It’s spring, and there are signs that the economy is blossoming along with the flowers. The stock market threw off the cloak of panic from what looks like a trader’s typo earlier this month and is back at its previous levels. Personal income, personal consumption expenditures, and personal income were all up in the latest figures from the Bureau of Economic Analysis.
However, there are some disturbing trends.
Item: While the Bureau of Labor Statistics reported multiple industries increasing their numbers, the overall unemployment rate edged up from 9.7% to 9.9% in the latest reports.
Item: We have heard of some clients with equity in their homes, secured assets, and dual six-figure incomes being turned down for refinancing requests because one of the parties is self-employed and (guess what!) their income decreased last year.
Item: The federal government is still working on legislation to “fix” the mortgage issue, but some experts feel these new laws may cause more trouble than they solve. As Robert E. Story Jr., chairman of the Mortgage Bankers Association, wrote in an editorial earlier this month:
“Enacting broad risk retention, requiring lenders to keep a portion of the original loan on their books, has the potential to eliminate a sizable percentage of the mortgage-lending capacity in this country. There is an entire segment of the residential mortgage-lending industry that only does mortgages and does not take deposits from customers. Those lenders make loans to borrowers, sell the loans into the secondary market (with representations and warranties) and then use the money they receive from the sales of the loans to make the next mortgage to another borrower.
Requiring these independent mortgage lenders - many of which are small businesses - to retain a portion of every mortgage they sell would render their business model unsustainable. Elimination of this critical segment of the market - often smaller lenders that serve underrepresented areas and borrowers -would limit capacity and choice for consumers, driving up borrowing costs or limiting access to mortgages altogether, which is the last thing we need in a real estate market that is just beginning to see signs of recovery.”
While these developments roil the traditional segments of the industry — including many of our friends and colleagues — we can’t help but feel that they will end up helping DBNR Investments’ business model to blossom along with the spring flowers. As we noted in last month’s column, The Road Ahead, we’re making a transition to a new phase of real estate investing.
Because lending institutions are still unable to deal with the massive number of abandoned mortgages and the distressed property left behind — whether because of their own inertia or governmental regulations — we feel we’re offering a valid alternative in the marketplace. With the government and in turn lenders turning back the clock fifteen-plus years on qualification criteria for getting new loans, they have effectively blocked a majority of the U.S. population from the ability to finance a home.
DBNR Investments is renewing its commitment to putting people back into homes that need them, want them, can afford them, and who are wiling to work to keep them, and we are doing this without forcing buyers to endure the expense, hassle, and frustration of the conventional real estate and lending communities. We believe we can return to a time when deals were based on performance and trust, and in doing so, contribute to the revitalization of property and local municipalities.
