There's No Reason To Panic Over Today's Lending Standards

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  #16  
Old 04-04-2021, 07:20 AM
Girlcopper Girlcopper is offline
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Quote:
Originally Posted by Stu from NYC View Post
Than how come it does not say so anywhere?
It does!
  #17  
Old 04-04-2021, 07:34 AM
ithos ithos is offline
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You need to worry about a housing collapse when

1.) either it becomes cheaper to rent than to own due to excess inventory

2.) a systemic collapse in the economy most likely caused by the falling value in the dollar as a result of massive trade imbalances and government debt.

Do you remember when growing up our moms told us that "Money doesn't grow on trees?" Well, they were wrong. Modern Monetary Theory has been adopted by our Federal Reserve and our politicians are exploiting it to the max.
Access Denied

But once the dollar loses the status of reserve currency, we will see the mother of all collapses. Then the only tangible assets that the US government will have will be real estate and natural resources.

"The federal government owns 27.1% of all land in the United States, or 615.3 million of 2.27 billion acres."

Last edited by ithos; 04-04-2021 at 07:42 AM.
  #18  
Old 04-04-2021, 08:07 AM
jbrown132 jbrown132 is offline
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Quote:
Originally Posted by BobGershEastCoastCapital View Post
Today, some are afraid the real estate market is starting to look a lot like it did in 2006,
just prior to the housing crash. One of the factors they're pointing to is the availability
of mortgage money. Recent articles about the availability of low down payment loans
and down payment assistance programs are causing fear that we're returning to the bad habits seen 15 years ago. Let's alleviate these concerns.

Several times a year, the Mortgage Bankers Association releases an index titled "The Mortgage Credit Availability Index (MCA)".

Basically, the index determines how easy it is to get a mortgage. The higher the index,
the more available mortgage credit becomes. The index stood at about 400 in 2004.
Mortgage credit became more available as the housing market heated up, and then
the index passed 850 in 2006. When the real estate market crashed, so did the MCAI
(to below 100) as mortgage money became almost impossible to secure. Thankfully,
lending standards have eased somewhat since. The index, however, is still below 150,
which is about one-sixth of what it was in 2006.

Why did the index rage out of control during the housing bubble?

The main reason was the availability of loans with extremely weak lending standards. To keep up with demand in 2006, many mortgage lenders offered loans that put little emphasis on the eligibility of the borrowers. Lenders were approving loans without
always going through a verification process to confirm if the borrower would likely
be able to repay the loan.

Some of these loans offered attractive, low rates that increased over time. The loans
were popular because they could be obtained quickly and without the borrowers having to provide documentation up front. However, as the rates increased, borrowers
struggled to pay their mortgages.

Today, lending standards are much tighter. As Investopedia explains, the risky loans
given at that time are extremely rare today, primarily because lending standards have
drastically improved.

There are definitely still loan programs that allow a 620 score. However, lending institutions overall are much more attentive about risk when approving loans. According to Ellie Mae's latest "Origination Insight Report", the average FICO (r) score on all loans originated in February was 753.

In 2006, mortgage entities originated $376 billion dollars in loans for purchasers with a score under 620. Last year, the number was only $74 billion.

In 2006, lending standards were much more relaxed with little evaluation done to measure a borrower's potential to repay their loan. Today, standards are tighter, and the risk is reduced for both lenders and borrowers. These are two very different housing markets, so there's no need to panic over today's lending standards.

Bob Gersh
Mortgage Coordinator
East Coast Capital
(352)561-3096
rgersh@eastcoastcap.com
Mortgages
I think what your saying is only partially true. If we continue to print money we do not have and raise taxes, it will eventually lead to higher inflation. Eventually this leads to recession and higher unemployment. If these mortgages are based on two incomes and one or both become unemployed it could result in their inability to repay those mortgages. Higher interest rates will also result in fewer people people being able to afford mortgages and less demand for homes. This usually results in a glut of homes on the market and thus becomes a buyers market resulting in lower selling prices. In your post you only talk about the lending practices that lead to the collapse in 2006. I lived through the late 70’s and early eighties with 18 percent mortgage rates and CD’s paying 10 percent. All I’m saying is economic conditions play a major role in the housing market. Right now we are are in a great real estate market resulting In a housing bubble. When it bursts the market will adjust, it always does.
  #19  
Old 04-04-2021, 09:00 AM
DAVES DAVES is offline
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Quote:
Originally Posted by BobGershEastCoastCapital View Post
Today, some are afraid the real estate market is starting to look a lot like it did in 2006,
just prior to the housing crash. One of the factors they're pointing to is the availability
of mortgage money. Recent articles about the availability of low down payment loans
and down payment assistance programs are causing fear that we're returning to the bad habits seen 15 years ago. Let's alleviate these concerns.

Several times a year, the Mortgage Bankers Association releases an index titled "The Mortgage Credit Availability Index (MCA)".

Basically, the index determines how easy it is to get a mortgage. The higher the index,
the more available mortgage credit becomes. The index stood at about 400 in 2004.
Mortgage credit became more available as the housing market heated up, and then
the index passed 850 in 2006. When the real estate market crashed, so did the MCAI
(to below 100) as mortgage money became almost impossible to secure. Thankfully,
lending standards have eased somewhat since. The index, however, is still below 150,
which is about one-sixth of what it was in 2006.

Why did the index rage out of control during the housing bubble?

The main reason was the availability of loans with extremely weak lending standards. To keep up with demand in 2006, many mortgage lenders offered loans that put little emphasis on the eligibility of the borrowers. Lenders were approving loans without
always going through a verification process to confirm if the borrower would likely
be able to repay the loan.

Some of these loans offered attractive, low rates that increased over time. The loans
were popular because they could be obtained quickly and without the borrowers having to provide documentation up front. However, as the rates increased, borrowers
struggled to pay their mortgages.

Today, lending standards are much tighter. As Investopedia explains, the risky loans
given at that time are extremely rare today, primarily because lending standards have
drastically improved.

There are definitely still loan programs that allow a 620 score. However, lending institutions overall are much more attentive about risk when approving loans. According to Ellie Mae's latest "Origination Insight Report", the average FICO (r) score on all loans originated in February was 753.

In 2006, mortgage entities originated $376 billion dollars in loans for purchasers with a score under 620. Last year, the number was only $74 billion.

In 2006, lending standards were much more relaxed with little evaluation done to measure a borrower's potential to repay their loan. Today, standards are tighter, and the risk is reduced for both lenders and borrowers. These are two very different housing markets, so there's no need to panic over today's lending standards.

Bob Gersh
Mortgage Coordinator
East Coast Capital
(352)561-3096
rgersh@eastcoastcap.com
Mortgages

Standards????? It is pure INSANITY. The average age here is 70. Assuming you ca make the payments, they cannot deny you a 30 year mortgage. Chance of paying it off
is about as close to zero as you can get.

Credit score? Our credit score actually went up. Why? We had paid off all of our loans.
We owed no body but credit cards that were all current. You will have a higher score if you borrow and pay than if you pay and don't borrow.

My wife does the accounting. She even has top billing on our checking account. I earned most of the money. I do think of it as ours. I was sort of amused, eight years ago we applied and got a mortgage. Everything is joint. She had a higher credit score than I did. Insanity.

To,"qualify," for our mortgage, we were told by the banker to get a letter from my brokerage account to show that we would get a check every month our of my account.
The conversation with the brokerage went something like, We get this all the time, after you get the mortgage you simply call and cancel it.

Oh, refinance to get a better rate. Closing costs-about 4,000. But, you hold our mortgage. If there were any liens on the property you would be notified. Title insurance? You would be notified. That 4,000? It is grand larceny that is legal.
  #20  
Old 04-04-2021, 09:16 AM
DAVES DAVES is offline
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Quote:
Originally Posted by jbrown132 View Post
I think what your saying is only partially true. If we continue to print money we do not have and raise taxes, it will eventually lead to higher inflation. Eventually this leads to recession and higher unemployment. If these mortgages are based on two incomes and one or both become unemployed it could result in their inability to repay those mortgages. Higher interest rates will also result in fewer people people being able to afford mortgages and less demand for homes. This usually results in a glut of homes on the market and thus becomes a buyers market resulting in lower selling prices. In your post you only talk about the lending practices that lead to the collapse in 2006. I lived through the late 70’s and early eighties with 18 percent mortgage rates and CD’s paying 10 percent. All I’m saying is economic conditions play a major role in the housing market. Right now we are are in a great real estate market resulting In a housing bubble. When it bursts the market will adjust, it always does.
We accept what we are fed. It even enters our lexicon. We use the term printing money.
I've read in financial papers that only 20% of the US dollars are actually printed, the rest are computer notes.

Inflation, we are told the target is 2%. Likely, fuzzy math but at 2% in 36 years it will take two dollars to buy what a dollar buys now. Last year the dollar lost 7% of it's value. Real rate of inflation? Housing, food, medial care have all gone up way more than 2%

I have a pile of German Reichmarks that belonged to my grandparents. I'm talking a pile.
Even the German government will not buy them back. Mine are not for sale, but there are tons of them on ebay. I regularly suggest people buy them and frame them on your wall.
They too believed it cannot, it will not, happen here.

Last time, I had the courage to look our national debt is 29 trillion dollars. That number Trillion has also crept into our lexicon. I for one proudly declare I do not comprehend one trillion let alone twenty-nine of them yet, I too an tossing this word about.
  #21  
Old 04-04-2021, 09:19 AM
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Bay Kid Bay Kid is offline
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Safety is no more than a 20 year loan, 15 year better. Pay off asap. 25-40% down. Never look at a loan as a needed tax write off. Need tax write offs get a rental property. A mortgage free home is a happy home.
  #22  
Old 04-04-2021, 09:26 AM
ithos ithos is offline
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For the next few years, the demand for houses by retirees should be strong barring a major economic event. But eventually the number of retirees will decline. Also future generations will not have the same level of retirement income for a variety of reasons.

The future of retirement isn’t doomed, but retirees may still need some serious help - MarketWatch

How Many People Will Be Retiring in the Years to Come? | St. Louis Fed
  #23  
Old 04-04-2021, 09:33 AM
Grunt 1946 Grunt 1946 is offline
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In the heyday of mortgage lending in California, one could get a no-down 30 yr mortgage and the lending company would give you $20,000 cash to furnish the house or buy a car or anything else you wanted. I had a friend I shot Trap with who was a Banker and he used to laugh about the stupid of lenders and buyers.
  #24  
Old 04-04-2021, 10:19 AM
Robnlaura Robnlaura is offline
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The issue is the homes that are renter occupied and those on a moratorium due to Covid few of these people realize that those moratoriums end and the total amount not paid is due unless they get a refi . When the rent stay officially ends I believe we will see a massive influx again of empty homes unless reits step in and buy again which they might
  #25  
Old 04-04-2021, 01:14 PM
Stu from NYC Stu from NYC is offline
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Quote:
Originally Posted by Grunt 1946 View Post
In the heyday of mortgage lending in California, one could get a no-down 30 yr mortgage and the lending company would give you $20,000 cash to furnish the house or buy a car or anything else you wanted. I had a friend I shot Trap with who was a Banker and he used to laugh about the stupid of lenders and buyers.
Wow that is incredibly risky and foolish
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