Elyse Cherry
DS News recently reported [1] that 2.5 million consumers are set to potentially re-enter the market with a clean credit file and fresh perspective between June 2016 and June 2017, after having relinquished their homes to foreclosure or other non-foreclosure actions during the housing crisis.
In examining the consumers who foreclosed or short-sold between 2007 and 2010 and have since opened a new mortgage, it was found that these "boomerang borrowers" are showing responsible credit behaviors, having improved improved credit scores and staying current on their debts. DS News sats down with Elyse Cherry, CEO of Boston Community Capital [2], to discuss these boomerang buyers and the impact they have on the housing market.
Cherry helped found Boston Community Capital in 1984 as a member of its original Board of Directors and has been integrally involved in its development and growth of the company. Cherry has authored opinion pieces for The New York Times, The Los Angeles Times, and The Huffington Post, among others. Cherry has served on the boards of directors of more than a dozen privately held companies including Pilgrim Insurance Company, Zipcar, and Acelero Learning and is a frequent panelist and speaker at national conferences.
What trends are currently being seen with regard to boomerang buyers?
It has taken a very long time for particularly lower-income buyer to being to recover from the effects of the Great Recession on the housing market. What we are seeing now is a number of years have gone by and as people have been able to improve their credit and credit scores and as original failures in respect to mortgage default and foreclosures move off of the credit score, people are coming back into a position in which they are able to borrow in the traditional mortgage lending market and actually become homeowners again.
To what capacity do you expect these buyers to return to the market?
People haven't been thinking about the capacity that they would return because what really happened in the respect to the housing market during the Great Recession was unprecedented certainly in the last 40 years. Because of this, everyone has been wondering what would happen in respect to boomerang buyers. We are also at a different position with respect to the interest of people in general in purchasing homes so I'm not sure anyone knows exactly how boomerang buyers will react, but I think anytime someone can clean up their credit and become a good borrower again in the housing market is a great thing not just for that borrower but also for the economy.
What impact will these buyers have on the overall housing market?
I think the impact will be positive. These buyers provide additional potential purchases in the housing market that will strengthen the market. There is not much reason at this stage to suggest that they will be different borrowers than borrowers that currently exist in the market. If you look at existing comparisons of default rates, they are roughly identical. I think a lot of what happened to these borrowers was that they got caught in a very difficult national and international downturn as opposed to suffering some personal privation. I think there is ever reason to expect as they come back into the market that they will pay their mortgages just like everybody else and be good, strong, solid borrowers who participate in the national economy.
What should lenders and servicers anticipate with these borrowers?
What I hope will happen is borrowers will be keenly aware of the need to pay mortgage and the need to be really careful about assessing their ability to take on mortgage debt. I hope that lenders will be equally aware, not just with a population of boomerang buyers but borrowers in general. The mortgage market in general works best when lenders and borrowers have similar ideas about how much debt can actually be comfortably carried by any individual borrower and I think it is incumbent on both sides of the equation to be realistic about that as opposed to making decisions based on potential future appreciation.