Part 2 of 4
Dr Yun commented on our frustration with the lack of loan products to finance second homes which will be used occasionally as short term vacation rentals. Currently only portfolio loans are available for these properties, as the government is not backing second home purchases, regardless of the excellent qualifications of ready buyers or the subject property.
He explained that banks shed jobs in 2009 in response to the lack of funds which froze the real estate market. Of course the freeze was due to the banks’ own decision to turn off the availability of funds. Though the taxpayers bailed out the banks, the banks are now so risk adverse they are not ready to start lending again. Yes, the bailout loans have been repaid to the federal government, and bank profits have soared to pre-crisis levels, according to Yun. But banks fear a double dip recession. So instead of providing funds to the very taxpayers that bailed them out, the banks’ fear of lending is now fueling the foreclosure market.
Taxpayers can neither buy nor sell when credit is unavailable. If a homeowner is unable to sell his vacation home because his fully qualified, ready, willing and able buyers are denied credit, he could end up in foreclosure. This is a nasty cycle that can only be cured by the return of sensible lending guidelines for vacation homes.
Tags: Real Estate, second home, vacation home