Thursday, February 17, 2011

Is SANITY beginning to creep back into the banking industry?

An old high school friend sent me this article from the Wall Street Journal and asked:

Is SANITY beginning to creep back into the banking industry?? Check out China’s typical mortgage requirements, and see how well they handled the global meltdown–coincidence? I think not. Not gonna make your job any easier, but I think it’s a necessary step. Your thoughts?

Well, here are my thoughts:

Satisfied First Time Home-Buyers
  • “Gradually” increasing the minimum down payment on conventional loans is a non-issue; conventional borrowers are savvy enough to understand and appreciate the potential benefits; specifically, avoiding or eventually eliminating paying mortgage insurance.
  • The FHA has already announced they will be increasing the “monthly” mortgage insurance premium by .25 of a percentage point beginning April 18, 2011. As over half of all home purchases last year involved FHA loans, I don’t see that number changing as the increase equates to an average of an additional $3o a month (less than a tank of gas).
  • Obviously, we want to learn from history and NOT repeat it. By gradually increasing down payments and marginally increasing mortgage insurance premiums on non-conventional loans (FHA/VA), risk will be reduced and short sales and foreclosures may be prevented.
  • As far as attempting to compare and contrast the situation with China, I am not familiar enough with their financial and housing dynamics to speculate at this time.

Our job, as real estate professionals, will never be easy (despite the opinion of those without licenses) because buying & selling a home is as “emotional” a decision as it is “financial”. And, as longs as 70% of Americans still view home-ownership as being part of their American Dream, their WILL is sure to find a WAY!

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