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Realtors concerned about buyers qualifying for mortgages
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At yesterday morning's session of the National Association of Realtor's Real Estate Summit, the message repeated by speakers, panelists and Realtors was consistent: one of the biggest obstacles to improving the real estate market is that qualifed buyers are still having trouble getting mortgage loans.
One Realtor said, "Even though the banks are being pressured to lend they seem to be doing anything they can to avoid making loans. If the buyer is qualified, they will find something wrong with the property."
A mortgage banker in the audience says that the new regulations on his and other small lenders, requiring them to keep ever-larger reserves in the bank means that they have significantly less money available to loan. He hoped that regulations could be loosened, but was given little hope of that by the speakers.
At the top of everyone's mind is this conundrum: We got into this mess in part because lenders were too loose with their money, handing loans to people who clearly had little possibility of making the payments. So now the requirements have been tightened and most everyone agrees this is a good thing: that mortgage loans should only be made to people who can truly afford the payments. The problem is that many people believe that the reins have been tightened too much, that otherwise qualified buyers are still being shut out. Lenders are wary not only of the buyers themselves, but of the property values - no one wants to make a loan on a property which may drop in value. It seems to be a bit of a Catch-22 - values can't go up until the existing inventory is bought up, but it can't be bought up until mortgages are more readily available,
While some real estate professionals look to the government to fix this problem - either through expanding and extending the first-time homebuyer tax credit or even more government-centric programs to buy out loans for people who are underwater in their mortgages - others (including me) would rather see a loosening of government restrictions on some of these lenders who would make more loans if they were able to lower their reserves. These lenders do not want to go out of business and are well aware of the risks taken in the past, so they are not likely to immediately begin making bad loans. Responsible lenders and responsible buyers are more likely to lead the way out of the housing crisis than more unwieldly government programs.
Remember the much-touted "Hope for Homeowners" program of 2008? Well, only 100 families were helped by that government program. I think the market can do better than that.
COMING IN SEPTEMBER; "HOMEBUYING: Tough Times, First Time, Any time" by Michele Lerner
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