What has happened to the mortgage industry?

The NATIONAL ASSOCIATION OF REALTORS® has been propsosing legisilation to congress that would help regulate the mortgage industry. The goal is to strike a good balance between protecting consumers from unscrupulous lenders while maintaining reasonable access to mortgage capital for qualified buyers.

I personally believe that the pendulum (of the mortgage industry) has swung too far to the side of caution in our current market.

I recently listed a home on a deep water creek with a beautiful view and access to the Chesapeake Bay. The house was a 3 bedroom, 2 bath home which could be used as two apartments or as one house. The upstairs has 2 bedrooms, 1 bath and the downstairs has 1 bedroom, 1 bath. Of course both apartments have separate entrances, a full kitchen and living room. A door can be locked to separate the two apartments. Early in February a contract was ratified. The buyer was using a large national bank for the mortgage. This was a second home for the buyer who was putting down almost 30% of the purchase price. When the appraisal was done this home was described as a unique property. That turned out to be the "kiss of death" in the eyes of the underwriters. Not one, but two underwriters at the bank refused to underwrite this expressing concern that it could not be sold on the secondary mortgage market. Thank goodness the buyer was willing to go to a local bank that was more familiar with the area and the types of property that exist there. There was a successful closing on May 1, 2009 almost a month after the original closing was scheduled.

I believe that if government is allowed too much regulation of the mortgage industry, hardships like the one I just described can result. This could be almost as detrimental to the housing market as the lack of regulation during the past few years was.