Housing.com News, Analysis & Opinion: Housing with no secondary market

Here are 10 things that I predict will flow from its collapse (many of which have already hit the beleaguered housing market):

1. The capital that exists from direct lenders such as community banks, savings institutions and large commercial banks will fall short of potential demand and focus on bread-and-butter loans, leaving most borrowers out in the cold.

2. Exotic loans of any kind will be completely out of favor, leaving many borrowers and many properties unfundable.

3. Home sellers will become active lenders, but only those who have equity. Seller financing will help some transactions.

4. Second homes, expensive houses and certain types of investment property will be penalized and difficult to fund.

5. Small boutique lenders will enter the business, capitalizing on market voids, funding specialized but secure niches.

6. Investment banks will take care of unleveraged high-net-worth customers, but terms will be unfavorable so this market will further shrink.

7. Sovereign wealth funds are not the solution, because many were burnt on mortgage-backed securities.

8. Those that do lend will revert to back-to-basics underwriting: perfect credit, large down payments, proof of income, personal character and good family upbringing.

9. Housing industry lobbyists will make the mortgage liquidity problem their number one policy issue in the next two years. They will argue that the sky is falling and it is.

10. The trend will keep the housing market starved for capital, prolonging the slump.

Like so many parts of our American culture, the accessibility to unlimited and poorly scrutinized debt helped turn Americans into a sloppy group of consumers, which spawned greedy Wall Streeters, out of control lenders and starry-eyed investors.

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From Bradley Inman of Inman News: Here are 10 things that I predict will flow from its collapse (many of which have already hit the beleaguered housing market): 1. The capital that exists from direct lenders such as community banks, savings institutions and large commercial banks will fall short of potential demand and focus on bread-and-butter loans, leaving most borrowers out in the cold. 2. Exotic loans of any kind will be completely out of favor, leaving many borrowers and many properties unfundable. 3. Home sellers will become active lenders, but only those who have equity. Seller financing will help some transactions. 4. Second homes, expensive houses and certain types of investment property will be penalized and difficult to fund. 5. Small boutique lenders will enter the business, capitalizing on market voids, funding specialized but secure niches. 6. Investment banks will take care of unleveraged high-net-worth customers, but terms will be unfavorable so this market will further shrink. 7. Sovereign wealth funds are not the solution, because many were burnt on mortgage-backed securities. 8. Those that do lend will revert to back-to-basics underwriting: perfect credit, large down payments, proof of income, personal character and good family upbringing. 9. Housing industry lobbyists will make the mortgage liquidity problem their number one policy issue in the next two years. They will argue that the sky is falling and it is. 10. The trend will keep the housing market starved for capital, prolonging the slump. Like so many parts of our American culture, the accessibility to unlimited and poorly scrutinized debt helped turn Americans into a sloppy group of consumers, which spawned greedy Wall Streeters, out of control lenders and starry-eyed investors.