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Privilege vs Right

There was a recent article in The Boston Globe mourning the recent stats that young adults have lagged behind others when it comes to buying homes recently compared to the past. I wrote a note to the author of the article below reminding her about an article back in 2005 that applauded the youth buying homes which only made them want to do it more. It actually discussed a 24 year old who was living at home and buying investment property to rent or flip, and again made it seem not only smart but cool. bad combination for kids!

Sarah I enjoyed your article last week on the young adults buying homes. I have to say I actually think it may be a good trend compared to 2005. In 2005 it was the peak of bad mortgage lending. Anyone could get a home. Young people are notorious followers. As soon as a few friends were able to buy they thought they should like they it was a pair of Uggs or a North Face. I'd ask you to go back to an article the Globe had back then that discussed kids coming out of college and buying right away and how crazy it was as they didn't really qualify. In particular it focused on kids who were still living at home and buying 2 family homes to rent. They were all trying to be Trump; they thought they were buying baseball cards not understanding the impact they could have on real adults lives by being foreclosed on. They still had a place to live; you win some you lose some. The lending environment and the mad rush to not feel left out is the likely cause of the change and I think they are good ones. As a lender I discouraged many young people who emotionally got excited to buy making sure that they new if you thought you may move with in 3- 5 years you would likely lose money on a home. Young people should not be tied down and pursue their careers, relationships and their dreams. Home ownership does not enable that attitude.

In the paper again this week I see comments from the Housing Groups, including the NAR who have teflon-ed themselves from any responsibility in this crisis, that state that lenders continued current conservative lending policies are the cause of our housing slump. All this while the regulators continue to pursue lenders for their past and present underwriting policies and behaviors as too liberal.

You can of course see this best in our own bi-polar bi-camera legislature where in the same day you can read folks both from the left side of the aisle discuss how current lending is hurting the recovery and minorities access to housing and one of their esteemed colleagues is stating how middle America and our cities are decimated from the same "aggressive" policies.

In particular they are focusing on the recent Streamline refi reactions, where HUD is saying that the overlays are killing the potential stimulus. Never once did they ask the lenders before they rolled these changes to see how they would react. If they did they would realize the programs are written poorly and in such a way that would guarantee a negative reaction as you were taking someone's underwater workouts and accepting their decisions. Upside down bad paper at 104 price isn't a bargain and would put you in direct conflict with the CFPB and State regulator for book of business and performance, while requiring more reserves.

As you've heard me say before, I estimate that 95% of people who should get a loan can get a loan. People who can't save, won't declare income so they don't pay taxes and can't pay their bills should not buy a home and it's our responsibility to educate them how they can position themselves to buy and encourage them to build their profile. Now we are vilified for holding the line and being the voice of reason. Just crazy!

Buying a home is a privilege to those blessed with enough cash or to those who have shown the ability to afford a mortgage. Otherwise we in society need to tell them to wait because they will ruin the neighborhood and the lending institution that supports it . it is not a right that everyone gets when, especially whenever they want one.

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