October housing summit results
“Insanity is doing the same thing over and over again and expecting different results.” – Albert Einstein
The National Association of Realtors (NAR) never fails to disappoint. NAR had a Housing Summit for October with all the fanfare of the circus coming to town. Economists, business leaders, Congress-types, and industry professionals were to be in attendance. The recommendations were just released (and you can read them in full at the end of this article). While there should be no disagreement with much of it, the ideas are not exactly, unique. Reiterating the same issues ad nauseum, in the exact same fashion, on behalf of our members, via letters to The Fed, President, and to our elected officials simply look silly.
Answering calls to action
A lot of us have answered the numerous Calls to Action regarding the Mortgage Interest Deduction and extending, or reinstating higher conforming loan limits. Just about everyone agrees that Dodd-Frank itself was a total overreaction to, and QRM (Qualified Residential Mortgage) rules are a joke in and of themselves. We get it. Everyone else gets it, too.
Shilling for both S. 170 (Helping Responsible Homeowners Act) and tweaks to HARP are one ginormous push for mass re-fi’s. Under both of these proposals, loan-to-value probably would not be considered, appraisals possibly wouldn’t be needed. Closing costs could be wrapped into loans, which could be as long as 40 year terms. Is any of this sounding familiar, because none of it worked so well the first time, did it? The debt for equity approach does sound intriguing. The old loan would be wiped out, replaced with a new loan (an appraisal would be done to determine current value) when the house is sold, hopefully when values are higher, the lender/servicer would share a percent of the profit, they get an “ownership position in the property when the new loan is re-written.” Progressive Policy Institute explains it here, on pages 4-5.
Short sales and foreclosures
Short sales should take priority over foreclosures. There are 19 bazillion things wrong with this one little sentence. Foreclosure = the legal process to repossess the home while REO = the actual home itself. Short sales and REOs are very different beasts. There is already a mega glut of vacant crap houses, which are going no place thanks to the robo-signing mess, MERS, court back-logs, and improper foreclosures being done. Until even one of those items can be corrected, this housing crisis is still screwed. In regards to short sales, better training, education, and more experience, for agents, title companies, and those in loss mitigation would go a long way in improving those types of sales. Setting similar standards and guidelines for all servicers/lenders would certainly allow all parties to come to an agreement much quicker than they do now.
Investors need to be able to purchase more, with better financing options. It would be great to allow the one or three person investment team to use the FHA 203(k) loans for rehabbing houses, and allowing investors to take out as many Government backed loans as they want, and can qualify for, when buying REOs, would be even better. Too bad the recommendation prior to this is basically saying that REOs should be put on the shelf.
Good idea: hybrid GSEs
Keeping at least some of the gov in GSEs (Government Sponsored Enterprises) is a really good idea. Otherwise it’s going to be QRM for all. We will have mega higher lending costs, and potentially doing away with loan options offered by VA and FHA.
Getting lenders to lend
When we wrote about the Housing Summit in September, we pointed out several things that had been attempted at correct housing thus far in the crisis. Once more, the current recommendations, The Five Point Plan, presented by NAR, is little more than a regurgitation of prior Calls to Actions, discussions, and lobbying efforts, which have been going on for years. It’s a total drag that NAR didn’t even mention job creation as any kind of a solution to the housing disaster. Apparently it bears repeating: Without a job, without an income, no lender will… LEND. Not for a new loan, not for a refinance, and not for a loan mod. I get that housing our thing, but it is linked with every other sector of the economy. Until people can spend money on housing, until they can actually make a mortgage payment, it’s not going to get any better.
“Try, try, try to separate them
It’s an illusion
Try, try, try, and you will only come
To this conclusion….
….You can’t have one, you can’t have none, you can’t have one without the other!
No Sir!” – Frank Sinatra
NAR’s Five-Point Housing Solutions Plan:
Recommendation 1: Do Not Risk Weakening Our Nation’s Housing Markets Any Further
- Recraft the Qualified Residential Mortgage rule mandated by the Dodd-Frank Act to include a wide variety of traditionally safe, well documented and properly underwritten products. Requiring a 20% down payment coupled with stringent debt-to-income ratios and rigid credit standards – as defined under the proposed rule by six federal regulators – would be detrimental to prospective home buyers, especially first-time and middle-income buyers.
- Restore higher loan limits supported by FHA and the GSEs to provide liquidity in housing markets and to assure mortgage financing options while stabilizing local housing markets. On September 30, the loan limits in 669 counties and 42 states declined. Already, this has had a harmful impact on our fragile housing recovery. Sellers have had to lower their price in markets where mortgages backed by FHA and the GSEs are no longer available. Buyers are confronting higher mortgage rates and larger downpayments because only private mortgages are available in these high-cost markets. In some instances buyers have given up their home search entirely.
- Resist proposals that call for changing the tax rules that apply to homeownership now or in the future. Without a doubt, now is not the time to change the mortgage interest deduction or any other housing incentives. Making gradual or targeted changes would send the wrong signal further undermining confidence and further depressing home values.
Recommendation 2: Restore Vitality to Our Communities and Neighborhoods by Reducing the Foreclosure Inventory
- Support S.170, The Helping Responsible Homeowners Act, sponsored by Senators Barbara Boxer (D-CA) and Johnny Isakson (R-GA). Their bill would remove refinancing limits on underwater properties for borrowers that have been paying on time, and would eliminate risk-based refinancing fees charged by Fannie Mae and Freddie Mac.
- Support bipartisan Senate efforts calling for improvements to the Home Affordable Refinance Program (HARP). Led by Senators Barbara Boxer (D-CA), Johnny Isakson (R-GA) and Robert Menendez (D-NJ), the time is appropriate to enhance HARP and provide refinancing opportunities to at-risk borrowers as an alternative to defaulting on their mortgage loans.
- Direct Fannie Mae, Freddie Mac and servicers to prioritize short sales above foreclosures.
- Support all necessary foreclosure/loss mitigation efforts to keep American families in their homes. Reology Corporation’s President and CEO, Richard Smith, has proposed a debt for equity approach to help underwater borrowers in trouble keep their homes and lower their monthly payments while lenders take a smaller hit than they would have with a default and foreclosure. We call on Congress to introduce legislation adopting this innovative proposal.
Recommendation 3: Open Opportunities for Private Capital to Return to the Mortgage Marketplace to Foster New Demand among Responsible Homebuyers
- Open up the FHA Section 203(k) rehabilitation loan program to investors to encourage purchasing of foreclosed property. This will facilitate the rehabilitation of the existing housing stock and help reduce the inventory of foreclosed homes.
- Require the GSEs to temporarily suspend investor financing limitations, especially the limit on the number of mortgage loans allowed for any one investor/borrower (currently 4 for Freddie Mac and 10 for Fannie Mae). This will give small, private investors the opportunity to absorb some of the excess inventory, resulting in the stabilization of prices for existing real estate-owned (REO) properties.
Recommendation 4: Support a Secondary Mortgage Market Model that Includes Some Level of Government Participation
- Reject proposals that call for full privatization of Fannie Mae and Freddie Mac. This is not an effective option because private firm’s business strategies will focus on optimizing their revenue/profit generation. This model would foster mortgage products that are more aligned with the businesses goals than in the best interest of the nation’s housing policy or the consumer.
Recommendation 5: We Call on the White House to Hold a National Housing Summit to Articulate a New National Housing Policy and Move the Provision of Housing to the Front of the Nation’s Domestic Agenda
- Homeownership matters! It represents the single largest expenditure for most American families and the single largest source of wealth for most homeowners. The development of homeownership has a major impact on the national economy and the economic growth and health of regions and communities. Homeownership is inextricably linked to job access and healthy communities and the social behavior of the families who occupy it. We recognize the serious public debate as to which tax and spending policies will best support the sound fiscal management that our nation requires.
- However, we urge caution against dismantling or eliminating vital resources for housing that provide important economic, social, and societal benefits. We call on the White House to empanel a body comprised of public and private industry participants to fashion a national housing policy that is flexible enough to address the varying needs across the nation, whether it’s homeownership or rental housing, production or preservation.