Mobile Homes & Stradivarius Violins

Stricter Underwriting Standards:
Dotting “i’s” -- lots and lots of “i’s”

Until recently, once the appraisal was completed and the amount supported the purchase price, it was very unusual to hear more from the underwriter. But that’s clearly changed.

One of the biggest consequences of spiking mortgage defaults is tighter lending and underwriting standards. For home buyers, lenders, and realtors, that manifests as greatly increased scrutiny, and more “i’s” to dot and “t’s” to cross – lots more.

Mobile Homes with Stradivarius Violins

Until recently, once a home had satisfactorily appraised, the loan was typically as good as done. Now, however, it’s not unusual for multiple layers of lender review, accompanied by requests for yet more information. Or, for lenders to insist on adherence to what seem like silly rules.

To pick just one example, the lender on one recent deal required the Buyer and Seller to delete a section addressing the sale of personal property.

The concern, which can be legitimate, is that a big chunk of the value that’s securing the loan actually resides in the personal property exchanging hands, not in the home itself.

If you were borrowing $200k to buy a $50k mobile home that just happened to include a $150k Stradivarius violin, the lender clearly would have grounds for concern. That’s because if you stopped making payments on the mobile home, the value of the mobile home at foreclosure –- presumably something much less than $50k -- wouldn't be nearly enough to make the bank whole. Meanwhile, you and the Stradivarius would likely be long gone.

But that was hardly the case with my client. The purchase price of their home was over $500k -– and the value of the furniture in question was about $250 dollars. Maybe.

Oh, well.

After years in eclipse, the Golden Rule is seemingly being re-asserted . . . with a vengeance.