Housing Market Enters Double-Dip
Posted by Michael A. Kamperman on May 31, 2011
According to the Case-Shiller index the housing market has entered a double-dip. Housing prices are now at the low point of the downturn that started four years ago. Apparently this has come as a shock to many including the entire economic team at the White House. But it should not come as a surprise because it is way way too difficult to obtain a mortgage in America. Those who were not expecting this have been asleep at the wheel.
Let me finish telling you the personal story about my daughter and her fiance’s attempts to get a mortgage. The good news is they closed on an FHA loan to buy their first home a few days ago. Now for the rest of the story. They both graduated from Baylor University in May of 2010 and have full-time professional jobs related to their majors. They both have no debt and cash for the down payment. Their income qualifies them for the mortgatge. They both have acceptable credit scores and no marks on their credit. Sounds like a slam dunk right…wrong! FHA has a new requirement that a borrower has to have three credit lines reported to the credit bureaus for two years to qualify for a mortgage. Because they both got their first credit cards a few months ago they don’t qualify. Rent payments can no longer be used as evidence one will pay a mortgage. FHA required they get a co-signer. No problem because his parents were happy to co-sign and were clearly qualified. However, FHA underwriters came back and said the two borrowers were both listed as authorized users on their parents credit cards and woud have to be removed to get their true credit score. When I asked why the explanation was even though they had a co-signor they still needed to have the minimum credit score of 640 to qualify for the loan. I of course asked \”so what’s the co-signer for?\” Basically, the co-signer is required because they didn’t go to Gap and open a store card and use it to purchase a $20 sweater two years ago.
Now this is FHA, the federal agency authorized to assist first-time and low-income home borrowers. We havea single family housing supply nation-wide for 2/3 of American families. There is absolutely no way 2/3 of American households can qualify for a mortgage under current circumstances. The pendulun has swung way way too far in the opposite direction from 5 years ago. Where is the Obama Administration while this goes on. Apparently they are asleep at the wheel. Almost all of Washington participates in group think. This is the process whereby one must acknoweldge conventional wisdom as truth. Right now such wisdom considers the debt and deficit the greatest threat to America. The Chairman of the Joint Chiefs of Staff made just such a statement in Q&A recently before Congressional panels. What qualifies him to render such judgement? Absolutely nothing. What qualifies the President’s economic team to lead us out of the depression? Apparently not much.
