Tucson is Ready for The Mortgage Pendulum
It really depends on where you put the the “is” doesn’t it. “Tucson is Ready for the Mortgage Pendulum” or “Is Tucson Ready for the Mortgage Pendulum.” Time will tell and it isn’t going to be long. The Mortgage Pendulum has swung past center and headed for the other side.
Newtons Third law of motion: Law of reciprocal actions doesn’t exactly fit. Simplified: “For every action there is an equal and opposite reaction.” In economics there is a similar version of this law of motion “For every action there is an opposite reaction.” It might be equal but often it is a lot more than equal. In some cases it is way more than equal; “Way More” being a scientific term.
We all know that is the past 4 or 5 years as the mortgage industry was deregulated the mortgage pendulum swung for controlled regulation to deregulation resulting in “No Regulation” to speak of. It was considered common practice as the pendulum reached full swing to see people that only needed to “fog a spoon” to qualify for a loan. Not only was this evident in the “sub-prime” part of the market but the “Alt A” loans as well. The Alt A’s didn’t require you to prove the stated income, just say I make this much I want to borrow this much and take me at my word. And I want $300,000 thank you very much.
Today I went down to the local branch of the bank I’ve used for almost 30 years now. I wanted to cash my own check, I wrote my check, I signed my check, I slid my bank card through the machine and then was asked to provide photo ID before I could cash my own check drawn on my own account at my own bank. But last year I could get a loan for hundreds of thousands of dollars just on my say so, no proof, no account, no photo ID. I would say that was a Mortgage Pendulum that swung way toooooooooo…… far.
The crisis that erupted in the Mortgage industry (and spills over into the Real Estate Industry) in August was more than just a natural slowing of the pendulum. It was a sudden stop and reversal in practically a single collisional moment in time. This type of sudden stop and reaction supplies the energy for a swing in the other direction with a lot more power than is needed to “Take things back to where they were”.
Many were expecting to see a return of 20% down to remove the necessity of PMI (Private Mortgage Insurance) and good FICO scores would once again be required. The days of 100% financing with a first and second mortgage to avoid the PMI are swept away with the current of the pendulum swing. There have even been some crying how can anyone afford a home now? Like those standards of just a few years ago are not unattainable. Yet more than 80% of the mortgages today are meeting those standards.
But those standards would bring us back to center, and center is never where the pendulum stops, and in this case we expect more than an “Equal and Opposite Reaction” and here it comes.
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Dave Smith | Tucson Real Estate
Today I went down to the local branch of the bank I’ve used for almost 30 years now. I wanted to cash my own check, I wrote my check, I signed my check, I slid my bank card through the machine and then was asked to provide photo ID before I could cash my own check drawn on my own account at my own bank.
On the other hand, somebody slapped my account number (taken from a stolen check of mine… never mind the ONLY check I write) on another (washed) check looking nothing like mine, with a name of a business!!! on it, a signature nothing like mine, and it happily went through!
I was honestly told they don’t check a darn thing unless a problem like this occurs.
Oh, and something else. Most of our dear major banks do a hard hit on your credit report when you open your own checking and/or savings account with your own money! But hey, once you press the Spanish button, apparently the existence of SS# is conveniently forgotten.