Fannie Mae is broken

Posted by Mike Sylvester - 1/21/09 @ 7:37 pm - Filed Under Featured, Local Politics, National Politics

I got permission from one of my clients today to post about what happened to that client today in general terms.

During the entire credit crisis I have been talking about how anyone with good credit, good income, and a strong balance sheet can borrow money.  That is still the case; however, one such client of mine was turned down for a loan with Fannie Mae today.  That client can get a loan with anyone except Fannie; however, Fannie is offering a lower rate than anyone else, so this client wants to get a loan from Fannie.

Our firm has about 500 clients at this time.  The client who got turned down today would certainly be in the top twenty of all of our clients as far as “credit-worthiness”; likely in the top ten.

Consider the following:

  1. The client has little debt.  Over 90% of the client’s debt is in a home loan for less than $200,000.
  2. The client had a taxable income of between $150,000 - $200,000 per year from 2004 - 2006 while running a small business.
  3. The client expanded that business in 2007 and had a taxable income of between $50,000 - $100,000 that year.  The client’s income dropped due to the expansion.
  4. The client will have a taxable income of between $100,000 - $150,000 this year.
  5. The client’s business has over  half a million dollars of cash, CD’s, and short term investments with no debts.
  6. The client has enough money in cash and other investments personally to more than pay off the house they want to finance.
  7. The client has a personal credit score of 810.

The client is not trying to take out a new loan; they are trying to re-finance their current home loan at a record low interest rate through Fannie Mae.

They were turned down today.

They were turned down because their business had a loss in 2007 of between $50,000 - $75,000 in 2007.  Note that even including this loss the client still had taxable income of $50,000 - $100,000 in 2007.

Fannie Mae turned down the loan because of the loss in 2007.  I applaud lenders for investigating loans and for doing their due diligence; however, who-ever looked at this case file has no idea of how to assess the “credit worthiness” of this client and should be fired.

For goodness sake I have never loaned anyone money in my life and I would loan this client money.  This client is as safe a bet as you could possibly have.

Rather then loan money to a strong client like this Fannie is re-negotiating with deadbeats who are behind in their payments. 

The taxpayers are going to end up pouring a lot more money into Fannie if they keep making stupid decisions like they did today.

Mike Sylvester

Comments

8 Responses to “Fannie Mae is broken”

  1. tim zank on January 21st, 2009 9:34 pm

    Mike, was his application processed through a brokerage or a bank?

  2. Mike Sylvester on January 21st, 2009 9:42 pm

    Bank.

    Mike

  3. tim zank on January 21st, 2009 10:38 pm

    Your client had inept processing & presentation. Based on the criteria you furnished, with proper documentation he’s a slam dunk FHA or conventional….it was probably decisioned electronically on a DU and not manually underwritten. But if it WAS manually underwritten, somebody dropped the ball big time, but it was probably the bank’s underwriting that dropped it.

  4. Bobett on January 22nd, 2009 2:00 am

    Ongoing Priorities

    Related Research

    I am sorry for you client.

    http://theheritagefoundry.org/category/ongoing-priorities/Back to the Thirties

    Posted January 21st, 2009
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  5. Bobett on January 22nd, 2009 2:17 am

    This website is not the click and edit technology. It’s like politics. Frame it anyway you want it. Edit it yourself!

    Click to Edit … Fort Wayne Politics!

  6. John Colgate on January 22nd, 2009 8:59 am

    From personal experence in a recient re-fi. the client has the wrong bank!

  7. Jeff Pruitt on January 22nd, 2009 9:03 am

    Bobett,

    You should be able to click the edit button below your comment and edit it.

  8. Robert Enders on January 22nd, 2009 9:43 am

    Is it possible that a newly nationalized bank would turn down a loan applicant for political reasons?

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