Hacker News new | ask | show | jobs
by leetcrew 2266 days ago
even in normal times, I don't think lenders are lining up around the block to give people with no income a mortgage for a house they intend to rent out. there are a lot of landlords with mortgages on several rental properties. if they have enough viable properties, it doesn't usually look super risky to give them another mortgage, since they can smooth the cashflow from the other properties in the case of a small number of vacancies / delinquent tenants. there are also landlords who have enough income from work to cover the mortgages if all the tenants stop paying at once. in a correlated event like this, even the "safest" borrowers might be unable to pay. it's hard for a lender to protect against the possibility of entire industries shutting down overnight.
1 comments
bluntfang 2266 days ago
sounds like they assessed the risk incorrectly or their risk tolerance didn't equal the actual risks they took. Isn't this normal? If I buy stock with all my money, and the stock dramatically lowers in price, I don't get to complain to the government and get free money, do I?
link
leetcrew 2266 days ago
first of all, if lenders did the kind of DD you are talking about, it would preclude most ordinary w-2 employees ever getting a mortgage for a home. "they have only one source of income! they could lose it at any time!" these people are a much bigger risk than some landlord trying to get a mortgage for their nth rental property.

to answer your second question: if you, a private individual, bet all your money on investments that go belly up, you're just screwed. if you're a large financial institution, you get to argue that your going under would create rippling consequences that outweigh the erosion of moral hazard that comes with a bailout. it's not fair or reasonable, but it's reality.

link
bluntfang 2266 days ago
>"they have only one source of income! they could lose it at any time!" these people are a much bigger risk than some landlord trying to get a mortgage for their nth rental property.

Fairly certain source of income isn't the only variable. What about rainy day fund? Aren't individuals encouraged to have 3-6 months worth of expenses in cash for emergencies? Shouldn't the lender assure that this is the case before lending?

link