The Collected Works of Author and Blogger Larry Roberts

Archive for December, 2015

By increasing borrowing costs for bankers, rising interest rates may force them to foreclose and resolve their non-performing loans. Most borrowers over the last decade used fixed-rate financing, so rising interest rates will not cause their payments to rise and put them at risk of default and foreclosure. That is not how rising interest rates might lead to more foreclosures. We also know that many loan modifications are facing interest rate resets that will increase the cost of ownership of many struggling borrowers. However, these loans will be can-kicked as necessary, so this is not how rising interest rates might lead to more foreclosures. The real reasons rising interest rates could cause more foreclosures is more complicated than that. Rising…[READ MORE]

Home sales generally decline in the fall, but this October saw a larger decline than normal. Was TRID implementation to blame, or high home prices? Lenders don’t set out to inflate housing bubbles. The pressures on lenders to obtain business prompts them to expand loan programs and develop “innovative” loan products in order to keep sales volumes up when prices reach the limit of affordability. Sellers could always rely on lenders to arm borrowers with dangerous loans to finance ever-higher asking prices. That will not be the case in the future. Dodd-Frank regulations installed a rigid ceiling on affordability. Borrowers must document their income, and that income is applied to amortizing loans with a reasonable debt-to-income ratio. Buyers can either…[READ MORE]

The lowest rungs on the housing ladder pay so much for a roof over their heads, they can't live a life. California has a housing problem. Anyone who lives in California copes with higher housing costs than nearly everywhere else in the United States. This problem is a boon to landowners and high wage earners, but it's a bust for lower middle class wage earners who often put 50% of their income toward housing. Why do we have this problem? First and foremost, the problem is one of supply. California has a chronic shortage of housing. The lack of supply is the primary reason prices are so high. When supply is limited, people substitute downward in quality just to obtain…[READ MORE]

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