state-of-the-unionDuring his State of the Union Speech, President Obama said: “…with mortgages rates near a 50 year low, too many families with solid credit who want to buy a home are being rejected. Too many families who have never missed a payment and want to refinance are being told no. That’s holding our entire economy back, and we need to fix it.

I couldn’t agree more, but how and when? These are the challenging questions behind the rhetoric. No doubt about it, current lending standards are too rigid and strict. New regulation is coming down the pipe soon that will again change the way loans are processed, but will it help? Time will tell. I am hopeful the new Qualified Mortgage rule will bring back “make sense” decisions and help lenders to approve quality loans.

However, there is another factor here that no one is talking about. Home value are consistently moving up. When this happens, banks and lenders tend to relax their standards as well.  Just imagine if you were a bank lending money to your neighbors, and the values in the neighborhood were increasing. You wouldn’t be as worried if they didn’t make the payments because you could take back the property and it would probably be worth than was it was originally.

Beau Hodson

Beau Hodson

About the Author Since 2003, Beau has been a mortgage professional and is a leading mortgage broker and lender in San Diego. As Founder and Senior Mortgage Advisor at Transparent Mortgage, he is truly committed to serving the needs of his clients and raising industry standards for integrity and transparency.