[Note: This is a longer version of the original, which was posted on AOL Housingwatch a few days ago. I'm crossposting it because Notorious ROB has no space constraints and my readers are used to 2,000 word posts, heh. 
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In Part 1 of this series, where I laid out why I believe the 30-year fixed rate mortgage (among other features of contemporary homeownership) was on its way out, to be replaced by a far greater emphasis on rentals. So let’s take a brief look at what the future of rentals might look like, since many of you reading this now will be renting for a lot longer than you had ever imagined.
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Your future tax dollars at work?
In my earlier post on the New Normal in real estate, a commenter took issue with my predictions about the future of the 30-year fixed rate mortgage (among other claims). I thought I would expand on that aspect a bit.
The specific mechanism that I think will be put in place is a change in the mission of Fannie Mae and Freddie Mac (possibly other housing-related agencies, such as FHA, VA, and the state/local housing authorities). I expect that Fannie/Freddie will actually become fully government-chartered entities (as NAR suggests) rather than this weird government-sponsored private companies that provide private rewards at public risk. As a GCE, rather than a GSE, F&F will no longer have profit as its raison d’etre, but the promotion of public policy.
In this case, that public policy is to encourage the development of affordable rental properties across the low and middle-income spectrum, thereby reserving homeownership for the (relatively) wealthy who pose far less credit risk to lenders.
That, to me, spells the end of the 30-year fixed rate mortgage.
Allow me to step you through the argument for why this is likely to happen. (Which is not to say I want this to happen, of course.)
It’s a chilly, rainy day here in New Jersey under iron grey skies. If where you are is sunny, and you’re feeling happy and optimistic, and you want to stay that way, let me strongly suggest that you not finish reading this post. This is where I engage in paranoid fearmongering speculation.
You have been warned.
Actual post continues after the jump.
Future Realtor-in-Chief?
So earlier today, I get an email of some interesting real-estate related links from my friends at AOL Housingwatch (where I pen an occasional column or two). In it, I find this gem of a story:
Mortgage loan originators will have to be fingerprinted and sign up to a central registry to do business in future, according to final rules issued on Wednesday by the Federal Reserve and other regulators.
The rules are part of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008, also called the S.A.F.E. Act.
They were issued by the Fed, Comptroller of the Currency, Federal Deposit Insurance Corp, Office of Thrift Supervision, Farm Credit Administration and National Credit Union Administration.
Well, isn’t that special! Heartfelt congratulations to my friends in the mortgage origination industry for finally earning the right to be fingerprinted to have a job. You have managed to join all Federal and State employees in that distinction. Now when your electronically-submitted loan application is found to be fraudulent, your prints will be all over that email! There is nowhere to run!
Snark aside, I missed the passage of and the significance of the SAFE Act of 2008. So… I went digging a little bit. What I’ve found convinces me more than ever that federal regulation of real estate agents is not far behind.
That such regulation would also fit into the overall shift in national housing policy, of course, is a given. What might such a scheme look like?
In part 1, I laid out some hints of what the Obama Administration has in mind for a new federal housing policy that would “reset the rules of the market” and engage in a “fundamental rethink” not just of the mechanics of housing finance, but of the objectives of housing policy themselves. The Treasury now has all of the comments that it requested from the public and we can expect to see a proposal from the Administration sometime this fall or early next year.
In this post, I’d like to engage in the purest conjectures about what such a policy might look like. I know that assumptions are dangerous, and any conjecture at this early stage is more likely to be wrong than right, but… hey, this is fun. (If you’re a real estate and politics geek like me anyhow.) So here we go.
1906 San Francisco earthquake
There was, apparently, an earthquake in Washington DC not too long ago. Thankfully, no one was hurt, and no serious property damage occurred as the 3.6 magnitude tremor rolled through. Mere days later, however, I learned that another tremor — this one not registered on any geological survey — centered around Washington DC occurred. From the Washington Post:
Responding to the collapse in home prices and the huge number of foreclosures, the Obama administration is pursuing an overhaul of government policy that could diverge from the emphasis on homeownership embraced by former administrations.
“In previous eras, we haven’t seen people question whether homeownership was the right decision. It was just assumed that’s where you want to go,” said Raphael Bostic, a senior official in the Department of Housing and Urban Development. “You’re not going to hear us say that.”
While this particular tremor hasn’t developed yet into anything earth-shattering just yet, and there are absolutely no details available just yet, for anyone even remotely connected to the real estate industry, these statements amount to a tectonic shift of realignment.
What rough beast, its hour come around at last, slouches towards DC to be born?
Conjectures follow.
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