Bank to Ben Bernanke: Application Denied
When the former top dog of the Federal Reserve central bank gets denied his mortgage refinancing, a few eyebrows are going to be raised.
Speaking to a conference in Chicago Thursday Bernanke told a moderator for Moody’s Analytics, “Just between the two of us …I recently tried to refinance my mortgage and I was unsuccessful in doing so.” He assured the crowd at the conference, “I’m not making that up.”
The conference was hosted by the National Investment Center for Senior Housing and Care, and former Fed chair Ben Bernanke reinforced his comments saying it wasn’t a joke.
So it’s perhaps a sign that things have gone a little too far on mortgages—if the Fed Chairman can’t get access to a favorable loan, the 99% are absolutely screwed.
His Application to Refinance
According to reports, Mr Bernanke wanted to refinance the mortgage on his Capitol Hill house, which he and his wife had bought for $839,000 (nearly Rs. 5 crore at 1 dollar=60 rupee) in 2004.
Mr Bernanke, who has not taken up a regular job after two terms at the Federal Reserve, reportedly charges $250,000 (Rs. 1.5 crore) for giving a speech and has also signed a book contract, which is expected to fetch him millions of dollars.
Why it was rejected
According to analysts, his application for refinance was rejected on grounds that he recently changed his job, a criteria that makes getting credit difficult even in India.
The episode highlights the tight credit situation in the US property market, economists say. It also shows how rigid lending rules have become post the subprime mortgage crisis that triggered the global recession in 2008.
Mr Bernanke’s revelation led to many hilarious tweets,
Name: Ben Bernanke. Job? None. Other sources of income? I’m writing a book. And giving speeches. #DENIED
Don’t feel bad if you can’t refinance your mortgage: Even Ben Bernanke can’t get a loan
Going forward instead of getting paid at a rate of $250,000 per hour, Ben Bernanke would prefer a mortgage refi LOI instead
How is the market
Mortgage company Freddy Mac said Thursday the nationwide average for a 30-year loan slipped to 4.19% from 4.20% last week. Freddy Mac stated that the average for a 15-year mortgage, a favorite among homeowners who are looking to refinance, remained at 3.36%.
“The 30-year rate is down from 4.53% at the start of the year,” they said. “Rates have fallen even though the Federal Reserve has been trimming its monthly bond purchases, which are intended to keep long-term borrowing rates low.”
A report from the National Association of Realtors last week said sales of existing home sales fell in August as “investors retreated from real estate and first-time buyers remained scarce.”
This is contrast to the Commerce Department’s report that newly constructed homes “surged in August, to the fastest sales pace since May 2008.”
The subprime crisis resulted from banks extending mortgages to risky buyers on high interest rates. Large investment firms then bought such loans as mortgage-backed securities (MBSs). A number of such loans became delinquent starting in 2007, triggering bankruptcy across many banks in the US. The fallout was a major contributor to the global recession that followed.