Notes from a financing class

Last week I attended a really interesting continuing education class on financing changes in our area at GCAAR. Once again, I was reminded how fortunate we are to be in Washington. In our market 18% of homeowners have negative equity, meaning that they owe more on their home than they could sell it for. While that statistic may seem grim, it's 70% and 47% in Nevada and Florida respectively. According to this teacher, the government is starting to wonder whether the push for homeownership is a correct economic strategy. Apparently homeownership rates are back at the year 2000 levels, on a graph there is a very high peak and then it goes right back down to where we were in 2000. What is truly sad about the downturn is how the crash has disproportionally hurt minority communities. So what is coming up and what can you expect from the realtors, the lenders and the government? Expect to see a lot of adds from the National Association of Realtors promoting homeownership as part of the "American Dream" to counteract any change in government strategy. There will also be a push to standardize foreclosure proceedings (so many mistakes have been made due to the fact that each state has different laws and procedures) and reduce loan fraud. Websites like www.preventloanscams.org will hopefully hinder those out to make an illegal buck, as will a provision in the Housing and Economic Recovery Act that requires lenders to take continuing ed and pass tests to continue to lend. Apparently DC is #5 in the country for fraud rates which is why I stress to clients that they they should not be shopping around on the web for lenders and title companies and they need to use someone from my list of trusted sources for their transactions.

On a positive note, the teacher did let us know that there will be changes in the lending industry to make a past foreclosure less of a Scarlett Letter on one's financial history. If the foreclosure is "circumstantial" (job loss, illness, etc...) the borrow may be lendable again in 2 years rather than 7. The key here is that they will need lots of documentation, so I would advise anyone in a foreclosure or precarious financial situation to keep all financial records in order to prove that they didn't simply walk away from their house.