Lenders Want to Eliminate DTI Cap!
No DTI CAPS – What could go wrong?
Well, the insanity continues.
HousingWire is reporting that a coalition of lenders and trade groups are calling on the CFPB to eliminate the debt to income cap on all qualified mortgages. Yes, you read that right. Lenders want to eliminate the debt to income cap to allow more loans to be originated. They claim by using alternative factors to determine risks, more low income borrowers can obtain a mortgage.
Mortgage Bankers Association President and CEO Robert Broeksmit stated:
With respect to the 43% DTI threshold, it makes little sense to commit to a rigid requirement that does not account for the complexities of underwriting. Instead, we should focus on alternatives, like permitting the use of compensating factors or implementing a residual income test,” Broeksmit wrote. “Allowing for this flexibility will ensure that lower-income borrowers and minorities are better able to participate in the home-buying process, without introducing undue risk to the system.”
The group petitioning the CFPB includes Bank of America, Quicken Loans, Wells Fargo, Caliber Home Loans, Mortgage Bankers Association, American Bankers Association and the National Fair Housing Alliance.
Let’s take a step back; We have eliminated appraisals with the use of Property Waivers to remove the burden of the any appraisal issues; we allow Joe, Uber driver to collect property information and give that information to an appraiser across the country to complete the appraisal with spoon fed data; and now they want to remove the cap on the amount of debt a borrower can have.
This is not going to end well.
It’s just a suggestion!
As most of you know, VaCAP President, Pat Turner has applied for a position on the Appraisal Standards Board. We obviously believe Pat is an excellent choice and support him whole heartily. Well, it has come to our attention, Phil Crawford, Voice of Appraisal has gotten wind of Pat’s application. In true Phil Crawford fashion, Phil has taken things to a new level…
Yes, Phil Crawford, Voice of Appraisal is selling official “Pat Turner Suggestion” T-shirts to support the Appraiser Cancer Relief Fund as discussed on his latest podcast. Listen to Voice of Appraisal E232 and order your suggestion shirt here.
- The New Con: Hybrids, Waivers & AMCs Threaten Public Trust - December 16, 2024
- VaCAP Supports Shane Lanham’s Legal Fight - September 10, 2024
- It’s Just Responsible Journalism! - February 21, 2024
This didn’t go well for us last time we tried it…
This is pretty much the norm I think in my market for properties under $125,000 +/-. All costs covered by the seller and it’s been going on long enough the Comparables also had costs covered. Answer: Oh, it’s typical, no worries. And we’re headed where: no human appraiser for properties under $400,000 and eliminate the debt to income cap? This is usually when my foreclosure business picks up. It’s our own fault since we have assignment takers who work with 100% satisfaction rate or send it on to the appraiser doing it right so they can be perceived as “The Deal Killer”
Well maybe the group petitioning for this -Bank of America, Quicken Loans, Wells Fargo, Caliber Home Loans, Mortgage Bankers Association, American Bankers Association and the National Fair Housing Alliance – should just start handing out keys to free houses…….that sounds good, right? Why worry at all what it costs or if you can afford it…..just take it because we wouldn’t want anyone to be burdened with actually qualifying for a loan…so much time and hassle. This is absurd.
WOW, just think how busy we’ll all be with the foreclosures.
Didn’t we try this prior to 2008?
While I don’t doubt there are many people who would be excellent candidates for this, I was working for the guy who signed Lehman Brother’s bankruptcy papers. You could say he was looking a might unwell in those days.
They want to do a lot of things, but if appraisers refuse Uber inspections then they will have to come up with another plan.
My suggestion…. make loan officers hourly employees instead of commission based on EVERY loan they close. That would put the breaks on the amount of loans the PUSH to close.
Craziness! Can’t imagine why the market will crash
History repeating itself.
DTI is outdated and can easily be manipulated by a nefarious mortgage broker.
Excludes too many equity rich self employed and senior borrowers.
Would rather lenders focus on debt to assets or debt to home equity
rather than debt to income.
Makes the appraisal a more relevant piece of the puzzle.
To play devil’s advocate, in San Diego/Carlsbad where the median home price is +$800,000 and a next level home is just above a million, its very very common for people to pay rent for years and on time at debt to income levels approaching 50, 60, and 70%. Say it ain’t healthy and you wouldn’t do it all you want, but when the numbers get this big (HIGH INCOME LEVELS), what other parts of the country don’t understand, and perhaps many appraisers posting here, is that the remaining 50, 40, or 30% of income is very very large and most likely EXCEEDS the total median income for the entire country.
Seek the truth.
Yes, correct. These actions are more about keeping the volume lending pipelines open, rather than expanding them. The lenders are simply adjusting policy to account for pending runaway inflation which all major lenders clearly understand is already on it’s way and can not be stopped. QE money from multiple rounds of such monetary easing is dumping back into the markets right now. The CPI is a poor indication of actual inflation. Triple the cpi number and the cost of goods and services will never again be constant as long as the fed continues to print fiat money. Most people in this country have not had housing value increase, despite yearly tables indicating so many percent price increase. What’s really happening is devaluation of currency and people are blissfully unaware as it simply takes a few years for the effects of devaluation to hit their actual products. In the first so many years of housing price increase, people think they’re in a winning position, but really they should just wait it out, then judge their personal affordability index at a later date. If people are not going to object to the fed and QE printing of trillions of fiat dollars, they should just learn to be more flexible and roll with it. This is why big cities and big industries are allured towards higher taxation, bigger government, and continuation of destructive systems, they get the bigger cut, other people far away whom are not on the inside track get to pay for it.
I like the idea of releasing qualifications. It’s about time I was able to claim some leverage to keep up with the big money investors. If this is true I’m going to pick up a rental property, probably several of them. There are enough people whom have cash, but can’t manage credit, if only the bar of qualification was not so stringent, more people could invest in investment housing. And no, I’m not going to be a nice guy and offer rent to own. I’m going to keep it. To me this story is exciting news.
BoA and Wells Fargo, now there’s two upstanding entities, not.
Loosening of qualification standards is the natural progress to runaway inflation. When home prices go up 2% or more yearly, and currency devaluation happens at a rate greater than 2% yearly. It’s a wash in terms of value equivalency, but it also sort of messes up those static qualification tables for all the people on normal fixed non flexible income. Employers are certainly not giving cost of living wage increases at a greater rate than inflation in most instances. Lenders have a mainline influence into government. They operate above the law without fear of personal consequences, so it’s not surprising they would request additional power or privilege. All that inflation has to be buried somewhere and it’s currently being buried in housing and taxation. Loosening qualification criteria is necessary as we continue down this path of allowing the federal reserve to manipulate monetary value and the supply of money.
There is no protecting people foolish enough to take loans on homes they can not afford. Don’t feel sorry for them when they lose their home, they get exactly what they contracted to. Predatory lending will never go away, it just changes form and face every now and then. It’s always been that way. I did not see appraisers getting this concerned when lenders were borrowing at negative rates and pilfering the value of the dollar behind the scenes. Individual policy corrections are not going to accomplish anything in the end. What’s new?
But what happens when they can afford them (paying rent at or near typical mortgage amounts) on a local level, but based on the current mortgage standards nationally, they can’t qualify to purchase? In other words, when you have high income people living in high cost home areas, why require them to have 57% of their income go towards other expenses (Non-home related)? That 57% locally can mean $100,000+ which on a national level would be a joke for ALL other expenses not home related.
Nationally policies, often don’t work on a local level.
Seek the truth.
Quite right. See my above response. Responsible people will be there to pick up the slack and zip up those investment housing opportunities. I’ve met enough realty people whom did that from 2008 circa periods whom released them recently. Boy, they have big old homes! Monkey see, money do. Pump and dump was so wildly successful last time around, it’s clearly on the dinner menu to be served again. The dumping frequency keeps getting closer and closer together. That’s the credit game, when people play the leasing game and subscribe to all the services, they’re not able to qualify in the dump phase. Debt is dangerous. Investment property however is a smart place to be. Who says that investment properties are only for the rich? Although these mega banks control policy, they’re unable to keep everyone out.
This is funny, someone updated the pump and dump graph. Genius.
To also speak directly on your important point; If people want locally focused affordability indexes and such, they’re going to need to do something about a federally controlled lending rate issued by a consortium of international mega banks.
If you need to point a finger, point it at the FDIC program. It’s the same old story, when government is involved, often the opposite of what they hoped to promote occurs. You can’t regulate honesty and government housing insurance promotes mal investment in housing in areas which would otherwise bear such incredible insurance costs that far fewer people would focus there. Coastal areas are prime examples. We’re all paying because they built their houses on the sand. Certainly places like CA and FL are not going to argue against the fed or fdic, they’re getting a big share of those benefits. Why would they want to be self bonded through state rather than federally backed programs, they’re already insolvent and have been in the red for decades. This is why small town people despise the big cities, they’re keenly aware of the disparities.
There is nothing wrong with considering alternatives such as residual income tests. DTI ratios have never been particularly pragmatic. Though like everything else, the Devil will be in the details. I almost choked when I read the comments about “complexities of underwriting”.
Those seem to be something else they are in favor of eliminating as well.
How many times can a security be repackaged?
https://www.philstockworld.com/2019/09/16/doj-accuses-jpmorgans-precious-metals-trading-desk-of-being-a-criminal-enterprise-1/
PTG guys talked about that story at length the other day. Sort of makes a boy wonder, what’s happening in their mortgage department?
https://www.allamericangold.com/