The banks are still hesitant to make loans to homeowners. They just don’t want the risk. They took the risk and look where it got them. Lenders are now looking for new metrics, actuary tables and analytics to protect them from getting stuck with bad loans.
What you needed to buy a house a couple of years ago were a good credit score, proof of funds and an appraisal. New regulations are coming that will expand the entire criteria spectrum. What lenders are now looking for is what is called “Future Trending”
To gather data for Future Trending you need history on the borrowers FICO score. Instead of accepting your current score they want to go back in your History and see what you’ve been doing before – well who knows how far back they are going to go. Better hope you paid for those breadsticks and milk cartons in Kindergarten.
To achieve proper Future Trending Profiling geographical areas will have to be accessed. Where you live will make a difference whether you get that house or wind up in a cold-water flat. The strength or weakness of the economy in your neighborhood will be a determining factor in the Future Trending Analysis. Good luck if you live in a place like Detroit.
The banks will have no choice but to take into consideration how stable your job may be. How is it now? What was it like in the past? How does the future look? Do you have a history of climbing the ladder of success or are you one of those who hide their ass behind the water cooler?
They want to know. They want to know now. They want to know if the industry you are working in and thriving in today will be a viable industry tomorrow. If they determine that it’s not, well somebody else just might get that house you were dreaming about.
Isn’t it tough enough to get a loan right now? As the banks become more and more risks adverse and throw up all this new criteria how many people will actually qualify for a loan? And how are the lenders going collect and sift through all of this data? Will they use more tax money? Will they use your money to turn the screws on you?
Let’s say you get all of this data, compile it and do the market research. You then come up with and employ this risk advers model that is supposed to hedge the bets. You have computers humming and the best predictive analytics ever devised by man. Now somebody gets sick. Somebody gets divorced. Somebody goes nuts. How can any system or model ever predict what is going to happen in someone’s life. A safer bet and a more accurate prediction can be done on the value of a property. The banks are better off hedging their bets off of LTV than they are on the next turn someone might take on the highway of life.
