Jumbo loans were people wanting more than they could afford and the bank hedging that they could actually afford it. Ends up that they can't.
I don't think those words mean what you think they mean.
Wealthy mortgage borrowers face cold shoulder from lenders
41–50 of 191 posts
Re: Wealthy mortgage borrowers face cold shoulder from lenders
#42Earlier quoted context omitted.
In the state of Georgia, I'd definitely call someone with a $700k mortgage wealthy. I'm in an affluent suburb north of Atlanta and I'd probably be showing some bias if I didn't consider myself to be wealthy in a $400k house. If I read it correctly, the example given in the article was for a refinance for a lower rate, and while that would be nice, it's not as likely to be a necessity. I've considered a refi, but as a…
I'd say much of this board disproportionately lives in places where $700k is the going rate for a normal mortgage, though. My definition of 'rich' would mostly include people who don't need $700k mortgages.
Agreed on the HN demographic. I have lived in the NYC metro area and felt the pain of expensive housing, and I would only do it again if I met your definition of rich.
Re: Wealthy mortgage borrowers face cold shoulder from lenders
#43Earlier quoted context omitted.
In the state of Georgia, I'd definitely call someone with a $700k mortgage wealthy. I'm in an affluent suburb north of Atlanta and I'd probably be showing some bias if I didn't consider myself to be wealthy in a $400k house. If I read it correctly, the example given in the article was for a refinance for a lower rate, and while that would be nice, it's not as likely to be a necessity. I've considered a refi, but as a…
I'd say much of this board disproportionately lives in places where $700k is the going rate for a normal mortgage, though. My definition of 'rich' would mostly include people who don't need $700k mortgages.
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Re: Wealthy mortgage borrowers face cold shoulder from lenders
#44Why exactly should we care about wealthy borrowers at this point, when millions of people are losing their jobs/health insurance...? So what if they get told no - it is not like they are living in a 500 sq ft apartment anyway
You should have empathy for everyone. You should have empathy for the pain poor people experience and the pain the rich people experience. Someone's income doesn't make them more or less human.
Not sure what this has got to do with empathy. If rich people don't get favorable mortgage, it is at max an annoyance to them. They are not going to be homeless or going to ask for food stamps. If a normal family with one home and one mortgage is not able to refinance or not able to pay their mortgage for a few months, their bank will go after them and they will end up on the street.
Sure we can talk about it and feel sorry for their inconvenience, but our time is better spent looking into much bigger problems of much bigger percentage of our population.
Re: Wealthy mortgage borrowers face cold shoulder from lenders
#45Wealthy Borrower: "Why can't I refi lower?" Lender: "No, because your loan isn't secured by the government" Wealthy Borrower: "I am just using logic here, you're telling me a riskier borrower with lower credit than me can refi?" Lender: "If their loan is secured by the government, yes" Wealthy Borrower: "I don't understand" Lender: "Well at least we agree on something" Are you really using logic? Seems like a dubious…
But government backing is risk mitigation...
Re: Wealthy mortgage borrowers face cold shoulder from lenders
#46Earlier quoted context omitted.
> taking the umbrella now that it's raining Always found this a very strange metaphore. Banks seem to always face criticism for 1) when they don't lend to people who need it most and 2) when they do lend to people who are likely to default. It seems fairly obvious that there is a very large overlap between those groups.
The central friction is there are two conflicting views of banking: 1) Lending, insurance, and investment as a social service. People need homes. Businesses sometimes need to weather crises without bankruptcy. Startups need funding. People need educations. 2) Lending as a private investment. You want interest rate to reflect risk. Evolving monetary theory means federal interest rates are set to reflect #1. The underl…
Nationalizing banking doesn't work either. If you lend money without penalty upon default, then you encourage defaults. If you encourage defaults, then people no longer pay attention to the price of things they buy, since they can borrow however much they need without consequence. The result is rapid inflation, which wipes out the wealth of the working classes.
If you keep strict controls on the amount of fiat currency issued, and lend for reasons other than earning a good interest for financing risk, then you end up with a shortage of capital to lend. Then loans are issued for criteria that aren't publicized - in polite terms, politically motivated lending. Society stagnates as the engine of progress itself turns into a zero-sum game.
There is a better way to ensure the delivery of socially-beneficial goods - to deliver them directly, taking care that public options provide only minimally sufficient goods and services, and only in response to the failure of the private market to provide alternatives.
Re: Wealthy mortgage borrowers face cold shoulder from lenders
#47I'm not sure what qualifies as wealthy, but most houses in the SF Bay Area bought in the past few years are probably financed with jumbo mortgages. E.g, 20% down on a $1MM house leaves $800k to be financed, which is greater than the $765k criteria stated in the article.
The median sales price for a house in the US is $327,000[1].
People buying houses for $1 million are wealthy by any standard.
Re: Wealthy mortgage borrowers face cold shoulder from lenders
#48The bigger the mortgage then the larger their emergency fund. Right?
Underwriters like to see six months of reserves on hand, but they don’t monitor that after the closing.
was close to building a house earlier this year (early March) and was talking to two lenders about construction loan. being self-employed was an extra small bump for underwriting, and I asked about loss of income because the covid19 stuff was just starting to become big news.
Both indicated that their underwriters would likely check up after closing - 30 or 60 days after - to check on income at that point, to see if there were problems, and that this was somewhat normal for them with self-employed folks, but wasn't anything related to c19 (which... I suspect some changes may occur to underwriting and loan processes in the aftermath of c19). They indicated this was just something that happens to 'a moderate portion of self-employed borrowers post-closing'.
I'm not sure what they could actually do to you if they found your income had gone down or away post-closing. I was going to ask in our next call, but ... we're probably putting that whole project on the shelf for now.
Re: Wealthy mortgage borrowers face cold shoulder from lenders
#49Earlier quoted context omitted.
> Payday lenders fill this gap. Everyone hates them as well. That's because they offer a very dangerous financial tool, and at the same time they work hard to put this tool in hands of people who can't handle it safely. In this way, they make money off destroying people. > Everyone hates student loans and they fill a different gap. The problem with student loans is on the higher level in the system; their existence c…
> The problem with student loans is on the higher level in the system; their existence causes runaway cost increase of higher education. If the loan is meant to pay for tuition then perhaps that's true. My loan was something like £1600/yr which covered about 5 months of rent, but the government paid for my tuition.
Yeah, I assumed the GP meant the American-style student loans that you need for your tuition, not the kind that exist in countries with public higher education, where you use them for e.g. rent or textbooks or hardware.
Re: Wealthy mortgage borrowers face cold shoulder from lenders
#50Wealthy Borrower: "Why can't I refi lower?" Lender: "No, because your loan isn't secured by the government" Wealthy Borrower: "I am just using logic here, you're telling me a riskier borrower with lower credit than me can refi?" Lender: "If their loan is secured by the government, yes" Wealthy Borrower: "I don't understand" Lender: "Well at least we agree on something" Are you really using logic? Seems like a dubious…
But the lender dismissed the borrower (in the story) as "you're trying to use logic", which is at least as big a confusion (and inability reflect on the root of the disconnect).