Tight-Fisted Mortgage Lenders Pressure Home Sales

Home prices have fallen by a third since 2006, creating tremendous bargains for home buyers. Mortgage rates are at rock-bottom lows, making houses more affordable than they have been in decades. Yet home sales last year fell to the lowest levels since the government began keeping records in 1963.

One big reason: mortgage bankers have gotten a lot choosier about approving loans, according to a report by Goldman Sachs economists Hui Shan and Jari Stehn. By some measures, they're pickier than they were before the housing boom took off.

With anecdotal evidence showing that home mortgages are harder to get, the economists crunched Federal Reserve data to show just how much tighter lending standards have become. Using the results of the Fed's survey of loan officers, the report found that lending standards rose sharply after the mortgage market collapsed and the financial system imploded in 2008. Since the recession ended in 2009, lenders haven’t eased their tight grip on mortgage money.

Part of the reason is that there’s less money available to lend. During the housing boom, as brokers produced a flood of new mortgages, Wall Street bankers churned out a torrent of mortgage-backed bonds for investors waiting to snap them up. That market has all but vanished; 90 percent of new mortgages written today are backed by the government.

The new mortgage pipeline also has slowed because it is clogged with paperwork. These days, you’ll have to fill out many more forms and produce a lot more documentation, on average, just to get your loan considered.

The percent of loans that required “full documentation” declined steadily from 2000 through 2006, hitting a low of less than 60 percent. Those “no-doc” loans were a big part of the reason mortgage bankers made the bad underwriting decisions that created the mortgage mess. Today, nearly 90 percent of mortgage applications require full documentation. That’s much higher than the pre-bubble level.

You’ll also have to show a much higher credit score than you did in the go-go days of the housing boom. In a separate report, Mortgage Marvel, an online mortgage-shopping website, analyzed data from more than 700,000 mortgage applications filed last year and found that the average FICO score was 730. That’s a significant jump from the days when borrowers with scores in the high 500s were routinely steered to high-cost subprime loans.

Applications with highest credit scores concentrated in California, Oregon, Wisconsin, District of Columbia and Hawaii, the company said. The states with the lowest credit scores were Mississippi, Arkansas, West Virginia, Louisiana and Oklahoma.

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  • by blake Location: gville on Jan 29, 2012 at 07:20 AM
    Make money off Obama...invest in America going down!
  • by danaoutlaw Location: US on Jan 28, 2012 at 09:33 PM
    If you move and sell the home before you have recouped the costs, you won't end up receiving a financial benefit from refinancing. Use our refinance calculator to help you decide. Check out 123 Refinance calculator to find your refi rates in seconds.
  • by voter Location: nc on Jan 28, 2012 at 06:38 PM
    snake oil for governor....oooh rahh barlow and lavon for lead custodian and assistant lead custodian.
  • by ncyankee Location: goldsboro on Jan 28, 2012 at 10:37 AM
    and the banks got all that money on taxpayers money..yes, some guidlines need to be in place, and hope that people who want the American dream, can afford one
    • reply
      by Obama Snake Oil co on Jan 28, 2012 at 03:33 PM in reply to ncyankee
      You are uninformed, banks are the only ones that have been paying it back....what news do you watch? Learn how to use the internet. Ignorance is not bliss doodle dandy boy.
      • reply
        by Anonymous on Jan 28, 2012 at 05:51 PM in reply to Obama Snake Oil co
        Reuters: "Bank of America Corp is close to a deal to pay $8.5 billion to settle claims from investors that lost money on mortgage-backed securities The largest U.S. bank by assets has been fighting claims by a group of 22 investors over the housing-related securities it packaged and sold before the financial crisis"
  • by rusty Location: aurora on Jan 28, 2012 at 07:06 AM
    can you qualify to buy a house if you receive Un-employment? This might be a good reason why sales are down.
    • reply
      by Anonymous on Jan 28, 2012 at 08:44 AM in reply to rusty
      I think part of the reason that sales are down is that Obama has imposed a bunch of new regulations on banks that are making it really hard for them to loan money to people who can actually afford to pay it back.
      • reply
        by ? on Jan 28, 2012 at 04:29 PM in reply to
        Please don't do any thinking, your are not qualified to do so.
    • reply
      by doc on Jan 29, 2012 at 04:57 AM in reply to rusty
      you would have when bush was president,they would even give you the down payment for it,remember the american dream down payment law that was wrote by nine republicans and signed by bush in 2003. if u dont believe it do a search for it
      • reply
        by Anonymous on Jan 29, 2012 at 07:17 AM in reply to doc
        Bush said Fico scores had to be 700 but Democrats made it 450 and below...
        • reply
          by doc on Jan 30, 2012 at 03:41 AM in reply to
          that the best u can come up with evidently the lenders didnt care what bush said.democrats had nothing to do with the bush down payment law,repubs were in control in 2003
  • by Anonymous on Jan 28, 2012 at 05:00 AM
    Sounds like it is the way that it is supposed to be. People get to borrow money for a home if they can actually afford it.
  • by Obama Snake Oil Co Location: Washington on Jan 28, 2012 at 03:34 AM
    I guess when you get burned by what the federal government did to banks by forcing them to give loans to people that could not afford a home, what would you expect. The banks had to be bailed out due to the huge debt layed on them. I guess if you loaned money to a friend who said he would pay you back and after a year, didn't get a dime...guess you would be reluctant to loan again, this is comon sense not rocket science.
    • reply
      by James on Jan 28, 2012 at 09:21 AM in reply to Obama Snake Oil Co
      So Obama had something to do with the housing market going bust??
      • reply
        by Obama Snake Oil Co on Jan 28, 2012 at 03:35 PM in reply to James
        As community organizer and attorney, his job was to go after banks to force them to give loans. What news do you watch? Is it on this planet or on Uranus? If you didn't know this, that scares us more than your driving.
      • reply
        by doc on Jan 29, 2012 at 05:01 AM in reply to James
        no bush busted the housing market with his american dream down payment law
        • reply
          by Anonymous on Jan 29, 2012 at 07:16 AM in reply to doc
          AND bARNEY fRANK AND LIBtards demanded people with 450 Fico scores be given loans...
  • by Barlow Location: Winteville on Jan 28, 2012 at 02:19 AM
    First the mortgage companies were writing fraudulent loans with no documentation needed. Then the housing bubble blew up, we used our tax dollars to bail them out and NOW about the only way you can get a house is with cash. And guess who has all the cash? The same people that wrote the fraudulent loans that we bailed out! What a racket!
    • reply
      by Anonymous on Jan 28, 2012 at 08:42 AM in reply to Barlow
      Barlow lets apply some common sense here. Of course it takes cash to buy a house. Everyone should have a down payment. You should only be able to buy a house if you can afford it, your credit is good and you can make your mortgage payments. Do you actually think a bank should make a loan to people who can't afford to pay it back?
      • reply
        by Barlow on Jan 28, 2012 at 10:18 AM in reply to
        People were buying houses with no money down AND , in some cases, no jobs. These bad loans were bundled with good loans and sold to investors holding things like pension funds. Those selling the loans knew the vast majority of them would fail, but they didn't care because they had made their money and gotten rid of the bad debt. It is called FRAUD. It is why the government is going after them. It is why the banks have had to pay millions and millions in fines. No a bank shouldn't make a loan to people who can't afford to pay it back and they certainly should not be allowed to bundle them together and sell them to unsuspecting investors.
        • reply
          by Obama Snake Oil co on Jan 28, 2012 at 03:37 PM in reply to Barlow
          Again, Barlow, would you find out what Obamas job was as community organizer. That was his job, to threaten lawsuits against banks for not loaning to minorities and poor people. Its your man. Geez...what news do you watch or listen to? No one should state that point without knowing the truth that has been all over most major networks for 6 years running.....
        • reply
          by WOW on Jan 28, 2012 at 04:58 PM in reply to Barlow
          No. You don't understand Barlow. they were making these loans to these people because they were being forced to by the very government that you say is going after them. It started with Carter and continued through every democratic administration all the way to 2008 when the sham caved in on everybody. And Snake's right, as a "community organozer" it was part of Obama's job (if you want to call it that)to threaten lawsuits against banks loaning to minorities and poor people, regardless of their inability to repay the loans.
    • reply
      by Obama Snake Oil Co on Jan 28, 2012 at 01:00 PM in reply to Barlow
      Well, Obama didn't collect that much money to run, just enough to get elected for president. Of course you supported this with your vote! Stop drinking the koolaid and learn about what Obama, Franks and Dodd did, you basically prove you have no idea what the party even does under your blindness. That is why I vote now for republican....I am not that stupid anymore...over, gone, done with.
      • reply
        by Barlow on Jan 28, 2012 at 07:44 PM in reply to Obama Snake Oil Co
        Yea, I betcha Citi Group and BOA are just scared to death of those community organizers out there. Do you guys have any idea how silly you look when you post stuff like that?
      • reply
        by doc on Jan 29, 2012 at 05:08 AM in reply to Obama Snake Oil Co
        if you guys are so smart now do some research on the american dream down payment law. cant blame that one on oboma or the democrats
        • reply
          by Anonymous on Jan 29, 2012 at 07:19 AM in reply to doc
          Obama does all he can to keep us going towards a socialist state...hello Castro!

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