As promised the plan to bring buyers back into the market.
If you have been following the past few days Blog the real estate and mortgage industry needs a tool to solve a problem that exists today. The problem is that in my estimation about 40% of would be buyers have no access to mortgage loans because of credit and cash down. A basic belief needs to be these buyers deserve the chance to own a home and with proper training and motivation, they will pay on time.
Simply stated, a person who is otherwise qualified in regards to job stability and income but who has credit issues and little or no money to put down and who does not qualify for any legitimate loan program available could enter a FHA program and earn the ability to get an FHA loan. Let’s call it “The Revamped FHA Loan”. Or not, call it something.
The parameters of the program are:
1. 100% loans are available.
2. The buyer would have to pay an elevated mortgage insurance premium based on the fact the lender and FHA is taking more risk. 2 tiers of insurance cost exist, one with and one without a down payment.
3. The elevated cost is fair and the money is refunded in the form of a mortgage principle reduction when the first 24 months payments are made on time.
4. At the end of 24 months the insurance premiums charged are the normal FHA premiums.
5. The buyer must attend 6 counseling sessions provided by a HUD approved counselor over a 6 month period where the buyer learns budgeting, credit basics, credit management, and comes out better prepared to succeed.
6. During the 6 months the buyer may not acquire any more debt or make any late payments on existing debt.
The plan is pretty simple. The buyers come out educated and protected from the predatory lenders and toxic loans with a solid FHA loan in hand.
The politicians will say you should not charge more to those who are already struggling. I say buyers who want the chance to own will jump at this. Let the people decide ignore the politicians.
Some will say these people don’t deserve the chance. I say it is time to give them the chance it is a win win for the economy and society.
Some will fear no matter what this group of people will fail, HUD approved counselors say they will not fail and even as bad as the loans were in the last lending cycle a surprisingly large percentage of people are making their payments on time.
The benefits are obvious; we have more people to buy the homes on the market. More people experience pride of ownership and accomplishment. The economy recovers faster, fewer foreclosures, and the list does not stop there.
“The Revamped FHA Loan”…………What do you think, I know it will work.
More to come
Lonny
Friday, November 30, 2007
Thursday, November 29, 2007
BUYERS BUYERS BUYERS
As the news worsens on a daily basis in regards to the mortgage lending meltdown what we in the Real Estate and Mortgage Industries need are more buyers to buy the homes that are for sale. We know you are out there. In the midst of the problems there is a silver lining. The market will recover, the losses will be absorbed, and hopefully the industry will learn a hard lesson and do things for the correct reason instead of greed. Bargains on homes abound out there; it is a buyers market for sure. Mortgage loans are available to qualified buyers at very low attractive rates. 100% loans are still available at good rates and you can get an FHA loan easily in the 5% interest rate range. With some money down and good credit scores Stated Income loans still exist at very low rates. So if you are thinking about buying, stop thinking and start buying. Oh yes send me your loan.
That being said, the mortgage industry needs a tool to bring buyers into the markets who don’t qualify under traditional underwriting guidelines. If you read my Blog yesterday you will know that I think this is about 40% of the people who would be buyers. To restate a large % of people who would be great borrowers are shut out completely of any mortgage loan at all. This void is created because of poor credit, a credit system that is clearly set up to keep people from buying, and little or no money to put down.
FHA loans could be used to bring these buyers back into the market. There is current reform in congress in regards to FHA loans. It will be helpful but in no way will it serve those who are now left out. If the reform passes (my money says it won’t) it will help a few. It allows 100% loans to first time home buyers, it raises the loan amounts and gives lenders some ability to risk base price. That is where you charge more to mitigate more risk on different types of loan products.
The pure simple fact of the matter is that the way the industry has to qualify the 40% has to change. It can’t be based on credit or credit scores. Traditional Automated Underwriting Systems can’t be used and HUD has to think outside of the box and eliminate politics and special interests and do something to help those who are left out. That is the reason HUD and the FHA exists as I recall. There is a basic approach that will work. Tomorrow, the plan will be revealed. Pulitzer Prize people get your reading glasses out! Can you hardly wait?
More to come
Lonny
That being said, the mortgage industry needs a tool to bring buyers into the markets who don’t qualify under traditional underwriting guidelines. If you read my Blog yesterday you will know that I think this is about 40% of the people who would be buyers. To restate a large % of people who would be great borrowers are shut out completely of any mortgage loan at all. This void is created because of poor credit, a credit system that is clearly set up to keep people from buying, and little or no money to put down.
FHA loans could be used to bring these buyers back into the market. There is current reform in congress in regards to FHA loans. It will be helpful but in no way will it serve those who are now left out. If the reform passes (my money says it won’t) it will help a few. It allows 100% loans to first time home buyers, it raises the loan amounts and gives lenders some ability to risk base price. That is where you charge more to mitigate more risk on different types of loan products.
The pure simple fact of the matter is that the way the industry has to qualify the 40% has to change. It can’t be based on credit or credit scores. Traditional Automated Underwriting Systems can’t be used and HUD has to think outside of the box and eliminate politics and special interests and do something to help those who are left out. That is the reason HUD and the FHA exists as I recall. There is a basic approach that will work. Tomorrow, the plan will be revealed. Pulitzer Prize people get your reading glasses out! Can you hardly wait?
More to come
Lonny
Wednesday, November 28, 2007
GOOD NEWS / BAD NEWS
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
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
Tuesday, November 27, 2007
WATCH OUT
For some time I have been watching what has happened with the illegal immigration problem. God knows there is plenty of press about it and opinions are everywhere. I suppose I am like the next person when I observe what is going on. When the folks show up to cut my yard I am pretty sure they are not legal people. (My yard guy swears they are) As long as my yard looks good it is easy to look the other way. I do believe there are many jobs not wanted by the rank and file of us and that we do need a legitimate, monitored guest worker program. I do have sympathy for those who try to enter the country legally to work to find a totally corrupt system that is practically impossible to utilize. Trust me I know, I have experienced it first hand.
When I was a young man working in West Texas I worked around many illegal aliens. For the most part they kept to themselves, were very respectful of our culture and our laws and those who enforced them. They made sure they were hidden from the authorities and didn't stand out any more than they did. My how things have changed.
As I drive down S. Cooper street on my way to work I see every day 10s of illegals standing waiting for someone to pick them up for work. They have no fear of being picked up by the authorities, they could care less if a policeman drives by, they know that the border patrol is not going to come by. This lack of fear is underpinned by all the special interests who protect them and line the pockets of the lawyers and politicians. It is business as usual for those who could care less about our society and the problems that rampant disregard for the law brings. To me this is something that is as defining for our future as much as anything. If this law is ignored and no one cares why should anyone obey any law. What a great message we are sending. A solution must be found.
It all became very real to me yesterday when I was almost ran off the road by two men who I would bet were illegals. They did it on purpose and were laughing during the entire ordeal. They were openly drinking and no doubt drunk by the way the driver was acting and driving. I thought to myself has it gotten so bad that they don't have any fear of the law? Surely not. I have noticed quite an attitude change lately in those who appear to be illegals. They are rude, very disrespectful and the numbers are growing. These people are rewarded every day for coming into our country and breaking the law.
It is time something is done. Let your elected officials know that now is the time to do something and if they don't you will do everything in your power to see that they are voted out of office. Now is the time........and Please Hurry.
More to come
Lonny
When I was a young man working in West Texas I worked around many illegal aliens. For the most part they kept to themselves, were very respectful of our culture and our laws and those who enforced them. They made sure they were hidden from the authorities and didn't stand out any more than they did. My how things have changed.
As I drive down S. Cooper street on my way to work I see every day 10s of illegals standing waiting for someone to pick them up for work. They have no fear of being picked up by the authorities, they could care less if a policeman drives by, they know that the border patrol is not going to come by. This lack of fear is underpinned by all the special interests who protect them and line the pockets of the lawyers and politicians. It is business as usual for those who could care less about our society and the problems that rampant disregard for the law brings. To me this is something that is as defining for our future as much as anything. If this law is ignored and no one cares why should anyone obey any law. What a great message we are sending. A solution must be found.
It all became very real to me yesterday when I was almost ran off the road by two men who I would bet were illegals. They did it on purpose and were laughing during the entire ordeal. They were openly drinking and no doubt drunk by the way the driver was acting and driving. I thought to myself has it gotten so bad that they don't have any fear of the law? Surely not. I have noticed quite an attitude change lately in those who appear to be illegals. They are rude, very disrespectful and the numbers are growing. These people are rewarded every day for coming into our country and breaking the law.
It is time something is done. Let your elected officials know that now is the time to do something and if they don't you will do everything in your power to see that they are voted out of office. Now is the time........and Please Hurry.
More to come
Lonny
Sunday, November 25, 2007
BLOGGER VACATION
You may have noticed (or not) that I have been on Blogger Holiday for the past few days. It is concerning to me that I have been a Blogger for less than one full month and for some reason I hit a wall. Yes it is true my brain checked out on me and I had a problem coming up with anything that I thought was worth blogging about. There must be a real correlation between coming up with witty thought provoking comments and the amount of Pecan Pie and Miller Lite that is roaming in ones blood stream at any one given time. I did continue to hope that when most of the toxins were free from my body that I would have something that might be worth talking about.
Here goes:
Sunday morning I was relegated too, watching a little Sunday morning TV. I must admit I am one of those people who have almost entirely been convinced by Fox News that I can’t trust anything said on any of the other networks. Honestly I am almost there but from time to time I stray a bit.
The banter on the show I chose was the same as most days on most of the shows. First on the list was the war in Iraq, followed by the rest of the problems in the Middle East, all being commented on by a number of people who all have opinions some more convincing than others. Honestly the whole thing scares me quite a bit. I am not so scarred of the reality that I might get blown up anytime soon but in something that is entirely scarier.
When I look at the politics of the day in regards to the race for the President, I want to run for cover, move to Cancun, or wall myself up in a cave with enough food to last me till the end. Do any of us think there is anyone out there who can truly lead a country divided by Partisan Politics and special interests? I look at things like illegal immigration, the broken health care system, and the loss of ethics and family values and wonder how much trouble we are truly in. My guess is our enemies have a better idea than we would hope to imagine.
My opinion is we had all better get active in the political process and be heard by those who represent us or claim too. If there is still something politicians are scared of is being voted out of office. I personally am not active enough in the process and should be. On the other hand I am more convinced than ever that the power still lies within the people who elect these so called leaders to power. Just look what happened when the people spoke up to defeat the last immigration bill. My challenge to you today is to be heard, loud and often. Whatever you choose to do…………. Please hurry.
More to come
Lonny
Here goes:
Sunday morning I was relegated too, watching a little Sunday morning TV. I must admit I am one of those people who have almost entirely been convinced by Fox News that I can’t trust anything said on any of the other networks. Honestly I am almost there but from time to time I stray a bit.
The banter on the show I chose was the same as most days on most of the shows. First on the list was the war in Iraq, followed by the rest of the problems in the Middle East, all being commented on by a number of people who all have opinions some more convincing than others. Honestly the whole thing scares me quite a bit. I am not so scarred of the reality that I might get blown up anytime soon but in something that is entirely scarier.
When I look at the politics of the day in regards to the race for the President, I want to run for cover, move to Cancun, or wall myself up in a cave with enough food to last me till the end. Do any of us think there is anyone out there who can truly lead a country divided by Partisan Politics and special interests? I look at things like illegal immigration, the broken health care system, and the loss of ethics and family values and wonder how much trouble we are truly in. My guess is our enemies have a better idea than we would hope to imagine.
My opinion is we had all better get active in the political process and be heard by those who represent us or claim too. If there is still something politicians are scared of is being voted out of office. I personally am not active enough in the process and should be. On the other hand I am more convinced than ever that the power still lies within the people who elect these so called leaders to power. Just look what happened when the people spoke up to defeat the last immigration bill. My challenge to you today is to be heard, loud and often. Whatever you choose to do…………. Please hurry.
More to come
Lonny
Thursday, November 22, 2007
THANKSGIVING 2007
Karren rolled out early this morning to make the dressing. I went along to stir and cut and chop and make coffee. I am not real handy but sometimes I can even surprise myself. As I was stirring I was thinking about the day and my thoughts seemed to go back to the times I remembered spending when I grew up and the many times family and friends gathered at Thanksgiving. I thought really for me Thanksgiving is about the good times and the memories of the past and the anticipation of those to come.
These days it is easy to think of the multitude of problems we seem to have but when I think of generations past the problems of the day don't seem so bad. It is for some reason much easier to focus on the bad and not the good. There is a passage in the bible that says something like don't worry about the problems of the day, there will be plenty to worry about tomorrow. Good advice for me especially.
On this day I will do my best to give thanks for all those who protect us and for all those who care for us and for all those who love us past and present. Just think a minute, I bet your list is as long as mine.
God bless you and yours and have a great Thanksgiving.
More to come
Lonny
These days it is easy to think of the multitude of problems we seem to have but when I think of generations past the problems of the day don't seem so bad. It is for some reason much easier to focus on the bad and not the good. There is a passage in the bible that says something like don't worry about the problems of the day, there will be plenty to worry about tomorrow. Good advice for me especially.
On this day I will do my best to give thanks for all those who protect us and for all those who care for us and for all those who love us past and present. Just think a minute, I bet your list is as long as mine.
God bless you and yours and have a great Thanksgiving.
More to come
Lonny
Wednesday, November 21, 2007
POLITICIANS TO THE RESCUE...
As is the norm I suspect after the cows are out of the barn is when someone starts worrying about closing the back door. So it is with the politicians who now are concerned about predatory lenders and those that they destroy. Lets keep in mind that predatory lending has been around for at least the last decade. The house passed a bill, house bill 3915, which is called the anti predatory lending bill, (I think). There are some good things about it but the in my opinion overall a big waste of time and effort. I doubt the crooks and thieves are sitting around stressing out over a law that has little or no hope of ever being enforced if it does pass.
In my opinion this bill has very little hope of becoming law. The reason you ask? There is no way to adequately define predatory lending and once all the well intentioned (whatever) politicians try to define it will certainly die a slow and agonizing death. Other politicians are now coming to the rescue with their own versions that try to fix what is wrong with the original version. Another problem is that it is hard to enforce the laws that are on the books that one can define like selling drugs, stealing cars, murder, etc. If a law is passed that has provisions that are open to interpretation then what is the likelihood anyone can or will enforce it. HB 3915 says for instance that if a lender refinances a home then that loan must have a “net tangible benefit” to the consumer. Now if you took all the possible combinations of why a consumer wants to refi their home and you let all the lawyers argue whether they got a net tangible benefit there would be no end. For instance if you wanted to refi your loan to lower your payment but you extended the term on the loan which over the long term made you pay more then would that be a net tangible benefit. I wonder what the odds are that the people who enforce such laws are going to sit around, look at every loan that is made and try to enforce a ridiculous law that no one can define.
The problem is that the lending process is so confusing that the predatory lenders will survive whatever law might be passed and the only group that will win in the end of this mess will be the lawyers who will always get paid.
The politicians need to be fighting the battles that do count and trying to enforce the laws that are on the books as a starter. But in thinking about it if they were to do that then they would not be politicians would they.
If you are getting a loan you better trust the person you are dealing with. Predatory Lenders are out to get you and they know what they are doing. Buyer beware.
If you are interested there is a great article that describes the reality of the Predatory Lender, click on this one.
http://www.nytimes.com/2007/11/20/opinion/20herbert.html?hp
More to come
Lonny
In my opinion this bill has very little hope of becoming law. The reason you ask? There is no way to adequately define predatory lending and once all the well intentioned (whatever) politicians try to define it will certainly die a slow and agonizing death. Other politicians are now coming to the rescue with their own versions that try to fix what is wrong with the original version. Another problem is that it is hard to enforce the laws that are on the books that one can define like selling drugs, stealing cars, murder, etc. If a law is passed that has provisions that are open to interpretation then what is the likelihood anyone can or will enforce it. HB 3915 says for instance that if a lender refinances a home then that loan must have a “net tangible benefit” to the consumer. Now if you took all the possible combinations of why a consumer wants to refi their home and you let all the lawyers argue whether they got a net tangible benefit there would be no end. For instance if you wanted to refi your loan to lower your payment but you extended the term on the loan which over the long term made you pay more then would that be a net tangible benefit. I wonder what the odds are that the people who enforce such laws are going to sit around, look at every loan that is made and try to enforce a ridiculous law that no one can define.
The problem is that the lending process is so confusing that the predatory lenders will survive whatever law might be passed and the only group that will win in the end of this mess will be the lawyers who will always get paid.
The politicians need to be fighting the battles that do count and trying to enforce the laws that are on the books as a starter. But in thinking about it if they were to do that then they would not be politicians would they.
If you are getting a loan you better trust the person you are dealing with. Predatory Lenders are out to get you and they know what they are doing. Buyer beware.
If you are interested there is a great article that describes the reality of the Predatory Lender, click on this one.
http://www.nytimes.com/2007/11/20/opinion/20herbert.html?hp
More to come
Lonny
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