Feds tighten mortgage rules

NEW -> Contingent Buyer Assistance Program
xsocal land merchant_IHB

xsocal land merchant_IHB

New member
<p>The FEDS are finally getting into the game by <a href="http://biz.yahoo.com/cnnm/071217/121707_fed_walkup.html?.v=1&.pf=loans">tightening up on the mortage industry</a>. What do the members of this group think the new rules will do to help or hurt <u>future values</u>?</p>

<p>With the government getting more involved both in the upfront rules for future loans and the "bailout" will it help or hurt the <u>long term situation.</u></p>

<p>My experience has shown that the government is really good at two things: <strong>1. Creating a shortage of things people want. 2. Creating an excess of things people don't want.</strong></p>

<p>This would lead to a shortage of housing in the future after all of the current REO and forclosures are rinsed through the system. That would again create a high demand which will stabalize or increase prices. If you look at history after the RTC bailout of the Savings and Loan failures we had a huge run up in prices due to the fact that builders hadn't been able to get construction or A & D money for several years. The banks had discounted all of the land and completed homes but there was little new condstruction. An example is Irvine Company delaying several large planned communities. When they hit the market they will be priced to the market at that time not todays lower prices.</p>

<p>This is part of the real estate "boom-bust" cycle. </p>

<p>What say you?</p>
 
<p>xlm,</p>

<p>I long suspected that the easy credit was a set up from our government to generate revenues for itself (taxes)--how else could one explain about the subprime mess?. Now, no one can even borrow money. Talk about a stagnant real estate market.</p>
 
I like proof of income too. Why should people who don't declare it on their taxes get to use it for their mortgages - esp. if the mortgages are then insured by a pseudo govt agency.
 
nir



I sold new homes in the early 80's with 17% rates, 20% down, 28/33 DTI and we did 3,2,1 buydowns by hand with escrow holding the funds to make the deferred part of the payments. Buyers had to have min of 2 years at a job to use income to qualify. People wanted to buy but funds were not available. Investors (non owner occupied) were 30% down and had to qualify with 85% of rent used as income. It was very much "real world" for investors under those lending guidlines. For some of the younger readers here this was before FICO scores and each lender reviewed each credit report on its own merrit.



We may see a return to those days. People waiting for the bottom may be surprised at how hard it may get to qualify.



As far as taxes we will see the counties and state start to whine due to the slowing economy and lower doc stamps. They had a windfall at both levels. I think the Governator is already asking for 10% cuts in each department and possibly raising the car registration fees.



As far as the subprime mess I feel it is explained by GREED at all levels.



Enjoy!
 
Sure, repeal the car tax (2003), but raise the reg fees....makes perfect sense. <a href="http://gov.ca.gov/press-release/3332/">Governor Schwarzenegger Repeals the Car Tax - Press Release by Governor Arnold Schwarzenegger</a>
 
<em>"People waiting for the bottom may be surprised at how hard it may get to qualify."</em>





They will also be surprised just how expensive a cheap home is. The reason prices will continue to drop is because the same debt service payment will service less debt. This is what happens when there is a credit crunch. When prices are at the bottom, people will still need to stretch (28%DTI) to buy a home, and many who qualified during the bubble will not qualify under the tighter standards even for much smaller loans.





To respond to the posted question: tighter lending standards can do nothing but bring prices down. The only way we will get a shortage of houses is if the cost to complete a house drops to less than its market value. At that point, builders stop building. We will probably see that in many areas of Riverside county, but not in OC. The Irvine Company may choose to slow down, but others will not in OC.
 
<p>IR,</p>

<p> This is what I was trying to warn the guy who wanted to walk away from his place. He was LUCKY he got into the house in the first place. Once he damaged his credit, I was postulating he woulden't be able to EARN enough or save enough to requalify for another loan. Anyways good luck</p>

<p>-bix</p>
 
It is interesting to speculate where all of these walk-aways will live. I don't think a porperty management company will rent to them (TIC) and I would not take a chance in one of my rentals. Are there any examples that members of this forum know that have actually walked or been foreclosed on and where did they move to?



There may be a whole new class of people who have a hard time finding housing.



Enjoy!
 
<p>bix,</p>

<p>During the easy credit period, I told many of my potential buyers that it was a rare chance to become homeowner. Of course, many took my comment as drumming up sales. Now homeownership is just a dream.</p>
 
<p><em>"Now homeownership is just a dream."</em></p>

<p>No, now it is a nightmare for those who used the easy credit for their rare chance to become a debt holder. </p>
 
<p><em>It is interesting to speculate where all of these walk-aways will live.</em></p>

<p>The LA Times had an article on that on Sunday. Basically property management firms are seeing so many NOD/foreclosure dinged credit reports, they are ignoring them as long as your targeted rent is less than 1/3rd of your income and you backend DTI is not out of whack from flooding your credit cards trying to save the house.</p>

<p><a href="http://www.latimes.com/classified/realestate/printedition/la-re-rent16dec16,1,2025083.story?ctrack=3&cset=true">http://www.latimes.com/classified/realestate/printedition/la-re-rent16dec16,1,2025083.story?ctrack=3&cset=true</a></p>

<p>It's sad that the 1/3rd of income for housing number comes up again, and again, and again and yet people don't pay attention to it when buying a house. </p>
 
<p>awgee,</p>

<p>Hi, how are you?. Thank you for all the tax tips.</p>

<p><em>No, now it is a nightmare for those who used the easy credit for their rare chance to become a debt holder</em></p>

<p>They say a glass can be seen as half full or half empty. In this case, a dream can be either dreamy or nightmareish. </p>

<p> </p>
 
<p>You mean it was a rare chance to be approved for a loan regardless of the ability to pay it back? </p>

<p>Sorry NIR, but that kind of comment ruffles my feathers. Why should home ownership be a "rare chance"? Most people lived in homes owned, not rented, even before the boom. Or was the comment made specifically to people who probably shouldn't be buying things they could not afford?</p>
 
XSocal,


I agree with your sentiments. My rental is becoming vacant this week and I worry that someone will apply before walking away from a mortgage while their credit is still good.





Once their credit is shot, what's to stop them from being late on payments, breaking a lease, etc....their credit is already ruined.





I've been asking lots of questions of people about why they are moving, trying to research their history, but still I wonder if I'll really be able to tell what is happening with their current living situation.





Hopefully my intuition will work out well :-)
 
<p>Cards, </p>

<p> As a apartment owner, i'm WELL aware of this. What I can and do look at is the rest of their credit history. If they have good history with credit cards, no large debt, on time for alot of their other things, then it looks like a good risk. </p>

<p>BUT you know what they say.... "past performance is not an indicator to future performance" pretty much that applies to any and everything in the world....</p>

<p>good luck</p>

<p>-bix</p>
 
House. If after running their credit report, you see a mortgage....that's obviously clue #1. Do some detective work, ask them if they live in the home or rent it out. If they live in it, why are they moving (obviously)....if they rent it, get the name of renter and address of house. Go and knock on the door and see who answers. Also, in rental application have them put their vehicle description and registration plate down. Then go drive by the house and see if the cars are parked out front. Most of all, trust your gut. If it doesn't feel right, it isn't.
 
Yeah...the thread where the guy was asking about walking out on his mortgage scared me a bit. Lots of people were recommending that he apply for a rental now while his credit is still good. That means landlords are going to have to watch out for that and do the kind of detective work you're talking about. Hopefully, the tenants are local...I don't want to be driving all over the state
 
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