Although it appears to be nothing but doom and gloom for housing and the mortgage industry I believe we have some good things about to happen to turn it all around. The Federal Reserve has given the opinion they aren't interested in fixing the problem, so be it.
They could, however, show a bit more concern over the problems the industry(s) are facing and drop the thought that inflation is the only problem in the world. Or at least the only one worth spending their time or effort to keep under control. Whether anyone realizes it, housing is the middle classes bank. The majority of their wealth is in their house.
Last night and this morning, right after I wrote the opening paragraph of this article,the Fed made a major intervention to correct what I see is a problem that they themselves exacerbated by their remarks. In my previous article I stated that the mortgage pools were not getting any bids on Wall Street and that affected all the mortgages in this Country except the conforming loans and some portfolio loans.
Countrywide came out and stated they were going to have interruptions in their business because of the lack of liquidity as did Washington Mutual, so the Federal Reserve using one of their two powers, regulating the money supply, went to the banks and bought $19 billion of mortgage backed securities. That will get the mortgage market moving again. Writers note: I had nothing to do nor do I take any credit for the Federal Reserves action. (As if anyone would have believed it anyway!)
Now for the good news which will be coming from the bond market, Fannie Mae and Freddie Mac and the major lenders in this Country. Let me start with the major lenders and what they are going to do to help those who have been "stranded" by the quick and I dare say hazardous action of about 30 states in disallowing stated loans for both employed and self employed borrowers. Not a great idea without at least a grandfathering in of those who have had these loans before and still own their house. Without the ability to use stated income for a self employed borrower how would they qualify? They write as much off as possible and do not show great earnings, yet on the whole they are exemplary borrowers.
The major prime lenders are taking a page from the sub-prime lenders and allowing stated borrowers to qualify with 12 to 24 months bank statements. In these statements one can ascertain the cash flow of the borrower which is what a borrower uses to pay their bills.
I applaud the quick response to the over reaction of the states.
Roger Schlesinger's Mortgage Minute is heard on hundreds of radio stations and daily on the Hugh Hewitt radio show and Michael Medved shows. Roger interacts with his hosts and explores the complicated financial markets in order to enlighten his listeners and direct them along their own unique road to financial freedom.