Obama Administration Requests More Lenient Lending Practices

     The Obama Administration is requesting that the banks ease up on those applicants who have weaker credit scores, stating that the housing recovery is leaving to many potential home buyers behind; in particular, young professionals who cannot qualify for financing. Since the burst of the housing bubble, home loans have become difficult to acquire due to banks requiring applicants to meet higher standards. Although it may not have been desirable to a good percentage of the population, it was more than necessary to get the U.S. back on track. It is understandable that everyone wants to have their dream home even if it means borrowing obscene amounts of money that cannot feasibly be paid back however, realistically that just does not work. We clearly saw the outcome of loose lending practices and it was a disaster to say the least. Borrow first and figure out paying back later is just not the way to go. Allowing unqualified people to acquire loans beyond their means is simply asking for a problem. The real problem here doesn't seem to be the borrowing but the fact that people NEED to borrow more and more which is a separate issue for the White House to discuss. 

     So, is the Obama Administration making the right call? The administration says that more lenient mortgage standards would not only help the housing recovery, but the economic recovery overall. While this would be a great idea, critics have put their two sense in as well and they believe an action like this could lead us right back to the risky lending that triggered the housing crash. The administration is working on getting the banks to lend to more borrowers by making use of government backed programs such as the Federal Housing Administration (more dependence on the government, of course). 

     The administration is working with the FHA in an attempt to create new policies that would make the banks more comfortable by assuring they will not face legal action or lose their guarantees if loans that conform to the program's standards later default. The administration is also hoping that Fannie and Freddie will jump on board as well. "If the only people who can get a loan have near-perfect credit and are putting down 25 percent, you're leaving out of the market an entire population of creditworthy folks, which constrains demand and slows the recovery," says Jim Parrot, the former senior adviser on housing for the White House's National Economic Council.

     This would all be great if there were no consequences for loosening up lending standards, but many remain very concerned.  "If that were to come to pass, that would open the floodgates to highly excessive risk and would send us right back on the same path we were just trying to recover from," said Ed Pinto, a resident fellow at the American Enterprise Institute and former top executive at Fannie Mae. 

Another Possibility:

Instead of figuring out ways to give people things they want but cannot currently afford, why doesn't the White House figure out some ways to create opportunities for people to be able to afford the things they want... "give a man a fish and he will eat for a day...teach a man to fish and he will never go hungry"... makes sense doesn't it?

Mortgage Applications Fall, But Why?

     As I have been stating numerous times in my previous posts, buyer activity has been going up and up and up. More and more buyers are coming out every week which has brought up the dilemma of very high demand (buyers) and very low supply (sellers). With all of these buyers coming out you would assume that the Mortgage applications would be going up due to more people purchasing homes...and you would be right and wrong. Mortgage applications for home purchases (which is a leading indicator of home sales) are up 1.4%, however mortgage applications for refinancing home loans are down 5.6%. The amount that the refinancing applications decreased offset the increase in the amount of applications for mortgages on home purchases. That is why, according to the Mortgage Bankers Association, the overall figure for mortgage applications has decreased by 4% for the week ending on March 29. This is good news for the real estate industry because if less people are refinancing it means that less people are considering staying in their home as opposed to moving to another home; more moving means more activity in the real estate market. Refinancing loans have accounted for 74% of total mortgage applications which is down from the previous weeks number of 75%. Also, the fixed 30-year mortgage rate has dropped 3 basis points from 3.79% to 3.76%. These are just some more strong signs of a solid recovery in progress!

Celebrity Homes ~ Michael Jordan

Frrrooooommmmmm North Carolina.....Standing 6'6''...number 23.....

     Yes, this Celebrity homes post is about non other than the basketball revolutionary who goes by the name of Michael Jordan.  Although he is best remembered for his time in Chicago with the Bulls, Jordan has moved back to Tar Heel country; that's right, North Carolina. According to Fox Sports, Jordan has just purchased a home in Cornelius, NC which is only 22 miles away from the Charlotte Bobcats arena where Jordan is the majority owner of the club. The home was bought for $2.8 million, which for Jordan seems quite conservative. However, Jordan seemed to work his magic once again. The home was originally listed for $3.99 million in 2011, but then went through a foreclosure and was re-listed for $3.49 million until it was swindled down to a mere $2.8 million.
     The home sits on a lot that extends out into Lake Norman inside a private and gated community. Built in 1993, this 12,310 square foot home features 6 bedrooms and 8 baths, a basement holding a home entertainment center and person gym, and a two-story great room which opens out to a terraced patio holding a pool and spa. This home is just an addition to his Real Estate collection featuring his custom estate in Chicago (currently on the market), his home in Jupiter, Florida, another home in Salt Lake City, along with a condo in Charlotte.

Embrace The Rise In Mortgage Rates

     As most of you are aware of the tremendous dip and record lows in the mortgage rates, many are slow to the news that the mortgage rates have began their turn-around. First, let's do a little background check on the mortgage rates just to make sure everyone reading this is of complete understanding when I begin to explain the current mortgage rate situation we are in.
     Just to be thorough let's start with square one: what is a mortgage rate? A mortgage rate is literally the rate of interest that is charged on a mortgage. This "rate" is most commonly generated by the mortgage lender after fully evaluating the situation at hand and can either be fixed (which means the rate you agree upon will be locked-in for the term of the mortgage) or variable (which means the rate will fluctuate in accordance with a benchmark interest rate). Also, when I speak about the mortgage rates and reference any percentages I will be talking about the national average of the 30-year fixed mortgage rate (the 30-year fixed mortgage is commonly used as a standard because it is the most popular choice for home buyers).
     The national average dipped all the way down to the low 3.3% range last year which achieved record lows, but it is now beginning its move upward. According to Freddie Mac figures, last week the rate hit a six month high of 3.63%.  Mortgages rates are expected to continue rising throughout this year which would make owning a home more expensive. I know the first reaction to this news is probably not a positive one, but after I go over a few things I believe I can turn those feelings positive. Let's review the rates in five year increments beginning with 1980 in order to put this "rate" into perspective:

• 1980 -- 13.74%
• 1985 -- 12.43%
• 1990 -- 10.13%
• 1995 --   7.93%
• 2000 --   8.05%
• 2005 --   5.87%
• 2010 --   4.69%

     Look at the recent mortgage rate jump up to 3.63% and then compare that to the numbers you see above; although the rates are slightly rising they are still very low.

     There are some other aspects to consider as well. Some housing analysts are saying that the rising mortgage rates could actually help aid the housing recovery. A lot of the home buyers who have been sitting on the fence may see the rising mortgage rates as a final sign that the housing recovery is fully on its way; and a sign to buy now because, while borrowing is still on the inexpensive side, it is time to lock in a rate now before the rates move any higher. "Rising interest rates alone are not enough to slow down the housing recovery," Barney Hartman-Glaser, a real estate finance professor at Duke University, told Fortune. “My sense is that underwriting standards are getting easier to satisfy, and so we would expect rates to rise as slightly more risky borrowers are brought into the fold."

     Furthermore, Andrea Heuson, a finance professor at the University of Miami, stated that the increase in mortgage rates interestingly enough coincides with increased demand for loans across United States businesses. Commercial and industrial loans were up 12.5% in January when compared to the previous year, reaching $1.5 trillion.  Heuson told Fortune that, "The recent increase ... bodes well for the future of the U.S. economy."  The reasoning for that statement is that when businesses borrow more, it usually boosts the economy in several ways which includes job growth,increasing consumer confidence, as well as increasing home sales.