Everyone seems to be making real estate predictions for the new year.  My crystal ball is hazy, but this is what I think is likely to happen:



*I know of homeowners who have not made their mortgage payments in a long time… some over a year… and many of their lenders have not yet started the foreclosure process.    I don’t understand how lenders can allow homeowners to live for free forever…sooner or later, the lenders/investors need to take these homes back and sell them.  Read more about it here

*For decades banks have earned money by making loans.  Generally the upfront fee income (points) is profit and when the loan is sold yet more money is made. Now that the housing market has crashed, it seems a little late for them to be such sticklers.  I mean really do they really think prices can/will drop that much more? Banks need to get back to common sense lending. 

In the 1980’s Columbia Savings and Loan was one of the most profitable S and L’s in the country… but they were in the junk bond business and it crashed and burned.   Banks are in the business to lend, and if they aren’t in the lending business they shouldn’t have the protections and bailouts that they are receiving. 

* Years ago, when I approved loans it was considered “risk management”.  Underwriters didn’t use a computer program; we used a calculator and analyzed the buyer and the collateral. 

Common Sense Lending: Buyers with excellent credit and verifiable income should be able to qualify with lower down payments.  On the other hand buyers who can’t verify income but have a healthy 30% down payment and excellent credit should still have a loan option (with higher pricing to offset the risk).  Buyers with poor credit should have to have larger down payments – perhaps even as much as 50%.  No one needs to be Einstein to figure this out.

I think we will move closer to common sense lending this year.  After all, how are all those loan execs going to get bonuses next December if they don’t make loans?