This is the seventh installment of HSH.com’s Think Tank series which features in-depth questions and answers from the nation’s top real estate professors and professionals.
“Prepare for the future of housing finance in the United States” – that’s one of four strategic goals the Federal Housing Finance Agency (FHFA) intends to reach in the next three years. With Mel Watt’s recent confirmation as director of the agency, we expect to see some changes in the mortgage lending industry – but will they actually make housing more affordable in the future?
We went to our distinguished panel of experts, professor Robert S. Sichel, J.D., L.L.M., professor of business law at Kennesaw State University, professor Kemberley Washington, CPA, professor of accounting at Dillard University, and Dr. Ken H. Johnson, Ph.D., faculty director at the Tibor and Shelia Hollo School of Real Estate to understand what policies Director Watt is likely to change and how those changes could affect the housing market, mortgage lenders and consumers.
A: I expect to see a shift in policy from the goal of stabilizing the mortgage market from the lender’s perspective to a focus on addressing the difficulties existing on the borrower’s side of the market. The emphasis will shift from protecting the lenders to protecting borrowers.
A: Not really sure of the changes. The politics suggest that Mr. Watt will want to take us back toward more liberal lending rules. But I doubt that we will return to the old days, as Dodd-Frank will tend to keep ultra-liberal lending policies in check. There is great irony here as both Dodd and Frank were once hardcore everyone-should-own advocates. It’s funny how the world works.
A: The new director should focus on creating an atmosphere where the making of a mortgage loan takes on a rational approach of providing borrowers with a mortgage that will be repaid. The pendulum has swung from the lax criteria which contributed to the mortgage crisis to an atmosphere of fear on the part of lenders which has created the extreme difficulties that now exist when obtaining and closing a residential mortgage loan. This difficulty continues to hamper the recovery in the housing market. The first issue to address is providing an infrastructure for lenders to effectively and quickly underwrite and close an approved loan.
A: While there are many issues Watt should address, I believe addressing home affordability and assisting homeowners who may be in the process of losing their homes should be priority.
A: I would really like to see Mr. Watt address the issue of owning versus renting and better explain the American dream of home ownership. Specifically, there is mounting evidence that not all should own a home. However, those that plan to move less often, have an affinity for amenities, and are not excellent savers should buy because it makes them save. Thus, I wish that Mr. Watt would be more truthful with the American public about ownership. Ownership is generally favorable with qualifications; however, most should own because it makes you save, not because property value will increase creating wealth through leverage. In fact, most of the wealth creation from ownership does not come from property appreciation as most suspect. Instead, it comes from paying down the existing mortgage.