20% down required by the government?
Yesterday, FDIC chairman Sheila Bair said the industry would be best off if lenders required 20% down in order to secure a loan, noting on the Fox Business Network that the 20% standard “worked really well for decades” and that the 30% down requirement floating around would “go too far.”
Bair said that lower income buyers would not be left out as “other products can address their needs” and what was really important was a borrower’s loan to values.
Today, the reaction is strong
Numbers ranging from 5% to 30% have been bounced around for a few years now and it appears that Uncle Sam’s roulette wheel is landing on 20%. The National Association of Home Builders states that this would hamper the first time buyer market and for once we think they have understated it- we believe it would destroy, massacre, and kill the first time buyer market.
Furthermore, the NAHB states, “By stipulating a 20 percent borrower down payment for a loan to be considered a qualifying residential mortgage, the Administration and federal regulators are preempting congressional efforts to reform the housing finance system by imposing a narrow and rigid gateway to the secondary mortgage market.”
NAHB Chairman Bob Nielsen said, “Millions of low down payment loans have been originated safely for decades,” said Nielsen. “Low-down payments are not what drove this lending crisis. It was lax underwriting standards. Unfortunately, regulators chose to focus on excessive down payment requirements as some type of silver bullet to solve the lending crisis when they should have looked at other underwriting failures and unsound mortgage products that produced the lending disaster.”
“The proposed rule establishes a standard for ‘safe and sound’ mortgages that would take the industry back to the 1980’s, when low wealth and moderate income borrowers, and particularly communities of color, were routinely barred from conventional, affordable credit. The proposed standard seems to ignore all the positive lessons lenders learned over many years of experimentation in how to offer sustainable mortgage credit. We are very concerned that when combined with other recommendations from the Administration’s White Paper on housing finance, including 10 percent down payment minimums for Fannie Mae and Freddie Mac mortgages, and possibly higher down payments for FHA borrowers, this proposal will move the lending industry’s goalposts unacceptably far from the reach of low, moderate and middle income homebuyers.
Barry Zigas, Director of Housing Policy at Consumer Federation of America said, “We are pleased that the proposals include at least a minimal set of servicing guidelines that would apply to all mortgage securitizations. We look forward to working with the regulators to improve and strengthen them. But there can be no doubt after the foreclosure debacle consumers have endured that clear standards are necessary.”
“Securitization provides financing for most of our credit- mortgages, car loans, credit cards, even financing for the buildings we work in. The collapse of this market led to the broad economic recession, and CRL supports reform of the securitization markets. The goal is to make the system safer, while still making credit available and affordable. The recent risk retention rules are an important part of this reform process. However, the proposed Qualified Residential Mortgage standards would unnecessarily over restrict credit and shut off homeownership to most working families. In particular, the down payment requirements of 20% would create an insurmountable barrier for most families, even though low down payment loans that are fully underwritten have performed well, even through the recent crisis,” said Mike Calhoun, President of Center for Responsible Lending.
REALTOR Magazine Senior Editor, Robert Freedman said, “NAR made its concerns clear in a letter it sent to banking regulators in January with other industry organizations. ‘It has been suggested that the QRM standard include a very high down payment requirement in order to limit QRM eligibility to some arbitrarily small percentage of the market,’ the letter says. ‘Creating an inordinately narrow QRM exemption could cause significant disturbances in the fragile housing market.'”
“Basically the government is telling Mr. and Mrs. America thanks for paying your mortgage during these tough times, and thanks for building your wealth around housing, as we have encouraged you to do, but we are now changing the rules. We are going to reduce the value of your retirement nest egg even more than the recession already has. And as an extra thank you, your kids are going to find homeownership that much more difficult to obtain,” said NAHB First Vice Chairman Barry Rutenberg.
Regulators must issue a rule defining “qualified residential mortgages” in coming weeks, but had originally planned to complete the proposal late last year. Disagreements over how to modify loans and what national loan servicer standards (like down payment requirements) should be structured. The new proposal is a comprimise among regulators but remains under fire.
Tell us in comments what you think of a 20% down payment requirement of all buyers- will it help or hurt the housing market?
Is the real estate industry endorsing Carson’s nomination to HUD?
(BUSINESS NEWS) Ben Carson’s initial appointment to HUD was controversial given his lack of experience in housing, but what is the pulse now?
NAR strongly backs Dr. Carson’s nomination
When President-Elect Donald Trump put forth Dr. Ben Carson’s name as the nominee for Secretary of Housing and Urban Development, NAR President William E. Brown said, “While we’ve made great strides in recent years, far more can be done to put the dream of homeownership in reach for more Americans.”
At the time of nomination, the National Association of Realtors (the largest trade organization in the nation) offered a positive tone regarding Dr. Carson and said the industry looks forward to working with him. But does that hold true today?
The confirmation hearings yesterday were far less controversial than one would expect, especially in light of how many initially reacted to his nomination. Given his lack of experience in housing, questions seemed to often center around protecting the LGBT community and veterans, both of which he pledged to support.
In fact, Dr. Carson said the Fair Housing Act is “one of the best pieces of legislation we’ve ever had in this country,” promising to issue a “world-class plan” for housing upon his confirmation…
Job openings hit 14-year high, signaling economic improvement
The volume of job openings is improving, but not across all industries. The overall economy is improving, but not evenly across all career paths.
Job openings hit a high point
To understand the overall business climate, the U.S. Labor Department studies employment, today releasing data specific to job vacancies. According to the department’s Job Openings and Labor Turnover Survey (JOLT) for April, job openings rose to 5.38 million, the highest seen since December 2000, and a significant jump from March’s 5.11 million vacancies. Although a lagging indicator, it shows strength in the labor market.
The Labor Department reports that the number of hires in April fell to 5 million, which indicates a weak point in the strong report, and although the volume remains near recent highs, this indicates a talent gap and highlights the number of people who have left the labor market and given up on looking for a job.
Good news, bad news, depending on your profession
That said, another recent Department report notes that employers added 221,000 jobs in April and 280,000 in May, but the additions are not evenly spread across industries. Construction jobs rose in April, but dipped in professional and business services, hospitality, trade, and transportation utilities. In other words, white collar jobs are down, blue collar jobs are up, which is good or bad news depending on your profession.
Additionally, the volume of people quitting their jobs was 2.7 million in April compared to the seven-year high of 2.8 million in March. Economists follow this number as a metric for gauging employee confidence in finding their next job.
If you’re in the market for a job, there are an increasing number of openings, so your chance of getting hired is improving, but there is a caveat – not all industries are enjoying improvement.
If you’re hiring talent, you’ll still get endless resumes, but there appears to be a growing talent gap for non-labor jobs, so you’re not alone in struggling to find the right candidate.
Economists suspect the jobs market will continue to improve as a whole, but this data does not pertain to every industry.
Gas prices are down, so are gas taxes about to go up?
Do low gas prices mean higher gas taxes are on the way? Budgeting for 2015 just got a bit more complicated, if some politicians have their way.
Gas taxes and your bottom line
Many industries rely heavily on time in their vehicle, not just truck drivers and delivery trucks. Sales professionals hop in their vehicles throughout the day, as do many other types of professionals (service providers like plumbers, and so forth). For that reason, gas prices and taxes are a relevant line item that must be budgeted for 2015, but with politicians making the rounds to push for higher gas taxes, budgeting becomes more complicated.
Gas prices are down roughly 50 cents per gallon compared to a year ago, which some analysts say have contributed to more money in consumers’ pockets. Some believe that this will improve holiday sales, but others believe the timing is just right to increase federal taxes on gas. The current tax on gas is 18.40 cents per gallon, and on diesel are 24.40 cents per gallon.
Supporters and opponents are polar opposites
Supporters argue as follows: gas prices are low, so it won’t hurt to increase federal gas taxes, in fact, those funds must go toward improving our infrastructure, which in the long run, saves Americans money because smoother roads mean better gas mileage and less congestion.
Gas taxes have long been a polarizing concept, and despite lowered gas prices, the controversial nature of the taxes have not diminished.
While some are pushing for complete abolition of federal gas taxes, others, like former Pennsylvania Governor, Ed Rendell (D) tell CNBC, “Say that cost the average driver $130 a year. They would get a return on that investment” in safer roads and increased quality of life, he added.
The Washington Post‘s Chris Mooney points out that federal gas taxes have been “stuck” at 18 cents for over 20 years, last raised when gas was barely a dollar a gallon and that the tax must increase not only to improve the infrastructure, but to “green” our behavior, and help our nation find tax reform compromise.
Is a gas tax politically plausible?
Mooney writes, “So, this is not an argument that a gas tax raise is politically plausible — any more than a economically efficient tax on carbon would be. It’s merely a suggestion that — ignoring politics — it might be a pretty good idea.”
Rendell noted, “The World Economic Forum, 10 years ago, rated us the best infrastructure in the world,” adding that we “need to do something for our infrastructure, not in a one or two year period, but over a decade.”
Others would note that this rating has not crumbled in just a few years, that despite many bridges and roads in need of repair, our infrastructure is still superior to even the most civilized nations.
Regardless of the reasons, most believe that Congress won’t touch this issue with a ten-foot pole, especially leading up to another Presidential campaign season starting next year.
“I think it’s too toxic and continues to be too toxic,” Steve LaTourette (the former Republican congressman best known for his close friendship with his fellow Ohioan, Speaker John Boehner) tells The Atlantic. “I see no political will to get this done.”
Whether the time is fortuitous or not, and regardless of the positive side effects, many point to a fear of voters’ retaliation against any politician siding with a gas hike, so this matter going any further than the proposal stage is unlikely.
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