Rafferty Capital’s Dick Bove says the Dodd-Frank Act, which went into effect in 2010, was intended to pave the way for lower income borrowers to obtain mortgages, but large banks are being shut out of that market, once again leaving those of modest means fewer options for borrowing money. He says this creates a two-tiered housing finance system: Loans are going to upper middle class and high end borrowers, effectively excluding many manufactured home buyers, as MHProNews knows. Because of constraints on the market following the housing bubble, the FICO score for purchase loans increased 50 points to around 750. “What the change in underwriting standards did was force large banks to only underwrite mortgages for people with high FICO scores and low loan-to-value ratios because they would have the lowest capital requirements,” Bove said. In addition, HousingWire reports requiring banks to buy back defective loans tightened constraints for lower income borrowers even more. “It’s virtually impossible for larger banks to underwrite lower-income households’ mortgages,” he added. This may push lower income people into public housing and rentals, a far cry from the intent of Dodd-Frank, but something Bove said he predicted over a year ago. He sees no movement in Congress to change it, either.
