I have the answer to fix the housing Market
Sounds like a heck of a plan to me. Take the time to read this post. I think some great points are being made here! Well done Barry!
Have you ever thought you had the answers to fix this housing market and there is no way that any congressman or senator will even hear you out much less run with the idea and save our economy or our way of life. Besides what do we know right? We are just a bunch of dumb Realtors and conniving Mortgage brokers out to make money, close loans, and stick it to anybody we can. That is a load of crap some of the smartest people I know are Realtor and Mortgage professionals and I think we got the short end of the stick when all this went south a few years back.
Yeah there are some bad apples but that is in every business.
The Mortgage companies got all the blame for writing bad mortgages and giving subprime loans, arms loans, Stated Loans but that’s another story all to its self. My point, and I’ll make this brief is, we did have guidelines to follow and the main one was DTI -50%, That was a good rule of thumb yes, some went higher but for the most part it was a max of 50% DTI. So, here is my problem with blaming everything on the Mortgage industry “WHAT ABOUT THE CREDIT CARD COMPANIES” after I closed on a mortgage I had built a relationship with most of my clients and I can’t even count how many called me after the closing and said hey I just got this credit card in the mail with a $5000 balance. {The point is and I don’t know or claim to know the ins and outs of the credit card approval process it just seems to me if you have a mortgage they really like to give them out and guess what “THAT 50% DTI RATIO IS OUT THE DOOR”} I have a really good friend with 4 CAPITAL ONE CREDIT Card's and his minimum payment on one of them is $15 of which $4.87 comes off the balance.
My point most of the time after a mortgage was closed the majority of Homeowner could afford their house payment.
My name is Barry Lynn Miller and I was in the Mortgage Industry for most of my career and I have been an Alabama Real Estate agent for right at 3 years now. After working both sides of the fence so to say “I think I may have the answer to fix this Housing Market”
Some time back I had several long phone conversations with Chris Boelter (a Mortgage Professional) and this was about a year before FHA started feeling the crunch. For the most part this idea belongs to Chris Boelter, but through our conversations back and forth about what would work and what wouldn’t work we come up with FHA “SAVE” just like say your FHA 203b or your FHA 203k it would be it’s own program with it’s own guidelines and restrictions.
The gist of our conclusions breaks down like this:
- Up until recently the Federal Housing Administration (founding in 1934) was the only government agency to not lose money (better yet it didn’t cost the U.S. tax payer money.) In 1965 FHA became part of the Department of Housing and Urban Development (also known as HUD) which is the FHA we all know today.
- There are thousands of HUD foreclosures on the market which is killing the New construction market, I don’t know the numbers but I would bet there are thousands of families living with mom, dad, sister, or other family members of some sort who would love to be able to buy a home.
- Those family members are working and do have jobs they just can’t afford that big house on the hill any longer.
Ok let’s recap thousands of foreclosures and thousands of families needing homes they can afford.
FHA SAVE IN ACTION
“Take those thousands of HUD foreclosures and thousands of homeless families and lets play a little match maker.”
Requirements, Guidelines and Laws that must be followed:
- Credit will not be the main deciding factor {what the buyer needs to explain or demonstrate is what factors caused the bad credit issue (job loss, sicknesses, ect.) and what they have done to correct the problem
- 3-4% minimum FHA funding fee to protect HUD and the tax payer for Loses
- Minimum of 5% down - no gifts of any kind {remember the buyer has to show improved financial conditions}
- Max DTI ratios of 29%-39%
- Make it illegal for any company to fund any loan that allows the buyer to exceed the max ratio of 39%
What would be the effect on HUD? I personally think this program would get HUD back out of the RED and profitable again. HUD is the worst when it comes to unloading a foreclosure at a reduced price I have seen some homes go for 10% of value which is crazy in my book but for the most part I would guess the true number is around 60-70% on the dollar. Take those same homes and use them for this program and hold the value to cover the balance of the original loss or even get fair market value and make money. The demand on these houses would go crazy and so what if you have a 15% delinquency on this FHA SAVE product you have already solved 85% of your original problem and guess what. If you take those homes that make up the new 15% and do it again your original problem is now down to 3%. You would have to be real aggressive to start with and get those foreclosures off the market. What I see after a while is a data base of buyers waiting for a FHA SAVE HOME to come available (oh and while they wait how about some credit counseling) and the HUD foreclosures of today being a thing of the past.
What would be the effect of the Housing Market? Well, guess what? This one is simple! If there are no foreclosures on the market to speak of or a drastic reduction and property is moving, the logical next step is new home construction, this time let’s get some guidelines in place, in 2006 it was just too easy to get a contractors license, My cousin had to go to cosmetology school for 2 years to cut hair. There is something wrong with this picture Yes we will have a grandfather clause for the seasoned Contractors, because I think the fly by night contractors are bust anyway I would imagine.
What would be the effect on the economy? The Housing market pushes our whole economy, if we are building then guess what; Lowes and Home Depot hire more employees. The sub contractors have a little pocket change to give the little wife and she goes out and buys her some new shoes and catches lunch with the ladies at the Steak House. Guess what? Wal-Mart, Target, etc need new employees. Mrs. Smith just got a new job at the Steak House and she can afford that new car she’s had her eye on. You get the picture Planes, Trains and Automobiles all revolve around the Housing Market.
What would be the effect on taxes and the deficit? Look at history when President Bush lowered the taxes what happened? The Treasury Department took more cash in! “Yeah, that is surprising but true”
If the unemployment rate is down the government has more people to tax and less people to supplement-there by allowing more of those funds to be applied to the national debt.
Who would have ever thought that a Mortgage guy (Chris Boelter) and a Alabama Realtor (Barry Lynn Miller) could come up with a plan to fix the Housing Market over the phone just throwing ideas back and forth at each other until it made since. I am not claiming that this idea would ever work; I honestly think getting the right people to head it up would be your biggest problem.
All I am saying is it’s a start so any ideas to make it better would be appreciated and welcomed
Please note: FHA SAVE is a fictional government program idea that Chris Boelter and Barry Lynn Miller came up with while brainstorming one night we gave it a name to transition the conversation it is not an official FHA product. Yet!
Sincerly Yours
Barry Miller "Exective Team" with Keller Williams
For all your Alabama Real Estate needs give me a call or visit one of my quick links:
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