Some weeks ago, I wrote an article, “Are Banks Controlling the Real Estate Market?” Now, more evidence of the Golden Rule (He who has the gold…rules!) is painfully apparent in this Real Estate market.
Lending institutions, once thought of as pillars of society, are keeping a tight lid on the housing industry. How? Simple. If you offer a home for sale, you are a Seller. If you loan money to an individual purchasing a home, are you not the Buyer as well?
Banks are playing both sides of the equation. With over 4 million foreclosures still tucked away somewhere in the bank’s balance sheet, the American public is waiting for the other shoe to drop. When will we see the “avalanche” tumbling down the mountain? Who knows??
In addition, banks are changing underwriting guidelines by the hour. With appraisers on a short leash, how is the hungry first time buyer supposed to find the American Dream? Getting a loan right now is possible, but ever turn and document is checked and rechecked by the bank’s underwriter.
In 34 years, there as not been a better time to buy. If you have the stamina and gritty resolve of a prize fighter, you can do it. So, take off the gloves and step into the ring.
Mark,
You have questions that are of course answered by virtue of the questions. What does this mean Steve, he wonders? “If you loan money to an individual purchasing a home, are you not the Buyer as well?” Not just since the summer of 2007 when melting started to ocurr with some impact, in any time period, whenever a bank lends money, the loans are approved based on the risk the investor takes when investing, loaning, or basically helping the buyer “buy” the property and becomming the buyer’s new partner in the property
Mark, the four million forclosures? They are there. The banks and the Government don’t know how to let them out into the market for a few reasons. And these reasons just deduced logically are not listed in any order. They are just stated for the reader to think about.
First, the amount of personel it would take to administrate these properties all at once would be so imense that the banks would go “further” broke administrating these all at once. Number two, if these four million plus units were let out on the market all at once, the supply would so far overshadow any demand that the price and values would not drop, they would plummet to an ugly place further crippling more people along the way. Number Three, There is such an imense number of these the personel at the institutions that own them really don’t know what to do. I thiunk there are more than four million.
The Mark my last comment on your blg for today is on your comment, “banks are changing underwriting guidelines by the hour.” Let’s first understand we are talking about, Government Insured product, FannieMae and FreddyMac loans. Loans that are conforming up to $417.0 and From $417.01 – $625.5 and $729.750 in some areas.The guidelines are called Fannie Mae and or Freddy Mac Guidelines, NOT the banks. When we originate a loan in our bank, we collect the paperwork that the “Guidelines” require us to collect. And the balance iss =credit, appraisal, LTV Income rartios and more. So please understamd these or regulations (guidelines) sent down to the lender banks whether it be a big barnded bank the consumer knows or a private mortgage bank doing the same thing as the branded big boys. Taking it a step further, each bank that is approved to “sell” their loans to the two agencies have their individual overlays on each product that in fact can be even more restricting because of risk. This varied by lender but buy no means confuse bank guidelines for underwriting, because we originate, fund and then sell to FannieMae or FreddyMac, then take the money and lend it again and again and again. If you or any readers have any further questions regarding the agencies or financing, I would be glad to help.
Please understand it is not us bankers, it is the Federal Regulators setting guidelines we originate to, the government. that purchases so the bank can lend again, sell again and lend again. Does that make sense? It does to me. Steve
Steve,
Thanks for your comments. This is a well thought out reponse and a good point of view from a professional like you involved in the process on a day to day basis. My question still remains: if the banks have sliced and diced many of these porfolios into Mortgage Backed Securities, which are distributed as far as Eastern Europe and beyond, why do banks still control the Real Estate assets and why haven’t they released even a partial inventory? Sometimes I scratch my head and wonder if we truly know or can understand everything that is going on in this historiacally unprecedented time.
Mark, get me spell check!