January 15, 2014
Mortgage Bankers Lower Forecast As Mortgage Applications Drop
"Despite an economic outlook of steady growth and a recovering job market, mortgage applications have been decreasing – likely due to a combination of rising rates and regulatory implementation, specifically the new Qualified Mortgage Rule."
As such, the Mortgage Bankers Association has lowered its forecast for mortgage originations in the US and is now expecting a 3.8 percent increase in dollar volume for purchase loans in 2014 versus 2013.
The MBA's index for purchase loans was 10 percent lower last week as compared to the same week a year before.
First Published: January 15, 2014 8:45 AM
Comments from "Plugged In" Readers
I would think that this would help put a drag on raising rates, as banks will be competing harder to sell mortgages....
Posted by: BigV at January 15, 2014 9:19 AM
This may not be good news for the banks, but it is great news for stability.
The banks have made a mint over the last 5 years from re-fis. This has been the biggest injection of bailout funds to the banks. But with the downward trend in borrowing rates reversed, the massive waves of re-fis has simply ended.
So the banks are left with new purchase mortgages rather than living off of re-fis, but the new sensible rules (things like a down payment, and a job, and a reasonable debt load that is not crushing) have closed off the easy money spigot. And guess what? Only people who can actually make their mortgage payments now qualify for a mortgage! That is a good thing for the economy as long as the rules are not unreasonably restrictive, which they are not, although it is not a good thing for lenders who dump loans on the gummint and investors.
Posted by: anon at January 15, 2014 10:12 AM
These "sensible" rules are draconian and will make it impossible for self employed or anything but a plain vanilla W2 employee to get a mortgage. There is very much a place for stated income loans and interest only loans if a buyer or borrower has good credit and equity in the property. With 25-30% down both the banks and the borrowers are protected.
Trust me, the qualified mortgage rule helps the banks and Wall Street since these will be the only ones bundled in their derivatives. These derivatives created the debacle more than borrowers ability to repay loans. The house always wins, btw!
Posted by: Stessa at January 15, 2014 4:23 PM
Here's a pro tip for the self-employed: I always make sure to have a couple hundred thousand in W-2 income annually to show the bank when applying for loans and I am always an "employee" on the loan application. Somehow I always manage to tap-dance around the underwriters and get the loan done. Tricks of the trade!
Posted by: Jimmy the House Flipper at January 15, 2014 9:10 PM
Did you set up some shell corp that shows you as an employee and "generated" your w-2? And the IRS never sees it? Or is there a more clever way?
Posted by: poor.ass.millionaire at January 16, 2014 9:14 AM
This "must have W-2" point is just silly. I haven't had W-2 income in over 20 years. Bought three homes in that period, including two years ago in a very tight lending environment. There are lots of other ways to verify income that lenders accept, primarily tax returns and 1099s. Now if you want to "state" income for which you have no proof (either because you never received it, or you did receive it but you are trying to hide that fact) then you will, and should, have trouble getting a mortgage.
Posted by: anon at January 16, 2014 9:39 AM
Can you get a loan and close escrow in 14 days? Which is what I did last month. You bought 3 houses in 20 years? I bought 3 in 6 months. For example. I have gotten loans both ways, trust me, W-2 is much faster and much easier than self-employed.
Posted by: Jimmy the House Flipper at January 16, 2014 10:06 AM
Re the shell corp, no it's a real corp. I just do this real estate thing for sport.
Posted by: Jimmy the House Flipper at January 16, 2014 10:08 AM
Yeah, our current house (bought first of 2012) closed in 15 days. That has nothing to do with verifying income by showing W-2s or tax returns. Each is treated equally. We were able to close so fast because we had already lined up the lending while we were looking, so it was very quick once we were ready to pounce. The "W-2" thing is a non-issue. If you have three (or more) years of tax returns showing a healthy income, lenders will gladly accept that as verification that is as strong as, or strong, that W-2 forms.
Posted by: anon at January 16, 2014 10:19 AM
Ooookay, anonymous internet guy. You win.
Posted by: Jimmy the House Flipper at January 16, 2014 10:41 AM
No, other anonymous internet guy, you win because your anecdote is undeniably more credible than mine . . . even though my point can be verified in two minutes with a google search of what documentation lenders permit or require.
Posted by: anon at January 16, 2014 11:05 AM
Actually, anonymous guy, you have completely mis-read what I wrote. I stated that I had obtained loans both as self-employed and W-2 employee, and that IN MY EXPERIENCE, that W-2 employee applications were faster and easier to ram through underwriting. You took the time to contradict me, as always, by stating that in one instance, closing escrow took 14 days as you had already commenced the underwriting process prior to opening escrow.
This is in no way the same as opening escrow, applying for a new loan with a new lender, and closing escrow within 14 days.
Also, your loan volume in the past two years, in terms of number of transactions, is 1/6th of mine.
Posted by: Jimmy the House Flipper at January 16, 2014 11:43 AM
Someone want to get a yardstick?
You guys sort out who's the top dog while I sip on my espresso next to the swimming pool. Ahhh, the SF RE rat race... Good times.
Posted by: lol at January 16, 2014 12:10 PM
I think Jimmy's right. W2 is very straightforward for idiot UW's to get. Tax returns, sched C, sched E, did they back out depreciation properly, etc., etc. takes longer. Now once you have an established relationship with the bank it gets better, but still a pain.
I know, I'm going through it now. OTOH I don't really care, as I've been comfortably living off my current RE holdings for years; pulling cash out and buying another prop is just gravy at this point. It gives me something to do, and I like the low rates avail now. But I'm not gonna buy unless it's a deal and prop I like. The SF investor market is still crazy-to-the-point-of-being-stupid price wise, so I'm hesitant. Lots of loose Chinese money grabbing at seemingly anything out there. That and Irish flippers are bidding shit up.
Posted by: poor.ass.millionaire at January 16, 2014 12:34 PM
I have found it challenging securing loans with the traditional banks when it comes to rental property. Generally they count only 75% of any existing rental income towards your overall income level. Additionally, any bonuses or stock is also generally exempt from the application. Therefore I've found you end up investing much more in a down payment than you otherwise would want.
Posted by: Willow at January 16, 2014 12:41 PM
"Generally they count only 75% of any existing rental income towards your overall income level."
That's the classic standard vacancy allowance. In no way does it match the reality in SF or the greater bay area though.
Posted by: The Milkshake of Despair at January 16, 2014 1:11 PM