Mortgages: Loan Officers Slamming the Barn Door

Talk about slamming the barn door after the cows have all gone, check the eye-popping percentage of U.S. loan officers in the following Federal Reserve chart saying that their firm is tightening credit for home loans. We are at levels of credit restrictiveness that we haven't seen in the modern history of the Fed loan officer survey.

So, where were all these belated barn door-slammers four years ago?

[via Federal Reserve]

Comments

[rm:]

[So, where were all these belated barn door-slammers four years ago?]

Same thing they're doing now... following the herd.

Apparently, our herding instincts are overwhelming regardless of age, experience, education, or income level.

2008 Aug 13 10:31 AM

[sickofthehype:]

Like you need to survey 'loan officers' to know that credit has tightened.. Of course it's tightened. This is a cycle, and the 'loan officers' of 2004-2006 are long gone. The door was slammed on them, and now it's back to the basics and the strongest in the industry will survive. It's a great thing. Gotta take out the trash and do spring cleaning every now and then.

2008 Aug 13 10:37 AM

[billddrummer:]

I was a loan officer for a mortgage company and we saw products start to evaporate fully a year before the credit crunch occurred. I remember one case where a wholesale mortgage broker made a call on our office on Tuesday, and her company closed its doors that Friday. That happened in 2006, long before anyone in the mainstream media thought anything was wrong.

Needless to say, I got out of the business.

2008 Aug 13 12:56 PM

[Carousel:]

Lending standards are still way looser than they were in the late 1990s. There are an unprecedented number of loan officers reporting tightening because things were unprecedentedly loose. More tightening will be both necessary and forthcoming.

I've read the loan docs of more than 30 illegal aliens who had an average debt balance of $650,000 and every loan was Alt-A -- they all had good credit scores and lied about their incomes. The highest earner among them made $60,000 a year. Some told me they didn't know they'd lied about their income on the loan docs until I told them because the mortgage broker filled in the bogus income data.

We have far to go before lending standards are sufficiently tight. It's just that when something is ridiculously, no, let's say comically loose, the tightening so far is just not enough.

2008 Aug 14 02:06 AM

[samo:]

As long as underwriting involves anything called 'no doc', banks are going to have problems. The beauty is that they deserve their fate. Ahhh...I love the smell of economic justice in the morning...

2008 Aug 14 12:01 PM

[Danfrphils:]

Unfortunately, samo, it's not the banks that will suffer in the end. We the tax payers will have to pay for it thanks to our idiot senators in congress like Barney Frank & others who pushed through the "Mortgage Rescue" Bill which will put the bad loans squarely on the balance sheets of Joe Q. Taxpayer. Freddie & Fannie are, even at this moment, buying up junk mortgages (although not as much junk as before) which will add to our national debt. Think about it... many of those $720K conforming loans in CA will default in the future, since in my opinion, CA still has a ways to go in price decreases and job losses have still not fully materialized from the recession. I shiver to think the tax bomb that awaits my kids... it could make Scandanavian tax regimes look like tax havens.

2008 Aug 14 12:35 PM

[corporatebully:]

Att: RBC Bank President Gordon Nixon - Salary - 11.73 Million!!

$100,000 - MISTAKE (FISHERMEN'S LOAN)
I'm a commercial fisherman fighting the Royal Bank of Canada (RBC Bank) over a $100,000 loan mistake. I lost my home, fishing vessel and equipment. Help me fight this corporate bully by closing your RBC account.
Website www.corporatebully.ca
YouTube www.youtube.com/CORPOR...

There is no monthly interest payment date on the contract.
Date of first installment payment, (Principal + interest) is approximately 1 year from the signing of my contract.
Demand loan contracts signed by other fishermen around the same time showed a monthly interest payment date on their contract,(agreement).
The lending policy did change at RBC from one payment (principal + interest) per year for fishing loans to principal paid yearly with interest paid monthly. This lending practice was in place when I approached RBC.
Only problem is the loans officer was a replacement who wasn't familiar with these type of loans. She never informed me verbally or in writing about this new criteria.

Phone or e-mail:
RBC President, Gordon Nixon, Toronto [phone]
RBC Vice President, Sales, Anne Lockie, Toronto [phone]
RBC President, Atlantic Provinces, Greg Grice [phone] mailto:greg.grice@rbc....
RBC Manager, Cape Breton/Eastern Nova Scotia, Jerry Rankin [phone]
RBC Vice President, Atlantic Provinces, Brian Conway [phone] mailto:brian.conway@rb...
RBC Vice President, Halifax Region, Tammy Holland [phone] mailto:tammy.holland@r...
RBC Senior Manager, Media & Public Relations, Beja Rodeck [phone] mailto:beja.rodeck@rbc...
RBC Ombudsman, Wendy Knight, Toronto, Ontario 1-800-769-2542 mailto:ombudsman@rbc.c...
Ombudsman for Banking Services & Investments, JoAnne Olafson, Toronto, 1-888-451-4519 mailto:ombudsman@obsi....

2008 Aug 22 09:57 PM