Speculation continues to run rampant from analysts and mortgage servicers about what might lie ahead in 2012 for bank owned properties. But one area that is critical to any improvement in the housing market is the economy, specifically the unemployment rate.
Cheryl Lang, president and CEO of Integrated Mortgage Solutions, Houston, Texas, said the two go hand-in-hand and this area will play a major role for the future of the housing industry.
“People are not unwilling to pay for their loan modifications, it's just that if you don't have a job, it doesn't matter what the banks make your interest rate or what your monthly mortgage payments are,” Lang said. “There doesn't seem to be much end in sight regarding unemployment.”
Lang said the looming possibility of nearly four million REO properties considered to be shadow inventory that might flood the market at some point this year could also “devastate” housing prices.
“As long as there is a steady stream of REOs into the market and not a tsunami, we won't see further slippage in home prices,” Lang added. “There may be a steady trickle of shadow inventory properties hitting the market and that is probably best for the housing industry.”
Lang also is concerned about the proposed qualified residential mortgage proposal issued last March by regulators requiring a 20% downpayment for mortgages that would be exempt from risk retention.
“Credit itself is hard to get these days and not many people have this type of cash laying around,” Lang said. “So FHA is the only game in town, but not every property is FHA. It all depends upon what you qualify for, but we're turning into a nation of renters, not homeowners.”
Coincidentally, with the federal government owning more than 200,000 REO homes, the Federal Housing Finance Agency is looking into renting these properties to prospective buyers. But Lang is not optimistic about the possible future outcomes from this proposed rental program, as 60% to 75% of all servicing shops transactions today that involve REOs are being sold to investors, rather than owner-occupants.
“It's good for the neighborhoods and cities to have these properties occupied because there is nothing worse than blight, but how the GSEs go about renting these homes is a different story,” Lang said. “If the GSEs sell these properties to investors, the thing to follow is who will the investors decide to sell their assets too. We are taking public wealth and transferring it to Wall Street and I'm not for that. We own those properties as taxpayers, so it's important to know if investors can only buy a certain number of properties.”
