On the usual network or cable network shows the Wall Street pundits continue to push the idea that things are getting better regurgitating numbers meanwhile the day traders continue on making money. On Main Street the middle class continues to get beat up and fleeced. One year later after the bail out of AIG we learn that 93 of the 180 billion was passed on to Goldman Sachs and Deutsche Bank (and others) with no possibility of seeing any of it again let alone on how it was spent other than some bonuses.
Meanwhile on the real estate front while home sales are occurring the big story continues to be the lack of acknowledgement by our government that big banks, the secondary market, wall street and others continue to hold the real estate market hostage.
Many foreclosed homes are listed in "unfinanceable" condition marketed 'as is' even though those same banks will not finance the buyer of the 'as is' home because of its condition. The solution to this of course is the FHA 203k loan however you may not be able to get the appraised value needed to meet HUD guidelines. This is not uncommon because banks refuse to sell the homes at a price to accommodate that solution.
Many foreclosed homes are either managed by ill equipped servicing companies or banks. Realtors that list these properties on behalf of these entities are often held hostage because when an offer comes in they send the offer into the banking abyss and it could be months before a response to the offer comes back....if it comes back at all.
We need a floor in the real estate market and the above activity prevents us from getting a floor on prices in fact it facilitates the spiral effect we see today.
Reform was needed in the lending world however the new re-disclosure act is laughable for the most part and frankly more cumbersome and in fact can hurt the consumer.
The appraisal reform is ridiculous on so many levels. We are the only industry that cannot talk to our vendor (the appraiser in advance) while performing the loan request on behalf of our client. That conversation could save the consumer money and time because we would be able to pick a competent appraiser that understands the market they live in vs. the appraiser (we know nothing about) we get driving 60 miles to do the appraisal.
Lenders underwrite the appraisal to confirm proper standards are used plus the appraisal is run through some BS system to make sure the value is really really there so why we are prevented from having conversations and picking a competent appraiser vs. the amateurs we have been subjected to in this new world is baffling to me.
The same banks make money off the consumer on this set up. In fact it is a new fee in addition to the other fees already charged so remember any time any regulation comes down it usually means more money out of the pocket of the consumer right into the pocket of the banks. The bank lobby lives on and strong! So of course the banks had no problem with this.
Another aspect of this appraisal issue is that appraisers traditionally compare home sales within a reasonable distance from the home they are appraising. In the past a foreclosed home would be considered a hardship case and not used as a comparable because it would not reflect the market. How does that apply today? Ask an appraiser or ask a Realtor about the challenges of valuation. My point is we need experienced appraisers and we are expected to navigate blindly and that is wrong and makes no sense.
NO the real estate market is not improving it is just limping along.Bernanke announced yesterday that ‘technically' we are in a recovery. Well I'm here to tell you technically the government is inept and the real estate market is still in shambles with more foreclosures coming however there are simple COST NEUTRAL tools to bring it back.
Bring back the down payment assistance program for FHA HUD loans.
(I would bet those that put down 20 or 30% down three years ago and since lost their job wish they still had the money in the bank. My point is from the beginning of time the person with the gold measures the ability of their applicant to repay the loan. Down payment is part of that only when someone is buying more than they could normally afford.) The down payment is used to keep the payment affordable and has nothing to do with the applicant's ability to repay the loan. Job loss and a declining market make the down payment irrelevant in most instances.
Force banks/servicers/investors to respond to offers and negotiate in good faith realistically so purchases can conclude within 60 days from time of offer.
If there are deficiencies in the collateral (House) preventing financing the bank/servicer should be required to fix prior to close at their expense.
Force banks/servicers/investors that hold 1st & 2nd lien position notes to negotiate and come up with a formula so that someone leaves the table with something and the current owner can move on with their lives relatively unscathed. The purchase should conclude within sixty days from time of offer.
Eliminate the HVCC appraisal process and give us back our ability to pick our own appraisers. The appraisers are licensed bonded and held to standard and practices. Lender underwriting community is there to make sure the appraiser is held to that plus the lender has another system to review the work after underwriting so the notion an appraiser is pressured to create a value is just nonsense and certainly not the force behind the calamity we face to day. I didn't hear a peep about appraisers but I heard plenty about the rating companies!
Eliminate CREDIT SCORING ..... Banks (and insurance companies) are making a bundle using this as a method to increase rates and costs. It is discriminatory by its very nature and its only purpose is for lenders and insurance companies to jack rates regardless of the circumstance behind the score. It eliminates our ability to use the tried and true tool and that is real risk analysis (the ability to determine a borrowers ability to pay back the loan).
Life happens on life terms or you may pay your bills on time but the magic box says we don't like the way you manage yourself even though you have never had problems in the past. You are not good enough so your score goes down and the cost for you goes up. If the credit scoring system is so good why are we in this financial calamity today? You can't blame sub-prime. Prime loans are defaulting too and the main reason is loss of job.
Good old-fashioned underwriting or risk analysis is better than any regulation. That's how we did it many years ago and many people (even with distressed credit) obtained loans because it made sense and they carried on successfully.
Write your representatives if you want to get out of this mess.
I wish us all well.