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REwired

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Opinion, commentary and analysis on everything that makes the U.S. housing economy tick -- not to mention the ghosts in the machine, too. Written by HW's team of editors and reporters each business day.
Lending

Real world consequences of an FHA overhaul

January 15, 2013

My husband and I have an FHA-insured mortgage. We are not low-income nor are we credit-challenged. Yet the conventional lending market appears closed to us.

Why is this?

We have good jobs and credit scores above 760, yet we fail to qualify for a prime loan. The original reason we couldn't qualify was because we bought a new home before the old one sold to relocate for my husband's new job as a minister in a small town. Without the house sale, we didn't have enough for a 20% down payment. Rentals for a family of four with pets weren't available in our new town. The FHA was our savior.

Now that we are settled in, we want to get out from under our expensive 30-year FHA loan and its onerous $226 per month mortgage insurance payment that never goes away, even if one establishes more than 20% equity. We want to refinance into a 15-year conventional loan.

But despite our good credit, good jobs, 20% down payment and leftover savings from our recent house sale, we don't qualify.

It doesn't matter that we have a decent retirement nest eqg, that our car loan will be paid off in less than two years or that we generally pay our credit card bills in full each month.

Our current lender said no. The reason given? My husband, a long-time journalist, recently went back to school, got his master's degree in divinity and became a minister. The career change scared away the lenders.

Lenders fear to stray from their post-crisis cookie cutter mentality. The fact that my husband's job and profession are new means at least a two-year wait to refinance. Our lender refuses to count his income in the debt-to-income ratio without two years under his belt in his current job and my income alone isn't enough to meet debt-to-income requirements.

Past job security means nothing. Nor does his advanced degree or unlimited contract. (He cannot be removed without the approval of three parties: The church, the church's larger governing body, known as the presbytery; and himself.)

I hear the drumbeat daily that the government should get out of lending. The FHA, critics contend, should be a lender of last resort — focused only on low-income and credit-dinged borrowers. The strong borrowers (such as my husband and I) should be part of the conventional market that eventually will be less government-based and more private-market centric.

But under such a scenario, my husband and I are shut out of the market.

Will housing ever return to some semblance of normal if middle-income hard-working couples like my husband and I cannot qualify for prime mortgages? What happened to using commonsense in lending decisions?

(Editor's Note: I haven't given up on a refinance and am now working the numbers with another potential lender.)

kcurry@housingwire.com

 

 

 

 

 

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