Feb. 16, 2013: Trends in home ownership - don't count out the youngins; reader input of note
Rob Chrisman


Realtors and lenders know that lots of different kinds of people own homes in the U.S. According to the U.S. Census Bureau, 52% of foreign-born householders owned their homes in 2011. In contrast, about 67% of native-born householders owned their homes. “Homeownership is a goal shared by many residents of the United States, both native- and foreign-born, citizen and noncitizen,” said Elizabeth Grieco, chief of the Foreign-Born Population Branch at the Census Bureau. “For immigrants in particular — who maintain nearly one in seven households in the U.S. — making the transition from renter to homeowner represents a significant investment in the United States.” This report found that foreign-born naturalized citizens were more likely to own their homes than foreign-born noncitizens. In naturalized citizen households, 66% were owner-occupied. That compares with 34% of noncitizen households. Rates of homeownership among foreign-born households also increased with time spent in the United States. Among foreign-born households with a householder who entered the country before 1980, nearly three-fourths were owned rather than rented. Among households headed by someone who entered the U.S. since 2000, only one-fourth were owned. According to the brief, just 10 metropolitan statistical areas accounted for about half the nation’s foreign-born households in 2011, led by New York and Los Angeles, each of which had more than 1 million foreign-born households. Rounding out the top five were Miami, Chicago and Houston.


Turning to age groups, the conventional wisdom today around the millennial generation, often defined as having been born between 1980 and 2000, seems to be that they aren't as interested in owning a home as previous generations. Recent stories in the media go so far as to claim that the dynamic, diverse people in this group prefer the flexibility of renting to the stable, long-term arrangement provided by home ownership. But one group begs to differ. Dr. Glenn Crellin, a professor at the Runstad Center for Real Estate Studies, University of Washington. D.C. says that this is a misinterpretation of present-day trends. It is true that the home ownership rate among the under-35 population in 2011 was just under 40% (compared to the national rate of approximately 65%), and that home ownership levels had declined more sharply among those under 35 than among other groups since the housing bubble burst. But he said many in the media were drawing the wrong conclusions from that data. "Recently, headlines showed the general press believed we were entering an era of rentership," Crellin said. "[As a result], they believe home ownership doesn't deserve the kind of support it had been given." But Crellin pointed out that the rate of home ownership for those under 25 today is actually higher than that of the under-25 baby boomers in 1970. Also, a recent poll of Washington State University students that he conducted showed that 48 percent of them expect to buy a home in the next 3-5 years. While the willingness of young people to purchase a home is certainly there, the financial means to do so may not be, Crellin said. The underlying story, then, is not one of shifting mindsets but rather changing economic factors. "[The recession] is probably going to delay purchases, but it's not the permanent transition that the national press is predicting," he explained. Let’s hope so!


Let’s turn to some recent reader letters that make some sense about current topics.


For example, here’s something to note. “Regarding the Fannie Mae and Freddie Mac lender incentives for borrowers to refinance under the DU Refi Plus and Refi Plus programs, I wonder if that's permitted under QM.  People may not realize it yet, but Loan Level Price Adjustments are included in the "3 point maximum" calculation, per the ABA.”


And here is one from an LO on builder-lender arrangements. “Whenever a client decides to buy in a new housing development the builder will only offer incentives or concessions if their own lender is used.  Generally the incentives are so great that I cannot match the offer.  I’m talking about 10’s of thousands of dollars in concessions and or closing cost credits. The most recent scenario was that you could use your own lender, (no concessions) but if they didn’t close on time the buyer would be penalized $500. Per day.  In speaking with the sales person she told me the outside lender deals usually ended up with a $5000-10,000 penalty for inability to close on time.”


Here’s a little regulation-related note. “We received our first audit back from the state of Maryland under the new compensation rules. On borrower paid transactions we are now finding out that if there is not enough lender credit to cover the origination charges, the state is determining that we have obtained funds from lender and borrower. We must refund that money that was in the origination block showing costs to the borrower or... We must produce documentation to show that in fact on borrower paid transactions, broker fee was paid by borrower and the lender credit was used for prepaids, title closing costs, appraisal and credit and of course the lender underwriting fee. So now we are attempting to save thousands in refunds by getting the closed packages from title companies to defend our stance. We all know that it is against Dodd Frank to be paid by both borrower and lender, on borrower paid transactions, but the HUD and GFE do not back that up on the surface. I have broker agreements that match the fee we made clearly, but the auditor says ‘send any origination costs (non paid by credit) back to customer’, yet they allow the credit to pay the lender fee in essence.”


There is plenty of blame to go around for the issues that the lending industry is grappling with, and here is one opinion from Matt Thoman. “I have to agree with Dennis Smith regarding FHA’s role, or lack of, in the housing crisis. (He wrote that the FHA did not fuel the housing crisis.) FHA had virtually no role in the market at all during that time.  Of course, they had the poison products, but, as Dennis states, Fannie and Freddie were undercutting FHA on price, along with the entire subprime market. Anyone with a half an ounce of knowledge about free markets knows that when one major player drops their pants on price, the rest will have to follow or lose business. Subprime followed in any manner they could figure out, FHA did nothing.  It played out exactly as an Econ 101 student would write it on a term paper. The prime example is Fannie Mae’s My Community loan: 520 minimum credit score with no price hits, 100% LTV single loan with private mortgage insurance negotiated to a reduced amount - all this at roughly the same rate as for an A+ borrower.  In 2004, everyone was competing with that. The second example is the Alt-A product they were buying from the Countrywide’s of the world.  Remember EZ Doc? Fannie would severely restrict who they allowed to sell this product to them. Unfortunately, the chosen few were all correspondent lenders, so everyone else had the product, too. It all funneled back to Fannie, there were never any controls (or even all that many guidelines, really).  They never took responsibility for making THAT product liquid in the market, either. Fannie Mae needs to take some responsibility.”


A few weeks ago Brady Holland from Phoenix wrote, “I wanted to bring up a topic that I haven’t heard covered but is one that will cause problems for our industry for the next couple weeks/months. After the year-end last minute fiscal cliff negotiations, there were tax law changes. And in response to these changes, the IRS has not yet been able to produce and publish procedures and tax filing forms as it pertains to 2012 tax filings. As a result we have many clients who are unable to file their 2012 taxes. I know a CPA who says he literally has hundreds of returns done that are sitting on his desk awaiting the IRS to release the required 2012 filing forms. This IRS delay potentially causes a no-go loan qualifying black-out period for clients who need to show filed 2012 returns for a refinance or purchase. This is especially problematic for self-employed clients who need to get their returns filed in order to document all of their 2012 income for loan qualifying. The latest word is that it may be March before the IRS produces the missing tax forms and procedures. And I would imagine that once the IRS forms are finally released that there will be a big bubble of tax filings all at once that may cause lender required 4506 verification delays for 2012 filers.” Thank you Mr. Holland!


It turns out that the IRS will start accepting tax forms with education credits, depreciation, and so on: http://www.deseretnews.com/article/865572770/IRS-to-start-accepting-tax-forms-with-education-credits-depreciation.html. And the IRS began processing Form 4562 beginning February 10. The IRS announced in a Quick Alert on February 8, 2013 that it will allow returns containing Form 4562, Depreciation and Amortization, to be filed beginning on Sunday, February 10, 2013. After completing the maintenance build window, the various business rules used to reject returns with Form 4563 attached were disabled. “That includes the Form 1040-family tax returns, Form 1065/1065-B, Form 1120-family tax returns and Form 990-family tax returns. UltraTax CS/1040, 1065, and 1120 version 12.3.1 updates will be available for download on February 11, 2013 that allow Form 4562 to be included in the electronic file. To apply these software updates you must download and install version 2012.3.0. Once you apply these updates, you can create and transmit returns previously delayed due to Form 4562.”


Looking at the proposed Nevada program, mentioned recently in this commentary, for buying mortgages on underwater homes, Tom D. asked, “Why would the government buy mortgages at a 30% discount when homes values have dropped 50%? It sounds like another veiled bailout to me.  Why not take the money and build 1,000 homes at $150K each, create construction and sales’ jobs, and reinvest the money from interest to build more homes.  Let the banks solve their own problems.  Disingenuous vote grabbing mentality is alive and well in Nevada, with the common folks too na├»ve to know it is not being done for them but rather for the banks.”



(A parental-discretion advised repeat, but a classic.)

An attorney arrived home late, after a very tough day trying to get a stay of execution.  His last minute plea for clemency to the governor had failed and he was feeling worn out and depressed.

As soon as he walked through the door at home, his wife started on him about, “What time of night to be getting home is this?” “Where have you been?” “Dinner is cold and I'm not reheating it.” And on and on and on.

Too shattered to play his usual role in this familiar ritual, he poured himself a shot of whiskey and headed off for a long hot soak in the bathtub, pursued by the predictable sarcastic remarks as he dragged himself up the stairs.

While he was in the bath, the phone rang.  The wife answered and was told that her husband's client, James Wright, had been granted a stay of execution after all. Wright would not be hanged tonight.

Finally realizing what a terrible day he must have had, she decided to go upstairs and give him the good news.

As she opened the bathroom door, she was greeted by the sight of her husband, bent over naked, drying his legs and feet.

“They're not hanging Wright tonight,” she said.

He whirled around and screamed, “FOR THE LOVE OF GOD WOMAN, DON'T YOU EVER STOP?!”



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