I work for a bank, I'm a loan officer. This year we went from 580 minimum Fico for Government loans (VA/FHA) to 620, then to 640, soon to be 660. Appraisals now have to go through an HVCC system (on conventional loans) that are holding up closings, reducing values and costing buyers more. FHA just annouced today guideline changes that will essentially put most brokers out of business January 1st 2010, Taylor Bean & Whitaker, previously the 4th largest Ginnie Mae servicer and most lenient lender (privately held company) got taken over by the feds and shut down in July. The $8000.00 tax credit for 1st time homebuyers (which essentially became a way to go FHA with no down payment) ends October 31st. And....as mentioned above, FHA is going to either need a bailout themselves or they will dramatically increase the fees to do an FHA loan. The fed buy back of Treasuries and Mortgage backed securites ends the end of November (unless one or both programs are extended, we'll probably know next fed meeting).
Folks, the bubble was all about giving a loan to anyone who had a pulse. That credit is long, long gone, and IMO getting harder to get. No more easy money. 49% of the USA has a credit score below 669. I am guessing (based on actual sales experience this year) that a good 1/3 of all people who could buy a home two years ago are now toast. That doesn't even include people who are now unemployed and without work or who just recently go re-employed (2 years work history now, no gaps for a house loan). The housing market has further to fall and will not bounce back to prior levels for a long, long time. Sorry everyone. Sorry.
Saturday, September 19, 2009
"Most brokers out of business January 1st 2010"
Interesting comments left by a reader on a recent MarketWatch.com article:
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It would be helpful to explain /why/ this FHA guideline would "put most brokers out of business." It is not reasonable to expect your readers to take on face value claims made by anonymous folks on MarketWatch.
ReplyDeleteyeah as I said before...if prices dont drop at least 40% here in the DC area, then they will be flat for at least 50 years.
ReplyDeleteWow. This would be is really good news. Hope you are correct! (Party like it's 1999....)
ReplyDeleteA handful of patience is worth more than a bushel of desire!
ReplyDeleteIt would be helpful to explain /why/ this FHA guideline would "put most brokers out of business."
ReplyDeleteRead the link provided. It tells you all the proposed upcoming rules. Looks like the gov't is finally starting to do the right thing and actually care about the loans it'll insure. Although the whole FHA premise is stupid.
Then what are the banks going to do with all the foreclosed homes they have been sitting on and continue to accumulate?
ReplyDeleteThey would be creating a situation where prices could drop precipitously severely devaluing their entire portfolio of mortgage investments.
Peter Sciff also does a great job explaining and acknowledges this huge issue.
ReplyDeletehttp://www.youtube.com/watch?v=JZi7uquwZKQ
You are wrong. The USDA is offering 100% financing for "rural" properties.
ReplyDeleteThese rural areas include suburbs on the fringes of San Francisco, and many areas just outside urban boundaries in Oregon
(one broker closed 6 USDA loans last month alone.)
This is about the worse arguement for further house declines I have read and I have read a lot of them. The main arguement for homes dropping more appears to be based on the fact that loans are now harder to get now. The writer however seems to ignore the following facts.
ReplyDelete1. Sales are up despite the increase in difficulty of getting credit.
2. The tax credit does not provide much direct assistence to peoples down payment because in generally people have to purchase the home before they can get a credit for that purchase.
3. over 2/3 of the population has a credit score of over 650 so by increasing the standerds to 640 or 660 you are only making it harder for the bottom 1/3rd of the population to get credit. My guess is the majority of the people in this braket should not be in contention for a nice homes in the first place.
1. Sales are up despite the increase in difficulty of getting credit.
ReplyDelete1% up on a 10000% decline is still 99999.99% lower than the norm.
3. over 2/3 of the population has a credit score of over 650 so by increasing the standerds to 640 or 660 you are only making it harder for the bottom 1/3rd of the population to get credit. My guess is the majority of the people in this braket should not be in contention for a nice homes in the first place.
I agree, but the bottom 1/3rd are the people who got home loans and drove prices up. They no longer can and that will drive prices down.
Incomes are also flat over ten years from 1998 to 2008. If home prices track inflation then why did prices raise over 70% in the same timeframe?
ReplyDeleteThe answer-- Easy Credit in the form of No Doc, no downpayment and lower FICO backed loans.
Now there is no credit.
Put 1 and 1 together.
The bottom isn't even close... And we WILL overshoot the bottom.
Where did you get incomes were flat. According to http://www.census.gov/hhes/www/income/histinc/f07ar.html Income is up about 25%. If you do the research I bet you fill find that the DC numbers are higher than that. I why do people make up stuff to argue a point. Please back your data.
ReplyDelete"1. Sales are up despite the increase in difficulty of getting credit.
ReplyDelete1% up on a 10000% decline is still 99999.99% lower than the norm."
Although sales maybe below norm, I do not think they are off more than you think. I personally would not consider sales between 2000 and 2005 to be norm because that was a period of high buying. If you go back to the early 90s and 80s sales were very low.
The REIC is on its way out!
ReplyDeleteI look forward to seeing fewer "loan correspondents" as fewer of them have 1M in tangible assets and they step up to funding a public accounting firm audit and they must now indemnify FHA eligibility on their own backs. This really means that purchase loans are more expensive.
As Sandra Rinamato (Realty whore)says, "most property virgins just don't realize how little purchase price actually affects their monthly payment!"
You seem to forget that the whole reason prices inflated over there actual value is due to the fact banks and lenders were willing to give loans to anyone with a pulse therefor creating this whole mess and now your upset over the fact they have placed realistic standards on people who want to borrow money with credit that shows they are not capable of paying there bills as required. Society has come to beleive that if you want something just go borrow the money. Make loans harder to get and people will take there credit obligations meanigful.
ReplyDeleteCool and that i have a super supply: How Much Are House Renovations Stardew Valley victorian renovation
ReplyDelete