[dfads params='groups=165&limit=1']I expressed the view that new mortgage regulations will prevent future housing bubbles. These new qualified mortgage regulations forbade the measures lenders employed to inflate previous housing bubbles. One of these restrictions caps debt-to-income ratios at 43% of gross income. While this rule contains an interesting loophole (See: The 43% DTI cap strongly favors those with no consumer debt), this loophole fails to penetrate the rigid ceiling on affordability imposed by the 43% DTI cap on gross income and other ability-to-repay rules. If lenders are unable to find "innovative" ways of circumventing this cap, then future housing markets will be very interest rate sensitive. Small changes in a borrower's debt-to-income ratio make a huge difference in the amount financed…[READ MORE]

I trust you are enjoying your holiday. Thank you for stopping by. I have something unusual for you on this holiday. Enjoy Trpytophan Slow Jam. Thanksgiving distraction: Watch the "strangest" Century 21 YouTube video Buying a home? Meet the Tryptophan Slow Jam November 26, 2013 -- Jacob Gaffney The latest ad campaign from Century 21 may end with their brand, but there's not a single mention of the real estate franchise throughout the unorthodox Thanksgiving ad. Indeed, AdWeek is calling the ad "easily the strangest thing Century 21 has ever done," while also offering some of the other unusual marketing tactics being employed at the firm. However, the Tryptophan Slow Jam takes the cake when it comes to ad engagement…[READ MORE]

The mainstream media spins financial reporting to put news stories in a positive light. Apparently, making readers feel good about their investments sells more papers, or perhaps reporters feel a moral obligation to improve consumer sentiment to boost the economy. Whatever the motivation, financial reporting is one area where good news sells, so financial reporters treat us to happy-talk stories, and they often ignore harsh underlying truths. The latest cheery chatter from reporters relieves those whose mortgages exceed their home's value. House prices are up, so fewer borrowers are underwater. That's the good news. The bad news lies just beneath the headlines. Homeowners who owe more on their mortgages than their houses are worth don't really own their properties. The…[READ MORE]

I recently asked What would Watt do as the new head of the GSEs? His public statements support the view he would institute a widespread principal reduction program to loot the GSEs for political gain. Such a policy would be a tremendous boon to loanowners and his colleagues on the political left. His predecessor, Edward DeMarco, fervently resisted such policies because he recognized the moral hazards, and he wasn't motivated to help politicians buy votes. By contrast, Mel Watt is a political hack who would like to dole out taxpayer funds to buy more votes for his party. Senate Rule Change Could Ease Housing Regulator’s Confirmation By Nick Timiraos -- November 21, 2013, 4:30 PM Thursday’s Senate vote to eliminate…[READ MORE]

What makes a city a desirable place to live? Is it history, culture, climate, the "vibe," or is it something more tangible that can be weighed or measured? We could readily compile a short list of quaint or fashionable communities and argue about their subjective qualities. Publications trying to be hip or trendy do this periodically. But in the end, these articles make people feel good about living in one place or another, but they settle nothing. So how can we carefully measure desirability in a way that allows comparisons between one community and another? Do we take a poll and tally the results? Such an effort might reveal which cities have the most fervent admirers because those would be…[READ MORE]

Just in case you didn't know FHA is a government insurance program for lenders. FHA has front-end Mortgage Insurance and regular Mortgage Insurance and it's paid by the borrower.  These rates have greatly increased since 2007. Now a new question is being asked.  Is FHA now one the lenders (really an insurance product) the government tried to band after the housing bust. The FHA is a predatory lender According to the FDIC's Inspector General: "Predatory lending typically involves imposing unfair and abusive loan terms on borrowers, often through aggressive sales tactics; taking advantage of borrowers' lack of understanding of complicated transactions; and outright deception." This happens all the time with payday loans, auto title subprime loans, and even student loans.…[READ MORE]

What is the price for your soul? What would you have to be paid to advocate for something you knew was harmful? Would you feel comfortable creating ads for cigarette companies? Would you work for a lender making subprime loans or HELOCs? How dangerous does a product have to be before you couldn't participate in its manufacture or distribution in good conscience? Even writers and reporters face these dilemmas, particularly those who offer opinions to influence people's decisions and behaviors. Because real estate agents historically spent millions on print advertizing, it's rare to read negative stories about realtors or the health of the real estate market. With so much paid propaganda, they exert a subtle yet powerful control over the…[READ MORE]

Are we witnessing a new sustained housing recovery in California, or are we witnessing a new housing bubble? Some housing bulls postulate the dramatic increase in prices springs from sound fundamentals. Rents and incomes increased, unemployment dropped, and distressed property sales returned to pre-crisis levels. Some housing bears posit the dramatic increase in prices feigns the signs of market health while the patient is still very sick. Prices moved up far faster than rents and incomes (nearly 10 times faster), unemployment lingers, distressed properties lurk in the shadows temporarily removed by lender can-kicking, and the demand depends on fickle investors and artificial government programs and federal reserve stimulus, both temporary measures. Debates concerning fundamentals aside, whether or not you consider…[READ MORE]

The populace was sold on quantitative easing and mortgage interest rate stimulus as a measure to save "Main Street." It was said this money pumped into the economy would create jobs, and the combination of jobs, increased incomes, and low mortgage rates would cause a boom in housing which would elevate loanowners above water. What was sold as a big benefit to Main Street has instead devolved into another massive bailout of the banking industry with few tangible benefits to the people the programs were ostensibly designed to help out. Proponents of these policies can point to the rapid increase in house prices over the last 18 months as a sign of success. While it's true that many loanowners have…[READ MORE]

Is it okay for salespeople to lie to us in order to close a sale? Was your first reaction, "No, of course not?" It is for most people, but when you reflect on it, salespeople are encouraged to lie to us and manipulate us all the time, and we all put up with it. In fact, we train salespeople to do this, and we reward them for it. Don't believe me? Consider this example. ... Does this make my butt look fat? Perhaps this analogy is politically incorrect, but… Imagine you are shopping for clothes in a high-end retail outlet. You are trying on an outfit, and you are concerned about its appearance, so you ask the salesperson, “Does this…[READ MORE]