High Anxiety
Waxing Philosophical
At a recent presentation I gave on the perils of lending guidelines and the possibility for deals getting derailed when co-ops and condos can’t or won’t satisfy the required regulations, an agitated upstate attendee interrupted my introduction to school me on the beauty of the free market. Apparently, if co-ops and condos fail to satisfy the bank's underwriting standards, and buyers can’t get financing, then the value of the apartments should adjust downward to reflect the co-op or condo’s financial inadequacies and all will be right with the world. This hardball approach works best in a town similar to the one in which my counterpointer resides, where there are only two co-ops. A solution without a problem. For the rest of us, the battle is ongoing...
And Then There’s MetLife…
One of the active participants in the residential lending space over the last few years has been Metlife. The loan officers and underwriters exhibited a flexibility and willingness to work to get deals done. In a number of cases, I was able to get loans funded with this bank that proved impossible with others. Ironically, Metlife now abruptly exits the marketplace, citing excess regulation among other things. In other words, residential loans are too much of a hassle, so 4,300 people are now looking for the next work station to occupy.
“Oh…Xiety”
This development speaks volumes about the current difficulties in the residential lending environment. Buyers are left with few choices for obtaining loans and face headwinds when it comes to clearing loan conditions. Yes, there is money available for mortgage financing, but simultaneously, there is an increasing hesitancy to make those dollars available unless both the consumer and his or her proposed residence are squeaky clean from an underwriting perspective. Even private banking customers are feeling the pain, as they are often forced to jump through lending guideline hoops, usually reserved for regular folks.
Residential Reality: Don’t Take “No” for an Answer
I’ll share my own anecdotal research from several recent transactions involving initially uncooperative lenders. Borrowers and their counsel are well advised to keep hammering away at their loan officers and underwriters to find solutions to the removal of loan conditions. In a number of cases where lenders initially refused to accept an alternative for removing a condition relating to the borrower’s finances or to the co-op or condo, I was able to find a solution or an exception was made and the condition was omitted. Expect frustrating delays for removal of troublesome conditions, but it can be done…