Gepetto spoke…and you had better listen!

…from the AP this morning…..The Federal Reserve Board on Tuesday considered new protections for high-cost mortgage borrowers to avoid a repeat of the loose lending standards that have put many Americans at risk of losing their homes. 

U.S. lenders would have to determine that such a borrower can afford a mortgage before making the loan, under a Fed staff proposal.  (duh!!)

The proposed rules would also promise that borrowers will get details on their brokers’ compensation and be billed monthly for annual charges like property tax and insurance. (uh oh..no more hidden Yield Spread Premiums)

It does not take a crystal ball to see where this is headed. Tighter loan restrictions mean less mortgages..meaning further decline in sales. Tighter YSP disclosure..less money for mortgage brokers, less brokers, less programs to choose from…equals less mortgages written and therefore, less sales.

That is of course you come from the inner city where groups like NACA can still get you the low interest, low down payment credit flexible home loan because..well they’re entitled to it???

So what’s an Investor to do…RENTALS BABY!!!  Read the writing on the wall…less people being able to qualify for mortgages does not mean less people needing housing. Better brush up on your cap rate analysis and virtual investing capability. You heard it here first…rentals will be huge in 2008!