Setting The Stage

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16 | Th e M Rep o RT cover story have to pay more for access to mortgage credit," Sorenson said. "If we consider all the Cs—capital, capacity, condition, collateral, cash flow, and character—then there should be a market for anyone that wants to buy. It's just that the terms will not be equal across the board." "In this reviving market, ac- cess to credit and education are crucial in helping the underserved achieve the American Dream of homeownership," said Ray Brousseau, EVP of Carrington Mortgage Services, LLC's Mortgage Lending Division, who added the percentage of all origi- nations for borrowers with FICO scores below 629 went from 13 in 2005 to 0.22 in 2013. Tino Diaz, president of America's Homeowner Alliance, repeated the "fully underwritten" and "ability to repay" parts of Wells Fargo's full statement. "What we have today is a marketplace governed by the Qualified Mortgage (QM) rule," he said. "The pattern of practice in the marketplace that resulted in the crisis has hopefully been permanently corrected with the 'ability to repay' rule that likely will eliminate broad, abusive, or predatory practices and curtail the growth of unsustainable subprime mortgage financing." Show a rational, well-docu- mented approach to these bor- rowers with lower credit scores, and banks will be able to show improved bottom lines. Bonham from the "Show Me State" calls it "fantastic" that lenders are beginning to give such consumers another chance at owning their own homes. "I see several banks starting to lower their credit score require- ments from 640 back down to 620 or even 600, including some national players like Wells Fargo," he said. "The demand is there, and there is a significant pool of potential borrowers that can mea- sure well on the payability scale if given the opportunity to borrow using a lower credit score. A great many consumers in our marketplace have been through incredibly difficult circumstances over the last few years that have negatively impacted their credit, from job losses, foreclosures, high medical bills, and lack of adequate insurance to fewer manufacturing and construction jobs. Let's just be mindful of the processes we use to qualify beyond the credit score and not get caught up again in the Wall Street feeding frenzy of years gone by." Buying In O bviously, the housing sector doesn't exist in a vacuum. For consumers to make the biggest purchase of their lives, they must be able to rely on steady income. "The lack of jobs that pay a wage matching available skill sets is the real culprit here [regarding housing affordability]," Sorenson said. "In the majority of the country, there are plenty of homes available. Unfortunately, we have a large population of underemployed workers that are not in positions enabling them to purchase a home." The America's Homeowner Alliance (AHA) and Bonham of Keller Williams Realty took opposing views, the former citing major market and demographic trends to espouse interventionist policy. Garrick Davis, chief policy officer of the AHA, referenced Harvard University's Joint Center for Housing Studies' report that more than 17 million additional American households will be created in the next decade or so and 74 percent of those, roughly 13 million, will be minorities residing primarily in America's cities. "The most important thing to know about the shortage of affordable housing in big metros is the fact that in the absence of action, the problem is only going to get worse," Davis said. "When taking into consideration the growing cost and scarce avail- ability of credit, coupled with the recent uptick in housing prices in America's 20 largest cities, a somewhat bleak picture is the result. The National Association of Home Builders (NAHB) indicates the restrictions imposed on America's homebuilders when seeking acquisition, development, and construction financing has all but shut down the development of inner-city, first time homebuyer new construction and severely impacted the ability to meet our affordable housing needs." Market trends, macroeconomic forces, and government policy obviously mean a lot, but home- buyers should start at—and stay focused on—square one. "Affordability is a tricky sub- ject. I've been in either the mort- gage or the real estate business for 25-plus years now, and it always comes down to one thing: the monthly payment," Ward said. "The derivative of this is having a good paying job and having your debts under control." Bonham held a laissez-faire view of the housing market. "The most important factor about the affordability issue in any city is that the real estate market is simply a commodity market that will always end up adjusting itself to supply and demand given enough time to do so," the Missouri-based real estate pro maintained. "What inevitably happens, however, is certain agen- cies get involved to try to relieve the pressure on the demands from the short-term situation, not realizing the negative long-term economic impact they are creating by not allowing the market to correct itself." The still-inexpensive credit and lower inventory have pushed housing prices back up recently. Rents have also escalated due to the increased numbers of resi- dents who are unable to qualify for mortgages. Subsequently, the prime rental market has attracted individual as well as cash-heavy institutional investors to snatch up much of the remaining bank inventory, making it even harder for homebuyers to compete. "This is all a short-term posi- tion that I believe will come to an end within 18 to 24 months," Bonham said, pointing toward rising rates and banks expanding their credit-score requirements as key factors for creating competi- tion in the single-family residential market and restoring equilibrium. "Housing is still one of the most affordable commodities in today's money when compared to other commodities and the impact inflation has had on them. I challenge you to find another commodity that, when adjusted for inflation, has actually become more affordable relatively speak- ing in the last 25 years." Ward, the homeownership coach, said, "I've seen five bad markets in my career, and when the market rebounds it is always from the bottom up. First time homebuyers buy up the inventory, which creates confidence and li- quidity for the move-ups, and the same goes for the next level." The storm has passed over the housing sector, but the winds of change are still buffeting. The American Dream of buying a home is critical to, as Ward stated, the ground-up stability of the industry. Market trends, macroeconomic forces, and government policy obviously mean a lot, but homebuyers should start at—and stay focused on—square one. MortgageBanking.indd 1 3/10/14 8:11 AM

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