I saw two articles that got my attention today. In the first article, Realtors Ask Mortgage Industry to Ease Underwriting Policies, Jann Swanson noted that the National Association of Realtors (NAR) and its President, Vicki Cox Golder, recently “appealed primarily to FHA, Fannie Mae, and Freddie Mac” to make the approval of mortgages easier so that qualified buyers could become homeowners. The second article was the Senior Loan Officer Survey, in which author Adam Quinones expressed that mortgage lenders expect standards to remain tight. I am going to take the guess that Ms. Cox Golder unfortunately did not have the opportunity to read the latter for the reasons I delineate below.
Alright, let me be perfectly clear. I’m obviously happy the NAR is looking to leverage their size and PAC money in an effort to urge anything that might make the housing market better. It is no secret to anyone who has seen my former blogs that someone needs to step up and force a change. That being said, I believe the NAR assumed that the Mortgage Bankers Association was lobbying. Sadly, your mother was right when she told you that “assume” is secret code. And no one really ever wants to make an ass out of you and me.
Stop for a moment and think rationally. The largest mortgage bankers are banks. Do you honestly believe Wells Fargo and Bank of America are interested in lobbying for independent lenders? No, so the PAC money for the mortgage bankers is nearly nonexistent.
Now that we have established that we need NAR to prompt changes, the goal of this blog is to better educate NAR and its president as to whom to push and what to push for. If Ms. Golder had the time and opportunity to read the aforementioned survey she might have found that the banks rule the earth – not FHA, Fannie Mae, or Freddie Mac. By way of example, the FHA does not have a minimum FICO score requirement, but Wells Fargo, Bank of America, and GMAC do. The investors have an overlay of rules well beyond the minimum standards of the government sponsored entities the NAR is “urging.”
The banks that our collective tax dollars bailed out of potential bankruptcy have chosen not to lend money. NAR needs to lobby for these banks – to repeat, the banks that our collective tax dollars bailed out of potential bankruptcy – to lend money. If FHA is insuring the lender up to 96.5% of the appraised value of the home it seems that the banks have pretty minimal risk. Why should they have tighter rules than the insurer of the bulk of the loan?