Federal Reserve Chairman Ben Bernanke spoke before the Joint Economic Committee of Congress last week about what he sees as our true economic outlook. In this statement he avoided sugar-coating worrisome trends and instead made clear that “the recovery is close to faltering.”
According to Bernanke, it has been three years since the beginning of the financial crisis, and while there have been improvements, such as manufacturing production rising 15 percent, a reduced U.S. trade deficit, and improved functionality in financial markets and banking, it is clear that the recovery is “less robust” than experts had hoped.

Bernanke noted, “The housing sector has been a significant driver of recovery from most recessions in the United States since World War II. This time, however, a number of factors–including the overhang of distressed and foreclosed properties, tight credit conditions for builders and potential homebuyers, and the large number of “underwater” mortgages (on which homeowners owe more than their homes are worth)–have left the rate of new home construction at only about one-third of its average level in recent decades.”

In a slice of good news, however, private residential construction spending has risen 3.9 percent year over year, making for the fourth month of consecutive gains (0.7 percent gain in August) and the largest percentage gain since June of 2010.

The National Association of Home Builder’s Eye on Housing reports, however, that “demand for new homes remains hampered by significant competition from distressed sales, tight lending standards and a weak labor market.”

Pending home sales, according to the National Association of REALTORS®, slipped in August, down in all regions. Lawrence Yun, NAR chief economist, said the decline reflects an uneven market. “The biggest monthly decline was in the Northeast, which was significantly disrupted by Hurricane Irene in the closing weekend of August,” he said. “But broadly speaking, contract signing activity has been holding in a narrow range for many months.”

Yun said the market is underperforming given a pent-up demand in household formation. “We continue to experience a pattern in which financially qualified home buyers, willing to stay well within their means, are being denied credit – a factor in elevated levels of contract failures,” he said. “Based on the improving fundamentals of population growth, some job additions, rent increases and higher stock market wealth, we should be seeing existing-home sales closer to 5.5 million, but are expecting just over 4.9 million this year. The unnecessarily restrictive mortgage underwriting standards are attenuating the housing recovery and are a risk factor for the overall economy.”

The good news for jobs? We are entering the holiday season and many of the nation’s top retailers are reporting they are gearing up for seasonal hiring. The New York Times reports, “Even with a turbulent economy, leading retailers say they expect to hire more, or at least as many, holiday workers as last year, when temporary hiring for Christmas grew nearly 50 percent over recession lows.”

Kohl’s is set to add 40,000 new hires. J.C.Penney plans on adding 35,000 and Target plans on hiring 92,000 holiday workers.

This is welcome news as Bernanke reported that the most significant factor depressing consumer confidence, even more so that reduced household wealth, home price declines, and high debt burdens, has been the poor performance of the job market.

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Randall

Landlords and their agents need to be aware of how they may be affected by new requirements imposed upon them by the Fair Credit Reporting Act (FCRA). This is because the FCRA has been amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). Dodd-Frank was signed into law by President Obama in July of 2010. Although less attention was paid to it than was paid to the administration’s comprehensive health-care act, they had this in common: we needed to pass them to find out what was in them.

What we have found out, in this instance, is that landlords who take “adverse action” regarding a tenant application will have to provide specified information if that adverse action is based upon the applicant’s credit score.

What might adverse action be? At least one of the following:

•denying the lease/rental application

•requiring a co-signer

•requiring a higher security deposit

•requiring an increased rent amount

If such an action is taken, based on the applicant’s credit score, then the following information must be provided to the applicant:

1.the credit score

2.the entity that created the credit report

3.the date of the credit report

4.the range of possible scores within the model used

5.the key factors, not exceeding four, that affected the credit score

If one of the factors is the number of credit inquiries made, then that can be listed as an additional factor.

Number 5 might pose a problem for some landlords. It is not clear that they are always going to know what the key factors were that affected the credit score. It may require that the landlord will have an ability to interpret the report, not just read the score. Sure, most landlords are going to be able to spot negatives, but they may not know what weight has been assigned to those negatives. Some landlords just want to know the score. That’s enough for them.

This kind of disclosure will not be entirely new to California landlords and their agents. Since 2005 they have been required to make disclosure to tenant applicants if their adverse action was based on a credit report. However, the California requirements had more to do with informing the applicant about the availability of credit reports and the right to dispute them than it had to do with the content of the reports. The new federal requirements are much more report-specific.

These new requirements have been in effect since July 21, 2011. Presumably, enforcement will come under the jurisdiction of the new Consumer Financial Protection Agency, about which we also have more to learn.

Need a mortgage? Apply today at: http://www.pickrandall.com/apply.php

Have a great day!
Randall