Duggan to Detroit Expats, 'We can't get mortgages'

**hybridy** · September-18-14, 10:32 PM

love love love the land bank and all its doing to advance the home ownership process, but this isn't surprising. as a student-debt heavy millennial, we are only homeowners courtesy of HUD and our 3%-down mortgage handout. would love to buy us one of these land bank beauties...

"Since the program started in May, 162 homes have been claimed at auction for more than $2 million. But only 45 of those sales actually have closed, because buyers can’t get mortgages. "

http://www.crainsdetroit.com/article...-blight-crisis

**Cincinnati_Kid** · September-19-14, 01:13 AM

These banks and mortgage companies caused the housing crisis and they now make it harder for anyone to buy a home, by increasing lending standards. How ironic. Besides, they won't invest in Detroit because the homes are undervalued and they won't make a profit financing them. It's all about the "benjamins" for them, instead of doing the right thing.

**Hermod** · September-19-14, 04:35 AM

Originally Posted by Cincinnati_Kid

These banks and mortgage companies caused the housing crisis and they now make it harder for anyone to buy a home, by increasing lending standards. How ironic. Besides, they won't invest in Detroit because the homes are undervalued and they won't make a profit financing them. It's all about the "benjamins" for them, instead of doing the right thing.

"Doing the right thing" led to the 2006 housing crisis. If banls could be sure of steadily rising home prices [[where the house is always worth more than the loan) they would be less picky. When you have doubts about the ability of the house to support the loan, then you have to be very picky about the buyer and his own credit or you need to demand "buyer participation [[i.e. a massive down payment).

**Honky Tonk** · September-19-14, 06:27 AM

Originally Posted by Cincinnati_Kid

These banks and mortgage companies caused the housing crisis and they now make it harder for anyone to buy a home, by increasing lending standards.

Just to be fair, in the midst of the housing-loan collapse, Ira Glass did a piece on the banks and mortgage companies, how the bubble burst, and what went wrong. I remember one interviewee sniffling while telling his story about how he lost his $369K house. The guy made $30K a year. Should he have been given the loan? No, of course not. But on the other hand, what was he thinking?

**Scottathew** · September-19-14, 06:48 AM

Originally Posted by Cincinnati_Kid

These banks and mortgage companies caused the housing crisis and they now make it harder for anyone to buy a home, by increasing lending standards. How ironic. Besides, they won't invest in Detroit because the homes are undervalued and they won't make a profit financing them. It's all about the "benjamins" for them, instead of doing the right thing.

So you're complaining that there was a massive housing collapse fueled by people defaulting on their mortgages... and then in the same post complaining that it's too hard to get a mortgage? I don't get it. I guess just blaming "the man" for all our woes will make things better.

How is it "ironic". Irony is when the opposite of what you expected to happen, happens. So for example, if tons of people defaulted on their mortgages because the banks didn't have strict enough lending standards, you would expect lending standards to get tighter.

It's not irony, it's common sense.

**313WX** · September-19-14, 07:11 AM

This is hardly a Detroit-specific problem. It's happening all over the country.

In addition to being buried in student loans, assuming recent college graduates can even find a job, these jobs aren't paying nearly as well as they did prior to the recession, not even adjusting for inflation.

**Jimaz** · September-19-14, 08:23 AM

I will never understand why some people kiss bankers' asses so eagerly.

How to rob a bank: William Black at TEDxUMKC

**DetroitPlanner** · September-19-14, 08:26 AM

Don't buy stuff on credit.
If you must have a mortgage put down at least 20 percent. If you can't come up with 20 percent then you will pay PMI and probably will be in a pickle with the first roof leak or furnace breakdown.
You need people to invest in these homes that have the capacity to keep them up. Highest bidder is probably not the best way to sell these; you need to be able to pay cash and have a good credit score.

**bailey** · September-19-14, 08:32 AM

Originally Posted by 48307

So you're complaining that there was a massive housing collapse fueled by people defaulting on their mortgages... and then in the same post complaining that it's too hard to get a mortgage? I don't get it. I guess just blaming "the man" for all our woes will make things better.

How is it "ironic". Irony is when the opposite of what you expected to happen, happens. So for example, if tons of people defaulted on their mortgages because the banks didn't have strict enough lending standards, you would expect lending standards to get tighter.

It's not irony, it's common sense.

Exactly correct. However in this context, we're not talking about no doc, zero down, 5 yr ARMS on overvalued property... we're talking about a special circumstance of trying to get blighted homes into private ownership through the land bank auctions. Problems with appraisals and LTV should have been anticipated. OF COURSE that $4000 house that needs 50k in renovations isn't going to appraise when all the comp sales are garbage.

It seems many lenders are refusing to address the disconnect there. And Duggan's admin seems caught off guard. Programs for this could have been put in place that address the unique nature of this situation. Work with banks on special portfolios for this. Charge a higher interest rate, require 30% down on some agreed value... whatever. But it is sort of silly that they're treating these places the same as if these were normal houses in a suburb.

**Shai_Hulud** · September-19-14, 08:35 AM

The land bank houses would be difficult to get a mortgage for even if you had perfect finances. I don't know how many cash buyers there are who want to live in Detroit and are willing to do a huge reno, in six months...

IMO, a bigger issue is that many of the inhabited Detroit houses for sale are below the minimum amount most banks will finance. If the sale price isn't below the minimum once you put money down it will be. Then it can be difficult to get them appraised for even low sale price.

Originally Posted by bailey

It seems many lenders are refusing to address the disconnect there. And Duggan's admin seems caught off guard. Programs for this could have been put in place that address the unique nature of this situation. Work with banks on special portfolios for this. Charge a higher interest rate, require 30% down... whatever. But it is sort of silly that they're treating these places the same as if these were normal houses in a suburb.

I wonder how many of those 45 closed sales were in the three or four neighborhoods for which financing is available?

**Gannon** · September-19-14, 08:41 AM

How is it that nobody can see the irony in this?

Dan Gilbert is acknowledged by the media as the savior of the city...his biggest company is Quicken Loans, one of the giants in the mortgage industry.

I'm betting he steps in as hero here, but ONLY if the City Council can slam the historic building people into accepting those big Quicken signs in the basement parking structure of One Woodward. Ahem.

I look up to see if prep work has been done to mount 'em yet...just this morning I gazed through the sunroof in wonder how long he'll wait to let these things see sunlight...it HAS to be bugging him that his best purchase can't be tagged for the world to see.

Cheers...

**ndavies** · September-19-14, 09:35 AM

Gilbert and Quicken loans aren't a bank. They are just a mortgage broker. He sells the loans they originate to other investors. They have to follow the rules set up by Freddie Mac and Fannie Mae. If he didn't follow the rules he couldn't resell the loans. Quicken doesn't carry enough cash internally to hold onto those loans.

If he took loans that he couldn't resell, he would very quickly not be able to offer any more loans since he has no deposits internally.

And your local bank has the same problems. They sell the loan on to other investors so they don't have to risk their own savings customers cash. So they also have to meet the Freddie Mac and Fannie Mae rules.

**Dan Wesson** · September-19-14, 11:30 AM

I've got a feeling that even if they gave those house's away for free with stipulations that they be brought up to code within a certain time frame many deserving people would still lose them based on those stipulations.

**animatedmartian** · September-19-14, 11:56 AM

I just discovered something rather interesting.

http://datatools.urban.org/Features/....4660/-83.0972

Detroit’s downtown [city proper], which held a large share of mortgages made to African American borrowers during the boom, has remained virtually devoid of new mortgages since the bust. From 2006 to 2012, the number of mortgages in the metropolitan area fell 79 percent for African American borrowers as lending within city limits fell off the map. In comparison, the number of mortgages made to white borrowers dropped only 11 percent. Recent investments from the private sector suggest a comeback could be under way, but the mortgage market in the inner city shows no sign of recovery yet.

Basically, what needs to happen is either banks loosen up on lending or Detroit's housing value needs to get significantly higher. The latter would disproportionately price minorities out of the metro area [[or create a great need for subsidized housing). The banks do play a role in this and they're not innocent bystanders. They have great leverage to move the economy in the way they want to.

Of course, a third option is to focus on getting more minorities up the wealth ladder so that they aren't simply limited to the least affordable areas.

**Kevgoblue** · September-19-14, 12:07 PM

Originally Posted by Hermod

"Doing the right thing" led to the 2006 housing crisis. If banls could be sure of steadily rising home prices [[where the house is always worth more than the loan) they would be less picky. When you have doubts about the ability of the house to support the loan, then you have to be very picky about the buyer and his own credit or you need to demand "buyer participation [[i.e. a massive down payment).

Not sure about this. I'd say the mortgage companies giving away money to people who obviously were not in a financial position to repay it caused the housing crisis. This was facilitated by legislation which allowed the lenders to bundle them as "investments". Thus they could reap the rewards [[closing costs, underwriting costs, points) without accepting any of the associated risks [[having to collect 30 yrs of mortgage payments).

**Armin** · September-19-14, 12:17 PM

Originally Posted by ndavies

Gilbert and Quicken loans aren't a bank. They are just a mortgage broker. He sells the loans they originate to other investors. They have to follow the rules set up by Freddie Mac and Fannie Mae. If he didn't follow the rules he couldn't resell the loans. Quicken doesn't carry enough cash internally to hold onto those loans.

If he took loans that he couldn't resell, he would very quickly not be able to offer any more loans since he has no deposits internally.

And your local bank has the same problems. They sell the loan on to other investors so they don't have to risk their own savings customers cash. So they also have to meet the Freddie Mac and Fannie Mae rules.

You have no idea what you are talking about. QL is a direct lender, not a broker. They fund the loans with their own money, and service close to 100% of the loans after funding [[meaning that you pay your bill to QL). many years ago, they would usually transfer the servicing to another lender, but not anymore.

**Cincinnati_Kid** · September-19-14, 12:21 PM

Originally Posted by 48307

So you're complaining that there was a massive housing collapse fueled by people defaulting on their mortgages... and then in the same post complaining that it's too hard to get a mortgage? I don't get it. I guess just blaming "the man" for all our woes will make things better.

How is it "ironic". Irony is when the opposite of what you expected to happen, happens. So for example, if tons of people defaulted on their mortgages because the banks didn't have strict enough lending standards, you would expect lending standards to get tighter.

It's not irony, it's common sense.

You can say and believe what you will, the banks and mortgage companies were just as culpable for approving loans to people that couldn't afford them. They knew what they were doing. Instead of advising them that they couldn't afford the loan, some convinced them they could and wrote them away. I understand the decision is ultimately the borrower's, but c'mon, some didn't even try to persuade them into a cheaper loan they could handle. And when they got into trouble with the loan, they refused to help them, which caused the crisis. The banks and mortgage companies then bundled all these bad loans and sold them off for more profit. Don't see why you're putting most of the onus on the customer, when they had a major part in this, now they are preaching accountability. Yeah, Ok....

**Cincinnati_Kid** · September-19-14, 12:25 PM

Originally Posted by Kevgoblue

Not sure about this. I'd say the mortgage companies giving away money to people who obviously were not in a financial position to repay it caused the housing crisis. This was facilitated by legislation which allowed the lenders to bundle them as "investments". Thus they could reap the rewards [[closing costs, underwriting costs, points) without accepting any of the associated risks [[having to collect 30 yrs of mortgage payments).

Thank you. Don't see how anyone would defend them. Especially when the government bailed them out from causing a world wide financial and economic disaster. I guess people forgot about Lehman Bros, Bear Sterns, Merrill Lynch and Countrywide huh?....

**BankruptcyGuy** · September-19-14, 12:47 PM

A few points here:

1. Virtually no banks hold residential mortgages on their own books any longer. While Armin is correct that they are not a mortgage broker, they do sell their mortgages to Fannie and Freddie when packaged. [[That's how they make money.) Unquestionably, they and every other lender are subject to the whims of Fannie and Freddie when setting loan standards.

I think you'd hear a collective groan from many sectors of the country if Fannie and Freddie loosened standards to favor one particular type of asset [[if that's indeed what needs to be done to spur mortgages).

2. I believe that land bank properties had some title issues that also negatively impacted lending. I don't know if those have been cleared up yet. I would imagine that would be something that Duggan would fix shortly.

3. There's plenty of blame to go around--the whole real estate industry was culpable in this collapse. It sounded too good to be true, and it was.

**mikeg19** · September-19-14, 01:16 PM

Banks are not in it to "do the right thing" and help Bill & Jane Doe own their dream home or open up a business. They are in it to make money and rip you and I off at any possible chance they can get. Banks to me are the biggest frigging scam artists out there besides the insurance industry.

But in this case, they are gonna protect themselves against doing the same thing again. Gone are the days of a guy making $45K a year and having a $350K house with 2 Escalades in the driveway [[should have never been that way from the start). I'm not well versed enough in mortgage options to really do a deep dive into meeting criteria to be approved for a mortgage, but for those with student debt [[like myself) it can be a challange at times. There should be option's for people in that position, but to my knowledge, there aren't.

**Hermod** · September-19-14, 01:30 PM

Originally Posted by mikeg19

Banks are not in it to "do the right thing" and help Bill & Jane Doe own their dream home or open up a business. They are in it to make money and rip you and I off at any possible chance they can get. Banks to me are the biggest frigging scam artists out there besides the insurance industry.

But in this case, they are gonna protect themselves against doing the same thing again. Gone are the days of a guy making $45K a year and having a $350K house with 2 Escalades in the driveway [[should have never been that way from the start). I'm not well versed enough in mortgage options to really do a deep dive into meeting criteria to be approved for a mortgage, but for those with student debt [[like myself) it can be a challange at times. There should be option's for people in that position, but to my knowledge, there aren't.

From 50 or so years ago, I remember a Rule of Thumb that said you shouldn't pay more than five years worth of income for your house.

**Scottathew** · September-19-14, 01:48 PM

Originally Posted by Cincinnati_Kid

You can say and believe what you will, the banks and mortgage companies were just as culpable for approving loans to people that couldn't afford them. They knew what they were doing. Instead of advising them that they couldn't afford the loan, some convinced them they could and wrote them away. I understand the decision is ultimately the borrower's, but c'mon, some didn't even try to persuade them into a cheaper loan they could handle. And when they got into trouble with the loan, they refused to help them, which caused the crisis. The banks and mortgage companies then bundled all these bad loans and sold them off for more profit. Don't see why you're putting most of the onus on the customer, when they had a major part in this, now they are preaching accountability. Yeah, Ok....

I'm not putting the onus on the customer. I'm point out that you're bitching that we had the mortgage meltdown, but then scoffing at tight lending restrictions that would had helped mitigate it.

Nowhere in my post did I assign blame, I pointed out that you're complaining about both the PROBLEM and the SOLUTION to the problem.

Problem: A whole bunch of people got foreclosed on, the housing market collapsed, values plummeted

Solution: Tighten lending guidelines to make sure that people who can't afford houses don't get into the situation in the first place

Your Grievance: People with low income\bad credit can't get mortgages!

"I hate fires! But dang, I sure do hate getting wet from the firefighters putting out the fire at my neighbors' house!"

**Scottathew** · September-19-14, 01:52 PM

Originally Posted by Kevgoblue

Not sure about this. I'd say the mortgage companies giving away money to people who obviously were not in a financial position to repay it caused the housing crisis. This was facilitated by legislation which allowed the lenders to bundle them as "investments". Thus they could reap the rewards [[closing costs, underwriting costs, points) without accepting any of the associated risks [[having to collect 30 yrs of mortgage payments).

I agree that mortgage companies should have had tighter lending practices, like they do now, and people are now consequently crying that lower-income folks can't get mortgages...

I also think the people getting the mortgages ought have done things differently too. Who knows your finances better? You? Or some company you're doing business with? Unfortunately, the answer is usually the company.

People got themselves into loans that they couldn't pay, shame on them. Mortgage companies gave loans to folks who shouldn't have got them, shame on them too.

**poobert** · September-19-14, 02:07 PM

Originally Posted by 48307

I agree that mortgage companies should have had tighter lending practices, like they do now, and people are now consequently crying that lower-income folks can't get mortgages...

I also think the people getting the mortgages ought have done things differently too. Who knows your finances better? You? Or some company you're doing business with? Unfortunately, the answer is usually the company.

People got themselves into loans that they couldn't pay, shame on them. Mortgage companies gave loans to folks who shouldn't have got them, shame on them too.

Finally. Someone who isn't completely insane.

**mikeg19** · September-19-14, 02:12 PM

Considering that a bank, when it looks at giving a loan, looks at your credit score amongst other things including debt, it also overlooks a lot. My wife and I are looking for homes now and shes in banking at a large bank. The bank doesn't consider things like a $50 gym membership every month, hundreds of dollars in food and gas monthly, your phone/cable/internet bill which all combined cound be $200. All of those expenses don't go into the equation on the banks end. That's the buyers responsability to figure that portion out.