Let's all give...

a little New Year Cheer here for the western housing market, where sales volume was up 10% from October to November. That's pretty consistent with what we're seeing on the ground. I expect December's numbers (which we won't get until late January) to be even better.

Here's the article.

You'll have to read down to the seventh paragraph to find the news, though, because financial markets care a lot more about the northeast than the west. And, well, bad news sells.

But the news here isn't bad. There are houses starting to move, especially in lower price ranges, below $250,000. There's even decent activity in the higher ranges, and I expect spring to bring more of that. So help is on the way.

Hope you had a wonderful Christmas. I'll have more to say about that in the week here.

Hey, I Feel Fine, Myself

Some of you know that we've had a bit of a rash of injury/illness here, so I thought I'd give an update on that, by way of blogging for the third day in a row for the first time in several months.

Brian Votaw, husband of Olivia, Empress of Marketing, blew out his knee and shattered his wrist a week ago. He had surgery on his knee where it was discovered that he had ruptured the patellar tendon, but no other significant damage was found. Shortly thereafter he had his wrist operated on and that was apparent much worse, but there are no external screws and he's home and resting, even if he's a little bit out of it because of the Percocet. Because she is a genius, she got the Potty Post out anyway, but the Christmas cards will be late. Forgive us.

Todd Yates, husband of AmyJo, Impressionist Extraordinaire, went into the hospital on December 6 for some relatively routine, if major, intestinal surgery. That seemed to go fine, but shortly thereafter he developed more serious problems with his gallbladder, so that had to be removed as well. His intestines may be reconnected, but his stomach hasn't realized that yet, so he's still on a very thin liquid diet and still in the hospital, and probably will be through Christmas. AmyJo, by consequence, hasn't been here for almost a week and things are about as fractured as they've ever been.

Also, Jason's computer blew. In trying to repair it/resurrect it/recover it, we have apparently blown the office computer as well, all of which leads me to the point where I'd almost just rather shut the whole works down until next Wednesday, and see if perhaps someone is available to assist me then.

But I won't. Sigh. I just can't bring myself to do that. So I'm here, in my 51 degree office by myself, with my Bob Cratchit gloves on. No kidding. We have no heat here.

God bless us, every one.

I'm Just a Little Black Rain Cloud....

The mortgage lending bill that I have lambasted in these pages before had drawn some comment from others, and I wanted to point especially to Harry Rodas's excellent blog, where he also commented on it.

The absurdity starts with the federal requirement that lenders make sure a borrower can repay a loan. As if there were any possible incentive not to do that. Stupidity knows no bounds up there on the Hill.

I also want to take just one second to point something out. It's true that credit restrictions were very relaxed over the past few years, and that this allowed more people to get into houses than ever before. It is also true that some of these people are now being foreclosed on. The media reports every foreclosure as a national disaster on the order of the raid on Pearl Harbor, but I want to ask a question: suppose Mary Jones was able to move out of her apartment and into a residential neighborhood, remained there for two years, then found that when her rate adjusted (she hadn't improved her credit in the meantime, so couldn't refinance), that she couldn't make the payment and is now being foreclosed on and forced to move back to the apartment she left. Are you saying she shouldn't have been able to leave her apartment? Is that the contention? Which is worse - having to stay in an apartment forever (and some of these subprime borrowers, ladies and gentlemen, are going to have to do that, especially now), or getting two years of the American Dream, but having to give it back?

I just wonder.

Incidentally, on a $150,000 house, the Fed rate increases over the past 3 years have added $400/mo to the payment of any homeowner with an ARM. But it's my fault, as the mortgage lender, that the homeowner now can't make his payments. Whatever.

As Promised

Very hard to blog at this point in the year. We are busier than we've been for months, and this without all the other obligations that Christmastime brings with it.

However, the Fed just proposed some new mortgage lending rules that I have to comment on.

First, most of the rules that are proposed are already law, at least in Utah. It's already illegal to put pressure on an appraiser to reach a particular value on a property. It's already required that mortgage brokers disclose their yield spread on the Good Faith Estimate as well as at the table. None of these sorts of changes will make any difference here, except perhaps to level the playing field a bit.

Second, many of the rules, such as "don't deceive people with low teaser rates" are welcome, and though they won't change anything here at all, because we already extensively educate our clients about neg-am, pay-option ARMs before we agree to do one, it will make it easier for us to compete with the other fellows in the industry that don't go though that education process. That sort of rule is long overdue, and I'm happy to see something done about it, though I strongly wish it weren't the government doing it.

Third, and sadly much worse, is the insistence of the Fed that subprime borrowers now qualify at the eventual adjusted rate instead of the initial payment rate. For the uninitiated, subprime loans are almost entirely what we call 2/28 loans, with a fixed 2-year period followed by the loan becoming adjustable. The new rules would require that our clients qualify for the loan using the eventual adjusted rate (as if you can know what that will be 24 months in advance) instead of with the payment they'll actually be making for two years. What it means in practice is that many of our borrowers - some 1/3 of our clients are subprime borrowers - will be unable to qualify for any financing at all. This rule is not just harsh, it's also unnecessary - more than 90% of subprime borrowers refinance out of their subprime loan before 3 years is up.

Fourth, and unfortunately worst of all, is that the new regulations will do away with stated-income loans altogether. And I mean all together, no more available, at any credit score, no matter what. If you are self-employed, one of two things is now true: one, you will have to pay to yourself (and therefore be taxed on) money for expenses that once were paid for and deducted by the business; or two, you will have extreme difficulty - enormous difficulty - getting a loan at all. For me, where I run a small business and deduct aggressively everything I can, using the business to pay for every allowable expense, and where as a result my personal taxes show a relatively small amount of income, I just lost my ability to get a home loan, or else I just gave myself about a 15% pay cut. Something like 20% of my clients are in similar situations.

Lovely.

Once, several thousand years ago, I was a stockbroker of sorts, and one of the reasons I left was the extreme difficulty of helping someone navigate all the arcane and ridiculous disclosure regulations the NASD and SEC put on purveyors of securities. The Potty Post, for instance, our most effective communication, would be impossible for a small securities firm to publish. They simply wouldn't be able to get it by Cerberus at the Fed in time to send it out with any relevance. The mortgage industry is getting to where it's much the same. There really doesn't seem to be anywhere anymore that a fellow can just do his job in peace.

Oh, Crap. Here we go.

Just as I was berating Senator Clinton of New York for her lamebrained mortgage rate freeze proposal, President Bush announces his own.

I'll have more comments on this later, but for now, let me say the following: government cannot repeal the laws of economics. There will be individuals who, in the short term, will benefit from these proposals, but in the long run they and everyone else will get seriously screwed. That's a guarantee.