Wednesday, April 20, 2011

Is too much debt a bad reason for denying someone a mortgage?

A new CNN Money article titled, "Mortgage denied: Sometimes, for no good reason" claims people are being denied mortgages for bad reasons, but their list of reasons looks pretty good:
  • Too few of the condos in your association have been sold
  • Your debt is too high
  • The wait after foreclosure is extended to seven years from five
  • Missed payments on credit card debt
A condo association with lots of unsold units is on shaky financial ground. A person with high debt is on shaky financial ground. Not paying your mortgage or credit card bills are signs that you have a tendency to be irresponsible with your money.

Meanwhile, the Federal Reserve has proposed an "ability to repay" requirement for mortgage loans:
The proposal under Regulation Z would require creditors to determine a consumer’s ability to repay a mortgage before making the loan and establish minimum mortgage underwriting standards.

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