Everyone knows that the housing market is still only 30 percent of what it was in 2006 and this fact is heavily influenced by the 23 million potential workers being unemployed, a drop in household income, personal net worth, and an uncertain future for even those who are lucky enough to be employed.
These uncertain times can have people worried, but the good news is the housing market is not a boom- it is recovering- slowly- but it is recovering. And because it is recovering slowly, it is recovering well. This means the recovery will be more effective and offer better incentives to encourage a broader ‘credit net’ for borrowers who have good jobs, but have margin credit. The issue isn’t availability of Mortgage programs, there are plenty of those. What it is about is about the availability of Mortgages programs to those who can actually qualify for them.
There is some tough credit criteria that people have to live up to, and that’s suppressing home ownership. While this could be fixed with a proper understanding of the mortgage/banking industries, it simply is not happening.
Over-regulation or forcing banks to accommodate this is not going to yield the intended results and right now, forty percent of borrowers cannot get Mortgages since the average consumer has a FICO of a 640 while the average FICO of the closed Mortgage in October was 762.
As you can see, this is a significant number disparity between what the market is demanding and what the actual numbers seem to be. Clearly, homeownership is in the best interest of all consumers at proportionate levels of income, versus what the market will actually offer.
This could mean that credit is about to be a little less restrictive as the administration is not pro-homeownership at all. In fact, they are they opposite; they are pro-tenting. This is an example of a powerful and true evaluation of where the political and economic landscapes appear to collide. While it is true that the FHA has done an effective job in providing broader opportunities, it can be said that there are still significant fiscal problems at FHA that will require a tax payer bailout to address a $16.3billion deficit. As one can expect, this will require a federal bailout and rather than a private sector solution, the spiral will unfortunately continue with further Federal oversight and involvement in an already heavily regulated industry.