Politicians favor home ownership because it serves as a proxy for retirement savings; however, unrestricted mortgage equity withdrawal defeats the purpose. Politicians provide many reasons for supporting home ownership through policy initiatives and outright subsidies, but one of the primary reasons they support home ownership is the forced savings account properties of an amortizing mortgage. History has shown that homeowners have more comfortable retirements than renters, and an abundance of home equity is one of the main reasons. Unfortunately, politicians allow homeowners to raid this retirement piggy bank with unrestricted mortgage equity withdrawal — an allowance politicians don’t provide to retirement savings accounts. People are still allowed to borrow against their retirement savings for specific things, like a mortgage down…[READ MORE]

People who live in houses they don’t pay for are viewed as folk heroes by some and contemptible deadbeats by others. Have you noticed that most of the human interest stories from the housing bubble have no heroes? The housing bust has brought out the worst in mankind. Every party involved seeks to avoid any financial responsibility while simultaneously looking for ways to game the system to their advantage. The cast of characters includes lenders, realtors, delinquent mortgage squatters, holdover tenants, mortgage brokers, basically anyone involved with real estate. Are delinquent mortgage squatters heroes fighting the system or deadbeats gaming the system? These people quit paying their mortgages, many quit paying several years ago, and banks are either unwilling or…[READ MORE]

Higher home prices without higher wages makes housing unaffordable and only benefits existing homeowners and the bankers they owe money. What good came from the recent house price reflation rally? Did it stimulate the economy? No. Did it put millions of unemployed construction workers back to work. No. Did it stimulate housing sales? No. politicians and the federal reserve promised economic expansion and acceleration; however, so far these great benefits from higher home prices remain elusive. So why isn’t the economy improving with higher house prices? The increase in home prices came with no increase in wages, so now houses everywhere are more expensive, and average Americans need to spend more of their income on housing, which makes less available to…[READ MORE]

Rather than exacerbating a problem with homelessness or creating a mass migration, most people who lost homes in foreclosure stayed in their neighborhoods. What happened to people who lost their house in foreclosure? Did they end up homeless and destitute? Did they resort to a life of crime or prostitution? Was foreclosure the end of modern civilization as we know it? People who tried to prevent foreclosures proffered all of these fallacious reasons why we needed to stop foreclosures and give delinquent borrowers principal reductions or free houses. The reality is, most people who lost their homes in foreclosure moved into a nearby rental — and many were financially better off with a lower cost of housing in something they…[READ MORE]

Based on the moral hazard from lessons learned from the last housing bust, future housing declines will experience very, very low sales volumes. What lesson did lenders learn from the painful losses from the housing bust? Did they learn they shouldn’t peddle toxic mortgages? Nope. Did they learn they shouldn’t give loans to unqualified borrowers? Nope. What they learned is that no matter how foolishly irresponsible their lending gets, they will get bailed out by government cash and federal reserve interest-rate policy, and they can avoid mortgage default losses by loan modification can-kicking until prices rebound. As long as they don’t foreclose and resell for a loss, they can amend-extend-pretend their way out of any lending disaster. That’s really what…[READ MORE]

It's possible to take over a seller's low interest rate mortgage if their loan is FHA or VA. This will be popular when mortgage rates are higher. I like to look into the future and stay ahead of the news cycle when I can. Six and a half years ago, I first wrote about loan assumability as a feature would garner new attention once interest rates began to rise. With the recent spike in interest rates, and with the widespread perception we are past the bottom of the interest rate cycle, the first article on this subject finally surfaced in the MSM. Expect many more to follow over the next several years. Taking Over a Seller’s Loan Homeowners with a…[READ MORE]

In order to provide a stable equity cushion for all homeowners, the minimum down payment should be at least 10%. The qualified mortgage standards provide a barrier against excessive risk taking in the secondary mortgage market. If mortgage-backed securities buyers lose their minds and start buying the same toxic garbage they coveted during the housing bubble, they must find an originating lender willing to underwrite that garbage and retain 5% of it on their own balance sheet. The 5% retention requirement generally kills the deal. This serves as an extra safeguard in the system, and it’s intended to prevent future housing bubbles. I wrote that New mortgage regulations will prevent future housing bubbles. The housing bubble was inflated with interest-only and…[READ MORE]

American housing policy should be neutral on whether a family or individual owns or rents. Instead, politicians embrace policies that favor homeownership at all costs -- costs that often prove to be very high. I am a supporter of homeownership — not loan ownership as it’s become perverted into — but real homeownership free of encumbrances like a hefty mortgage. Most people who achieve home ownership go through a period of indebtedness because few can save enough (or get gifts from relatives) to buy a house for cash. Those that achieve home ownership do so through disciplined repayment of mortgage debt without adding to it to supplement consumer spending via the home ATM. Anyone who plans to stay in one…[READ MORE]

The economy pulled out of the Great Recession because lenders wrote down billions in bad loans, not because borrowers paid these debts off. The financial mainstream media often tells people what they want to hear. They’ve learned they make more money by providing emotional support to people seeking reassurance rather than providing facts and accurate analysis. This is a shame because people often make important and complex financial decisions based on erroneous or biased information they obtain from the financial press. When these investment decisions go bad, people are often wondering what went wrong. The problem is that they trusted the veracity of what they read in the mainstream media. We’ve seen a great deal of spin and nonsense over…[READ MORE]

The National Association of realtors is a sales organization that pretends to be professionally objective. They want to be accepted as experts, but they shun the responsibilities that go with being a professional. The National Association of realtors is dedicated to advancing the interests of listing agents who dominate the organization. Their primary focus is to generate real estate sales and commissions that provide income for its members. It spends enormous sums promoting real estate sales with the mantra, “it’s a great time to buy or sell a home.” The problem with this singular focus and approach is that it is not always a good time to buy or sell a house. realtors want to pass themselves off as experts…[READ MORE]