This is part II of a series of questions I asked a group of real estate professionals about the state of real estate lending in 2009. Click here to read Part I of the Leavenworth Mortgage Roundtable.
Our panelists include:
Michelle Wilson of Alpine Mortgage. You can find her on the web at WilsonHomeFinancing.com
Darel Ansley of Peoples Bank in Wenatchee Washington. He blogs on Active Rain and has been a guest contributor here.
4.What reforms in the real estate lending industry will have the biggest impact in 2009?
Michelle: It will be very interesting to see how Obama and lawmakers choose to allocate the remaining $350 billion in TARP funds, in addition to the $825 billion fiscal stimulus plan that is currently in the works.
Darel: Most of the reforms are actually positive. The major one is the removal of the programs like 'Option ARMs' which allowed people to get upside down in a house fast, and also threw too much gasoline on the Real Estate fire, which led to unsustainable growth rates, and ultimately a hard fall. One negative change is the addition by Fannie Mae of high fees for anyone buying rental properties, no matter how much money they put down. For instance, even a buyer who puts $300,000 down on a $400,000 multifamily property will have to pay 2.75% in extra loan fees on top of everything else. These buyers provide housing for a lot of people, and I believe they are being unfairly penalized.
William: See New Guidelines http://www.myequitypro.com/?p=642
Rhonda: I'm concerned about the new guidelines for ordering appraisals. Many loan originators will have little if any contact with the appraiser. The system may be similar to that of how appraisals are ordered with VA loans--you have no idea who that person is going to be or what their level of service is.
Tom: Tightening lending requirements, reducing mortgage fraud and reducing appraisal abuse. There were too many times when an appraisal was "manipulated" by too many parties to the transactions and that ran prices higher than they should have. For those of us in the business a long time, that's something that is hard to adjust to, but it's a necessary evil.
David: Nation-wide loan officer licensing should have a positive impact on lender ethics and borrower trust. It's not about rubber-stamping lenders but it does give us a way to keep out those lenders that can't maintain honest standards.
5.Are there reforms that didn't happen that still should?
Michelle: I would like to see FHA roll out the proposed zero down HUD insured mortgage that has supposedly been in the works for some time. FHA has consistently required full job/income disclosure on purchase financing and I believe there is a place for zero down, even in the current lending environment. Those young professionals with excellent education/job/line of work and good credit should be eligible for zero down financing.
Darel: I don't see any dangerous lending programs out there anymore; so the only additional changes I would like to see is the punishment of the big investment banks that created all these crazy financial derivatives and drove the economy to near collapse. If you look at it like a drug distribution cartel, they were the drug lords, Countrywide was a distributor, and mortgage brokers were the dealers on the street. People have gotten mad at the dealers, and slapped the hands of the distributors, but we have bailed out the drug lords. I am not for long trials and investigations, we should have just let them collapse and go bankrupt, the normal market punishment for making bad choices in business.
William: The tightening may have gone a little too far; we will see loosening in 2010. For now guidelines are tight and we will live within them
Rhonda: Any person who takes a residential loan application as a mortgage originator should be under the very same legislation regardless of what type of institution they work for: bank, mortgage broker, correspondent lender, credit union, etc. Currently much of the legislation is focused on mortgage brokers because they are an easy target lacking the same lobby power the banks have. Consumers should be able to rest assured that regardless of who is taking their loan application, they have the same duty, obligation, responsibility and liability regardless of the type of institution they work for.
Tom: That's a topic for about two days of conferences, but I'd say there are a couple of them:
Secondary Market reform - the fundamental shape of the secondary mortgage market has and will forever be changed. There will be a substantial difference in the way mortgages are packaged and either they will go the route of permanent and complete nationalization or smaller and more diverse "not too big to fail" little fannies......
Banking Industry - the banking world is essentially bankrupt and we have yet to see even a glimpse of the changes that are coming down that track.
David: We need more transparency in the mortgage industry at the transaction level. I would like to see a public registry for all GFE's. This may sound like a radical idea but Zillow Mortgage Marketplace has proven that it's possible. Quotes on Zillow are made public without jeopardizing borrower's privacy and we've learned that when quotes are public, lenders are keen to hold their peers accountable and they will clean up their act.
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