December 16, 2015

It’s Once Again Easier To Qualify For A Mortgage

A report from the International Business Times. “The U.S. Federal Reserve is widely expected to pull a crucial economic lever for the first time in nine years Wednesday, boosting its benchmark short-term interest rate by a quarter of a point and edging it up gradually after that. As the Fed embarked on the era of rock-bottom interest rates, the most commonly raised fear was that uncontrollable inflation would soon take off. Those concerns grew more strident when the Fed doubled down on its stimulative efforts with an expanded asset-buying program known as quantitative easing in November 2010. More insidious than inflation was the risk that the Fed’s easy money policies would touch off another asset bubble.”

“Could there be a Fed-driven bubble hiding somewhere in the market today? It’s hard to say. Part of the challenge in forestalling asset market bubbles is simply detecting them. ‘I don’t see any obvious major mispricings. Nothing that looks like the housing bubble before the crisis, for example,’ former Fed Chairman Ben Bernanke said in October — before adding, ‘But you shouldn’t trust me.’”

10 News in California. “It’s not a surprise to many that housing prices are out of control in San Diego, but there are new indications of a bubble that could burst in the immediate future. Amy Simon sensed it was time to cash in on her Carmel Valley home. Her hunch paid off. She and her husband Eric bought the five-bedroom home in 2000 for about $567,000. The Simons sold the home last month for about $1.1 million. ‘We decided to do it now because the market is super hot,’ Simon said.”

“Simon and many others don’t know how long that heat will last. A new study from Zillow ranked San Diego County as the nation’s fourth most at risk for a housing bubble, which could lead to a crash. The last time the bubble burst, thousands of San Diegans defaulted on their loans and a recession began. Adding to the fears of a bubble burst is San Diegans’ ability to pay for homes. Home prices are growing twice as fast as incomes. Simon said there are many new homes being built in Carmel Valley. ‘I thought if I wait and they keep building, then I’m competing against all these new builds,’ Simon said.”

The Portland Tribune in Oregon. “The Portland area economy is booming but incomes are not keeping pace, contributing to the growing affordability problem in the region. Those findings are included in the 2015 Check-Up on the Portland Region’s Economic Health. One result of the disparity is a growing affordability problem, especially given the recent dramatic increases in housing costs. ‘Couple income stagnation with rapidly rising housing prices and increases in the cost of living and we have some fundamentally profound changes emerging in the Portland-metro area around who can afford to live here,’ reads the report.”

The News and Tribune in Indiana. “t’s no secret to anyone looking that the United States is in the midst of a real estate boom — and Southern Indiana is enjoying particularly low housing costs. But while many are rejoicing in the plummeting price tag figures, Jeffersonville Real Estate Agent Lincoln Crum said it’s not such a happy picture for low-income residents. Stagnant wages in Southern Indiana mean people with low incomes still struggle to find affordable housing, despite the real estate boom. ‘What I have found is we are still in a very affordable housing market in the fact that we have a lot of inventory that’s $150,000 or less,’ Crum said. ‘… But somebody that makes 13 dollars an hour and has two kids to raise, it doesn’t matter how cheap the house is, they’re not going to have access to financing.’”

“Many of the cheaper homes that people with low income otherwise would be able to purchase are being scooped up by investors during this real estate boom who either rehabilitate the home and put it back on the market or lease it. ‘You could get a $40,000 house and your total payment will be 100 bucks [a month], but if you rented that same equivalent property, you’re going to pay $650, $675 a month,’ Crum said.”

WFLA in Florida. “The Clearwater Cay Club was supposed to be something special. It was special alright, part of a $300 million dollar condo flipping scam that stretched from Clearwater to the Keys to Vegas. The sales pitch claimed the Cay Club was going to turn apartments into a 5-star luxury hotel resort. Part of the pitch to out-of-staters focused on an elaborate water park, which was supposed to be built nearby, adjacent to upscale retail projects. That sounded great, but the problem is no one got permission from the city of Clearwater.”

“‘I just can’t believe that something like this could happen,’ investor Laurie McNulty said. Laurie bought a condo at the Clearwater Cay Club in 2005. ‘They were selling snake oil in the form of condominium hotel units. That’s what it boiled to,’ Laurie’s attorney Bruce Barnes stated. It also boiled down to Clearwater Cay Club operators flipping the condos to themselves at artificially inflated prices. The scheme also involved bank loan officer Roger Windey, fraudulently pushing through loan applications that contained false information. According to Bruce Barnes, Clearwater Cay Club also had an appraiser working with it. He provided artificially high appraisals.”

“The minute Laurie McNulty purchased her condo for $697,000, she was hundreds of thousands of dollars in the hole. According to Barnes, Clearwater Cay Club closed on Laurie’s condo hours before it sold the property to her. Clearwater Cay Club paid what was closer to the true value, $251,000. ‘It’s been bad. I’ve probably cried every night about it,’ Laurie said, her voice cracking.”

“Two other former sales people, Barry Graham and Ricky Stokes, entered into plea agreements with the feds in Miami and are serving 5-year terms in federal prison for bank fraud. There are more charges coming against more involved parties. Barnes has waited for this day for 7 years, but it is bittersweet. ‘I don’t know of anybody who’s been made whole. The vast majority of the investor victims saw nothing,’ he said.”

National Public Radio. “The Federal Reserve is expected to start raising interest rates later this week, and anyone who’s ever bought a house — or thought about it — knows that if mortgage rates rise by much that will make it tougher to afford a home. De Desharnais, a homebuilder in Nashua, N.H., says she’s one of the lucky ones — her company survived the crash. But it didn’t come without pain. ‘We had 32 employees on our payroll at normal times; we have 6 on our payroll right now,’ she says. ‘We have big subdivisions that we’ve been carrying through that recession. I think there is a big concern if the interest rates go up, that everything’s going to come to a screeching halt.’”

“John Burns, who runs a national real estate consulting firm, says mortgage rates are expected to rise about 1 percentage point over the next several years. That would mean the same-priced house will cost you 12 percent more in monthly payments. And Burns says it’s once again become easier than many people think to qualify for a mortgage, despite caution on home loans by some of the biggest banks.”

“‘There’s a lot of non-banks, like Quicken Loans and loanDepot, that are taking a lot of market share from the banks,’ he says. ‘As long as you can provide the income, and you’re not, say, below a 660 FICO score — which is about a bottom 30 percent of the country — they can get you a mortgage relatively affordably.’”

Bits Bucket for December 16, 2015

Post off-topic ideas, links, and Craigslist finds here. Please visit my Youtube channel which you can also find here: