This is a good idea and long overdue.
In addition, the new proposals announced this week would cap the amount of income that borrowers could devote to mortgage payments to no more than 28 percent of gross income.
This is a good idea and long overdue.
Worse, it would disqualify any borrower whose combined debt payments amounted to more than 36 percent of monthly gross income.
This is a good idea and long overdue.
Why is it a good idea for individuals to go into debt up to their eyeballs just like the government.
The housing bubble was created because it vastly increased demand by lowering lending standards. Now that those folks can’t pay, the bubble pops.
There is nothing preventing private lenders from holding loans to doctors, lawyers etc who have high income upside, they just can’t sell them to the government and leave the tax payers holding the bag if things go bad with the loan.
If we don't keep these programs, how will people who can't afford housing by a home?
Good grief, I'm surprised he can fog a mirror by himself.
Terrible idea. The lender gets huge profit and no risk. You think home sales are slow now? Institute these changes and nothing will sell. Longer term loans are a better idea than this.
It's not just 'home ownership', it is a question of where a society wishes to invest it's wealth. McMansions for the masses with those lovely 9 foot ceilings requiring all that extra heating and cooling, or factories to create wealth for current and future generations. Are we talking home ownership for those who can afford it or palace ownership for everyone?
Aren’t these the rules that used to be pretty standard for most banks naturally? I don’t have any problem with it. I would just say that for every 10% additional down payment beyond 20%, there should be some flexibility in the debt to income ratios. If someone has serious “skin” in the game they are a much better risk and the loan to asset ratio is much safer.
A solid recovery can only happen when home buyers “have skin in the game”.
Has the cause of this disaster already been forgotten?
Like so much else that damages America, the federal government precipitated this recession/depression with their foolish racist demands that lenders finance homes for people who do not have the ability to pay back the loans.
Of course, lending institutions ran amok with the policy once they found the profitable loopholes, but the root cause is social engineering by a leftist, racist government.
Returning the housing industry to normal is going to take at least five years, so why not get it right?
Financially, the biggest problem our nation has is Leverage, i.e. we're over-leveraged: Wall Street, the federal debt, credit cards, student loans...need I go on?
I don't know where the bottom is on housing prices, but it's obvious we aren't there yet.
20% too steep? What's wrong with 15% combined with a credit score of 720+ and verifiable income for the past 3 years?
Beats the heck out of someone with a credit score of 550 and no verifiable income getting a home loan for $600K.
I am against micro-management of the economy by government prescription. Very often, so called consumer protection regulations have just the opposite effect. They hurt more than they help. This is just another manifestation of the nanny state in action.
Intervention by the government created the housing market bubble in the first place. Relaxing market based qualifications by government coercion was the main culprit. Such a regulation would swing the pendulum back in the opposite direction way too far. The market had it right and the government had it wrong all along. The government should butt out and let the market place do what it does best.
Those were the rules when we bought our home and never should have been repealed!
Kick the low income and those that don’t save and live on credit leaches out in the street!
Wow.. This is EXACTLY the underwriting criteria routinely used prior to the 1990s. You know, back when sanity reigned? Before the build-up to disaster that was caused by the lax standards Chavez apparently wants to retain?
The enactment of all these rules would guarantee that in 18 months I could afford any house I wanted.
This may not exclude as many people as they think. Making it more difficult to buy a house will lower the value of houses, making them easier to buy. What the net effect would be is hard to figure.
Bottom line is that the government shouldn’t be manipulating the housing market at all.
In my area, there are huge developments full of huge “spec” houses full of tiny families with no furniture or equity. There are also many, many empty brand-new houses. These “modern” houses only have a life expectancy of 40-50 years because of the cheap construction. Their values start dropping immediately upon completion. The housing marking is going down, down, down.
Sucks to be “in” real estate, but I suspect that the cost of living, rather than investing, in homes, will be going down fast.
Big government f’s up again.
This is truly interesting and I’d be on the fence about this if it weren’t for the fact that “home buying” may not be such a great idea after all. Many of the “youngsters” I talk to are renting. If they’re interested in buying, they’re looking at undeveloped acreage far away from city centers as weekend get-a-ways and places to go to play, often near suitable rivers or lakes for boating and fishing. Just my opinion, but frankly, I think that makes a lot of sense. When I ask why, they’re first concern is that if they lose a job or get a job move notice, they don’t want to be concerned with having a house they can’t sell. Mobility is important in this job market.
At the rate of price deterioration, now reaching back to the mid-1990’s, I predict that within five years, we will start seeing the government pushing large, private corporations to start buying up distressed housing developments and leasing them to their employees, most of whose current houses will be underwater/foreclosed. The same will happen with private magnates who will be able to buy developments for pennies on the dollar and, with the blessings of the local municipalities, fill them with formerly-middle-class families who can no longer qualify for mortgages.
Real estate will start looking more like the construct of feudal society instead of private property.
This will offically kill what is left of the housing market. Few people would have the $20,000 down needed on a $100,000 home
It is incredibly stupid to make regulations out of rules of thumb. What mechanisms exist to change these regulations when the economics and markets vary over time? (none,..which is why we are in such a socialist malaise at present.)
“But the effect will be to disqualify millions of potential homebuyers.”
That’s the basic idea, Linda. The 20% downpayment and the 28% ratio of mortgage to income is nothing more than the traditional lending standard that was in effect before the bubble insanity took over the mortgage industry. That’s exactly what I had to meet 40 years ago.
Why it’s a bad idea to return to the numbers that prevented mass default on mortgage loans is something known only to Linda Chavez.
The flaw in the article is that it agrees there should be rules. Then it whines about which rules.
There should be no rules. Nor should there be Fannie and Freddie or any other taxpayer guarantee. Nor should any lender be too big to fail. Let the market figure out what's an appropriate down payment, interest rate, income percentage, and what not. And if they're wrong, well, screw 'em!
And if some bank in Bavaria goes bust from over-investing in California liar loans, we shouldn't wring our hands. We should laugh. (Of course, if the Krauts were intentionally fed lies about the liar loans, that should be cause for a perp walk. I guess I'm not against all rules, just most rules invented since English common law was established.)