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Vol. 15 No. 4 - November 19, 2014

REAL ESTATE

The big mortgage chill

 

I know it’s almost winter by the chill in the mornings and the arrival of the white pelicans. But I’m feeling a chill for more than just the overnight temperatures; I’m really chilly thinking about mortgage lending standards being loosened.

In October, federal regulators in conjunction with Fannie Mae and Freddie Mac have made lending institutions very happy. The reason they’re happy is because these government backed institutions have announced plans to expand credit to borrowers with weak credit and low down payment funds.

Mel Watt, the director of the Federal Housing Finance Agency, which regulates both Fannie and Freddie, said they are planning to guarantee some loans with down payments as little as 3 percent. At the same time, they are working with mortgage lenders to remove some of their responsibilities and remove potential penalties when mortgages default.

While Fannie and Freddie do not make loans, they do buy them from lenders and then package the loans into securities. These loans are guaranteed to investors in the event borrowers do not repay. Therefore, in order for a lender to give a loan that can ultimately be sold, it has to meet certain criteria dictated by Fannie and Freddie, which are arms of the federal government.

Mark Zandi, chief economist at Moody’s, is in favor of loosening standards because it “would allow credit to flow more freely to lower and middle income households.”

As you will recall, after the financial crisis, access to home mortgages has been very tight because of the severe regulations instituted at that time. Now, however, because of slow growth in the housing market, the government is anxious to find a way to expand credit in an attempt to boost the sluggish economy. According to the National Association of Realtors, U.S. home sales are down almost 2 percent from last year.

That sizzle you’re hearing is the sound of my brain on fire. Does no one in Washington remember the reason low and no down payment loans were stopped in the first place? As any freshman economics student can tell you, if a homeowner puts down only 3 percent and the home’s value goes down even a little, that burrower is underwater, a word that I hoped never to have to use again. Now these poor people who never should have been given loans in the first place are faced with living in and paying for a home with no equity, and if they have to move frequently, their only choice is to walk away and default on the loan.

This is exactly what happened during the housing bubble and why stricter regulations were instituted six years ago. Mr. Watt defends the policies as an effort “to move mortgage financing back to a responsible state of normalcy.” Really, in what universe is granting a 3 percent down payment for a mortgage normal? Normal in the good old days of responsible lending was 20 percent down, and you can bet your IRA that it won’t be long before 3 percent becomes zero again.

I like nothing better than to see young people get into their first home and perhaps some of the regulations put in place after the financial crisis were too tight, but I also don’t want to see another housing bubble and all the pain that went along with the last one. The American taxpayer should not have to fund easy lending because government bureaucrats want to make their books look good.

For now it’s time for me to put on a sweatshirt and watch the white pelicans. Maybe that will put out the fire in my brain.

Real Estate Transactions
As of August 31, 2014
Sponsored by Alan Galletto Island Real Estate

Sold Date | List Price | Sold Price | Address | Provision | Property Style

Anna Maria

08/13/2014 649,000 589,000 112 Hammock Rd. 2009 85x112 3 Br/2 Ba SFR
08/15/2014 697,500 660,000 208 Lakeview Dr. 1408 75x110 2 Br/2 Ba SFR
08/15/2014 749,000 725,000 519 South Dr. 1582 60x110 3 Br/2 Ba SFR
08/04/2014 895,000 895,000 316 Tarpon St. 2351 4 Br/3 Ba SFR
08/20/2014 1,195,000 1,079,000 218 Archer Way, 2712 4 Br/3.5 Ba SFR
08/06/2014 350,000 350,000 70 North Shore Dr. 836 54x78 2 Br/1 Ba Half Duplex

Bradenton Beach

08/22/2014 199,000 189,000 1801 Gulf Dr. N. # 215 691 1 Br/1 Ba Condo
08/29/2014 379,000 372,000 117 10th St. N. 121 1027 2 Br/2 Ba Condo
08/23/2014 625,000 625,000 2600 Gulf Dr. N. # 24 1195 2 Br/2 Ba Condo
08/29/2014 199,000 189,000 103 Gulf Dr. N. 1200 53x100 Com
08/18/2014 599,000 599,000 2412 Avenue B 2984 50x100 Inc

Cortez

08/06/2014 165,000 155,000 9604 W Cortez Rd. 224 1218 2 Br/2 Ba Condo

Holmes Beach

08/20/2014 549,900 540,000 218 85th St . 1534 90x100 3 Br/2.5 Ba SFR
08/15/2014 595,000 560,000 210 55th St. 2185 131x105,70,118 3 Br/3.5 Ba SFR

Holmes Beach

08/12/2014 599,900 572,000 4005 5th Ave . 1994 3 Br/3 Ba SFR
08/20/2014 599,000 585,000 312 61st St. B 1707 3 Br/2 Ba SFR
08/29/2014 599,000 585,000 628 Foxworth Ln. 2334 100x115 3 Br/2 Ba SFR
08/22/2014 675,000 627,500 518 Bayview Dr. 1250 75x120 2 Br/2 Ba SFR 08/05/2014 699,000 675,000 6201 Holmes Blvd. 1822 101x78 5 Br/3 Ba SFR
08/01/2014 749,000 705,000 214 82nd St. 1536 90x90 3 Br/2 Ba SFR
08/01/2014 873,500 837,500 514 Bayview Dr. 1841 75x120 3 Br/2 Ba SFR
08/12/2014 965,900 900,000 684 Key Royale D 3003 4 Br/3 Ba SFR
08/13/2014 1,249,000 980,000 8407 Marina D 2164 80x125 3 Br/2 Ba SFR
08/22/2014 1,499,900 1,400,000 3007 Avenue F # 1 & 2 2200 4 Br/4 Ba SFR 08/04/2014 232,000 215,000 4307 Gulf D 206 1027 2 Br/2 Ba Condo, Short Sale
08/13/2014 395,000 370,000 6500 Flotilla D 174 1622 3 Br/2 Ba Condo
08/15/2014 418,000 410,000 5200 Gulf D 508 1169 2 Br/2 Ba Condo
08/13/2014 597,000 573,500 244 S Harbor D 2 1330 2 Br/3 Ba Condo
08/07/2014 649,900 650,000 5608 Gulf D 215 1092 2 Br/2 Ba Condo
08/29/2014 1,725,000 1,700,000 7310 Gulf D 5 1952 2 Br/2.5 Ba Condo
08/22/2014 675,000 627,500 518 Bayview D 75x120 Vac
08/01/2014 425,000 395,000 3004 Avenue C 150x10 Vac
08/21/2014 650,000 405,023.85 8101 Palm D 1971 90x115 3 Br/2 Ba Inc, Short Sale
08/04/2014 519,000 493,000 306 65th St 1300 90x105 3 Br/2 Ba Inc
08/08/2014 419,000 380,000 4603 Gulf Dr # A 1334 50x100 4 Br/2 Ba Inc

Source: Manatee County Property Appraiser’s Office


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