Mini Skirts And Mortgage Affordability - Part Two

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Mortgage affordability is not about squeezing into a mini skirt to get the best mortgage deals.

How do I know? My dad told me so. That's why I am dedicating this series to Dad on his 90th birthday. I hope you enjoy!

The Question Of Mortgage Affordability

Following the rebound of the economy under Clinton, homeownership continued to increase.

In fact, loan approvals were soaring in number.

100% conventional loans with PMI? No problem. Got a pulse? Then Freddie's automated underwriting has got an FHA for ya.

And last but not least, the ascension of subprime lending. Mortgage brokers, visited by lender representatives, were being offered innovative programs to further homeownership.

Here's just a sample of the ground breaking innovation...

• Stated income options
• Zero documentation
• Under 600 credit scores
• No downpayment
• Reserve savings not required
• 55% debt ratios
• Low teaser rates

Fannie, Freddie and FHA were officially raising their skirts to qualify more home buyers.

But who was looking out for mortgage affordability? And what affect did this have on future hope for homeowners?

Mortgage Affordability And The Millennium

The late 90's ushered in the Millennium. Fannie Mae, Freddie Mac and FHA vied for the most liberal guidelines. Credit scoring and automated underwriting threw caution to the wind.

At this juncture, subprime lending became the darling of Wall Street. To replace the tarnished image of loan shark and make it palatable for borrowers, hard money underwent a name change to Alternative Lending.

How Musical Chairs Decreased Mortgage Affordability

A frantic game of musical chairs ensued to see how many home buyers each could produce. Fannie, Freddie and FHA, the millennial Flappers, had raised their skirt hems even higher.

When one of the Big Three loosened underwriting guidelines, you can be sure the other two competed. But Alternative Lending financed by Wall Street made qualifying for mortgages the easiest of all.

Walking In The Shoes Of Joe The Home Buyer

Encouraged, in stormed the home buyers. And why not! Mortgage programs galore were offered to make home buying easy.

Take a moment to walk in the shoes of a first time home buyer. Rents had been gradually increasing. Saving for a down payment to buy the first house got pushed further out of reach as the months drifted by.

Prospective home buyers caught wind of mortgages allowing 100% financing. Mortgage approval was granted just like that and 30 days later they quit paying rent.

Could Joe The Homeowner Afford His Mortgage

But who was considering Joe's mortgage affordability?

Okay, I know I am going on too long but it is because of a lingering attitude and I just can't stand it any longer. It goes something like this...

"Home buyers by the thousands had the audacity to get a mortgage with no down payment and we all know how THAT turned out."

In plain words I, Kate Ford, am sick and tired of home buyers being called irresponsible.

Leverage And Greed Versus Mortgage Affordability

Yet, I would contend that in the 90's The Big Three saw traditional guidelines becoming outdated and took measures to modernize loan approval standards to match a healthy economy.

Had mortgage investors not succumbed to the greed of prepayment penalty and teaser rate yields, and of most import had mortgage investors not excessively leveraged...

...yes, I would also contend Joe Homeowner knows how THAT turned out for him.

Joe The Homeowner Takes Back Mortgage Affordability

Now don't misunderstand me. I am not advocating victimhood for Joe The Homeowner. Because in the end, no one is responsible for me but ME!

But I AM advocating a simple solution to bringing back the joy of homeownership and how Joe The Homeowner can forgo another mortgage debacle, ever.

The intriguing saga of Joe The Homeowner preventing another mortgage debacle concludes at Mini Skirts And Affording A Mortgage - Part Three

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