Maui Council Pushes Back Against Rent Control

Maui County Council’s Housing and Land Use Committee met this week to further discuss rent control as a means to stop the county’s skyrocketing rents.  The committee chair, Councilwoman Tasha Kama, informed her fellow members and the audience that after hearing from experts in housing and development, she will not consider advancing any proposal for government intervention in the crisis.

 

As expected, those most affected by Maui’s broken rental market, were upset and disappointed.  How can you blame the frustrations of lifelong residents no longer being able to afford or find a place to live?  It’s hard to convince those so unfortunate that rent control would have only made matters worse.  They just look at it as developers and big business caught the ear of the politicians and once again, they are left with no one fighting for them.

 

Maui, your housing troubles are far from over.  Without bold new housing initiatives to build thousands of units soon, the outlook for stable rents, lower rents, or more units available will only be a dream.  At some point you may need to make the decision on quality of living versus living on Maui.

 

 

 

Fraud for Housing

Fraud is such an ugly word.  I am knee-deep in my annual continuing education for lenders.  Each year we must endure 8 hours of lectures reminding us of all the bad things that people do in relation to lending and real estate.  I wish they would require lenders get refreshed on how to compute income and other valuable tools that really impact us doing our job.

 

Let’s get back to fraud.  There are two types of fraud in lending.  Fraud for financial gain, and fraud for housing.   Fraud for financial gain is defrauding to obtain money – pretty self-explanatory.  A good example of that is title theft, we’ve discussed that topic recently.  Fraud for housing is the type of fraud where a consumer makes fraudulent claims in order to obtain a home.  Examples include bogus income documents, getting someone other than your boss or supervisor to verify your employment at work, or claiming occupancy different than your true intentions.

 

This chapter reminds of a recent interaction I had with a couple applying for an owner-occupant mortgage here in Hawaii, while still living on the mainland.  Both husband and wife work for employers at a west coast airport, but not for an airline.  They presented their plan to move to Hawaii while still working for their current employers.  They stated that their plan was to continue working a regular 40-hour week but commute daily between one of our neighbor islands and this west coast city.  Despite every question I raised on how one could logically commute daily to the mainland, they insisted that was their plan.  It was clear in my conversations and emails with this couple, the main reason they insisted on claiming owner-occupancy was to allow for a smaller down payment.

 

You may not see it as a big deal when someone tries to game the system, but it is a big deal to the federal regulators.  There’s plenty of opportunity to truthfully obtain financing, and still have lots of ways to make money in real estate.  If we all play by the rules, there will be less fraud, less losses by lenders, and lower rates for all of us.

 

 

 

 

Happy 25^th Birthday

How time flies when you’re having fun!  Hawaii Mortgage Company opened its doors 25 years ago this month.  1999 actually has a lot in common with 2024.  Mortgage rates were pretty close to what they are today.  We were in the middle of a fierce presidential election between Al Gore and George W. Bush.  Inflation was running just under 3% in 1999, just like it is today.  One scary thought I hope is not repeated is that in 2000 we had the dot-com stock market bust.  There’s lots of signs of economic turmoil coming our way next year.

 

In the last 25 years of mortgage lending, I lived through the boon then bust, of subprime lending.  I still get calls today from people asking if there’s a stated income loan program available.  I was there after the collapse of 2008 decimated property values leading to the term “short-sale” becoming a part of the real estate lingo.  2009 to 2015 were some really weird times in lending.  On one had you had the newly created Consumer Financial Protection Bureau (CFPB) implementing new rules almost monthly, trying to prevent unscrupulous lenders from taking advantage of consumers, while shady borrowers were doing all they could to defraud lenders.

 

It has been an education watching firsthand how my industry has evolved in 25 years.  It’s funny that in 2024 there are loan programs other than full-documentation loans - requiring lenders to review all your income.  The general rule is that a borrower must show the "ability to repay" their loan – that’s known as ATR in lending.  The creativity the lending industry has developed is intriguing.  How a borrower demonstrates their ability to repay has led to bank statement loans, debt service coverage loans, and other loan products with reduced documentation requirements.  Please note these products all have some form of income verification.  Nothing is done using “stated” income.

 

Well, I’m not going anywhere, and I look forward to our journey together into 2025 and beyond.  As Jerry Garcia sang, it has been a long, strange trip…

 

 

 

 

 

And now the week’s economic news…….

 

Quiet Week 

It was a quiet week for mortgage markets.  The major inflation data came in very close to the expected levels, and the other economic reports also caused little reaction.  Mortgage rates ended the week nearly unchanged, remaining near the lowest levels since early 2023.

 

Fed officials keep a close eye on inflation, and the PCE price index is their favored indicator.  In August, core PCE, which excludes food and energy to reduce short-term volatility, was 2.7% higher than a year ago.  This was up from an annual rate of increase of 2.6% for the last several months, the lowest levels since March 2021.  While far below its recent peak, further progress toward the Fed's target of 2.0% remains challenging.

 

The monthly report on consumer confidence published by the Conference Board revealed a rapidly deteriorating outlook in nearly every area, particularly from lower income consumers earning less than $50,000.  The index posted its largest decline in over three years, dropping to just 98.7, far below the consensus forecast.  For comparison, it was at 132.6 in February 2020 just before the pandemic.  Consumers expressed the greatest concern about price increases.  In addition, labor market conditions deteriorated for the seventh straight month, with the largest number of consumers reporting difficulty finding a job in over three years.

 

After unexpectedly jumping to the highest level since February 2022 last month, sales of new homes in August fell 5% from July but were still 10% higher than a year ago.  The median new-home price of $420,600 was down 5% from last year at this time.  In contrast to existing home sales, which measure closings during the month, new home sales are based on contracts signed, so they are a leading indicator of future housing market activity.

 

 

 

Next Week

Investors will continue to look for Fed officials to elaborate on their plans for future monetary policy, and Chair Powell is scheduled to speak on Monday.  For economic reports, the ISM national manufacturing index will come out on Tuesday and the national services sector index on Thursday.  The key Employment report will be released on Friday, and these figures on the number of jobs, the unemployment rate, and wage inflation are always closely watched.

 

 

 

 

Until next week….