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VOL. 7 | NO. 36 | Saturday, August 30, 2014

Courtney

Richard Courtney

Is It Really Time to Relax Lending Standards?

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Just when you thought it was safe to believe in the wisdom of the system, they pull this.

Back in 2008, when the Great Recession made its way into Middle Tennessee and the area began to feel the pain that other regions had endured for several years, the financial world collapsed.

The government, under the leadership of George W. Bush, initiated a bailout that was supported by both John McCain and Barack Obama, both then presidential candidates. The stock market dropped considerably with the Dow Jones hitting 7,063 and S&P dropping to almost 600.

Home sales dropped to the lowest level in years, and the auto industry would have failed without the bailout.

Today the Dow is up from its 7,063 to 17,085, and the S&P is hovering around 2,000. Home sales have skyrocketed to record numbers, and the auto industry has been healed.

With the country as polarized at it is, no one thinks the other side did anything right and both sides of the aisle sling mud at the other. That is, when either side manages to meet in session, a feat that has only occurred some 40 times this year, according to US Representative Jim Cooper, who sadly notes that the US House of Representatives is now in session less than the General Assembly.

As this Congress threatens to beat the record of the “Do-Nothing Congress” for having done nothing, the lending institutions began to disseminate literature announcing that there is a new method of determining the FICO credit score.

After reading the headline, most who follow lending policies feared the guidelines would become even more stringent.

For those who have not followed the regulation instituted after the Recession, a recap is in order.

The guidelines were severely tightened, so much so that some feared no home buyer would ever qualify for a loan again. The regs required that the borrower have an occupation – a two-year track record of self-employed – good credit and some cash saved.

To the average observer, those seem like reasonable requirements. And they have worked.

Loans made during the past six years have largely been solid and will have low foreclosure rates, barring another major collapse.

It seems the system was unable to tolerate too much of a good thing, so now Fair Isaac Corp. (FICO) is adjusting its method of computing credit scores, thereby raising credit scores for people who had medical collections.

And my favorite: “Paying off a bill in collections now makes sense.” Yes. In their release, it says “Paying off a bill in collection now makes sense.”

So what did paying off a bill in collection do before?

Sale of the Week

Last week, 2516 Ashwood Avenue sold for $334,000 in a matter of days, of course, after Kimberly Davis of Avenue Real Estate Services listed the dwelling for $339,000.

The house has 1,040 square feet – yes sir, $321 per square foot – and had been rented for the last 10 years.

In her remarks, Kim led with “RENTAL ADS ARE FRAUDULENT,” and followed with “Adorable cottage ready for your upgrades!” She later noted that it has hardwood flooring diamond-paned windows, fireplace, large deck, galley, den/office area.”

She was quick to note that this is an “as-is” sale, and warned that she meant it. It is always wise to follow her instructions. One might find it odd to lead with the warning that rental ads are fraudulent when marketing a property, but such action is required when the evil forces that slither into Craig’s List from time to time spew their poison.

There are some that search for properties that are for sale in areas that might command high rental rates. Based on its proximity to Vanderbilt, the property at 2516 Ashwood would be a candidate. Then the serpents snag the photos and pertinent data from the MLS, design and post an advertisement offering the home at a low rental rate.

When this occurs, the listing agents are overwhelmed with calls from any number of would be renters viewing the homes for rent on Craiglist.

In many cases, it is impossible to convince these starry-eyed future tenants that the ads are scams and that the homes are not, in fact, for rent. They want so much to believe, that they fight for their cause.

“But it says..” But it says…”. The agents respond “But it isn’t..” “But it isn’t.”

On more than one occasion, those making the inquiries have managed to communicate with the perpetrators of the mischief and called the listings agents to boast of going around them and wiring or Paypalling the funds into the offshore account and as a result of their investments demand the keys.

The agent’s firm denial only inspires them to desperation. Eventually the desperadoes realize their mistakes and do as many students do when in trouble. They phone home.

Then the calls ensue from the angry parents of the children of the scorn. Eventually, but not before blowing off an enormity of steam, the parents relent, and the Kim Davises of the world post exactly what she posted.

I recently read a quotation posted on the internet from one of the greatest leaders in history, none other than Abraham Lincoln. “Don’t believe everything you read on the Internet. Some of it is not true.”

That from Honest Abe himself.

Richard Courtney is affiliated with Christianson, Patterson, Courtney, and Associates and can be reached at richard@richardcourtney.com

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RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 65 366 17,721
MORTGAGES 70 417 23,068
FORECLOSURE NOTICES 15 91 4,519
BUILDING PERMITS 210 932 42,157
BANKRUPTCIES 62 299 16,691
BUSINESS LICENSES 19 80 5,781
UTILITY CONNECTIONS 49 305 25,174
MARRIAGE LICENSES 16 96 5,381

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