Airbnb causes confusion in refi market
Lenders unsure how to classify Airbnb homes
Airbnb is causing yet another disruption in the housing market, according to an article by Peter Rudegeair for The Wall Street Journal. Lenders are unsure on how to treat Airbnb homes when it comes to refinancing.
Because homeowners are using Airbnb and other room-rental apps to pull in extra income, it is blurring the line between commercial and residential properties, according to the article.
Big banks including Bank of America and Wells Fargo scrutinize customers who rent rooms, and some are even told they are no longer eligible for refinances, or that they have to pay higher interest rates, the article states.
From the article:
The issue for lenders is how to classify loans in the Airbnb age. Historically, that has been pretty easy: a house usually was either a principal residence or an investment property. Mortgages on the latter are often viewed as riskier because owners had less of a personal connection to the house and rental income isn’t always reliable.
Now, the distinction isn’t so clear-cut. That is posing challenges to lenders and frustrating some customers, illustrating how fast-paced technological change can reverberate in unexpected ways.
How can lenders know that the home is being used by Airbnb? Borrowers are reporting Airbnb income when applying for a refinance, in hopes that it will improve their credit profile, the article states.
That being said, three Democratic senators are concerned about the impact of short-term home rental companies like AirBnb, HomeAway, VRBO and Flipkey on communities’ housing markets and want the Federal Trade Commission to investigate.
To read more about why some democrats think these companies are harmful on the housing market, click here.
(Image above courtesy of easy camera / Shutterstock.com)