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With More Competition, You’re Going To See Loosening Of Underwriting Standards

A report from CBS News. “Home affordability has been worsening since the real estate market bottomed in 2012. The recovery in home values has easily surpassed gains in typical paychecks. In the Dallas area, just 55 percent of the listings are affordable for median-income families with 10 percent down payments. That’s a decline from 59 percent in 2017.”

“Nationally, home values have climbed 44 percent on average since 2012 but incomes only about 15 percent, according to Tendayi Kapfidze, chief economist at LendingTree. ‘Ultimately, incomes are the anchor or the gravitational field on prices,’ Kapfidze said.”

The Wall Street Journal. “Aryanna Hering didn’t have pay stubs or tax forms to document her income when she shopped around for a mortgage last year—a problem that made it tough for her to get a loan. But the nursing student who works part time providing home care for children and the elderly eventually hit pay dirt: For a roughly $610,000 home loan, a mortgage company let her verify her earnings with 12 months of bank statements and letters from clients.”

“Ms. Hering’s case highlights how a flavor of mortgage once panned for its role in the housing meltdown a decade ago is making a comeback. Tom Jessop, the loan consultant at New American Funding who handled Ms. Hering’s loan, said he has seen demand for unconventional loans double over the past 18 months and they currently make up more than one-third of his business.”

“‘I think it’s just catering to an audience that’s been neglected for years,’ Mr. Jessop said. ‘Now they have an opportunity to get financing finally.'”

“‘It’s definitely starting to swing,’ said Guy Cecala, chief executive of Inside Mortgage Finance. ‘As more companies enter the space you’re going to see more competition, and with more competition, you’re going to see loosening of underwriting’ standards.”

The Herald Tribune in Florida. “Depending on your perspective, December’s residential real estate market figures in Sarasota-Manatee look disappointing, with declines in closed sales, pending sales and median prices compared with the same month in 2018. Not good for sellers.”

“Inventory jumped year-over-year by 9.3 percent. Combined with the lower median prices, that’s good for buyers. ‘In December 2018, the number of new listings increased, while the number of sold and pending listings decreased, with a resulting increase in inventory and push-back pressure on prices,’ said Robert Goldman, a Realtor with Michael Saunders & Co . ‘If it continues, i.e., buyers resisting continued price appreciation, sellers will be forced to lower their sights, adjust their expectations.'”

“‘Parenthetically, notwithstanding an increase in new listings, on almost any given day the MLS has more list price reductions than new listings,’ he said.”

“Manatee single-family homes fell to a median price of $309,000, a 2.7 percent decrease from the highest recorded median price in 2017 — $317,500. Sarasota single-family home prices increased by 3.6 percent, to $285,000. Sarasota condo prices decreased by 12 percent, to $220,000, while Manatee condos decreased by 2.6 percent, to $190,000.”

From Space Coast Daily in Florida. “Florida’s housing market reported higher median prices and increased inventory (active listings) in December compared to a year ago, according to Florida Realtors. Sales of single-family homes statewide totaled 20,633 last month, down 9.9 percent compared to December 2017.”

“The Median Sales Price for Brevard Single Family homes is up 0.5% to $229,000 compared to a year ago, which was $227,789. Months Supply of Inventory is up 25.9% to 3.4 months, an increase from 2.7 months in 2017. Traditional Sales are down -11.8%, with a median sales price of $235,000. Foreclosure/REO Sales are up 38.5%, with a median sales price of $138,750.”

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This Post Has 37 Comments

  1. ‘For a roughly $610,000 home loan, a mortgage company let her verify her earnings with 12 months of bank statements and letters from clients’

    So now we got baby sitters getting $600k liar loans. This isn’t recent, that’s why foreclosures are way up:

    May 25, 2018

    “In his corner of American finance, where hard selling meets hard luck, Angelo Christian is a star. Each time Christian sells a home loan, the company he works for, American Financial Network Inc., takes as much as 5 percent. Many of Christian’s customers have no savings, poor credit, or low income—sometimes all three. Some are like Joseph Taylor, a corrections officer who saw Christian’s roadside billboard touting zero-down mortgages. Taylor had recently filed for bankruptcy because of his $25,000 in credit card debt. But he just bought his first home for $120,000 with a zero-down loan from Christian’s company. Monthly debt payments now eat up half his take-home pay. ‘If he can help me, he can help anyone,’ Taylor says. ‘My credit history was just horrible.’”

    “Christian can do this kind of deal because he is, in effect, making the loan on behalf of the federal government through its most important affordable housing program. It’s a sweet deal: He gets his nearly risk-free commission. Taylor puts no money down. If things go south, the government ultimately bears the risk. Many borrowers ‘are living paycheck to paycheck and, if they lose their jobs, they go into default immediately,’ says John Burns, a housing consultant.”

    http://thehousingbubbleblog.com/?p=10443

      1. john
        January 16, 2019 at 10:51 am
        Are lending standards as shoddy? Back in the day you heard on these very pages about “strawberry pickers” qualifying for 800k loans, you heard about 120% cash out refi’s, negative-am loans, bubble payments and so on and so forth. Prices have had an extreme run-up but I don’t thing the lending standards are as poor as last time.

      2. Got to admit, that is pretty shoddy. Now how common is it? It feels like this is starting later in the cycle so won’t do as much damage.

      1. I expect to see her in a future article whining about predatory loans as the bank takes her house.

  2. New American Funding is that REIC devil outfit I’ve told readers about before. These loans are a sign they’re running out of buyers.

  4. ‘Now they have an opportunity to get financing finally.’

    Bwahahahaha. Opportunity – I love how they disguise it as them doing YOU a favor. Pawn shops, pay day lenders, Buy Here Pay Here car lots, NoDoc loans except for 12 months of bank statements…….WE are helping YOU!

    Once again, this is how poor people remain poor.

      1. I have nothing against poor people. I hope she succeeds and pays off her house, but what I do have is a problem with dumb people taking out gobs of money at a high interest then complaining they are “victims”. Moreover I have a problem with swindlers like our friend Angelo who just rob people left and right, then act like they “help” you.

        No one sat these people down and gave them an economics lesson. No one said to them “don’t worry about keeping up with everyone”. Why in America can we not say “I can’t afford it” anymore. Sadly there will always be someone there (car salesman, Realtor, mortgage broker) who will “show you” how you can afford it.

        2. No one sat these people down and gave them an economics lesson.

          It would be harder to fleece them if they made informed decisions. No, Mr. Banker had it right: dumb ’em down and profit.

        3. I am glad you don’t solely attribute the blame to those taking the loans but also to those making the loans. It’s a two-way street, you have to hold the lenders accountable at some level as well.

    3. “…Once again, this is how poor people remain poor….”

      Sadly, a truism about the current state of our culture.

      Lots of talk lately about how ~60% of all households have less than $1K cash on hand for emergencies.

      Financial Crack Cocaine, the household drug of choice.

      2. ~60% of all households have less than $1K cash on hand for emergencies. If all of them mended their evil ways and started saving every penny possible, I imagine the US consumer economy would collapse.

        2. If all of them mended their evil ways and started saving every penny possible, I imagine the US consumer economy would collapse.

          Good. I’d prefer that, TBH. At least people could be self-sufficient and we’d get rid of all the free-loading “money-changers”

    4. “I love how they disguise it as them doing YOU a favor.”

      You use what works.

      “Once again, this is how poor people remain poor.”

      Stupid. Once again, this is how stupid people remain stupid.

      At some point in their miserable lives the question should be asked by themselves of themselves:

      “Just what is it that I am doing wrong?”

      But apparantly this question is never asked.

      Their pain = My gain.

  5. Very timely post! Realtor friend of mine told me recently that this time last year folks like myself, high income with good credit and responsible enough with money to have nice wad of cash tucked away, would have been competing with other similar buyers. Now she says such folks are competing against the types of folks described in the articles Been posted above, or in many cases no other offers. And this is in the supposedly hot suburbs just to the east of Los Angeles. Of course she could just be angling for me to buy a house with her as my agent, but her description seems reasonable given how many properties I’ve noticed just lingering on the market for weeks, in addition to all the new inventory building up for the spring selling season. Hmm, I think we’ll keep renting at half the cost of ownership for another year or two…

    1. Oh yeah, and I forgot to mention all the new construction that is hitting the market in “hot” Los Angeles neighborhoods like Highland Park and many LA suburbs, often at prices sellers are asking for used houses.

  6. BIL is selling his house in Phoenix Queen creek area and is going to rent, thinks RE will fall like it did in 2008. If he is thinking this way the word must be out because he doesn’t follow any economics at all just kind of spend spend spend theory with facebook posting to prove it.

    If the common person expects it I find it often doesn’t happen. Its when they are all high at the same time their is trouble.

    Or maybe hes so broke he can’t get a loan ? who knows.

    1. My aunt’s house in Phoenix went into escrow ten days ago after three days on the market and a bidding war.

        1. I was merely offering an anecdote to demonstrate that doom and gloom has yet to set in in the Phoenix area.

          5. People in Phoenix can be a bit slow…

            But, yes, “affordable” houses at ~$300k and below seem to still be selling in Phoenix. It’s the high end flips that are sitting. I’ve watched a bunch of $400k+ houses sit for months.

            With so much influx from LA and that market slowing down, I’d expect us to be a little late to the party. Time will tell…

  8. “Ms. Hering’s case highlights how a flavor of mortgage once panned for its role in the housing meltdown a decade ago is making a comeback.

    Will mortgage-backed securities be making a comeback, too? And will our captured ratings agencies once again give AAA ratings to toxic-waste subprime crap?

  9. Wow, an article from my local paper, the Herald Tribune.

    Usually they tow the REIC line due to very large RE ad presence. In fact, there was an article written by them about a month ago with very rosey outlook. The data they quote was contained in the December stats published by the local Realtors association. They publish stats each month. The YOY game will bite them once we get enough months past the peak and will look like sudden and very abrupt downturn when, in reality, it is just the sum of each month’s smaller downturns.

    Each month the YOY will look worse and worse. Same thing happening all over the country. This will unquestionably create increasing levels of confidence loss and eventual panic. Just like 06 to 07. A self fulfilling process.

    As the song said: “get ready, cause here I come”

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