *** $220K *** mortgage?!? In the DC area, this makes the difference between a quasi-slum and a very nice neighborhood.
Answer: The rhetorical answer to your rhetorical question is: The Secondary Market — most mortgages are sold to investors as standardized securities (GNMA, FNMA, etc.) so they must be a ’standard’ product. The secondary market rules are based on previous experience and statistical underwriting about who pays their mortgages and who doesn’t. Frequently, we are paying for the sins of those who came before us.
The positive point of having a secondary market is that is makes a very large amount of money available for mortgages. The negative point is that most bankers no longer have the freedom to look you in the eye and judge your honesty and make the loan based on that alone.
By the way, the ratios aren’t the only basis on which the loan is made. IF you had a spotty employment record, bad credit, bankruptcy, a history of paying your rent late, these would all effect the amount that banks would lend you.
There are lenders that will go over 40%, plus there are no-income verification and Portfolio loans. Portfolio lenders (those that keep their loans rather than sell them) have much more discretion and will listen to sensible arguments like yours.
The banks have a responsibility to the investors and depositors, so they have to have some way of proving they’re not being careless with other people’s money.
It’s not always good for borrowers, but that’s the way it is.
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