I CAN TELL BY THE NATURAL EVOLUTION OF THIS BLOG FROM REAL ESTATE CHAOS AND DROPPING PRICES TO FLOORING SAMPLES THAT STRONGLY SUGGEST THAT THIS REAL ESTATE MESS IS WINDING DOWN.
THE BLOG USED TO FOCUS ON REAL PROBLEMS AND THE MESS OUT THERE BUT NOW IT HAS SHIFTED TO MUNDANE NEWS. TO ME THIS HINTS THAT THE END OF THE BUBBLE IS OVER.
JUST MY CASUAL OBSERVATION.
It might have been the all-caps that got me, but let’s address his observation. Transparency is a good thing, and if all observers were weighing the most critical factors every time they made a decision, we’d all be better off for it.
Is the Housing Bubble over?
The inflating of the housing bubble appears over. Not only do buyers have to qualify, they must have skin in the game. And they’re bringing the dough – of the 2,448 detached sales in NSDCC last year, 525 were all-cash purchases, or 21.4% of the total. We saw all year that another 30% to 40% more of the homebuyers were using at least a 30% down payment:
If we figure that at least half of the buyers are in for the long-haul, it’ll help bring stability to the marketplace by not adding many new defaulters to the environment. But we still have over-hang, the rest of the underwater/underemployed folks to work through the system.
Could the rest of the clean-up cause more double-dip?
Everyone has to decide for themselves about how they think the future will unfold/unravel. We’ll review here every piece of relevant news, and encourage those reading to offer their opinions – that way, we all learn. It’s been working great so far, let’s keep examining!
Here’s something that could play a role in how it turns out:
This from Diana Olick at cnbc.com:
A recent report from the folks who oversee the TARP (the Congressional Oversight Panel) said that the Treasury has spent just $4.3 million on HAFA for 661 short sales. So Treasury, last week, decided to change the rules a bit:
- HAFA no longer requires that servicers verify the borrowers finances
- HAFA no longer requires servicers to determine if the borrowers monthly payment is higher than a 31 percent debt-to-income ratio.
- HAFA no longer requires second-lien holders to agree to accept 6 percent of the unpaid principal balance owed them, up to $6,000. Servicers now decide who gets paid how much, with a cap still at $6000.
- HAFA now requires borrowers seeking a short sale get an answer/agreement within 30 days.
The last one is a no-brainer, as delays have scuttled far too many deals that could have benefited both borrowers and lenders.
I’m less thrilled with the verification of borrowers’ finances and DTI ratio. If you don’t have to verify anything about the borrower, other than a so-called, “hardship affidavit,” then that opens the program up to all kinds of scams by borrowers who don’t need to sell their home but just want to get out from under a bad investment. They may be delinquent on their loans by choice, not by necessity.
I’m sure the folks who had no problem lying on their mortgage applications would also have no problem fabricating some kind of “hardship.”
As for the second lien issue, that’s just a big bad can o’ worms that needs far stricter guidance, not more lenient guidance.
Second lien-holders, many of whom are the major banks/servicers themselves, have been the fundamental roadblock to short sales so far.
Here they go again, letting borrowers off the hook. If the sellers don’t have to provide their financials, it could help the short-sale market – some of the biggest delays are from the sellers not supplying their paperwork, or being over-qualified to short-sell. But if it’s easier to get a short sale, could it cause a run of additional takers? Probably, and it would clog deadbeat-alley even further.
Diana is right though, the second-lien issues are a big hurdle – if you think that short-sales will be a pivot point to how the bubble deflates, keep an eye on how the second-lien issues get resolved. My opinion? Short sales are still long and arduous, there’s no improvement yet in getting them closed – and likely to stay that way. Short sales are a great can-kicking device for servicers.