patrick.net

Logan Mohtashami says

Federal Reserve chair Janet Yellen: "Demand for ‪#‎housing‬ is still being restrained by limited availability of ‪#‎mortgage‬ loans to many potential home buyers."

Yellen Needs a course in residential Lending

he he he.
Yellen is the Chairman of the Federal Reserve, the lender of last resort. No one knows about lending more than Yellen.
How come you and Call Crazy stubbornly refuse to acknowledge this fact?

If She aint Yellen then she aint sellin'.

Strategist says

stubbornly refuse to acknowledge this fact?

Because our family has been in Banking since the late 1950's and Yellen doesn't even know the core standards of VA, GSE and FHA...

Math, Facts and Data Matter!!! :-)

Now that is crazy stubborn that she doesn't take a course in lending

As many of my readers may be aware, my mantra since 2010 has been that “We simply don’t have enough qualified home buyers in American, once you take away the cash buyers, to have a real economic recovery in housing “. While some may be tired of this refrain, there remain a number of highly respected housing “gurus” who continue to profess that it is unfairly tight lending standards, not the lack of qualified buyers that are suppressing a housing recovery. The difference is not academic.

Would-be home purchasers are unable, to qualify for a mortgage due to the following factors:

• They lack adequate monthly income. A lot of the jobs created, post-recession, are low paying jobs that don’t provide adequate income to support a mortgage payment. More liberal lending standards will not correct this.

• They lack liquid assets. The down payment (even just 3% for some loans) and closing cost for a home purchase exceeds many American’s available liquid assets.

• There is no financial bubble. The formal definition of a financial bubble is an economic cycle characterized by a surge in asset prices above the fundamental value of the asset. The housing bubble created excess demand based on poor lending standards. When the bubble popped, that excess demand disappeared. Not all the demand was fake in that cycle, however. In fact a good portion of it was real. It would be a drastic mistake to attempt to manipulate lending standards in an effort to recreate that extra fake demand. If historically low interest rates cannot generate home ownership demand, then we need to accept that a percentage of our adult population is simply not in a financial position to take on mortgage debt.

• Demographics are not favorable in this cycle, but in time they will be. Household formation has been very soft. People are staying single or getting married older. This translates into lower housing ownership demand as most people will wait to marry before considering a home purchase. Fewer dual income households so fewer households that can afford a mortgage payment. These factors have driven strong demand in the rental market

Still think tight lending is preventing a housing recovery? A quick review of the requirements for some of mortgage loans available may surprise you.

No money for a down payment? Is zero down too tight?

VA (Veterans Administration) loans require no down payment, a minimum FICO score of 620 and allow up to 60% debt to income ratio. I don’t think anyone could call this tight.

Poor credit score? Is a FICO score of 560 too high? FHA (Federal Housing Authority) loans require a FICO score of 560 to 620. (Scores of 650 are considered “fair and below 600 are considered poor or high risk). Other requirements include at least 3.5% down, and a maximum debt to income ratio of 43%. In some cases they will accept up to 50% debt to income ratio.

High debt to income ratio? Is 50% debt to income ratio too stringent? GSE (Government Sponsored Enterprise) loans allow for 43% to up to 50% debt to income ratio in geographical areas where housing is particularly expensive. A minimum FICO score of 620 and a 3 % down payment is also required.

Other common requirements for these loans are a history of the same line of work for the past 2 years, 4 weeks of consecutive pay stubs to verify income, most recent W2, and most recent 2 months bank statements.

Home loans are available and home loans are being made. Over 4 million purchase home loans were given to Americans in 2014 and thankfully those were largely to folks who have the financial capacity to own the debt the home ownership.

One of my 2015 housing predictions was that we would see 5%-10% total growth in mortgage purchase applications due to the low bar set last year.

Rest here ;-)

http://loganmohtashami.com/2015/04/09/tight-lending-and-other-urban-legends/

People get ahead by backing dogma in economics. Yellen taught an international econ class at UC Berkeley that I took and all I can say is - she was wrong then.

It's in gramma's best interests to blame it on mortgage availability. Takes the heat off the real economic issues that they know they have zero control or understanding of.