By Bianca Wright
This guy might show up again if Mortgage lending rules are eased. Change is good and it may be exactly what this economy needs to create better consumer confidence. However, the very reason for restrictive lending policies today may become a reality again if this new change goes to far.
As The Trump Administration pushes for a more flexible Financial Institution with Lending by repealing the Dodd Frank Act, one who has experienced the 2008 financial crises would question his intentions. Its obvious that these changes would directly help those Subprime Borrowers qualify for a mortgage. Just to speculate on what could change, you may see more people with lower credit scores and higher debt to income(DTI) ratios purchasing homes which is great for majority of us but in hindsight it may just turn out to be that same old familiar horror story we all know with a nice new cover.
On September 30th of 2010, American Economist Ben Bernanke delivered a great summary of The Dodd Frank Act(DFA) and some of the issues it would remedy. The DFA made strong progress by creating the Consumer Protection Agency that regulated big Financial Institutions thus ending big corporate bail-outs which was definitely a huge expense on Tax Payers. When the financial crisis hit this country, it also hit globally especially for industrial countries. With American spending and employment taking a drastic dive, so did international spending on imports and exports. Writer Joel Havemenn of the Encyclopedia Britannica in his article title "The Financial Crisis of 2008" Summarizes how the stock Market really took a plunge in 2008 loosing nearly 34% of its value in the Dow Jones Industrial Average.
So whats the catch 22? In short Trump will make available more opportunities for people to become Home Owners thus allowing investors to gain more which will create a soaring level of consumer confidence and a magical playground for investors. You can almost imagine Trump pointing and yelling at everyone saying "You get a house and you get a house and you get a house" But with opportunity comes a cost. Of course people will snatch their chance at Home Ownership and investors will milk as much as they can while the moment is euphoric. The cost in this case, as in 2008, would be that our financial institutions become susceptible to risk once again.
At this point, most predictions of repealing the DFA can only be based off speculation as we sit patiently on the other side of closed doors literally and wait for the results. No need to panic yet but its hard not to when considering the Precedent .
Lending Tree - https://www.lendingtree.com/glossary/what-is-subprime-borrower
Economist Ben Bernanke Summary of Dodd Frank Act - https://youtu.be/WYJArv6fzms
GLOBAL FINANCIAL CRISIS - https://www.britannica.com/topic/Financial-Crisis-of-2008-The-1484264
Consumer Reports - http://www.consumerreports.org/mortgages/how-trump-plan-would-ease-mortgage-lending-rules/
I cover Real Estate Market information, RE Investing, legislation, loans and other stuff :-) My Goal is to bring facts to the table in hopes to open up a dialect among real people. Far to often the topic of Real Estate is perceived to be foreign when in fact it directly affects all of us. So lets talk about something that matters.