Anyone who has watched the news lately will be surprised to see that Ben Bernanke, the former chairman of the Federal Reserve is unable to refinance his mortgage. While this may seem as a bad joke, it is actually the result of strict regulations set by the government owned mortgage companies, the automated process that is used when determining if a person is eligible for a loan and the fact that loan companies are unwilling to take a higher credit risk.
Ben Bernanke’s trouble
Ben Bernanke has confessed at a Chicago conference that he tried to refinance his mortgage only to find out that he is unable to get approved for it. With the audience starting to laugh, Bernanke clarified that it is no joke and said that he is not making this up. He said that he thinks lenders have set too strict mortgage credit conditions. He believes that the first time buyer home market should not be this strict, especially with the economy strengthening right now and with the home prices rising.
He has refinanced before
As absurd as the situation sounds right now, Ben Bernanke has refinanced twice up until now. For his Capitol Hill home, he and his wife took two loans, the first one being a 671,200 dollar adjustable rate mortgage in 2004, with a rate of 4.125 percent. He also took a fixed-rate loan worth of 83,900 dollars.
In October 2009, he refinanced with a 30 year fixed-rate mortgage worth of 685,385 dollars with which he paid off their two earlier loans. On the 26th of September 2011, Bernanke applied for a second refinance worth of 672,000 dollars on a 30 year fixed-rate loan with a 4.25 percent rate.
What is actually happening?
So if Ben Bernanke managed to obtain two loans and refinanced twice, why is he unable to refinance now? This is a surprise especially since we’re talking about a person who was the chairman of the Federal Reserve and who played a huge role in setting the US interest rate policy.
The trouble may be multiple-fold. One problem is that lenders seem to further tighten their mortgage credit conditions. Another is that with the government-owned giants Freddie Mac and Fannie Mae dominating the mortgage market, many loan companies have to abide to their strict rules.
There is also the problem of the automation that is currently ruling in the mortgage industry. While in the past, a person might have met with a loan officer who tried to determine if the person can afford the loan, now most loan officers rely on computer programs which calculate everything from them.
The problem with mister Bernanke is that he switched jobs just a few months ago. While any sane person would not see Bernanke as a high credit risk, the automation makes him look this way due to the fact that he switched from a salaried position to a commissioned one. So, even though Ben Bernanke may be able to earn a lot more than the sum he wants to refinance, the current loan system may see him as a high risk.