In the last insane mortgage lending cycle the BAD NEWS was that a lot of buyers got mortgages they should not have gotten. The GOOD NEWS was that a lot of buyers who should not have gotten them did. Just doesn’t seem logical for some reason.
The reason all these folks got the loans is sub prime loans were readily available to those with bad credit, lax underwriting standards, rampant mortgage fraud fueled by an industry that looked the other way, and products that allowed people to sign up for more than they could hope to pay for. The result of the BAD NEWS is that there are record foreclosures and more to come for some time to come. The result of the GOOD NEWS is that a lot of people who had no chance before of home ownership are now living the American Dream and will make their payments.
The unfortunate reality of all that has gone on is that an entire group of buyers are shut out of any type of mortgage loan once again. The lax loan programs are not coming back, sub prime loans are history and mortgage fraud is going to be harder to get away with and the industry has finally started looking for it instead of looking the other way.
A rather large percentage of today’s population has less or no money and poor credit which will eliminate in my estimation some 40% of people who would like to buy a home. These people would for the most part be good borrowers who make their payments on time. The real estate industry is seeing record inventories of homes unsold and pending sales down more than 20% from just one year ago. This in turn fuels more foreclosures and the cycle gets deeper and deeper.
Congress in now considering reforming the good ole FHA loan but the reform will not bring back the majority of this group of buyers. Help yes, substantially, no, and it is bound up in the political process and likely to fail altogether. Politicians are rushing to pass laws that will hurt the good lenders and do little if nothing to stop the bad ones. The result, harder credit and more buyers unable to access mortgage loans.
There is a solution to the problem. Problem is no one wants to listen. Imagine that. I was ranting and raving to my friend Larry the other day and I told him if the politicians would simply use their heads (and do what I suggest) they could really help the people they are supposed to represent. He reminded me that was not what politicians like to do.
More to come
Lonny
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1 comment:
Your friend Larry is not only absolutely right, but he is smarter than any politician currently in office. PW
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