A ‘Sensible’ Outline for Housing Solution

All reports to the contrary, unless and until our housing market stabilizes you can rest assured our economy is NOT going to rebound in a meaningful fashion anytime soon.

A wide array of government sponsored mortgage programs to date have yielded very limited support. Uncle Sam has written checks and violated many a moral hazard via these programs, but has very little to show for it in return.

As we enter into 2012, the markets for purchasing versus rental in many geographic regions of our nation are dramatically different. Might a program which promotes converting current foreclosures to rental properties be viable?

I continue to strongly maintain that a more aggressive posture needs to be taken in addressing the widespread and systemic fraud that occurred in our mortgage and housing sectors. That said, we do need to move forward and develop market based solutions to cleaning up the housing mess.

What do some of the sharpest real estate minds in the nation have to say about our housing market? Let’s read what noted real estate experts Kenneth Rosen and Lew Ranieri recently asserted:

The United States housing market can be fixed. Credit is the most essential ingredient needed immediately to allow first-time home buyers and others to take advantage of historically high affordability rates. Mortgage modifications are the next critical step to stem the tide of foreclosures and facilitate keeping people in their homes.

For the high level of inventory already vacant, the proposed rent-to-own program can readily absorb units, expand the availability of rental housing and set more households on the path of either stable renting or eventual homeownership.

Unlike credit and modifications, this rental program can be executed by the private sector with participation of the GSEs as sellers. While government involvement in making investor finance available would speed the process, financing can be obtained in the private sector on the basis of the anticipated return from rental income.

There was clearly rampant fraud which led our nation into this housing mess, and as Rosen and Ranieri point out illicit and unsavory behaviors likely persist. They further add:

What to be on the alert for?
• Programs that we deem to be unscrupulous are requiring tenants to pay a down-payment when signing a lease. We believe first and last month’s rent and/or a security deposit in keeping with state law is acceptable, but do not believe additional advance payments are warranted.

• Programs without feet on the ground to execute tenant underwriting and property management.

• Programs must follow zoning ordinances and fire codes.

• As these rental programs roll out, the question will be asked: Which is more destructive to a neighborhood, a
vacant house or a poorly leased house that becomes a drug den or similar problem?

For an exceptionally well detailed and thorough analysis of the housing market in general and the specifics for how a large scale rental program might work, I welcome highlighting Options for REO: The Private Sector Solution to the Foreclosure Problem.

About Larry Doyle 522 Articles

Larry Doyle embarked on his Wall Street career in 1983 as a mortgage-backed securities trader for The First Boston Corporation. He was involved in the growth and development of the secondary mortgage market from its near infancy.

After close to 7 years at First Boston, Larry joined Bear Stearns in early 1990 as a mortgage trader. In 1993, Larry was named a Senior Managing Director at the firm. He left Bear to join Union Bank of Switzerland in late 1996 as Head of Mortgage Trading.

In 1998, after 15 years of trading and precipitated by Swiss Bank’s takeover of UBS, Larry moved from trading to sales as a senior salesperson at Bank of America. His move into sales led him to the role as National Sales Manager for Securitized Products at JP Morgan Chase in 2000. He was integrally involved in developing the department, hiring 40 salespeople, and generating $300 million in sales revenue. He left JP Morgan in 2006.

Throughout his career, Larry eagerly engaged clients and colleagues. He has mentored dozens of junior colleagues, recruited at a number of colleges and universities, and interviewed hundreds. He has also had extensive public speaking experience. Additionally, Larry served as Chair of the Mortgage Trading Committee for the Public Securities Association (PSA) in the mid-90s.

Larry graduated Cum Laude, Phi Beta Kappa in 1983 from the College of the Holy Cross.

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