Editor’s note: The following is a collection of real estate professionals’ responses to a real estate-related question.
QUESTION: What is the best approach to fixing the housing market, in your opinion? And what is the wrong approach?
Dan Melson, Realtor and loan officer
Clarion Mortgage Capital
Clarity Real Estate Network
San Diego, Calif.
1) Keep the underwriting sane and balanced, neither nonexistent as it had been nor completely paranoid like it appears to be headed for.
2) Expand FHA Secure. This was probably what the government should have done in the first place. Keep debt-to-income ratio, but drastically reduce the importance of loan-to-value ratio, and enforce a levy upon lenders whose loans need an FHA Secure refinance to pay for the shortfalls of the program. This eliminates the emergency panic sale, which is the hallmark of the current market, allowing many people to have no choice but a short sale. By not flooding the market with distress sales, it also keeps property values from falling as much, meaning there will be fewer loan-to-value-ratio problems.
3) Meanwhile, the tax levy on current lenders being relieved of what would otherwise be bad debt by FHA Secure refinances forces the cost of those properties where the problem cannot be dealt with onto the proper people: the lenders who loaned the money that should not have been loaned, and the loan officers who encouraged it.
Continental Real Estate Group Inc.
The feds are taking the right approach. The wrong approach would be to do nothing. However, with this approach more regulation is needed.
Realty Trust Group Inc.
We are already in a "Catch-22" with the downward spiral of home values and increasingly tighter credit preventing the market from clearing out the problem loans before new ones develop. So, while something must be done to put a floor under the falling values, the nationalization of Fannie and Freddie and the conversion of investment banks to normal banks will likely not stop the declines. Buyers now are very nervous to invest when they fear that prices will be going lower, and that sentiment only reinforces the reality. We are in for a rough several years while this situation goes from very bad to enormously worse before it can begin to heal.
Bryan Bomba Group
Improve affordability by correcting the credit markets.
RE/MAX Equity Group
The best approach is an RTC (Resolution Trust Corp.) with a long time horizon, as well as a plan to re-privatize Fannie and Freddie. Unfortunately, this may also be the worst approach. Well, second-worst, if you count doing nothing. This problem has been internationalized, and if foreigners quit buying American securities we’ll all begin to sympathize with Argentineans. As for simpler solutions with admittedly lesser impact, lenders need to seriously revamp their short-sale procedures. If these took a month to liquidate instead of three, four or five, everyone would be better off and some liquidity would return.
Jonathan J. Miller
Miller Samuel Inc.
New York, N.Y.
There is no "fix" for housing until credit and liquidity is restored. That’s not going to happen for a while simply because the problem is so vast and complex that it will take several years to simply stabilize current conditions.
The wrong approach is to simply apply a Band-Aid and create a myriad of aid for borrowers and lenders. It’s simply a drop in the bucket. For those who defrauded the borrowers, there should be relief at the expense of those who perpetrated the fraud. As I understand it, under current regulations a borrower has little or no recourse when their application was fraudulently modified without their knowledge — from the mortgage broker, to the bank, to the investor. That does little to restore faith in the system.
Benson Sotheby’s International Realty
Crested Butte, Colo.
Require mortgage brokers to be licensed, educated and monitored. Teach them ethics and economics. As a real estate broker, I am required to keep up on continuing education every year. I am watched like a hawk by our multiple listing service board and association of Realtors.
At this point, after experiencing the difficulties with both short sales and foreclosures, I would say that the same stupidity that got us into this mess with lax lending requirements is continuing with idiotic and counterproductive methods of handling short sales and foreclosures. It is very difficult for a regular buyer to navigate the minefield that is the short sale or foreclosure process. These properties are being handled as bundled assets without regard to the areas, neighborhoods, real estate procedures and local standards. Until the banks smarten up their systems and stop flooding the market willy-nilly with their bad business decisions, nothing will get better. (Example: a short sale has six offers on it all over the list price. The lender does not respond, and the offers finally go away after a month or six weeks or two months of waiting for a response. The lender then forecloses and puts the house on the market with a list price of half what it had in offers before. How is this an intelligent business practice?)
Woolley Robertson Group
Boca Raton, Fla.
I think that in order for the housing market to be fixed the credit markets/banks must come first. I see this as more of a "credit crisis" than a "housing crisis." I’m afraid that the problem is so big that we have run out of any new approaches and are left with the current situation. The government should move in fast and then move out as fast as it can.
Stanberry & Assoc. Inc.
I think the housing market has been fixed already by the lending industry starting to make sound loans. It’s just going to take a while for the fix to take effect. And what is the wrong approach? The lending pendulum has swung too far the other way. Now that quality properties can be bought for 25-50 percent (less), why make it hard for investors to buy them by limiting them to only three investment loans, for example?
Realtor, mortgage broker, owner
Show and Sell Realty, SMA Financial
We need a catharsis. Some heads need to roll … to let people know the riff-raff has been ousted and it’s safe to come back in the water. Simply bailing out the banks isn’t enough. All taxpayers want is for those who created this mess (not) to make money doing it again. This would include senior management of banks, Wall Street, and corrupt mortgage lenders. (We must eliminate) liar loans — think how much cash will be realized because now, in order for these wealthy self-employed owners to qualify to buy that mansion, they have to document their income.
Toni Everett Co.
I believe the best approach is allowing the theory of supply and demand to work itself out. I expect investors will swoop in and buy up as much as possible when they feel we have reached the bottom.
Information compiled by Lai Saetern and Glenn Roberts Jr., Inman News.
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