Shattering the American Dream — Buyer mortgage note

According to our political leaders and certain well-placed economists, the U.S. economy is recovering well from the recession.  If only the country could get the housing market back on track, then everything would be just dandy.  In my view, while the housing downfall heavily contributed to the financial crisis that started about four years ago, real estate is now more of a symptom of the economic malaise than a cause.  Unemployment, government debt, and general economic uncertainty are driving our current problems.

Real estate is nowhere near a recovery anyway, with joblessness being the biggest factor.  Consider:

* Young adults who are just starting out (and are historically the ones most likely to buy starter homes) have no money to buy a house due to having no job or a low paying job, as well as to the high levels of student loans for many that can reach well into six figures.
* The home ownership rate for all age groups under the age of 55 has declined from 1980 to 2010, stayed flat for ages 55-64, and increased slightly for those above age 65.  The rate for those people ages 25-34 is only 42%, while 77.5% of adults over 65 own their own homes.
* The level of homeowners who are more than 90 days late on their mortgage stayed flat (7.72% in November) over the second half of 2011. (1/6/12 Housing Wire)
* The average time for a foreclosure to complete has climbed from 253 days in 2007 to 674 days (almost 2 years) in 2011. (1/6/12 Dr. Housing Bubble).  Gee, why pay rent or a mortgage when you can live for free at someone else’s expense.

So, of course, the government would have the common sense to let the housing market go through its normal cycle so that it can begin to recover, right?  Oh silly us, but of course not!  Despite the Fed’s approach of keeping interest rates down, with mortgage rates finishing 2011 near a record low of 3.95% for a 30-year fixed loan, housing continues to be in the dumps.  How have the government programs done so far in rescuing housing?

* The Home Affordable Modification Program (HAMP) was supposed to reach 3-4 million borrowers, but at best helped less than 800,000.
* Despite trillions of dollars in government help, major banks are still doing minimal lending, and even then only to customers with stellar credit.  One could argue that the banks are no more solvent today than they were four years ago.
* FHA has been giving loans to borrowers who could only put in a down payment of 3.5%.  If housing values went up, the borrowers could then enjoy the profits, while if they declined those folks could walk away with minimal financial impact.  Not surprisingly, the default rate for FHA loans that have been ongoing for at least two years is almost three times higher than that of Fannie and Freddie, two other government entities being bailed out by taxpayers due to lax lending standards.
* A couple of days ago, Fed chairman Bernanke suggested converting foreclosed houses into rentals to stem price declines.  Sounds logical until you consider the fact that government involvement would certainly just make it messier and more expensive.

At its core, the economic problems of this country can be traced back to Washington, D.C.  Everyone who has thought about it must know that the more the federal government borrows, the less likely they are to pay it back.  Raising taxes would only address a small part of the debt issue and cutting programs is anathema to politicians, so we’re left with a major conundrum.  The bureaucrats won’t face up to the true problem until all other options have been tried and failed.  Sadly, we have a long road in front of us.

Alan Noblitt is a buyer mortgage note in all 50 states.  If you are in need of a buyer mortgage note, please contact him.

One thought on “Shattering the American Dream — Buyer mortgage note

  • By Pat Rombach -

    Excellent summary

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