Fannie Mae and Freddie Mac are at it once again! While I understand the need for some of the changes (very few actually) made over the last several years many have become a hinderance to a housing recovery. The pendulum has swung from very little to way too much. Ok! OK! I'll get to the point.....
I am talking about the changes to "Risk Based Pricing." RBP for short. RBP has been around for quite some time now. I am not opposed to this. Basically what RBP does is reward those who are deemed less risky borrowers and charge a premium for those who are deemd more credit risky. Think of the difference between a 640 credit score and a 740 credit score. I remember when I was a Broker many years ago, one of my lenders sent out a matrix that showed the statistical likelyhood of someone defaulting for every 20 points up or down in credit score. Credit score is just one part of RBP.
Few people know that just about every bank out there gets their money to lend from these two government agencies so they set the guidelines, parameters, and matrixes. What they are proposing now to the RBP scenario could put a big damper on any momentum or recovery in the housing market. Basically what they are proposing is that anyone who is getting a loan is a RISK!!!!
For example: You have a buyer with an 800 credit score who is going to put 25% down. Great credit, good money down. Seems like a low risk borrower. Well not according to what may come out. This borrower would be charged what is called a .25% hit or add on thereby increasing their interest rate.
Another example: If you have a borrower who has a 679 credit score and is going to put down the same amount? They will be charged a 2.25% add on/ hit!!!!!
Condo? .75% hit/add on Adverse Market? .25% hit.
If this happens it could push good buyers into rentals. Stay aware of what is happening and stay active. What happens in the lending arena could not only affect my livelyhood and the service I provide to my clients but it will trickle down in to the Realtor arena as well.
Showing posts with label housing crisis. Show all posts
Showing posts with label housing crisis. Show all posts
Tuesday, January 11, 2011
Thursday, March 5, 2009
Are you prepared to live in Your Parent's Basement?
Its been awhile since I posted so I owe you 2 posts:)
Ok, so the title is a scary thought to most of us, and I won't say that the picture I am painting applies to all, but there are some reading this or others you know that will be experiencing this reality soon.
The Economy
Watching the news lately is painful and everyday it seems to get worse.
Two days ago it was about the stock market dipping below 7,000 points. Today, two stories are dominating the news. First Citigroup's stock has fallen under $1 per share, which considering their 52 week high was over $27, is simply ridiculous. Citi has its hands in so many pies, the destruction of this company would have consequences that are hard to imagine.
GM was also in the news today. An accounting firm basically said that there survival is doubtful the way they are going. Bankruptcy seems likely, the company ceasing to exist is a possibility.
What does this mean for Housing?
If any or most of these things come to fruition it means job losses. It means foreclosures. It mean bankruptcies. This is very good news for the financially stable as they will continue to be able to buy homes at prices that seem way to good to be true. But where do the jobless and homeless turn? Mom and dad might be the answer.
Mom and Dad, can I come back?
Most of us would never dream of having to move back in with our parents, but for many in America this is becoming a reality. A sad, terrifying reality for many, or at least an embarrassment for most. It is tough to "fail" and have to go back to the place where you were taken care of as a child, only to have to be taken care of again.
In other cultures this is actually not that big a deal. Many people live with their extended families to save money and it is considered somewhat normal. A crowded house to some is a good thing.
The larger question that should be asked is why do I no longer own my home and my parents still have theirs and in many cases it is paid off?
The answer lies in a generational shift that has occurred from our parents to us. Debt was frowned on more when our parents were originally buying homes. Banks actually wanted you to put some of your own skin in the game (they are getting back to this now.) Once they were in them, they stayed in them. My parents have lived in the same house for 30 years. The generation before them was even more removed from us today. My mother grew up in a household of 7 people with one bathroom and about 1000 square feet. People made due, they got by somehow.
Today is different. We need BIG, we need a room and bathroom for everyone in the home. When we can't pay for things we charge them and hope for money tomorrow to pay the bill. What happened to us? When did enough not become enough anymore?
The reality is I think this country has spent its way back into how things use to be. I am sensing a shift in thinking towards small is okay and big is unneeded.
Ok, so the title is a scary thought to most of us, and I won't say that the picture I am painting applies to all, but there are some reading this or others you know that will be experiencing this reality soon.
The Economy
Watching the news lately is painful and everyday it seems to get worse.
Two days ago it was about the stock market dipping below 7,000 points. Today, two stories are dominating the news. First Citigroup's stock has fallen under $1 per share, which considering their 52 week high was over $27, is simply ridiculous. Citi has its hands in so many pies, the destruction of this company would have consequences that are hard to imagine.
GM was also in the news today. An accounting firm basically said that there survival is doubtful the way they are going. Bankruptcy seems likely, the company ceasing to exist is a possibility.
What does this mean for Housing?
If any or most of these things come to fruition it means job losses. It means foreclosures. It mean bankruptcies. This is very good news for the financially stable as they will continue to be able to buy homes at prices that seem way to good to be true. But where do the jobless and homeless turn? Mom and dad might be the answer.
Mom and Dad, can I come back?
Most of us would never dream of having to move back in with our parents, but for many in America this is becoming a reality. A sad, terrifying reality for many, or at least an embarrassment for most. It is tough to "fail" and have to go back to the place where you were taken care of as a child, only to have to be taken care of again.
In other cultures this is actually not that big a deal. Many people live with their extended families to save money and it is considered somewhat normal. A crowded house to some is a good thing.
The larger question that should be asked is why do I no longer own my home and my parents still have theirs and in many cases it is paid off?
The answer lies in a generational shift that has occurred from our parents to us. Debt was frowned on more when our parents were originally buying homes. Banks actually wanted you to put some of your own skin in the game (they are getting back to this now.) Once they were in them, they stayed in them. My parents have lived in the same house for 30 years. The generation before them was even more removed from us today. My mother grew up in a household of 7 people with one bathroom and about 1000 square feet. People made due, they got by somehow.
Today is different. We need BIG, we need a room and bathroom for everyone in the home. When we can't pay for things we charge them and hope for money tomorrow to pay the bill. What happened to us? When did enough not become enough anymore?
The reality is I think this country has spent its way back into how things use to be. I am sensing a shift in thinking towards small is okay and big is unneeded.
Subscribe to:
Posts (Atom)
