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Nothing Personal
A few borrowers are cranky: argumentative, suspicious, and resistant to bureaucratic requests.
Most borrowers are nicer to us than we deserve. Nicer than the system deserves, at least.
"Would it help if I got references from all five of the jobs I've had?" Nope: for analysis of income, the universe was created two years ago. Nothing happened before then. If last year happened to be the worst of fifteen, you have our condolences, and no loan.
"My CPA would write a terrific letter about my new business, and so would the investment banker who plans to take us public next yearÉ." So sorry. If the Ford Motor Company had been started only a year ago, no Fannie Mae lender would loan a dime to Henry.
"My clients in California would say I did a great job as their stockbroker for eleven yearsÉ." Aw, too bad until you have a history of earning commissions in Colorado.
"I want one of those three percent down FHA loans, but my deal is a little complicated." Oh? "I'm buying the house from my sister, and from the sale proceeds she's going to give me my down payment and all my closing costs." We can do that, as long as it was your sister's primary residence; otherwise it's 15% down. "Really?" Really. "By the way, my wife has a new job, and her old one was in a rural part of Kenya. Will that be a problem?" We can handle it. (Sigh from banker.)
Boulder County lenders find themselves able to do many weird and weak deals, and refusing transparently good ones, all the while reciting gobbledygook passages from various rule books.
Who makes these rules?
The most basic rule books are the ones lining the knothole which lies between Boulder and the securities markets. Most loans disappear into bonds (often those "derivatives" about which you have read lately), and lenders can only accomplish the disappearance feat if the loans fit the FHA, VA, FNMA, or FHLMC rules.
Once you have made it through the rules, you cease to be an individual human being. You become identical to all other people who ever bought a house. For that matter, your house (condo, townhouse, farmhouse, cabin, A-frame, adobe, stone, duplexÉ.) becomes the same as any dwelling anywhere. To be tradable in the financial markets, one must be uniform.
Uniformity implies large numbers, and large numbers are the key to the rule books.
The rule-makers learned long ago that it was impossible to know exactly which borrowers would default on loans. To do that, lenders would have to be able to predict which individuals would lose jobs, which employers might fail, and predict future real estate values.
The rule-makers play the averages. Take 20,000 loan files (please). In 10,000 of them, a gift of down payment was allowed from anybody, and in the other 10,000, gifts were limited to blood relatives only. If after a few years there are many more foreclosures in the friendly gift files than the family gift ones, lenders won't accept friendly gifts.
The same goes for 10% down versus 20% down: loans with the smaller down payment have double the foreclosure rate. Hence, mortgage insurance. Investor loans have several times the default rate of primary residences: therefore investors pay higher rates, and put more down. The same principals apply in condos versus houses, salary versus commission, mountains versus in-town.
You may be the most reliable individual in the world and not fit the laws of loan averages. Or, it may not be wise to trust you with lunch money, but if you fit the actuarial pattern, you get house and loan.
It's not fair, but at least it's nothing personal.
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