Aug282015

Do realtors care if buyers sustain home ownership?

realtors lobby for the same foolish policies that caused the housing bubble and ended with millions of families losing their homes.

eliminate-lending-standardsrealtors care primarily about obtaining a large check from escrow after closing. What happens after that is not their concern. I assume most of them wish their commissions clients well, and if they think about these people for a nano-second after closing, they imagine them living happily ever after in their newly acquired properties. However, in the real world, if those buyers face challenges because the buyers believed the realtor’s sales pitch, well… that’s not as important to the realtor as closing the deal and getting paid.

The evidence of a realtor’s lack of concern for buyers was clear during the housing bubble. realtors shamelessly pushed people into transactions that benefitted the realtor, but left the homeowner in a hopelessly untenable position after grossly overpaying for the property — you know, the property that only goes up in value.

Today’s featured article is a look inside the mind of a realtor. After reading it, you tell me if you see any concern for the future well being of the realtor’s client.

Millions are returning to the homebuying market — here’s what you should know

It’s our responsibility to educate potential buyers

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Nabil Captan, Jul 30, 2015

Takeaways:

  • Millions of people who lost their homes in the recession are now ready to buy again.
  • Boomerang buyers now have more loan options.
  • Rebuilt credit is the most important part of the homebuying equation.

There are many who defaulted on their mortgages because of a job loss or personal disaster, who otherwise would have paid responsibly. These defaulted mortgages resulted in short sales or foreclosures. These defaults were the product of decisions made by homeowners in distress — they aren’t representative of the homeowners’ character.

Really? I think he has this exactly backward. Isn’t distress the true test of a person’s character?

These former homeowners are in the millions, and many want to — and are ready to — become homeowners again.

The Boomerang buyer myth refuses to die because realtors need false hope of future earnings to stay motivated, so they work to keep this story alive even when all evidence points to a complete absence of boomerang buyers.

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According to the most recent U.S. Census figures, around 12 percent of all U.S. households — more than 14 million people — rented a single-family home in 2011 alone.

Three-fifths, or 8.4 million, of people who lost their homes to short sales and foreclosures in the past seven years ended up renting, with many others not even being able to afford to pay rent.

If they can’t afford to pay rent, how are they supposed to save for a down payment? How does buying help them? (See: Will Millennials be forced to rent for life?)

Subprime lending is back and very much alive

Yes, it is. But Will subprime mortgage lending 2.0 be a disaster? And will realtors care?

With the gradual but surely rebounding real estate market, some private equity firms are now willing to take higher risk for greater yields to accommodate this discounted market.

Many lenders have sprung up to meet this demand. Some are approving borrowers in as little as weeks after a foreclosure.

That’s just what we need, right? These borrowers proved their failure in the most uncertain terms possible: they endured foreclosure. Why would anyone loan them hundreds of thousands of dollars at the peak of their disgrace? What could go wrong?

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Credit profile is not an issue; however, a higher down payment is required with an expected above-market interest rate.

Because the guidelines are looser and fall outside of the Consumer Financial Protection Bureau’s “qualified mortgage” rule, loans are kept by these firms for future securitization.

New Penn Financial LLC, a lender based in Plymouth Meeting, Pennsylvania, and Drop Mortgage in Encinitas, California, are some of today’s players in a field that will soon become increasingly crowded.

The money is about to pour into toxic mortgages — the behavior that inflated the housing bubble and lead to millions of foreclosures — and this guy can barely contain his excitement.

Boomerang buyers have more loan options

Most victims who lost their homes in the recent recession are unaware of the waiting periods for a new loan secured by Fannie Mae, Freddie Mac, FHA and VA following a mortgage default or bankruptcy.

Victims?

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They suspect that they don’t qualify for a mortgage today. Fannie and Freddie waiting periods are similar: For a short sale, deed in lieu or bankruptcy, it’s four years, while foreclosure is seven years.

FHA is little different: For a short sale, deed in lieu or foreclosure, it’s three years, and only two years for bankruptcy.

VA waiting periods are even shorter: two years for all mortgage defaults and Chapter 7 bankruptcy. Rebuilt credit is a prerequisite by all to qualify for a new loan.

Furthermore, many people today also are taking advantage of FHA’s Back to Work program.

In as little as one year, people who experienced periods of unemployment or other severe reductions in their household income and were forced into a mortgage default or even full-blown bankruptcy could be approved with as little as a 3.5 percent down payment.

Everyone in the real estate industry decries tight lending standards. Due to this endless complaining, it’s become conventional wisdom that lending standards are tight. Given the facts above, does the spin about tight lending standards ring true? (See: Despite industry spin, mortgage lending standards are not tight)

Major lenders consider this program risky. They believe it puts them at greater risk to buy loans back.

Thank goodness. The threat of buy-backs is the only thing keeping lending sane today.

Still, there are a number of lenders who are delivering limited numbers of these loans.

Hopefully, they will go bankrupt after a flood of buy-backs erode their margins.

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realtors learned nothing from the housing bubble. They lobby for the same foolish policies that caused the housing bubble and ended with millions of families losing their homes. realtors don’t care about the long-term well being of their clients.

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