Comments on the proposed “Home Valuation Code of Conduct”

Shelter Rock Mortgage Corporation has been a New York State Registered Mortgage Broker for over 20 years. During this time we have seen the mortgage marketplace go through extreme cycles. Time has shown that governmental over-reaction to market conditions can make a bad situation, worse. A detailed analysis of the issue, followed with input from all industry participants, yields a superior response. We would like to recommend that the agreement, creating The Home Valuation Code of Conduct, be reconsidered based on its overall impact to the consumer.

We understand the desire to address the current mortgage crisis and to take whatever action necessary to prevent this situation from ever happening again. We have worked closely over the years with State government, as well as the New York State Banking Department, in drafting laws and regulations regarding the mortgage industry.

There is no question that we are currently in a mortgage crisis. Numerous mortgages were written based on overly optimistic projections of our economy, in addition to those that were written due to criminal actions. The Federal Bureau of Investigation divides these criminal actions into 2 classes, Fraud for Property and Fraud for Profit. Fraud for Property involves the direct actions of the borrower to obtain a mortgage for either a purchase or a refinance, by knowinly misrepresenting his income, debt or property value usually involving only that one loan. According to the FBI, this represents 20% of the total of fraudulent mortgages. Fraud for Profit is what the FBI identifies as the actions of industry professionals in criminal actions to close mortgages, which involve many many properties and mortgages.

An accurate appraisal report is the foundation of a well underwritten mortgage. Without a proper evaluation of the collateral an underwriter is ill equipped to do his job. The Home Valuation Code of Conduct attempts in improve the overall accuracy of appraisals. We feel that the agreement reached between Andrew Cuomo, the GSEs and OFHEO does not address the real issues and will result in increased costs to the borrower both in money as well as in time, without adding any tangible benefit to the consumer.

The current policy regarding the ordering of appraisals is that the originating entity orders the appraisal from a state licensed appraisal. Some entities have their own list of approved appraisal companies; others have a list of appraisers that they will not do business with, and others may actually have appraisers on staff. The Home Valuation Code of Conduct was written under the assumption that the entity ordering the appraisal has the ability to influence appraisers to generate appraised values reflecting what the entity needs and not fair market value.

Only a fool would say this situation can never happen but it’s not reasonable to claim the problem is wide-spread without assembling the necessary data. Appraisal services are not high profit businesses. The typical fee for the work necessary to produce a finished report on a 1-family residence is $350.00. How many professionals are willing to jeopardize their livelihood for an additional $350.00? We can’t forget that appraisals are reviewed for accuracy by a lender before accepting the value shown. In addition to the underwriter’s review, prior to commitment, it is also common practice for the investor who finally purchases the closed loan, to utilize one of the various databases available that are designed to confirm the reasonableness of the appraised value.

The appraiser’s name and license number is tied to the mortgage from the beginning of the process right through to when the mortgage is paid off. It at any time a question regarding the accuracy of the appraisal is raised, the appraiser will be questioned. If a lender’s underwriter is not doing a review of the appraisal when approving a mortgage and the investor isn’t doing the proper due diligence when purchasing a portfolio of mortgages, shouldn’t we be addressing these weaknesses in the mortgage process?

There is no data presented showing that the GSEs have purchased large numbers of mortgages with inaccurate appraisals. The only apparent reason this agreement was made with the GSEs is strictly based on the fact they purchase the majority of the mortgages written in this country, so this agreement then covers the majority of appraisal reports.

A contributing factor for a mortgage going into default is an inflated appraisal. The vast majority of mortgages that are currently in default, are subprime mortgages. The GSEs do not purchase subprime mortgages. From this we can conclude that although this agreement covers the majority of mortgages, it does not address the subset of mortgages that are most likely to go into default. If this agreement were in place during the housing bubble, it would have had no effect in reducing the number of mortgages going into default. Therefore, there is no reason to conclude it will help the industry going forward.

The money that will be spent in implementing The Home Valuation Code of Conduct would be better spent in enforcement actions against those committing Fraud for Profit. Taking the criminals out of the industry will have a more far-reaching impact and help rebuild confidence in the mortgage market.

The appraisal business is like any other business. In order to be profitable, an appraisal company needs to provide a higher level of service to its clients, than its competitors, in order to maintain its share of the market. Appraisers do this by giving their clients what they want. This doesn’t mean bringing in the value based on what the client wants. It does mean doing their job in a professional manner. Arranging for appointments that meet the homeowner’s busy schedule. Treating the homeowner with the respect they deserve. Developing a more extensive knowledge in certain geographical areas, making themselves a more valuable commodity. This puts them in greater demand to clients who need work done in those regions.

In order to comply with The Home Valuation Code of Conduct, a lender will develop a list of appraisal companies and randomly select off that list each time an appraisal in needed. This will give the larger appraisal companies an advantage over the smaller shops, forcing many of the smaller shops out of business. Why would this happen? Larger shops will naturally have a larger staff of appraisers. If they are also randomly assigning appraisers, just like the lender’s policy is when selecting the appraisal company, the lender separates himself further away from the appraiser. This would be a good business practice on the part of the lender; allowing for a greater diversification of appraisers from a shorter list of appraisal companies.

A mortgage broker that currently orders appraisals will deal with the companies that have a reasonable turnaround time in completing a report, schedule appointments at the homeowner’s convenience, arrives on time for the appointment and will answer any questions that an underwriter has regarding his work in a timely and complete manner. If an appraiser doesn’t fulfill any of these expectations, he will no longer get appraisal orders. Once the appraisal is complete the broker can use that appraisal in submitting application packages to as many lenders as needed, without additional cost to the applicant. A broker’s obligation to his applicant is to help the applicant arrange for the best financing that fits his needs. This can mean submitting a package to more than one lender.

If The Home Valuation Code of Conduct is implemented, the broker and the applicant will not be able to predict how long it will take for the appraisal to be completed. If the file needs to be submitted to more than one lender, the applicant will need to pay for multiple appraisals as well as wait for each new appraisal to be completed.

Currently, a broker has the appraisal report prior to submitting the application package to the lender. The actual appraised value permits the broker to accurately calculate the loan-to-value (LTV), adjust pricing to reflect that LTV, calculate the mortgage insurance properly as needed and update the applicant regarding any changes to his profile based on the appraisal report. None of this can be done if the appraisal is performed later in the process. Any preliminary work that was done before the package was submitted will now need to be redone with the updated data. We are not helping the applicant by slowing down the process, only making the entire process more expensive and tedious.

Longer processing time will require applicants to lock-in for a longer period. This costs the applicant money. Should an applicant need to go to a second lender, a second appraisal will need to be done. This costs the applicant money. This agreement will increase each lender’s cost in conducting business and this will be passed onto to applicant. This costs the applicant money.

The consumer is not getting any real benefit in return for what it’s costing him.

The Tightening Mortgage Market

It seems that every day we see reports that the credit market is tightening. I though it was time that we review where we are and how it affects the consumer.

Before we go into details I want to make a comment on current interest rates. The rate of interest one needs to pay to borrow money is directly related to the perceived risk the lender is taking when it decides to give you the loan. This applies to consumer borrowing as well as business borrowing. It also applies to the rate of return an investor wants when he purchases that closed loan from the lender.

The Federal Reserve has been lowering the rate it charges to banks to borrow money from them. With banks having a lower cost of funds this encourages lenders to offer loans to consumers and businesses at a lower rate of interest. It would seem that this would result in lower mortgage rates. Unfortunately, this isn’t happening. The perceived risk is, writing a mortgage by a lender, is greater than it has ever been. This translates into higher, not lower, mortgage rates. Until the financial market settles down, we are going to see interest rates higher than they should really be. Depending on the day, the benchmark 30-year conforming fixed mortgage interest rate with 0 points in ranging from 5.50% to 6.50%. Although still a low range by historic standards, the range would be lower if it wasn’t for the risk premium that the marketplace is factoring in on mortgages.

So don’t conclude that all the decreases in interest rates that we’re reading about in the paper have brought mortgage rates down. They haven't yet, although it may bring them down in the future or we may never see rates this low again. There is no way to accurately predict the direction.

There have been two areas of lending that have benefited from the Fed’s actions. The Prime rate moves in tandem with the Fed rate. Any existing credit line mortgages, which are typically indexed to the Prime rate, now have lower interest rates, yielding lower monthly payments. Credit card interest rates are also tied to the Prime rate so the interest due on everyone’s credit card balances has also dropped.

Now lets look at the current availability of mortgage products.

This financial crisis started in the subprime mortgage market. This is an area of lending that addresses the needs of applicants with issues that prevent them from borrowing money through the more traditional channels. The availability of subprime mortgages has almost completely disappeared. A consumer that has a less than perfect credit history will not be able to use a subprime mortgage as a tool to consolidate debt and improve their credit profile. A consumer in this situation is now limited to one course of action. That is to make timely minimum payments on all the outstanding debts and wait for this new payment pattern to improve his credit profile over time.

Homebuyers were, until recently, able to purchase their home with no money down. This is no longer available. There is still some 95% financing available, depending on the specific neighborhood, but for the most part a 10% down payment will be needed. If a neighborhood is showing signs of declining market values, 95% financing will not be offered. We are even seeing some programs holding to an 85% loan to value.

The only high loan-to-value program that is still available is the FHA program. 97% financing is still available here. The FHA loan limit was always low. It was a program designed to help first time homebuyers purchase their homes. This has limited the usefulness of this program in this region of the country. The good news is that the FHA limits have been temporarily raised. The bad news is that we don’t know as of yet what changes to the underwriting guidelines or what pricing changes will be imposed along with these new limits.

Any mortgage that exceeds the conforming loan limit ($417,000 for a one-family property) becomes a jumbo mortgage that carries a higher interest rate. Historically this rate increase has been in the 0.25% to 0.375% range. Currently this spread has increased to 2.0%. To ease the credit crunch, the conforming limit was temporarily raised at the same time the FHA limit was increased. But the same problem exists here as with FHA. The underwriting standards and any pricing issues are still being drafted and we are awaiting the details.

A common way to avoid paying mortgage insurance has been to us a piggyback or a combo mortgage. Instead of taking out one large mortgage, the borrower takes out a first mortgage at 80% and a second mortgage for the remainder. This eliminates the mortgage insurance premium that one large mortgage would require. This product is disappearing quickly and I suspect that we will no longer have it available from any source shortly. A borrower will now need to pay for mortgage insurance on all mortgages over an 80% loan to value.

Home Equity Lines of Credit (HELOC) or Credit line mortgages are now carrying a much higher interest rate. In the past, a rate of Prime was typical. Now we’re seeing pricing ranging from Prime to Prime plus 3.5% depending on the credit score and loan-to-value. Credit Scores are also influencing the maximum loan-to-value available to the borrower as well as impacting the rate.

Fewer and fewer borrowers are able to obtain "limited" or"no-documentation" mortgages. Nearly all mortgage products today require documentation confirming all aspects of the mortgage application package. This is making it difficult for self-employed borrowers to arrange financing. This type of mortgage was also utilized for borrowers with very complicated income profiles. Individuals in this category will now have to spend time and money to assemble an income package that can be understood by the underwriter.

Credit scores are playing a larger role in the pricing of mortgages. It used to be that a scores of 620 or better received the same pricing. It was only when the score was below 620 that pricing varied, based on how low the score was. Now we’re seeing pricing differences through the entire range of scores. Today a borrower with a 740 score will be priced better than a borrower with a 700 score. The borrower with a 660 score would be paying an even higher interest rate and the borrower with 620, higher still.

Applicants today are faced with a requirement to invest more money into the home they are looking to purchase. They are going to need to prove that they have the financial capability (through income documentation) and the desire to meet their contractual obligations with their creditors (through their credit profiles). There are no shortcuts right now.

There used to be a saying years ago that went, “banks only lend money to people who don’t need it”. After decades of developing new programs and standards to make homeownership more available, we have gone full circle. Banks are again lending money only to those who don’t need it!

Legislation Needs to be Carefully Crafted

One of the last acts of Governor Elliot Spitzer, prior to his resignation, was to proposed legislation to address the subprime mortgage crisis in New York. The New York Association of Mortgage Brokers asked Don Romano to draft their response to the proposal. This is the text of the response.

The New York Association of Mortgage Brokers comments to Program Bill #44

The New York Association of Mortgage Brokers (NYAMB) is the only trade association in New York State that represents the mortgage broker community. It was founded in 1986 and is the State Affiliate of the National Association of Mortgage Brokers (NAMB).

We understand the desire to address the current mortgage crisis and to take whatever action necessary to prevent this situation from ever happening again. We have worked closely over the years with State government as well as the New York State Banking Department, drafting laws and regulations regarding the mortgage industry.

We appreciate the opportunity to comment on this proposed legislation. We are focusing our comments only on the sections that directly impact our business. This does not mean we are supportive of the other sections, it simply means that we are not in the position to comment on areas of the mortgage business that we are not directly involved in.

In Subdivision 1 of section 6-1 of the banking law, paragraph (f) we are creating a new category of mortgage, the “Non-conventional home loan”. The intent is to separate sub-prime mortgages from prime mortgages through the use of a rate and/or fee trigger, modeling it after the existing high-cost mortgage trigger approach. The trigger model, as used to define high-cost mortgages, works reasonably well. It’s not a perfect solution but works adequately for high cost loans. The cost for a high-cost mortgage consists of 2 components, the market price for mortgage money and the addition cost the lender is imposing to address the weaker attributes of the file (risk based pricing). The interest rate trigger which would make a first lien a high-cost loan is 8 percent over the treasury yield. There is no doubt that the additional cost, based on risk based pricing, represents the larger percentage of this spread.

By using the same approach to define a “Non-conventional home loan” we run into an unforeseen consequence. By taking the yield on Treasury Bills and adding 3 percent to create the trigger, market pricing for mortgage money carries enough weight to bring many prime loans into the “Non-conventional home loan” category.

For example, let’s look at the yield on 30 year T-Bills as published on March 10, 2008. That rate was 4.53%. If we add 3 percent to that we end up with a trigger point of 7.53%. The rate for an FHA mortgage on March 10, 2008 is 7.0%, putting us within 0.53% of being a “Non-conventional home loan”. A FNMA conforming rate is at 6.50% but if a “my community” product is used the rate is increased to 6.75%. On March 10, 2008 none of these loans would trigger, but after seeing what has happened in the bond market since August 2007, would anyone be truly surprised if mortgage rates moved up more? If this law was already passed and mortgage rates continued to trend upward, we could be facing FHA and FNMA conforming loans that would be categorized as a “Non-conventional home loan”.

If this law was already in place, all mortgages between $417,000 and $750,000 closed since August 2007, would be “Non-conventional home loans”, since the jumbo fixed rate mortgage has been over 7.53% every day. Do we see the need to protect high net-worth individuals from themselves? This is an immediate unintended consequence of the bill. Any lender that elects to write non-conventional home loans to high net-worth individuals, would be exposed to "predatory borrowers". Borrowers who have the knowledge and the deep pockets to utilize those same consumer protections meant for the non-conventional borrower, would be able to relieve themselves of their financial obligations to their lender, whenever they felt that they would benefit financially.

This would be reason enough to make the prudent business decision and not be involved in originating non-conventional home loans.

We predict that with the passage of the Bill with this language, lenders will immediately stop writing mortgages between $417,000 and $750,000 until the secondary market sets the yield on jumbo mortgages to some percentage less than 7.53%. If the market for mortgage-backed securities continues to worsen, we could see lenders halting all mortgage originations in New York State. This cannot be what the author of this Bill intended.

We need to develop a “Non-conventional home loan” test that truly captures the mortgage that was the real intent of this Bill.

The NYAMB would like to propose two suggestions that can be used as a starting point to address this issue. Current events in the financial marketplace have shown that the spread between conforming loan size pricing and jumbo loans can vary greatly. No longer can we assume that jumbo pricing will consistently be 0.25% to 0.50% higher than a conforming mortgage. With this in mind, our first suggestion is to use a different rate-based trigger point for conforming and jumbo mortgages.

We feel it would be reasonable to use a 1 percent higher trigger point for jumbo mortgages. This will allow the secondary market pricing to respond to investor demand without capturing the mortgages that should not be captured, into the “Non-conventional” category . A closer investigation into the abuses in the sub-prime market over the last several years will show that the vast majority of these loans fall under the conforming loan limit.

Our second suggestion is to raise the rate trigger from 3 to 4 percent for conforming loan sizes. As we have illustrated in the above example, the 3 percent margin over T-Bills doesn’t allow for the secondary market to demand the higher yield on mortgage backed securities over T-Bills that is currently being used, without capturing prime loans in the “Non-conventional” category. In capturing prime loans, we draw attention away from the issue that “Non-conventional” home loans require special protection and at the same time we run the risk that lenders will become reluctant to conduct business in New York State. Reduced availability of mortgage money into our economy will cause additional damage to our housing market.

T-Bill rates are published in every major newspaper daily, making it readily accessible to the consumer. Unfortunately, as recent events have shown us, the spread between T-Bill interest rates and prime mortgages is erratic. An alternative to increasing the margin for the rate trigger that we considered, was to use the FNMA mandatory 60-day delivery rate, instead of the T-Bill. This way we would be using a base rate that is representative of prime mortgages. Our conclusion was that the superior distribution of the T-Bill was too valuable an asset to the consumer. This is why we have recommended the higher margin, as opposed to a different index rate.

The Bill proposes adding a new paragraph, (l). This paragraph confuses the definition of “Yield Spread Premium” and “Upselling”. The proposed definition of “Yield Spread Premium” reads’ “compensation that a mortgage broker receives from a lender for originating a home loan that is more costly than that for which the consumer qualifies, or that is based on, or varies with, the terms of the home loan.” Wholesale lenders, that are lenders dealing with mortgage brokers, recognize the cost benefits to themselves when originating mortgages in this manner. They routinely price their mortgages lower to a mortgage broker than they do to the public, that’s the reason the term “wholesale” is used in the definition. For example, a lender prices a mortgage directly to the consumer at 6.0% with 0 points and to the broker at 6.0% with a 1 point yield spread premium. The broker offers the product to the consumer at 6.0% with 0 points. The broker is being compensated 1 point for placing the mortgage but the consumer is paying the same regardless of which channel is chosen.

The term that is being defined here is “Upselling”. Going back to our example, the broker offers the mortgage to the consumer at 6.25% with 0 points. Here the broker has increased the interest rate in return for higher profits. This practice is what we want to address, not the concept of “Yield Spread Premium”. We also need to recognize that brokers, in designing the right mortgage for their clients, will at times take this additional point as a credit to the borrower to offset closing costs.

Our suggestion is to change the term “Yield Spread Premium” to “Upselling” in the proposed bill. Instead of banning “Yield Spread Premium” on “High cost” and “Non-conventional home loans” we suggest that any “Yield Spread Premium” generated due to “Upselling”, be credited back to the borrower. This still gives the broker the ability to use “Yield Spread Premium” to offset the borrower’s closing costs yet takes all potential economic gain to the broker out of the equation.

Section 590-b is an attempt to write a set of underwriting standards into State Law. We feel this is bad public policy. Underwriting standards are modified in the industry to reflect market conditions and needs. Once something is written into Law, it becomes inflexible. We suggest that restrictions regarding income documentation be done through regulation, not Law. This will afford the consumer protections that are needed today but allow for changes to meet markets needs in the future without needing to draft new legislation. We are all well aware of the time involved in reaching consensus on pending legislation and how rapidly the mortgage market can change. It is not in the best interests of New York residents to create a set of standards that cannot evolve with market conditions.

In paragraph (b) of the same section we are defining the standard of practice for which mortgage brokers are to be held to. The NYAMB has been promoting ethical standards for our members to follow since our inception. We are happy to see that the author of this Legislation is putting into Law what we’ve been promoting to the brokerage industry for decades.

We hope that you understand the basis of our concerns and we look forward to working with you.

Mortgage Broker Regulation

The mortgage brokerage community is taking the brunt of the blame for the mortgage crisis. Currently, there is no way to track a closed loan back to the actual originator. This makes it difficult, if not impossible, to identify the individual who originated the mortgage application in the first place. Without the ability to identify each position in the origination, processing and closing process there is no real way to identify the trouble spots. This prevents regulators from focusing in on specific issues that need to be addressed.

In attempting to respond quickly and effectively, the regulators and well as the legislators are revising the laws and regulations that govern the way we conduct business. The revisions are broad in scope. Some of the proposed changes are long over-due and others will result in un-intended consequences that may actually cause more harm than good.

I want to review what has already been enacted as well as what’s being proposed as it relates to the mortgage brokerage business. Mortgage Brokers originate over 50% of the mortgages in the country. Because of their small size (the average business has 7 employees) they are located throughout the various communities. These small community-based businesses are able to offer a wide array of mortgage products to the consumer, as well as keep the consumer informed throughout the mortgage process, in a more personal and efficient manner.

Mortgage Brokers have operated over the years with minimal supervision and nominal educational and experience requirements. If anything good should come out of the mortgage crisis, it is that the supervisory agencies have exposed this weakness in the system. We just need to be careful that, in their haste to address problems in the industry, they don't hinder a broker’s ability to supply the quality of service the consumer deserves.

In 2006 New York State finally acknowledged the weakness in their mortgage relations and passed a law requiring all mortgage originators to submit to a background check, complete mandatory ongoing education and register with the State. The New York Association of Mortgage Brokers had been pressuring the State for nearly 20 years to implement these requirements. Any reputable broker welcomed this long time in coming revision.

Ten years ago, the National Association of Mortgage Brokers, in conjunction with the Mortgage Bankers Association, attempted to implement these requirements on a National level. Although we were successful in gaining a consensus of the majority of the industry participants, we couldn’t move forward with implementation because of the resistance received from Citibank. With Citibank opposed to the idea, full implementation would be impossible.

One of the responses from Washington to the mortgage crisis is a Bill mirroring New York State’s Law, taking the new standards for originators, National. This is a concept that should have been in place years ago. We may finally see accountability on a National scale.

Several years ago laws were passed, on the Federal level as well as on each State’s level, addressing high-cost mortgages. These are mortgages that carry very high rates and/or fees and are given to borrowers that are not qualified for conventional financing because of particular circumstances in their profiles. There could be credit issues, income issues, the condition of the property or a time constraint. Lenders wishing to do high-cost mortgages would be required to issue additional disclosures, including a recommendation that the applicatant go to counseling, before taking on the mortgage. It also gives a greater range of consumer protection once the mortgage closes. The end result was that, only a handful of banks do high-cost mortgages.

We’re not seeing consumers that need to utilize a high-cost mortgage complain that their financing needs aren’t being met. This verifies that there still remain enough lenders willing to originate this type of product to meet the needs of the consumer. This legislation has done what it was designed to do, increase consumer protections without shutting off the availability of mortgages to the public.

Currently, there is legislation pending, both in Washington and Albany, that will create another classification of mortgages. The Washington version calls it “higher cost mortgages” and Albany is using the term “non-conventional home loans”. Both versions are creating a category of mortgages that are perceived to be more expensive than a prime or conventional mortgage but less than that of a “high cost mortgage”.

The theory here is that additional disclosures and consumer protections would be beneficial for consumers to have when they are outside prime lending. Upon closer examination you find that not only will it cover consumers that need additional protection, it also covers a large percentage of prime jumbo mortgages. Should mortgage rates increase from where they are today, all conforming mortgages will also be reclassified as “higher cost” or “non-conventional”. This is an example of legislation that results in creating more problems than it is intended to solve. Before passage, it needs to be revised in such a way that it does what it was intended to accomplish.

The New York State Attorney General, Andrew Cuomo opened an investigation into inflated value appraisals performed by eAppraiseIT, under the direction of Washington Mutual several months ago. The result of this investigation was an agreement that lenders, as well as brokers, would no longer be able to select the appraisal company when ordering an appraisal on a conforming mortgage. The idea is to keep the appraisal as independent from underwriting as possible.

The effective date of this new policy is January 1, 2009 and the details haven’t been worked out yet. The repercussion of this new policy will be longer turnaround times for appraisal reports and many small appraisal companies will be forced out of business. It’s ironic that eAppraiseIT will end up with a larger market share when they were the reason for the investigation in the first place.

The mortgage industry is going through major changes. More and more regulations will be written in an attempt to prevent another lending crisis in the future. Tighter regulation and more thorough oversight is definitely called for. It’s important to be careful not to over-regulate an industry that, for most if its existence, has functioned well. More people own their own homes in this country than in any other country in the world. Without a vibrant mortgage industry that wouldn’t have been possible. Mistakes have been made over the last few years. Lending standards became too liberal and greed motivated too many people. We are now suffering the consequences.

Through all of this we can’t lose sight of the risk in over-compensating for these mistakes. It is very easy to force too many businesses to close and to write underwriting standards that are too restrictive. This will result in allowing this crisis to last longer that it should. Liberal underwriting policies allow people who can’t afford to be homeowners buy houses and end up in foreclosure. Conservative standards discourage qualified individuals from buying a home. The net result in both cases is the same. Houses don’t get sold; inventory increases and prices are driven down.