Letters: A lot goes into making loans
Re “Slam-dunk home loan is rejected,” Business, Jan. 12
Lew Sichelman, who complains that he was unfairly denied a loan despite his stellar credit score and ample assets, displays an injured sense of entitlement.
The key factors in lending are the ability and the willingness of the borrower to repay the loan from the primary source of repayment. Sichelman has demonstrated that he has the willingness to repay his loans and a reasonable secondary source of repayment. Yet, since he is a freelance journalist, his future income is unproven.
Sichelman is asking the bank to give him the benefit of the doubt that he will be successful as a journalist. Why should it take that risk?
The Dodd-Frank law that Sichelman blames for his failure to obtain a loan has produced many unintended consequences, mostly because it was created from a flawed concept.
If lending institutions were required to retain ownership of loans, the absurd underwriting would not be required. But since that would hinder the resale of the loans (and make capital less liquid), that approach wasn’t taken. I would favor an option for lenders to ditch portions of Dodd-Frank if they retained ownership in some reasonable percentage (perhaps up to 20%) of a loan.
You can’t legislate judgment, but you can tie the decisions directly to the lender’s bottom line.
It worked for centuries for community banks.
La Habra Heights
A cure for the common opinion
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