Are Lenders Controlling the US Economic Recovery?

Would you be surprised to learn that despite the housing-bubble we all lived through, major U.S. banks are making non-qualified mortgages to the rich and holding the loans as investments rather than selling them? In fact in a recent press conference, BofA Chief Executive Brian Moynihan said the bank was doing just that. Many of these loans are originating from their wealth management business.

Additionally, Bank of America Corp. recently reported that 36% of its fourth-quarter mortgages were jumbo loans, up from 23% of originations in the first quarter.

36% of the homes in California are not valued over $625,500 so it makes you wonder why that percentage is so high.

Are our lenders controlling the economic recovery by favoring the rich? You probably all remember the $5.95 million 30-year, 1.05 percent adjustable mortgage rate home loan that Mark Zuckerberg secured on his Palo Alto home in 2012.

Wouldn’t your clients like to get a rate like that?

In the past banks were required to give a certain percentage of their loans to low income customers. When looking at recent stats it makes one wonder if banks are preventing well qualified, lower income families from realizing the American dream with their lending practices?

The good news is that most of the risky mortgages that triggered the financial crisis have disappeared from the marketplace, and lenders will have even more reason to avoid them because of a new federal crackdown on loose lending.

But one housing-bubble favorite — the interest-only loan — will remain a common offering to well-heeled home buyers, despite new rules from the Consumer Financial Protection Bureau. The rules, which took in January, exclude interest-only loans from “qualified mortgage” status, which protects lenders from liability over defaults.

Bankers don’t seem worried about affluent clients missing payments. With high-end home prices on the rise, they have recently embraced jumbo mortgage lending, including interest-only mortgages.

Are these new lending practices preventing lower income Americans from participating in the economic recovery? If the major lenders aren’t loaning them money it makes you wonder where they are going for loans and how much higher their interest rates are than Mark Zuckerberg’s!

Tell us what you think. We’d like to hear from you!

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