The Biggest Stumbling Block to a Housing Revival Is...

The answer to that question is: tight credit with unemployment being the runner-up. Although some naysayers believe the job picture hasn't improved much, there are many realists who think otherwise. But one thing we can agree upon is this: employment is not booming. It's getting better, but in increments. Still, homes are beginning to sell because those with a job realize that in many markets it's cheaper to own than to rent. But loan officers continue to report to us about the problems their borrowers are having making the grade under tough loan underwriting standards – standards that emanate from Fannie Mae and Freddie Mac. Even though Bank of America told Fannie to take a hike last Thursday, many funders are reliant on the two government controlled mortgage behemoths. The biggest problem in the market is fear of loan buybacks – and that's why credit is so tight. Many lenders are going the extra mile to make sure that whatever they fund, it is bulletproof against a buyback request. And just how does a lender accomplish this? Answer: make sure the borrower has no chance of defaulting, hence very tight underwriting.