An employee of a think tank owns a house in the Capitol Hill neighbourhood of Washington. He wants to refinance his mortgage, but the bank won’t give him a loan.
It is perhaps not the most shocking story in the world, but it becomes so when you learn that the think tank employee is Ben Bernanke, who was until earlier this year the chairman of the Federal Reserve, charged with setting the course of interest rate policy for the US economy.
And it seems downright absurd when you consider that he now makes a reported $250,000 for giving a speech and has signed a book contract that is surely in the seven figures. His income this next couple of years will surely dwarf the value of his house.
“Just between us,” he said on stage at a conference in Chicago on Thursday, according to Bloomberg News, “I recently tried to refinance my mortgage and I was unsuccessful in doing so.”
So what’s going on?
Anybody who knows how the world works may know that Ben Bernanke is as safe a credit risk as one could imagine. But he just changed jobs a few months ago. And in the thoroughly automated world of mortgage finance, having recently changed jobs makes you a steeper credit risk.
“The biggest issue that we see with changes in employment is when a change in pay structure occurs,” said Jim Woodworth of Quicken Loans. “For example, someone that goes from a salaried position to a commissioned position will encounter some obstacles with applying for a loan, even if the new job results in higher income.”
The more automated mortgages have become, the less room individual lenders have to use sensible judgment to conclude that, just maybe, the nice man with a beard who looks vaguely familiar and seems quite certain he will make plenty of money to make his mortgage payments might be a good credit risk, no matter what his employment status says.