I wanted to give a prospective look into fixing the [tag]mortgage mess[/tag] from a variety of view points. Below is the position I would take if I were given the chance to make the decision:
If I were the Federal Reserve, I would help fix the mortgage mess by lowering [tag]interest rates[/tag]. Both the Prime Rate and Libor Index are directly tied to a good portion of adjustable rates and variable rates. While the Fed has cut their rate 1% in 2007, it does appear that it could be cut another 1% in 2008. This will help both the Prime and LIBOR indexes to continue falling.
If I were the Federal & State Governments, I would structure legislation that requires loan officers to be licensed. Many states have already adopted this, but all states should be subject to minimum requirements of both experience and testing. This will, in turn, help weed out all the “bad apples” and curtail the fraudulent activity that is associated within the lending industry.
If I were a [tag]Bank[/tag], I would require all first time home buyers to complete some form of buyer’s education course. The current mortgage mess has forced many to point fingers at who is at fault. Is it the loan officer, realtor, lender, appraiser or the customer’s negligence when someone defaults? In the end it does not matter whose fault a borrower’s [tag]foreclosure[/tag] is. What matters is what we can do to properly educate those first time home buyers so they have a better understanding of the entire real estate process……and the risks associated with their purchase.
If I were a [tag]Real Estate[/tag] Investor, I would look to cash flow every property that I purchased. Cash flowing a property will become increasingly easier in 2008. The price for real estate is down significantly and could continue to fall. Taking advantage of foreclosures and [tag]short sales[/tag] can lead to instant equity as these properties are purchased. If you combine low prices and low interest rates to areas that did not cash flow two years ago, now may be the time to buy. Do not forget the fact that demands for rentals should increase due to the difficulty in qualifying for home financing.
If I were a First Time Home buyer, I would need to realize that current underwriting guidelines are reverting back to the days when all borrowers needed to put money down. I am told that Mortgage Insurance companies may change their guidelines from 100% to 95% financing. This will, in turn, cause banks to cut current 100% financing options. First Time Home Buyers may have to rely on relatives for gift equity, self directed IRA’s, or Sellers contributions to qualify. All of which require more preparation of the borrower.
What can I do? Continue to mentor and educate all individuals regarding real estate. It is my job to give advice and feedback to every scenario. I study real estate……I am active in real estate……therefore, I continually learn real estate. No matter what is done to fix the mortgage mess, it will be continual and ongoing. Knowledge is power. Make sure you arm yourselves with as much as possible to weather the storm.