Now consider the turmoil with Dodd-Frank, the restrictions imposed are forcing many buyers onto the conventional paths. Lower credit scores opens the market pulling up the slack from the alternatives that were closed before.
Since Dodd-Frank refers to conventional guidelines for qualifying standards, lower credit scores opens those qualifying restrictions as well.
Clearly, after the bubble, there are investors willing to take additional risks for higher yields on otherwise well originated mortgages.
There may also me the implication that the credit scores alone have two issues, 1. they may have become less relevant as the scoring system is weighted from more than just credit histories, age, education, employment history, location, homeownership and other factors can be filtered into obligations paid, 2. credit scores may be out of line in relation to mortgage default rates accurately relating to mortgage financing. How scores are computed and used change.
Bottom line, glad to see the drop, that will make life easier digging up qualified buyers. :)
Insanity: doing the same thing over and over again and expecting different results.
Albert Einstein
How would there be a real estate cycle if we didn't predictably move back and forth between fear and greed? And how would investors capture extraordinary returns if they didn't work the opposite side of the popular sentiment?
I have no problems with a RE cycle since it is going to happen no matter what, but I have huge problems spending tens of billions bailing out the banks who are going to be lending out this money. Can't wait for TARP II.
I have no problems with a RE cycle since it is going to happen no matter what, but I have huge problems spending tens of billions bailing out the banks who are going to be lending out this money. Can't wait for TARP II.
Can't beat the government, but you can figure out how to ride their cycle, too.
Unfortunately there are going to be many people thrown off of the cycle because of this. Hopefully there won't be millions of people foreclosed upon like the last time the government tried this element of central planning. Even, the staunch defender of the last round of easy mortgage money, Barney Frank, very belatedly realized that 'pushing low income people into houses they couldn't afford was a mistake.'