Boomerang Home Buyers are Coming Back

Millions of Americans who lost their homes during the foreclosure crisis are now poised to become homeowners again.

That's according to a new report from RealtyTrac, which estimates that 7.3 million so-called "boomerang buyers" will return to the U.S. housing market over the next eight years.

Half a million home buyers: Homeowners can recover from foreclosure in as little as three years, but seven years is the "conservative" amount of time it takes to rebuild a credit score, according to RealtyTrac. That means many homeowners who lost their homes in 2007 should be able qualify for a new home loan this year.

More than 500,000 people will fit this description in 2015, according to RealtyTrac. The number jumps to 1 million next year, peaks at 1.3 million in 2018, then tapers off by 2022.

A home in Vegas: RealtyTrac identified several markets with the most potential for boomerang buyers.

They include cities that were hit hard by the foreclosure crisis, but now have home prices that are affordable for the median homebuyer.

Las Vegas is arguably the epicenter for boomerang buyers. Several hard hit cities in California, such as Merced, Stockton and Modesto, are also prime candidates.

Retirement cities: Boomerang buyers are likely to be from either Generation X or the Baby Boom generation, according to RealtyTrac.

So cities that attract people nearing retirement age, like those in Florida, or metro hubs with jobs such as Chicago and Atlanta are on their list. 

NEW YORK (TheStreet) -- Big banks are continuing to back away from offering mortgages, allowing nonbank lenders such as Freedom Mortgage and Quicken Loans to grab a bigger share of the market.

Although the big banks such as Bank of America , JPMorgan Chase and Wells Fargo are still happy to provide mortgages to wealthy borrowers with strong credit records, they are much more cautious about higher-risk loans, even ones that meet underwriting requirements of government agencies such as the Federal Housing Administration, Fannie Mae , Freddie Mac or Ginnie Mae.

That has created an opportunity for nonbank lenders such as Freedom Mortgage, a privately held lender based in Mount Laurel, N.J.

Although fewer mortgages were originated last year than in 2013, Freedom Mortgage actually increased its business, selling $22 billion worth of mortgages, according to Chief Executive Stanley C. Middleman.  

He expects to originate more than $30 billion this year.

Freedom Mortgage was the 10th-most-active mortgage lender in the United States during the first quarter last year, according to Inside Mortgage Finance, a trade publication. "If you don't have a lot of legacy issues to drag around with you it's a lot easier to be nimble, and I think that's been a big part of our advantage," Middleman said.

Many of the loans that Freedom Mortgage sells are insured by the FHA.

Indeed, when the government mortgage insurer this month reduced the annual premium that it charges by 0.5 percentage points, Freedom Mortgage said that it would hire up to an additional 500 employees to meet the expected rise in demand.

By contrast, during a Jan. 14 earnings call, JPMorgan Chase Chief Executive Jamie Dimon cited two reasons that the bank continues to avoid making FHA loans.

The Federal Reserve said it will remain "patient" and not rush to boost interest rates. But the writing is on the wall. Rate hikes are coming sooner rather than later.

The central bank sounds very upbeat about the U.S. economy. It cited evidence that the economy is getting stronger, especially the job market.

Perhaps even more telling is that the Fed dropped the term "considerable time" it has been using to describe when it will start to hike rates. It even hinted that if the economy improves faster than expect, the market should be prepared for a rate hike "sooner than currently anticipated."

The Fed has not changed interest rates since cutting them to near zero in December 2008. So investors are obsessed with trying to pinpoint when the Fed will finally raise rates.

The general consensus from economists and investment strategists is that the Fed will do that this summer. Michael Gapen, an economist with Barclays, said that the Fed is still in a "wait-and-see mode" and that the first rate hike will likely take place in June.

Market reaction: Stocks were up slightly ahead of the Fed announcement but lost those gains after the statement was released. The Dow, S&P 500 and Nasdaq fell steeply into negative territory with the Dow slipping nearly 200 points.

Mike Arone, a chief investment strategist with State Street Global Advisors, said investors may have been hoping the Fed would be less optimistic about the economic outlook. That might have bolstered the case for pushing rate hikes to the end of this year or even 2016.

The yield on the 10-Year Treasury bond dipped as well to 1.72%, a sign that many investors around the globe are still attracted to the safety of American debt. (Yields fall when investors are buying bonds.)

Still, stocks and bonds have been extremely volatile for the past few weeks as investors grapple with the question of what the big drop in energy prices mean for the market and global economy.

The big debate on rates: Lower gas prices should be good news for consumers. That's been the party line from Fed chair Janet Yellen and several other policy makers.

In addition, last year was the best one for job seekers since 1999. That's key because maximum employment is one of the Fed's goals.

So if the unemployment rate continues to fall and consumers keep spending, the Fed should have no problem sticking to its plan to raise interest rates at some point later this year.

But the decline in oil prices may be evidence of weakening demand across the globe. Inflation is very low in the U.S. as well. There are even some worries about deflation, particularly in Europe.

Those might be reasons for the Fed to hold off on any rate hikes. Price stability is the Fed's other mandate.

"If the Fed does start to lift rates in the current environment, it would be viewed as a negative to financial markets," said Patrick Maldari, senior fixed income specialist at Aberdeen Asset Management. He added that deflation might still be a "greater risk" than inflation.

But the Fed continued to stress that it thinks the decline in energy prices is temporary. It reiterated that its longer-term inflation expectations have "remained stable."

Still, the Fed acknowledged the turmoil in the global markets. It said "international developments" were one of the many factors it was monitoring. The Fed did not say that in December.

Making matters more complicated? The Fed is trying to figure out the ideal time for a rate hike just as the European Central Bank is starting to buy a massive amount of bonds.

This so-called quantitative easing policy is the ECB's attempt to lift Europe's economy out of a big hole.

That should sound familiar to Americans. The Fed used several rounds of QE after the 2008 financial crisis and finally ended the program last year.

The combination of easing by the ECB and expectations of higher rates from the Fed have helped push the euro to a more than a decade low against the U.S. dollar.

That's awesome news if you plan a trip to Italy, France or Spain soon. But the stronger dollar is another headache for the Fed since it's wreaking havoc on the market.

Stocks plunged on Tuesday after Caterpillar (CAT), Microsoft (MSFT, Tech30) and Procter & Gamble (PG) said the strong dollar could hurt their profits this year.

Fellow blue chips IBM (IBM, Tech30) and Johnson & Johnson (JNJ) have issued similar warnings.

Do you spend more than you make? Be honest. If so, you are not alone. But there is a way to reverse the trend: put yourself on a budget.

And I know we all hate the "B" word.

Nobody enjoys budgeting. Having to control your spending and say "no" to those impulse purchases isn't easy. But knowing you have complete control of your money is empowering enough to overcome that.

So whether you are old school and use a yellow pad, you're an Excel fan or you go with one of the many budgeting apps out there, you need to create a budget.

Let's do it. First, make a list of your expenses - and I mean all of them.

Sure mortgage, rent, utilities, car payment and cell phone bill will be at the top.

But don't forget your commuting costs, kids' dance classes, sport fees, piano lessons, birthday gifts, etc.

And then include your indulgences -- like Starbucks, the gym membership, magazines (yes I still read them offline), monthly fees for digital subscriptions and apps.

Include your credit bills, because we need to pay those off (that includes me). Because only then can you compartmentalize your paycheck, says Anthony LoCascio, certified financial planner and enrolled agent.

Allocate money to the necessities - and be honest - because Starbucks is not one.

In addition, you need to set aside money for that emergency fund, if you haven't already. You need enough to cover three to six months worth of living expenses, and while it's not ideal, it doesn't have to be all cash -- as long as you have access to investments that are not in retirement plans, says LoCascio.

Once you do all that, what's left?

Gulp. I know. Not a whole heck of a lot.

But don't be discouraged. Facing the problem head-on is half the battle. You can do this. Just for a while, eliminate some extraneous expenses, just until things get under control. And in no time, you will be living within your means.

Next week, we'll talk about all the cool apps out there that can really help us keep our spending under control.

But for now, go relax and have a cup of coffee - just make it at home.