The answer lies within lending regulations, which have become much more stringent in recent years. Lenders are fearful of loan buy-backs (meaning they have to essentially 'buy back' any loan defaults) and thus has resulted in strict lending requirements for borrowers. Of course, Fannie Mae, Freddie Mac and the Federal Housing Finance Agency have their own standards, but lenders and loan originators abide by their own restricted set of qualifications in order to reduce the chance of having to buy back delinquent mortgages.
|Getting A Mortgage Today (Photo credit: Eastern Bergen County Board of REALTORS)|
To go one step further, regulators are also finalizing the definition of Qualified Residential Mortgage (QRM) which applies to all securitized loans and deals with the exception to the 5 percent risk retention requirement in Dodd-Frank. To clarify, lenders would need to retain up to 5 percent of the originated loan balance for loans that do not qualify as a QRM and consequently would increase rates for consumers to cover the costs. Loans that meet the QRM criteria would be considered exempt from risk retention. The criteria are still yet to be finalized by the six federal financial institution regulators.
Regulations pertaining to the housing and lending industries are a necessity, but so are clearly defined standards and requirements. For a healthy housing market and a vibrant mortgage industry, we need regulations to resolve disputes between loan originators and regulators, encourage compliance for borrowers and lenders and provide stability to allow for secondary market investment.
By Doug Lebda, Chairman, Chief Executive Officer, Founder, LendingTree.com
Taken from: http://www.huffingtonpost.com/doug-lebda/why-is-it-so-hard-to-get-_1_b_1954218.html