Although, as a mortgage loan professional, I am licensed to help people with Oregon Home Loans and California Home Loans, it does not matter what part of the country we are talking about here. There are several ways that the housing industry can be improved to help reduce the glut of homes currently on the market.
Here are my seven favorite:
Allow Investors who are interested in owning more than 5 properties to not have to have a minimum credit score of 720 points. First of all, any score over 700 shows that the borrower/investor has successfully made their monthly payments, on all of their bills, for many years. Furthermore, the cumulative debt on 5 properties would make it difficult for the borrower to keep their score over 720 because the credit reporting agencies lower your score with every outstanding debt that you take on. This is an unnecessary restriction that has hampered no telling how many modestly successful investors, from owning more than 5 properties at a time when properties are cheap and interest rates are low. If you want to sell homes, these are the types of borrowers who have the ability to help reduce America's housing overabundance.
If a borrower puts 10% down on a home, they should not be subjected to mortgage insurance. This does not have to be a permanent guideline, but certainly would help many renters to enter the housing market. They might be excellent home purchase candidates, but might not have enough savings to put 20% down. In order to create a safety net around these types of loans, make 700 the minimum credit score. With a solid credit score and adequate verifiable income, a borrower should be able to put 10% down without the burden of an extra Mortgage Insurance payment.
Along those lines, if a relative wants to help a family member buy a home, the 10% down rule should also apply. Especially if both the family member and the relative they are helping have scores in the 700's. Make mortgage payments more affordable by eliminating the mortgage insurance monthly premium for borrowers with over 700 credit scores, who are able to put down 10%, not 20% as is presently the case.
Bring FHA back to its earlier levels. Let there be a 1% fee on the loan amount, and return the mortgage insurance premium back to.55%. This was a great deal for those borrowers who only had between 3.5% and 5% to put down. Again, good borrowers, with adequate income, should not be denied the opportunity to buy a home, especially if they can also show a good credit history. Stop letting FHA carry HUD's burden. Let FHA be the engine to improve our housing market, not the entire HUD bureaucracy. When FHA raised its fee past.55%, it prohibited countless borrowers from being able to purchase a new home or refinance their present mortgage.
Eliminate HVCC and the AMC's that are perpetuating a tragic distortion of home values; when Andrew Cuomo and the lawmakers in Washington decided to take the appraisal out of the appraiser's hand. These rules have allowed outrageously gross errors in home valuation for a countless number of borrowers.
It is one of the most significant reasons that home prices have not risen. Appraisers, through their AMC's have been known to undervalue homes even when both buyer and seller have agreed that a home could be sold at a particular price. The undervalued home then becomes one of the comparables when determining the value of other homes in the area. If the appraiser would have confirmed the agreed to price by both buyer and seller, every home in the neighborhood would then have enjoyed a comparable sale at a higher value.
This is only one example where inaccurate home values have harmed the housing industry.
On that theme, do not allow a short sale or foreclosure to be allowed as a comparative sale when determining a home's value. Let it only be considered a compensating factor. Allow only those homes sold by homeowners, not banks. A homeowner should not be penalized because someone down the street lost their job and had to sell their home at a discount, or got a loan they could not afford and so lost their home to foreclosure, sold later by the bank at a discount.
On that theme if the loan officer wants to personally pay for a portion of a borrower's closing costs, in order to stay competitive, they should also be allowed to do so.
Let a Mortgage Loan Professional determine just how much they should be paid per transaction instead of fixing their rate, as dictated by the new rules of April 1, 2011. This is a ridiculous rule that does not allow the Loan Officer the flexibility to meet the demands of a borrower who is seeking the best interest rate available for their financial situation.
If these few ideas were implemented at this time, I believe that they would help relieve the backlog of homes presently available, and assist in the process of putting our financial house back in order.
