The Federal Reserve is at a tug of war with setting new Mortgage Regulations.  On one side, the consumers are stating with the new rules set to be enforced in December, there are too many loopholes that will cause consumers to continue to default and allowing reckless lending to continue.  On the other side, the lenders are stating that with the new rules it will limit them on who to lend to and will prompt them to further restrict credit.

 The Fed claims the new regulations will prevent sub prime borrowers from getting into loans they can’t afford.  With the way the rules are currently set up today, borrowers can still obtain mortgages by showing limited documentation.  Consumers are worried this will continue to hurt the economy.

Consumer’s Side 

Consumers are stating the Fed needs to enforce rules that require banks to document the borrower’s ability to pay.  Get rid of all the Stated income loans and require the borrower to prove their ability to pay.  If a consumer is looking to purchase a primary home and claim they make $100,000 a year, then make them prove this in tax returns or W-2’s. 

 The Fed needs to close the doors on fraud and misbehavior so this market can stabilize.  If the fed continues to allow borrowers to obtain a mortgage with the current rules in place, the market will continue on the road to destruction. 

Another rule consumers are hoping the fed will change is to eliminate pre-payment penalties.  Advocates cliam pre-payment penalties cause more harm than good. 

 Lenders side

Lenders claim with the new regulations, lenders will lend fewer mortgages and increase the amount of work they would have to do. 

Also lenders are stating the Fed needs to clarify the new rules on how to determine a borrower’s willingness to pay.  Even though with the new rules it still gives the lender options on how to determine a borrower’s ability to pay.

My Side 

 Overall lenders are worried the market is going to continue to spiral downword and the only thing the Fed is doing to prevent this is cause them more work and less loans. 

It’s a tough market right now and the fed is doing everything they can to prevent the market from getting worse.  Nobody has an answer right now and as a consumer, we’re just going to have to sit here and deal with what we’ve created.

 Being in the mortgage market, I’m seeing more rules and less loans, but the loans I have been seeing are cleaner loans.  The consumers we were seeing before asking to go stated are now submitting tax returns and w-2s.  I personally think the new rules are tough because it’s more paper work and a longer process, but in the long run it’s creating more qulified borrowers and allowing us to lend money to borrowers who can pay the loans back.

We just need to keep working through this tough time.

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Well, we all know the economy is going through some issues, and being in the mortgage business we’re always hoping things will change.  The key to staying successful in this business is keeping a positive attitude and making yourself an expert.  You want to be the GO TO person when someone has a question about financing, and the reason why I’m saying this is because you need to learn about Foreign National lending.

Foreign Nationals are buying real estate over here in the U.S. for two reasons.  For one, their currency has an exchange rate that almost doubles the U.S. Dollar.  Right now the Euro is worth just over $1.50 and in the Pound is currently worth just under $2.00.  So for an English investor to come over here and purchase a $200,000 home, it really translates into them buying a $100,000.  Why wouldn’t a European come over here and buy a beautiful second home they can visit at anytime?  Their money is worth double the amount… if they want to go to Disney world and spend $100 on tickets, it really means they’re only spending 50 pounds.

Another reason why Foreign Nationals are coming over to the U.S. and buying real estate is because it’s a buyers market.  Homes that were selling two years ago for $400,000 are now listed for $250,000 and will most likely go for less than that.  This is the type of market where the old saying “The poor get poorer and the rich get richer” except this translates into countries.  Right now the U.S. is in a lot of debt and the government is trying to fix this but it’s not something they can do over night.  In the mean time other countries are coming over and buying property, businesses, etc. at a discount price and in turn will cash them in when the time comes for a higher profit.  It’s all relative. 

 Here’s the way I look at Foreign Nationals and the Mortgage Market:  Yes, I know home values are going down, and yes I know a lot of home owners are losing a lot of money, but the only good thing coming out of this is First Time Home Buyers, Investors and Foreign Nationals.  As long as they are buying up the market, it’s going to create transactions that fill the pockets of Real Estate Agents, Mortgage Brokers, Banks, Title Companies and this in turn will create more spending which will boost the economy.  Every little bit helps!

If you’re in the Real Estate world and wondering why it’s important to look at the Foreign National world, just know they’re going to continue to buy, and you might as well be a part of the transaction.  Now is the time for them to buy and they’re not even hesitating to stroke a check.  This is their market!

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In today’s tough market many banks are closing doors and others are struggling to survive.  The banks that decided to offer “specialized” financing are now wishing they hadn’t and for the banks that stayed on the straight and narrow are glad they did. 

The real estate world is going through what many would call a “Tough Time.”  Most people in the Real Estate profession  have either retired or found new jobs because the last year and a half home sales have dropped more than 40% in some parts of the Nation.  What has the government done to try and fix this?  Well the fed has tried numerous times over the past six months to stabilize rates by lowering the fed funds rate and create a turn in the market to get things back on track.  So far none of those attempts have worked because we’re still dealing with declining home prices and banks are still having a hard time lending money.

Just recently, the Fed started allowing big firms to temporarily borrow money from the Fed for emergency financing that only large banks had access to previously.  These actions have caused many to protest and raise concern because many believe the Fed is putting tax payers hard earned money at risk by simply bailing out Wall Street.  The Bush administration and Fed Officials state this is an action they needed to take to prevent an economic meltdown.  Analysts believe the way the first three months of this year have gone, we’re heading towards what many would call a recession.

Despite all the negatives associated with today’s market, there are a number of positives that we’ve noticed take place during this time.  For the people losing homes to banks and dropping prices on their homes, there’s always new purchasers out there looking for a good deal.  Now is the time for First Time Homebuyers to start buying their dream homes.  Two years ago a home that was going for $250,000 is now going for $150,000.  Despite what people may think, there are still a number of programs out there for First Time Homebuyers.  There’s been a large increase in local and state grants that are strictly for First Time Homebuyers that gives them a chance to own a home and afford it.

Another positive that has been a result of today’s tough market is lowered interest rates.  The Fed has desperately tried to stabilize this market and it hasn’t had much affect on the market so far, but one thing it has done is helped out home owners who have a Home Equity Line of Credit.  Two years ago the prime interest rate was somewhere around 8.25% but over the past year the Fed has dropped that rate and is currently at 5.25%.  This has saved many home owners hundreds of dollars which has created a little relief. 

It’s a tough market but if you can get through the “Tough Times,” just think about how nice the good times are going to be.  Also just remember, you’re not the only one going through “Tough Times,” the whole Nation is.

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