Today’s headline: Mortgage applications jump; rates at record low!  Let me revise that, please. Mortgage approvals decline, rates still high!

 

Here is the problem: the media, the government and the banks. (Oh my!)

 

The media: completely erroneous information is being reported in an unknowledgeable and candy-coated manner. The media reads reports from the government about buying treasuries and toxic mortgages. It is putting money into the system and thinks that banks are lending the money. So, the media reports there is plenty of money out there to lend. The media hears the interest rate is 4.5% and then reports that the current mortgage rates are such, when this is simply the base rate the banks are working off of. Only the perfect get those rates today.

 

There is no actual research done other than word of mouth, so where is the media getting this information from? Well, there seems to be a lot of clowns running around telling people that they can modify their mortgage, get a loan at 4.5% and they can do that with no closing costs. I just watched an interview with a guy who owns a mortgage company on the east coast (no names please).  He said that his average borrower puts down more than 35% and has a credit score greater than 720. He is so busy that he just hired 150 salespeople this year. The interview turned into a cocktail party gloating session and the talking head on the news announced that people should send their resumes to him. Is this reporting?

 

I say, let’s do some undercover investigative reporting! Rachel Maddow, go out there with a funny hat and sunglasses and apply for a mortgage.  See what mortgage rate they really offer you and how hard it is to get it.

 

The Government:  Don’t get me wrong, I like the current administration. However, they are not in the trenches, nor do they really understand the mortgage business, so they probably should not be throwing around a lot of money out there without knowing where it is going. You cannot give a bank a billion dollars on a promise that they [banks] will try to lend it out. The banks have assured the government that they are doing everything in their power to get the money flowing, while really doing everything in their power to hold onto the money. Now, the government is telling the banks which received TARP money that they have to refinance any mortgage up to 105% of the appraised value. Isn’t that how we got into this mess in the first place? Home values are still declining in this awful economy so 105% turns into 115% or more real fast.

 

What I would hope the government would be doing is regulating advertising and watching which clowns are running around ripping people off on so-called mortgage modification schemes. Truly, is there enough manpower to handle consumer action- and reaction?

 

The Banks: On Monday, I received a notice from Suntrust, a large national bank, that they have increased the minimum FICO score to 660. As usual, the other banks will follow the lead in time. You sort of cannot blame the banks for not wanted to lend out their money at 4.5% for 30 years. That is not much of a retirement plan for anybody. In the dark light of our current economy, people’s FICO scores are going down and down under that 660 line. So, sorry Mr. President, we tried to lend out the money, but nobody qualifies.

 

Let’s try again. Any suggestions?

 

Dale Siegel