THIS WAS SO EASY THE LAST TIME!

   I hear this comment fairly frequently from past clients as well as folks that have found their way to my door who have purchased homes previously.
 
 If you bought a home prior to 2008 no doubt it was easier.  2005-2008 was the Wild West for the mortgage loan industry.  Liar Loans, low doc, no doc, and stated asset loans not to mention the really big bad guns of the loan industry-the subprime loan.  During this period of time all someone needed to do to obtain mortgage financing was have a pulse.

  But all good (?) things must come to an end.  Millions of loans went bad due to over priced housing, people who had been able to purchase homes with terrible credit, the influence of Wall Street greed, and just about anyone who wanted to make an easy buck at the expense of the consumer.  When I think about all the highly creative and questionable methods that were used to finance homes and then sold on the secondary market as "A" investments...it is no wonder the whole house of cards came tumbling down. It almost brought the global economy down with it. It was that bad.
 
   The logical consequence of the economic disaster that took place in 2008 was that the Federal Government passed a series of regulatory controls that have put the handcuffs on banks, Wall Street, and mortgage brokers.  These handcuffs don't just fit the big boys-they are attached to all of us down to the local level. (I didn't get rich writing bad mortgage loans-that I can assure you.)

  So what this means is that we now have to question and prove all kinds of things such as where the money comes from that you are using for your down payment. It isn't enough that a big wad of cash was just deposited in your bank account. It is now required that you disclose where the money came from. If your mom gave you a check for the down payment you may or may not be able to use it-there is a methodology to gift funds for loans.  It's not that the bank doesn't want your mom to give you a gift-it's that the bank and the Federal Government want to be sure that the money is hers to give and not borrowed from a credit card, another bank etc. Borrowed money has to be paid back and for the most part it is required that the borrower has some skin in the game so to speak.

  You also have to be able to prove your income. While I know most of you are thinking, "that's a no brainer," since many of the loans that went bad were loans in which income wasn't verified there are now checks in place to be sure that the borrower is employed-such as calling the employer on the day the loan closes-to requesting transcripts for two years of tax returns from the IRS.  The Federal Government now requires lenders to have proof on file that they have done everything possible to ensure that the loans they have approved are to people who have a high likelihood of paying them back.
 
  And since Federal Finance Reform is an equal opportunity law, it applies to everyone-me, you, all of us. So while I understand the pain of those of you are imminently qualified to pay back your loan, who have never missed a payment in your life, we have to do what seems to be a huge amount of overkill.  Not because we like poking around splitting the hairs finely, but because Uncle Sam says so.
 
  I want you to be certain of this fact alone-when you go in to obtain mortgage financing, everything that the loan originator asks you to produce is for a good reason.  The good loan originator will try to be pro-active and obtain documentation prior to the lender requesting it. Why? Because your originator wants to  make the process as easy as possible as they can for you. If we have something in a file already then we don't have to track you down from packing your moving boxes to ask you for it. We know you have a life too which has been complicated by the fact that you are moving your worldly belonging somewhere else. Experience tells us what items we will most likely need. But underwriters are a cagy lot. It is their job to ensure that the loan is watertight and won't be questioned by whatever entity is buying it-so the underwriters often ask for things we hadn't thought of. They are creative that way. But it is also their job to screen out risk.

 In essence, we are now paying for "it was so easy last time".  One would think the pendulum will gradually swing back again.  But thank you for asking.