All Banks Were Not Created Equal
Plus where the bank is located is a key to clarifying why high default rates exist in one location but not another.
Researchers have found when borrowers get their loans from a local home lender that those falling behind on their payments and rates of foreclosure are significantly less for higher risk borrowers (those having credit scores less than 660) . Home owners obtaining their home loan from a local community lender were not as likely to let their mortgage go into default than those homeowners who got their loan from an out of town lender.
The door you enter when you're getting a loan is a bigger deal then previously thought. Local lenders appear to offer some shelter to home borrowers, particularly those borrowers with minimal paychecks who may be viewed as risky borrowers with more risk
So why are banks located in the same community a much better choice? Local banks tend to apply more weight on other reasons beside just credit scores alone in deciding if they conform to the criterion for a obtaining a mortgage. As an example, they take such factors as how long they’ve been employed by their present employer and whether they make regular savings account deposits into account. Also they are more than likely to have an ongoing association such as savings and checking accounts with the borrower
Bank of Stockton
Click thunbnail for large image
Information of this kind actually provides a more comprehensive depiction of whether someone can actually afford a mortgage, in particular higher-risk borrowers.
This research suggest that affordable homeownership policies need their focus expanded.
Too many rules and regulations focus on the loan by itself, and that's absolutely important. But for those lower-income , higher-risk applicants, mortgage organization also matter a whole lot.. These borrowers should be working with banks that will correctly assess their loan application and provide them with ongoing support after they obtain the mortgage.
Article by Gene Wright -
Jan. 22, 2011
Real Estate Finance