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Tuesday, March 17, 2009
Roger Schlesinger :: Townhall.com Columnist
What a Difference a Crisis Makes
by Roger Schlesinger
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I moved off the point for a moment, which was no longer getting into a house without a good down payment. Forgetaboutit! So let's move on to checking people's income. What does a tax return show you: how well the borrower did in the PAST. It doesn't do a thing for the future, when the borrower will be making the payments on the house. Just ask the employees of Circuit City, Lehman Brothers, Mervyns, IndyMac Bank and several hundreds of other businesses. The stubbornness of my industry to insist that this is the premier way to ascertain the borrower's ability to repay the loan has been one of the large contributing reasons for the problems we are having.

I believe we should concentrate on the present if we can't use the future. If a borrower has good credit (say, 700 or above) a low loan to value (like 60% or below) and has liquid assets equal to a minimum of a year's gross income, or 50% of the balance of the loan or some combination thereof, this borrower should be acceptable for a lower rate on a refinance.

We would have enough information from the credit report, the value of the house and the fact that the borrower has sufficient liquid assets to care for the loan under any circumstance. Unfortunately, this method of loan approval has been ruled out since December 15, 2008. You obviously can figure out what my opinion is about this ruling?

Liquid reserves, to me, are the answer to most financial problems. If you are still nervous about my idea set up a scale that has the most reserves needed, and seasoned for the longest time, when the loan to value is between 60% and 70% and the credit score is between 680 and 700. At this level, I would want 1 year's gross income in liquid assets that have been seasoned for 1 year (in the borrowers possession). Decrease the reserve requirement as the loan to value drops and the credit score rises, to a maximum of 740 credit score and 50% loan to value. At that value, I myself would be satisfied with 6 months of gross income in liquid reserves that have been seasoned for 6 months.

What we need is common sense and reasonable rules. We need to strengthen the mortgage industry, not destroy it.

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About The Author

Roger Schlesinger's Mortgage Minute is heard on hundreds of radio stations and daily on the Hugh Hewitt radio show and Michael Medved shows. Roger interacts with his hosts and explores the complicated financial markets in order to enlighten his listeners and direct them along their own unique road to financial freedom.

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Reply # 1
Date: Mar 17, 2009 - 10:08 AM EST
Warning that goes unheeded
And from a man who was one of the most significant men who founded America.

"Put down all banks, admit none but a metallic circulation ...."
http://etext.virginia.edu/jefferson/quotations/jeff1325.htm

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Reply # 2
Date: Mar 17, 2009 - 9:56 AM EST
Correction,
Sorry, should have read: "Slush Fund".

Also, when will Everyone get it, that Dems NEVER
met a tax they DIDN'T LOVE? Heard Whoppie Goldberg(of the Leftie View) complaining about all the taxes.....Just Wait, till all the adoring ones of the Holly-woodheads have to cough up big bucks to support their Messiah. I have noticed a 'quietness about the Woodheads'
though some are still defending Obama...we'll see. It IS about time that the double standards
of the Dems, starts applying to them, in getting
rid of those Dems that HAVE committed crimes(like Jefferson, w/the $90K in the freezer)-IS he STILL being investigated or did that get smoothed over, kinda like Rangle, who got caught
in his little scams. Dems DEMANDED the ouster of GOP members for a lot less, but they CIRCLE the wagons for their OWN. All Crooks(that MAY NOW INCLUDE THE LIKES OF MAXINE WATERS) NEED TO GO, as most are merely: "Politico Pigs Feeding Off the Taxpaying Public Trough"

Most people in public office forgot they are there to SERVE the people of America, NOT THEMSELVES, IN AMASSING THEIR WEALTH. Public SERVICE should be a TOTAL OF 8 YEARS ONLY-NOT A
MONEY GRAB FOR THEMSELVES FOR THE REST OF THEIR CROOKED LIVES. WE ARE TIRED OF THIS FLEECING,
AND DON'T CARE 'WHAT PARTY IT IS'....

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