The saying: “ With friends like that who needs enemies” comes to mind. We all can agree that banks are the main culprit in our current housing mess. I would also add Wall Street and lax governmental oversight into the mix. But when Washington tries to solve a clear problem the pendulum swings way too far sometimes and now is the sometimes.
In an article today from the Daily Real Estate News the Consumer Financial Protection Bureau unveiled new mortgage rules which will change how buyers get approved for loans. My personal opinion is that these rules will only hurt our fragile and failing housing recovery.
They have created a monster called the “qualified mortgage” whose goal is to not repeat the sins of our past in which a borrower could fog a mirror with their breath and get a loan. Good goal no doubt – but lousy execution for sure.
Here are the criteria:
– Lenders must prove that income and assets are sufficient to repay the loan.
– Borrowers must be able to document their jobs.
– Must be able to show they can still afford all their other debt such as property taxes and home equity lines associated with their homes.
– The lenders will now consider other debt outside the home such as student loans, car loans, etc.
– Monthly payments must be affordable to the borrower.
There are some exceptions to these rules like some refi’s and loans that target low income borrowers but otherwise it covers most future loans and is in force in one year from now.
Now you might be saying that the above rules don’t seem that bad but it’s not the rules that concern me so much as who is creating and monitoring the rules. The Federal Government is not very good at efficiently running programs. Think US Post Office as a shining example.
What we need now to get our housing market back up and running is a slight relaxing of the lending standards because I think the pendulum has swung too far. Two things I can guarantee you will come out of these new rules (in my humble opinion):
- Higher costs to borrower since the additional government oversight will add additional costs to the lenders who obviously will simply pass those costs on to the borrowers.
- With tighter regulations will come less people being able to qualify for a loan and we NEED first time home buyers to be a part of the recovery.
We currently have investors artificially keeping prices from falling further but investors will soon get their fill of properties and we will need first time buyers to fill this void. Unless the government either creates some programs for first time buyers or eases the restrictions it just going to get worse for awhile I’m afraid.
I am talking about the worst parts of California where there are still a very large number of under-water mortgages. Other parts of the country seem to be doing fine but not the central valley of California.
I wish I could report some good news today but I can’t. When I do get some good news you will be the first to hear about it.
My everyday is in the world of under-water mortgages. If you have any questions or concerns about your own personal situation I would be happy to give you a FREE one on one legal consultation. You can call me at 877.442.4577 or send me an email at firstname.lastname@example.org