The Salem witch hunts ended in 1692, but to borrowers today seeking home loans, the bloodshed continues.
I’ve been a real estate lending officer in the L.A. area for about 25 years and I’ve never seen it this difficult to obtain any sort of home financing. Last year, I thought we had reached the pinnacle of paranoid lending scrutiny, but I was wrong. Late 2011 is worse.
Banks are treating decent people with good stable jobs, credit histories, incomes and abundant savings as monsters from another planet. Every lender in town is running scared and trying to document loan files to such an extraordinary extent that very little can be done.
The same banks in Los Angeles that spout the importance of saving our environment by going “green” to online banking won’t accept those printed Internet bank statements for mortgage loan applications and approvals. Today, if you’re in need of a mortgage, you’ll need to have mailed hard-copy statements with your loan application and you’ll need to provide all pages to all statements even though some are absolutely meaningless. All banks want the blank sixth or seventh page for their loan files, and if none is provided, chances are your loan will be delayed or won’t close.
Today, potential borrowers are being treated with little respect and are judged guilty unless proved innocent (like the Salem witch trials). It’s no wonder there’s a real estate mess in our city. Dollars aren’t changing hands swiftly enough and commerce is being stalled. Banks, in essence, are saying you can have all the historic low-rate money you want at 4 percent or less, but we’re going to make the process so difficult for you that in actuality you can’t have any.
Many escrows around town are stalled, hung up on minutiae or just plain have become canceled. Sellers can’t sell because buyers can’t get loans approved. Real estate agents, title representatives and mortgage brokers are visiting their therapists more frequently, and Prozac prescriptions are up at Rite Aid and Walgreens.
It’s time for practical lending standards – not witch hunts conducted by banks against good, honorable and deserving people. Unless changes are made to the current environment in the lending world, our housing markets and economy will continue to suffer for a long time.
The Salem witch hunts ended centuries ago. Today, it’s time to put an end to our banks’ burning of innocent humans, and to help restore order and improve our flattened economy.
Ted Lux has been involved in real estate lending in the L.A. area for nearly 25 years. He also is a writer who has authored an investment book. He lives in Playa del Rey.
