[Name of the Writer]

[Name of the Supervisor]

[Subject]

[Date]

The Fair housing Act

Introduction

Market plays a vital role in fair housing act. In a market, where lenders remain cautious and risk adverse, to say it has not been easy for many first time buyers to secure a mortgage would be a severe understatement. Banks and Building Societies are unwilling to lend larger sums to first-time buyers without enormous deposits. However, since the housing market downturn, it is property investors that have felt a tighter squeeze on the availability of mortgage products. In April, the number of mortgage products available to property investors rose to 483, up by 25% compared to the start of the year (Lamb, pp. 47-49). Despite of the encouraging signs that the buy-to-let mortgage market is growing once again, people are a long way from 2007, when there were over 6,000 buy-to-let mortgage products available. Those lenders who had their fingers burned after irresponsible lending to speculators still view buy-to-let lending as inherently risky and are yet to increase their commitment to the market.

This conventional view is no longer borne out by the facts. For instance, during 2010, just 0.48% of buy-to-let properties were taken into possession by banks and building societies. Buy-to-let mortgages prove to be less of a financial gamble than loans to owner occupiers. By the end of Q1 2011, just 21,300 buy-to-let loans were three months in arrears according to Council of Mortgage Lenders. This represents just 1.61% of the 1,304,900 buy-to-let mortgages outstanding. By way of comparison, 2.09% of all homeowner loans were three months in arrears or more, in the same period. These statistics indicate that US housing corporation's needs to address the matters related to rental arrears that are increasing at a rapid pace. Therefore, all issues related to US housing practice in terms of prevention and management of arrears will be discussed in detail.

Financial Pressures

Unlike lending to owner occupiers, lending to buy-to-let investors is not inherently risky. The lender benefits from three potential sources of repayment, the rental stream from the tenant, the covenant of the investor, and the value of the property itself. That is not even taking into account the large percentage of landlords who have rental insurance, preventing tenant arrears from driving them into mortgage arrears. With rents performing so strongly, in comparison to current interest rates reducing average monthly mortgage payments, many investors are also able to build up reserve funds to act as a buffer for unforeseen maintenance, late rent payments and mortgage payments.

Tenants have been under increasing financial pressure in recent months. The average US rent rose by 0.8% in April, but rents are still high at $692 per month. These are likely to rise further as 2011 progresses as demand from frustrated first-time buyer's takes its toll. However, wider economic pressures too are taking their toll on tenant's budgets (Friedman, pp. 323-325). CPI inflation was at 4.5% last month over twice the average annual wage inflation. As the cost of living increases faster than pay ...