{"id":1310739,"date":"2019-05-27T19:40:01","date_gmt":"2019-05-28T01:40:01","guid":{"rendered":"https:\/\/www.postindependent.com\/bankers-hours-column-regs-can-punish-those-targeted-for-protection\/"},"modified":"2019-05-27T19:40:01","modified_gmt":"2019-05-28T01:40:01","slug":"bankers-hours-column-regs-can-punish-those-targeted-for-protection","status":"publish","type":"post","link":"https:\/\/alwaysmountaintime.com\/kske\/local-news\/bankers-hours-column-regs-can-punish-those-targeted-for-protection\/","title":{"rendered":"Bankers\u2019 Hours column: Regs can punish those targeted for protection"},"content":{"rendered":"
Pat Dalrymple<\/strong>
IMAGELOADER<\/em><\/figcaption><\/figure>\n

As the dust settled following the Great Meltdown of 2008, the popular perception was that pervasive victimization of American homeowners was one of the root causes of the deluge of \u201ctoxic loans\u201d and ensuing foreclosures.<\/p>\n

However, what happened wasn\u2019t necessarily a process of victimizing, but rather cooperation and collusion: There was a lot of money on the table for the taking, and a lot of people wanted to grab a handful. As the old mantra goes, \u201cNo con works without the cooperation of the mark.\u201d<\/p>\n

But when viewing a blasted economic landscape, human nature took over, and just about all of us felt we\u2019d been taken advantage of.<\/p>\n

So The Dodd-Frank Act, which mandated draconian consumer protection regulations, was passed in 2009. The regs were created to protect homeowners, to make borrowing money on a home more transparent, and to make the entire borrowing process, especially in the instance of home loans, easier. The intent wasn\u2019t to restrict money to deserving borrowers who need cash for a legitimate reason.<\/p>\n

But that\u2019s what\u2019s happened in many cases.<\/p>\n

Following is a case study of an actual recent loan request. Some descriptive elements have been changed, but the salient facts are true.<\/p>\n

John Householder (I don\u2019t know anyone by this name) is in his mid-60s, has lived in a Colorado mountain resort for about 20 years and has owned his home \u2014 currently worth around $450,000 \u2014 for most of that time.<\/p>\n

He\u2019s worked for the town government for about eight years, and is under no compulsion to retire. He\u2019d like to simplify his life, and have some cash to enjoy life, so he\u2019s decided to sell his home, on which he owes about $190,000, broken down into a very small first mortgage and a fairly large home equity line of credit (HELOC) second. He\u2019d like to pay off the mortgages, plus some credit card debt, and get around $35,000 to effect some repairs to the property that would increase the market value up to at least $500,000. And, finally, at the same time, reduce his monthly payments during the repair and marketing time frame.<\/p>\n

So John was looking for a $250,000 short-term loan. Upon completion of the improvements, the property\u2019s market value at $500,000 would result in a 50 percent loan-to-value ratio. With his salary and Social Security payments, he\u2019d have a 25 percent to 30 percent debt-to-income ratio, depending on the bank\u2019s interest rate, well below the standard Fannie Mae 36 percent standard. Sounds like a good loan, right?<\/p>\n

Well, once it was. But not post-2008.<\/p>\n

John ran into some problems, since corrected but which resulted in a low credit score. He\u2019d opted to take early Social Security, and then ran into a common trap: He made too much money from his job, which resulted in an overpayment of benefits. During the time that the overpayment was being resolved, benefits naturally stopped. Cash flow had a double hit, and the small first mortgage went into default and foreclosure.<\/p>\n

John managed to cure the default and stop foreclosure action, but, of course, the credit score suffered. It should be noted that he\u2019s never been behind on any other debt. Also, the second mortgage (HELOC) outstanding represented money borrowed to pay for his mother\u2019s assisted living during the last years of her life. Social Security payments resumed after retiring of the deficits, so income stability was considerably enhanced.<\/p>\n

At the turn of the century, this would have been a very good loan for a bank\u2019s portfolio: a borrower with a history of employment in a very stable job, supplemented by Social Security. The loan-to-value ratio would be very conservative, bolstered by a strong market. How desirable would it have been in, say, year 2000? This resort town had a couple of locally owned banks and at least one branch of a large regional institution. In addition, the thrift that I was affiliated with, although not having an office there, was a very active portfolio lender in the community. All of us would have competed for the deal, and when the examiners came around, they would have signed off on the asset without hesitation. The low credit score would have been mitigated by job stability, income stability, the nature of the circumstances leading to the credit issue and, finally, the low loan-to-value ratio and marketability of the property.<\/p>\n

But not now. One of the banks that looked at the request agreed, \u201cGood loan, but not bankable.\u201d<\/p>\n

In fact, it\u2019s almost not doable by an arm\u2019s-length lender. Most private money lenders won\u2019t touch a consumer-related loan due to the extremely punitive penalties for exceeding the terms limitation of the consumer protection regs, or incorrect disclosures of terms and rights.<\/p>\n

Is regulation of banks a good idea? Absolutely; federal insurance of depositors\u2019 accounts is a cornerstone of the U.S. monetary system and, ultimately that of the rest of the world. And banks do need to be supervised; witness the recent debacle at Wells Fargo.<\/p>\n

But we tend to feel a frisson of dread when we hear those ominously solicitous words:<\/p>\n

\u201cWe\u2019re from the government, and we\u2019re here to help you.\u201d<\/p>\n

Pat Dalrymple is a western Colorado native and has spent more than 50 years in mortgage lending and banking in the Roaring Fork Valley. He\u2019ll be happy to answer your questions or hear your comments. His e-mail is pdalrymple59@gmail.com<\/a>.<\/p>\n

via:: Post Independent<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Pat DalrympleIMAGELOADER As the dust settled following the Great Meltdown of 2008, the popular perception was that pervasive victimization of American homeowners was one of the root causes of the deluge of \u201ctoxic loans\u201d and ensuing foreclosures. However, what happened wasn\u2019t necessarily a process of victimizing, but rather cooperation and collusion: There was a lot […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[160],"tags":[],"class_list":{"0":"post-1310739","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-local-news"},"acf":[],"publishpress_future_action":{"enabled":false,"date":"2026-06-18 03:56:50","action":"change-status","newStatus":"draft","terms":[],"taxonomy":"category","extraData":[]},"publishpress_future_workflow_manual_trigger":{"enabledWorkflows":[]},"distributor_meta":false,"distributor_terms":false,"distributor_media":false,"distributor_original_site_name":"KSKE Ski Country","distributor_original_site_url":"https:\/\/alwaysmountaintime.com\/kske","push-errors":false,"_links":{"self":[{"href":"https:\/\/alwaysmountaintime.com\/kske\/wp-json\/wp\/v2\/posts\/1310739","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/alwaysmountaintime.com\/kske\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/alwaysmountaintime.com\/kske\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/alwaysmountaintime.com\/kske\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/alwaysmountaintime.com\/kske\/wp-json\/wp\/v2\/comments?post=1310739"}],"version-history":[{"count":0,"href":"https:\/\/alwaysmountaintime.com\/kske\/wp-json\/wp\/v2\/posts\/1310739\/revisions"}],"wp:attachment":[{"href":"https:\/\/alwaysmountaintime.com\/kske\/wp-json\/wp\/v2\/media?parent=1310739"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/alwaysmountaintime.com\/kske\/wp-json\/wp\/v2\/categories?post=1310739"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/alwaysmountaintime.com\/kske\/wp-json\/wp\/v2\/tags?post=1310739"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}