The question I would now like to explore is whether mortgage professionals can play a positive role in healing our ailing housing market.
When they consider the systemic problems of the current housing market, most loan officers would come to the understandable conclusion that these problems are well beyond their ability to fix:
- Depressed home values, keeping traditional Sellers and holders of distressed inventory from putting homes on the market.
- The difficulty of getting buyers approved for financing in today's regulatory and, some would say, paranoid underwriting environment.
- Concerns about the state of the economy, keeping prospective home buyers from committing to buying a home.
The whole thing looks like a big, tangled ball of yarn. But sometimes if you pull on the right end from the right direction, you can create order out of chaos.
Let's start with the supposition that the current market represents a very good opportunity for people who would like to own their own homes. Let's further suppose that many of these people are currently inhibited from pursuing that opportunity because of their concerns about home values, their ability to be approved for financing, and their concerns about their own financial stability in the face of our troubled economy.
The case can be made that the currently depressed value of homes is, in fact, a feature – not a bug – if your goal is to buy a home that will increase in value over the years. When values are depressed, you can make a better deal. Add to that the fact that mortgage interest rates are currently at historic lows, and the opportunity becomes even more attractive.
Furthermore, mortgage loan underwriting, which most informed people would agree is more stringent today than it has been in many years, is itself a protection against taking unnecessary financial risk – for a prospective home buyer. We have a hard enough time qualifying people who can actually afford the home they want to buy; it is even less likely that we could gain underwriting approval for someone who is on thin ice financially, and would be taking an unreasonable risk if they were to try to buy a home.
So a case can be made that if you want to buy a home, you should at least look into it. You have very little to lose – other than a little of your time – and even if it turns out that now is not the time for you to buy a home, you will at least have learned something from the experience – including some kind of action plan that would put you where you want to be in the future.
Now, if we can accept this supposition, who would be in the best position to help prospective homebuyers overcome their fears and inhibitions – and take positive, productive steps forward?
Realtors? While Realtors are generally well informed about their local markets, are able to give good advice to homebuyers, and are capable of making the arguments in my supposition, the problem they would experience (and in fact are experiencing) is that their arguments tend to be seen as self-serving. In other words, while you and I would say that their advice that now is a very good time to buy a home is, in fact, good advice, consumers would tend to view it skeptically.
Politicians? OK, now you're just being silly.
Mortgage professionals are in a unique position to make a reasoned, balanced, objective case for the idea that, assuming you are financially ready to buy a home, now is as good a time as we have seen in many years for you to take steps in that direction.
Mortgage professionals are also in a unique position to be able to predict, with greater accuracy than just about anyone else, whether or not your efforts to obtain financing will be rewarded with success.
Mortgage professionals – particularly if they take the time and trouble to educate themselves about their local real estate markets – are in a unique position to credibly give potential home buyers and objective analysis of the likely effects that buying a home would have on a family's finances.
And finally, because mortgage professionals are seen as being more objective and neutral (perhaps because they do in fact sometimes say no to a prospective borrower). As long as loan officers do not present or position themselves as "salespeople", they are more likely than anyone else to be seen as credible, even authoritative, by people who are considering the purchase of the home.
We know that there is a significant amount of pent-up demand in our real estate market, composed of millions of people who want to own a home, but are afraid to take the plunge for a variety of reasons, most of which are based on unexamined fear and misinformation.
If every loan officer in the country were to help just one person/family each month to recognize that they can, in fact, afford to buy a home, and that it is in their best long-term financial interests to do so, it would immediately increase the number of home sales in the United States by a staggering 25%.
Home values today are stuck at levels roughly 30% below where they were at the peak of the housing boom – and they are stuck there for the very simple reason that there is way too much inventory (including shadow inventory that has not yet hit the market), and because not enough people are buying homes. Increase the number of homes being sold, and values will begin to recover. The overall economy will begin to improve. And while no one in their right minds wants to return to the Wild West days of Franklin Raines, Barney Frank, Chris Dodd, James Johnson, and Angelo Mozilo, one can even hope that an economic recovery would result in a return to prudent – but not paranoid – lending standards.
Thus, the ball of yarn becomes untangled.
Repeat after me: "Let there be an economic recovery, and let it begin with me."