Over the past 4 years, banks were lending non-stop to anyone breathing using no doc loans at high ltvs. Now market prices have fallen, ltvs are more stringent, and now banks are hesitant to lend. Go figure a bank's mentality.
Why you think we are in the situation we are in because banks make bad decisions.
I believe it was Strategic positioning!
Not simply bad decisions they ran the models.
David,
What is normal?
I have not checked what lending products are available lately
I hope it is sensable "responsable lending" as apposed to what had been going on previously.
I think it is great thou that they are going to lend us the money we used to bail them out. That's mighty white of them.
I think a significant percentage of the interest they make on those loans should be going to paying US off.
Hey Dave can I borrow 700 dollars from you then lend it back to you with interest?
Banks are extremely tight right now on many asset classes. From my experience, lending is very difficult currently on investment properties, vacant properties, and most types of land/development projects.
Banks are WAY to tight now. To the point that they are being compared to 1990's Japan.
Banks MUST stop hording their deposits and start lending again. Otherwise, we are going to have a 15 year economic slowdown (see Japan).
I am a bit of a 'RE newbie', but a specific example I have is that my first rehab-then-hold deal I was able to get conventional financing a month after the property was rented and after owning it only 3 months. That was 5 months ago.
Now I'm midway through rehabbing my 2nd house and tried to start the end-loan process with the same broker. He can't find me a loan until I've owned the property 6 months--the same lenders don't do what they did a short time ago.
Can someone give me an example of a bank being excessively tight?
If you have an example, please post the situation of the banks saying "no" to a solid deal.
Otherwise, all we have is anecdotal evidence.
A buyer of mine that had 8 mortgaged properties wanted 2 of mine. Did all the paperwork with a lender that would do up to the magic 10. 20% down and high ficos, income etc.
On conditions to close, lender realized FOR the first time that 3 of the 8 were with this same lender doing the new loans. They would only do 1 of the 2 because their policy was no more than 4 of their own loans to any borrower. Closed on 1 and haven't been able to find any other lender now that will allow 10
I also had another situation where buyer was qualified at 10% down, good scores etc. Then, no pmi company would cover the loan. Found one to do it with 15%, then lender wanted 6 months reserves seasoned in the bank for 90 days and had to prove where extra funds came from.
Also had an Fha owner occ loan . I had an appraisal from an FHA approved appraiser for $216K, although the actual appraisal was for a previous conventional buyer. He wasn't the appraiser FHA assigned. Their appraiser came in at 175K and wouldn't budge.No review was allowed either.
I've lost 6 of 7 deals that were in escrow the last 120 days. If you don't see things tightening in your area, I can't understand it. There are signs everywhere and these are full doc, qualified loans. Investors seem to be looked at as the bad guys right now, imo.
Just to play Devil's advocate
20% down and high ficos, income etc.
I don't see a problem with a lender refusing investor loans at greater than 70% LTV. Given how bad they have been burned, do you blame them?
Also had an Fha owner occ loan . I had an appraisal from an FHA approved appraiser for $216K, although the actual appraisal was for a previous conventional buyer. He wasn't the appraiser FHA assigned. Their appraiser came in at 175K and wouldn't budge.No review was allowed either.
If I were a betting man, I would say 215K was a "high" appraisal and 175K was closer to the "truth". No?
Honestly, I don't see these issues as overly tight lending standards. I see them as appropriate.
Tighter than before?
Absolutely.
Necessary to prevent another world wide catastrophe?
I think so.
Just my two cents.
There's really no such thing as a recourse loan anymore.
By definition banks tightening up lending standards IS banks being way tight...
How tight?
1. 3 month LIBOR at 215bps while 3 month treasures is at 1bps - a 214bps TED spread -historically very high
2. Non-conforming 30yr fixed at 750+bps versus conforming at 600bps - historically very high and indication that banks are being VERY tight
3. Fed's alphabet soup of lending facilities (such as commercial paper). If banks were lending the FED would not be the lender of last resort.
Anecdotally I have heard many many stories of deals falling out of escrow because of funding issues.
Furthermore I know for a fact that a certain investment bank cut a certain $200 mil line not because of the numbers but because of "excessive exposure to the US auto industry".
I also know for a fact that WAMU balked at a certain $100 mil real estate project 72 hours before it was set to fund - if it was good 72 hours ago it is still good, but the money just isn't there...
Lending is tight - I have yet to hear any anecdotal examples of banks being "loose"....
You don't think it was bad decisions that lead to this mess come on man banks gotten into this mess through their own greed and bad bets and decisions.
No I think and again it's only my opinion that on some level they had to be able to percieve the possible outcomes. Had their exit stratigy in place "bailout" & are simply fleacing the American people.
We bail them out we should literally own them!
I say let them fail & hire me to dispose of their assets!
To David.
Why should lenders make a 97% FHA loan to high risk first time buyer and then limit an investor to 4 loans IRREGARDLESS of ficos, inco strength etc. That is plain stupid.
2nd pt.- The 2 appraisals were BOTH by approved FHA appraisers. Myhonest belief is they absolutely didn't want to make the loan and hence the reason for an appraisal nearly 20% lower.That seems like tightening to me.
LOL
Well CITI group is ok with me because they sell my clients REO's at discount.
B & A however pulled a bait & switch so they can give us there assets & we will both get Enzo's!
The big banks have it exactly right, not wrong:
The purpose of the federal reserve system is to protect the large member banks (those who conceived the fed) from competition and to preserve their profit margins. When the banks get in trouble, the purpose of the federal reserve is to pass on the losses of the banks to the taxpayers. This was planned by big banking competitors during the conception of the federal reserve system in 1910. This is a cartel, and in a lot of ways it appears to working exactly as it was intended. The purpose of any cartel is to protect its members and preserve its profit margins.
That sounds like some kind of consipacy non-sense.
The institutions would not do something like that to the American people!
Why should lenders make a 97% FHA loan to high risk first time buyer and then limit an investor to 4 loans IRREGARDLESS of ficos, inco strength etc. That is plain stupid.
I agree whole-heartedly. That makes no sense to me. However, USAA is a very conservative bank and they have had a very similar policy that pre-dated the boom. That makes me think that their is some risk based modeling that goes beyond surface level "common sense".
2nd pt.- The 2 appraisals were BOTH by approved FHA appraisers. Myhonest belief is they absolutely didn't want to make the loan and hence the reason for an appraisal nearly 20% lower.That seems like tightening to me.
I seriously doubt that was the case. Do you really think they are that organized to get that done?
I'm just playing devil's advocate. Everyone agrees that loose lending standards were a large portion of the problem, and now a return toward normalcy can be regarded as over done credit tightening.
I'm just saying that it may not be as overly tight as we think. Anyone here try getting a loan in an area considered to be in a depreciating market area?
Furthermore I know for a fact that a certain investment bank cut a certain $200 mil line not because of the numbers but because of "excessive exposure to the US auto industry".
I also know for a fact that WAMU balked at a certain $100 mil real estate project 72 hours before it was set to fund - if it was good 72 hours ago it is still good, but the money just isn't there...
Jack,
At that level, I am sure you are right. I have witnessed large deals (but not that large!) stall and stumble too.
However, do you think that commercial tightening filters down to the end user residential buyer who is buying a regular home?
Matty M
"Sarcasm" was the theme of the last post.
I've read the FED's yearly report. I have read their memorandum. I have called and spoke with board members myself.
& I can tell you in no uncertain terms that you are absolutly
CORRECT