Obama’s plan to revamp financial regulation

‘Vanilla’ home loans could benefit borrowers – Washington (AP), June 22, 2009

WASHINGTON (AP) — If President Barack Obama gets his way, consumers who take out mortgages would automatically get a “plain vanilla” loan — such as a traditional 30-year fixed-rate mortgage — unless they opted for a riskier variety.
Obama’s plan to revamp financial regulation aims to protect borrowers from the confusing and high-risk mortgages that fed a pandemic of delinquencies and foreclosures, led to the worst financial crisis in decades and thrust the nation into a deep recession.

Critics in the mortgage industry are denouncing Obama’s plan for government-approved mortgages. Some call it a paternalistic intrusion that would restrict borrowers’ options and make loans harder to get and potentially more expensive.

With the government in charge of lending guidelines since taking over Fannie Mae and Freddie Mac in 2008, let’s consider who is being approved and who is being declined now.  The following are actual cases I have dealt with this month:

$195,000 loan on a $305,000 home declined.   Borrower earned more than $6,000/month, had $100,000 in liquid reserves and 805 credit.

$50,000 loan on a $100,000 home declined.   Borrower had debt ratios or 6% and 22%, $14,500 in liquid reserves, and 698 credit.

$210,000 loan on a $700,000 home declined.  Borrower had $83,000 in income on tax return, $930,000 in liquid reserves, and 787 credit.  Loan would have allowed borrower to avoid penalties on early IRA distributions.  Government lending guidelines force borrower to pay more taxes and penalties.

$275,000 loan on a $355,000 home declined.  Borrower had more than $1,000,000 of taxable income, $400,000 in liquid reserves, and 803 credit.

Automated system recommended approval and government guarantee of a $206,600 loan on a $200,000 home to a borrower with 32/44 debt ratio, $200 cash, and 676 credit.

Automated system recommended approval and government guarantee of a $211,765 loan on a $205,000 home to a borrower with 27/33 debt ratio, $3,000 cash, and 683 credit.

These are just a few of the files I’ve dealt with this month.  They clearly show what the government considers high risk and low risk loans.

Don Opeka – President
Licensed Colorado Mortgage Loan Originator  MB100007878
Colorado Certified Mortgage Broker

Orion Mortgage, Inc.
10560 Wadsworth Blvd.
Broomfield, CO 80021
303-469-1254
800-404-0453
www.OrionMortgage.net
Don@OrionMortgageInc.com

Check the license status of any Colorado mortgage loan originator at http://eservices.psiexams.com/crec/search.jsp