Tuesday, May 15, 2012

Lenders Put Borrowers Through More Scrutiny

Home buyers and refinancers applying for a mortgage are being caught off guard in what all lenders are asking for when approving a loan. The Wall Street Journal reports an incident where a borrower was even asked for a copy of her divorce decree — from two years ago — and asked to explain a deposit of about $200 into her bank account when applying for a mortgage. Lenders are being more careful in who they issue a loan to nowadays, tightening underwriting standards and carefully documenting applicants’ finances and ability to repay the loan. Practically nothing is off the table these days when it comes to what a lender may ask for. Lenders may question any deposits to bank accounts, increases in a borrower’s income, and any disputed balance over a late payment, even if it was from years ago. Some lenders are even requesting college transcripts and diplomas in verifying employment history. Any credit inquiries on a person’s credit invites red flags and more questions from lenders, Rhonda Porter, a loan officer in Seattle, told The Wall Street Journal. "I have customers who know they're a strong [borrower], and they're still asked for documentation," Porter says. "Some of them get their feathers ruffled." Some borrowers — particularly refinancers — are getting so frustrated by the extra paperwork and questions that they are increasingly just stopping the process, according to news reports. Stella Adams, a fair housing advocate in North Carolina, says banks need to lighten up. Banks should return to "solid, old-fashioned underwriting" standards that were used prior to the housing boom and stop making it so difficult for people to get financing. Source: "Lenders Want to Know Everything," The Wall Street Journal (May 12, 2012)

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