Friday, February 26, 2010

Lenders Behaving Madly

An illustration of just how ridiculous lender requirements have become, direct from an email written by a loan officer and sent to loan specialist Rob Chrisman:

"Rob - The following is an actual underwriting condition from a large wholesale lender which is known for having the best wholesale pricing for conforming loans. (As background, the borrower is a staff attorney for the Federal Reserve Bank of NY.) 'Please provide a signed letter from CPA stating if [client's first name] has 25% or more ownership in Federal Reserve Bank. If 'yes' he should be run as self employed.'"

For readers not fluent in lender-speak –

  • An attorney who works for the Federal Reserve applied for a home loan

  • The loan underwriter (the bean counter who gives the final blessing on the mortgage) asked the home buyer to prove he doesn't own 25% of the Federal Reserve, his employer

Prove you don't own the Federal Reserve Bank? Ownership of the Fed is a complicated thing**. But no one person owns 25% of it, for sure.  And in any case, asking someone to prove they don't own something is  sort of moronic.

If you’re home shopping, I really can’t stress enough how vitally important it is that you get a loan approval long before you even think of looking at houses in person. The rules have changed. Drastically. And in too many cases, the new rules are being deployed by people who don't think very hard before asking silly questions.

Get the silly out of the way early, so you can focus on falling in love with a new house, and not waste your time trying to prove you don't personally own 25% of the nation's central bank.

March 5, 2010 - this post has been edited after author did a bunch of research into the ownership of the Federal Reserve. I was mistaken: the Federal Reserve is not owned by Congress, although it was created through an Act of Congress in 1913. The Federal Reserve System is a part-private, part-government collection of Member Banks, with oversight provided by the Federal Government through the Fed's Board of Governors.

If you've been inclined to believe any of the crap being peddled by books or websites that claim the Fed is a for-profit conspiracy controlled by a few ultra-rich, mostly European banking families like the Warburgs, Rothschilds, Lazards, the Kuhn Loebs and Moses Seif, read this short summary of the Federal Reserve Banking System prepared by the Congressional Research Service for the Library of Congress.