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Low-Income Will Find it More Difficult to Get Mortgages in the Future

The new qualified mortgage rules will change the number of people who can get a mortgage.

Now that the “qualified mortgage” rules have been put into writing and the debt ratio of 43% is going to be common place going forward, many will not be able to qualify for a mortgage.

So, what do these families do? Rent forever? Find higher paying jobs, that don’t exist? We have a nearly 8% unemployment rate and a much higher rate if you include those that are under-employed, what do these families do?

Once interest rates start moving upward, less and less potential homeowners will be able to qualify for a mortgage and their American dream is gone.

When there are less folks coming into the market place to buy homes, what happens to real estate values?

More Low-Income, Minority Credit Shortages Ahead

By: Amilda Dymi

"In recent years data have shown the legacy of the housing crisis was disproportionately negative on low-income and minority homeowners. New findings indicate another crisis in the making for these buyers."

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Scott Wheeler January 25, 2013 at 03:25 AM
If they are lower income earning they are in the wrong state and need to think about moving somewhere more affordable. Simple enough.
Lou January 25, 2013 at 05:27 AM
I can't believe what I am reading. What do you think caused the housing market to crash to begin with? The answer is banks lending money to people who can't afford to pay the loan back! If you can't afford it you have no business buying it.
jane January 25, 2013 at 11:21 AM
The one thing it will do is help to prevent unrealistic, over-inflated home prices. That, my friend will be the best thing to come out of this whole fiasco.
Kate R January 25, 2013 at 12:46 PM
that conjures an interesting scenario. if every lower income earner who dreamed of owning his/her own home moved away, CT would soon be a garbage filled cesspool with no restaurants, shops, day-care workers, tidy public areas....and home prices would go down. So hey! They could all move back.
Albert Williams January 25, 2013 at 01:17 PM
Dreaming of owning your own home doesn't ENTITLE you to get it. I dream of a 3500 sq ft home in Simsbury, but I know I can't afford it so I stay where I am until I can. If your income doesn't match your dreams do something about it; get a second job, get a better job, further your education...stop suckling off my paycheck!!
noah goode January 25, 2013 at 01:49 PM
Owning a home is something that everyone has the right to shoot for: equal opportunity, fair housing practices, etc. But it does not mean it's a right, simply a level playing field for financially qualified buyers. Low Income pretty much means that they are near, at or below poverty level. Are we at the point that everyone is entitled to everything regardless of ability to pay? Moreover, borrowing money requires (or is supposed to require) an ability to repay. Unfortunately owning a home will beyond the reach of many, as is a new car. But should one qualify for a loan of any kind, congrats and good luck.
Ed Froem January 25, 2013 at 02:55 PM
Banks don't make money making bad loans. So why did they do it? Because Fannie may and Freddie Mac told them, don't worry that the client can't pay the mortgage. We federal agencies will buy that mortgage from you so you make your money risk free. And then other federal agencies would also make threats," mr banker, you aren't making enough loans to poor minorities, you don't really want to face a discrimination in housing lawsuit do you?" You can blame it on the banks all you want, but if someone wasn't buyin the loans from the banks, the banks wouldn't be making risky loans to people who can't afford them. Only the government does that, banks don't make money if you can't pay them back.
Maria Giannuzzi January 25, 2013 at 03:25 PM
I think some of those commenting forget about all those fees the banks "earned" by making those mortgage loans. And then most of them sold those mortgages to other banks as soon as possible because they knew the loans were highly risky, generating more fees. Those banks in turn quickly sold the same loans to other banks and so on and so on. And then those same banks turned around and made more risky loans to new homeowners, generating more fees and bonuses for themselves. Bankers are supposed to manage risk. But the easy money from fees and the bonuses were just too much of a temptation for many. And then irrational exhuberance set in. The bankers figured that housing prices would continue to rise and that the foreclosures on those defaulted risky mortgage loans (because they knew that these loans would default) would generate new home sales and new mortgage loans--and guess what, more fees for them. Check out how much the head of Countrywide walked away with. Most lawyers are taught in law school that exotic mortgage loans (like variable rate mortgages, balloon mortgages, etc.) are intended for highly sophisticated and affluent (or soon to be affluent) homeowners. They are not designed for low-income and unsophisticated homeowners with little education. The recent mortgage crisis was a giant fraud. Even those with the best intentions should have known there might be trouble ahead.
Maria Giannuzzi January 25, 2013 at 03:29 PM
Yes, and who will you get to serve you at Dunkin Donuts and McDonalds and Walmart? And who will clean up your grandmother in the nursing home with infinite gentleness and compassion after she vomits in her bed? And what about when it is you in the nursing home bed?
Lisa Beth January 25, 2013 at 03:57 PM
I worked in a New London law office during the 'boom' right through the 'crash' and we did 5-6 closings a week. In the beginning, they were on the up and up but as time went past my ex-boss and I found ourselves saying "What is this?" time and again. We saw some of the frutiest stuff you'd never want to see in your life come through the office. Including one couple on a fixed income buying their first house. The mortgage alone was $100.00 MORE than their monthly income and the bank knew it! When we tried to warn them about this they casually looked at us and said: "The bank said that's fine." Needless to say within a few months they were in foreclosure. This bank outright took advantage of them and who knows how many other people. Why? Because they knew they could flip the house for a faster tidier profit than simply collecting the mortgage money every month. Near the end of the crisis the banks got stuck with the houses they foreclosed on. Case in point; my neighbor who lived in his home for 50 years. He wanted to get a loan to make small improvements to his modest home and was told by Countrywide Home Loans that the "least" they could possibly lend him was $110,000.00 and he fell for it. Again, he was on a fixed income and Countrywide knew he'd have trouble paying it back but he believed them. The banks played a lot people for suckers and got away with more than they should have for longer than they should have.
Gregory Johnson January 25, 2013 at 04:03 PM
Frontline just did an episode on this. It made the DoJ's Lanny Breuer resign. Here is the link to watch it: http://www.pbs.org/wgbh/pages/frontline/untouchables/ It's quite clear what happened, AMAZING FRAUD...and no one went to jail. So tell me why I should trust corporations (and by extremely close association, our government)?
Maria Giannuzzi January 25, 2013 at 05:50 PM
The experiences of the homeowners you describe in your comment, LB, were repeated all over this country. The bankers and mortgage brokers were sophisticated, knowledgeable individuals, who even under the spell of irrational exhuberance, knew what they were doing. A German bank, Deutsche Bank ended up with a lot of those foreclosed homes and huge losses on their books. They got into the mortgage loan merry-go-round late in the game, just before the bubble burst. I believe they and other foreign banks were bailed out by the U.S. government.
Maria Giannuzzi January 25, 2013 at 05:52 PM
I think the head of Countrywide was prosecuted, but I believe all he paid was a fine, a very small percentage of what he reaped in compensation and bonuses.
Maria Giannuzzi January 25, 2013 at 05:56 PM
My hunch is that a lot of the bankers and mortgage brokers told many homeowners that their mortgage could be refinanced in the future, so that the payments would be more affordable. But some of those loans were junk, right from the beginning. If you do not have enough income to cover a car payment along with your other expenses, you don't get the car loan.

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