" When the Fed's Open Market Committee meets Tuesday, its economists will doubtless produce reams of data and theory aiming to explain why GDP growth is fading fast. But there is a very simple - and disturbing - reason why the recovery is sputtering out: The damage we did to our economy during the housing bubble and subprime crisis was far too severe to be fixed by the weak and superficial steps our government has taken in response.
IF the Fed's Open Market Committee honestly wants to address the problems affecting the mortgage loan market
(i/e Banking & Lending) they have to review the Democrats Banking Legislation. New lending guidelines that are destroying the market (here in California).
1) The removal of all STATED INCOME LOANS:
Presently estimates are that less than 15% of current home owners in Southern California’s coastline communities (expensive homes) can qualify for loans to purchase, or refinance the homes they already own. If current owners cannot qualify to refinance, how many do you think can afford to buy?
RESULT: Falling property values are forcing many to walk away from homes that buyers would love to buy, but no longer qualify even with large down-payments.
Buyers who want to buy, and should be approved for a loan, can not qualify. Why?
2) Debt to Income Ratio Guidelines:
Before the Mortgage Market Meltdown we often saw income qualifying debt ratios as high as 50%, and occasionally as high as 55%. Current guidelines mandate ratios of 31% of taxable income (as shown by last 2 years tax returns). WOW! There goes a lot of the markets values as buyers who have paid rents of much higher amounts (never late for years), now want to buy but do not qualify.
3) The Fed’s need to admit that all of their attempts to help the markets under the guise of “Bailing Out Home Owners” are nothing more than stalling tactics to hold off inevitable foreclosures.
It’s all about their banking buddies best interests… and nobody really cares about home owners; the American taxpayers will pay the bill!
END RESULT: Even lower property values. Permalink