Willl mortgages ever be the same?

Posted December 25, 2008 at 13:51 PM
ronlargent
Will the lessons learned from the real estate slowdown spark genuine creativity in marketing and lending to push more sales?
What are the chances that the residential mortgages bought and sold in the secondary markets will revert to the conservative portfolio business that existed before the first securitizations in the early 1980s?
The real estate industry will recover, but it will be different.
Tom Kelly at Inman News has some thoughts on this....and what are yours?
From my viewpoint, I think we will continue to see a continuing interest on the part of lenders in making good loans, but they will be to those that are qualified, using some old measurements. Not too many years ago, the yardstick was that your mortgage payment should not exceed 25% of your gross income. If you made $1000 a month, your mortgage payment could not exceed $250, for example. Over the recentl years, this went to as high as 50% with some lenders...and this was the beginning of the end. Then, lenders started including the 2nd income in the family as a permanet source of income and that was considered in the payment amount. All was good and fine as long as that 2nd income was there. Things changed, though, when the 2nd earner had other things enter in, such a another child, unexpected illness, or college expenses that were not expected. All of a sudden, the 2 family income became 1, and a problem was on the horizon.
So, we will be back to good financing in the future, but for the next few years, the guidelines will be more conservative than in the past 5 years. Now is the time to refinance, if you can....for interest rates are at an all time low.
To discuss this further, give me a call or e-mail ronlargent@kw.com or www.ronlargent.com