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Hovnanian Enterprises CEO Ara Hovnanian on why the mortgage qualification process must be addressed to improve the housing market.
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I've time for claimants moneymaker on a day where we have a slight ray of hope for the housing industry -- new home sales beating analysts' estimates.
Rising seven point 3% since the prior month but the news may not be as good or bright as it -- -- -- sales are still 23.
Point 1% lower than they were.
One year ago so will it take another government handout or some type of incentive to get the housing market on its feet again.
My next -- is not necessarily so it should help in some way but.
What is it Eric have -- as president and CEO Hovnanian Enterprises starting made out of Fox Business exclusive on this day.
When you just did get a decent piece of news but.
You still feel the industry's kind of bumping along what would help.
Give it a spark plug moment.
Well one thing that would help is is something that the government shouldn't do and that's talk about mortgage interest deductibility whether they should do ordered not eliminating Fannie and Freddie.
Those things worry.
Potential buyers.
But one of the things that's really changed his mortgage qualification.
Has gone from.
Very very lean to in two very very difficult just overly restrictive right.
About what you're talking about is that the back in the day 2000 to 2006 before the housing at at implosion.
There were liar loans -- of anybody could say I don't even work and they get a mortgage now you say it swung too far to the others.
It's gone too far and people with a minor blemish.
May not get a mortgage that are a consumer that's really otherwise -- but but how that's something the government can control one Wells Fargo initiates alone.
Don't they decide what the important metrics are that somebody has to have like an up -- a down payment there really the GS seize Fannie Mae Freddie Mac FHA account for the overwhelming majority of loans today so.
Anybody that originates ultimately looks to the requirements of the -- I thought FHA was asking for tiny amounts these days and I -- worry David was true that.
Working -- too lenient at this point that were not making sure people have enough stake in it enough skin in that home.
No they're two different issues one is down payment and -- FHA is a low down payment program right now.
Later on that's something that could be addressed at this moment in the housing crisis it would be bad policy to address.
But what I'm discussing right now really -- to -- qualifications.
Such tests what what should be easier to get a home well the credit scores gone.
White.
-- requires about sixth when he.
Before the sub prime mess is somebody that had a 580 school or with other extenuating circumstances.
Could call what do you think it should be.
-- I think going back to the other low six hundreds makes sense going to 605 -- the in certain circumstances not everybody's credit worthy.
But there are people the kind of low scores that are credit -- that's hurting the economy what else what else should be.
Relax well there is something that used to be called compensating factors today everything is black and white is completely formulaic if you don't qualify would be.
Payments to income ratios there's very little flexibility.
So an example.
And in the past if you had tax free payments where they come from alimony child support or other areas.
You could growth those up to determine if you could qualify as -- income.
As part of income because income that ratios figured on the pre tax base and now forgetting can now you can't do that but -- -- silly because today it really is an after tax payment what do you say to people.
Out there who say -- happening in his pushing us back to the evil ways that got us into trouble in the first place.
You know all what I'm suggesting is we go.
Not to the standards regardless of trouble to the standards that worked for decades before that before it got to -- We have a system that worked for decades and we never had these foreclosure problems and delinquencies problem -- -- -- mortgage originators fall.
There are these guys in San Diego at storefronts that we're just giving anybody you know there's a lot of finger pointing.
And -- wanna get into that at the moment but clearly there were mistakes made by many many what mistake will you never make again as at their home -- Oh well you know we've got lulled into thinking this is gonna go long for ever.
And not focusing on things like what -- the qualification standards of the mortgage industry.
To do it today I think we're gonna be much more careful on every front.
Buying land -- is looking at though mortgage qualifications.
Home prices affordability.
You name it were much more focused on department.
Era of naming of the hanging in there -- -- thank you so much for joining us beer love to have you here for the perspective.
