Here’s why real estate investing is still a good thing. The headline account relates to a steady increase in home values for almost three years straight. Rents are also on the rise as well and combining property appreciation with rising rents and real estate investors everywhere are smiling. But there’s aLower Default Rates difference in today’s environment compared with the price rises that led to the financial fallout of the last decade and why loan defaults will continue to fall and rental rates on the rise.

In today’s lending environment, mortgage loans issued today are of some of the highest quality ever. In fact, they may very well be the best over just these past two years. In somewhat of a boomerang in terms of underwriting, lenders abruptly changed their attitudes toward mortgage loans. Instead of approving and quickly selling loans by the millions, they’re carefully evaluating every loan made. Lenders in business today are very aware of buybacks—loans a lender is forced to repurchase due to shoddy underwriting practices or downright mistakes. Both the GSEs and individual lenders hire legal teams to scour purchased loans for errors and when found, force the originating lender to buy the loan back. Too many of those and the offending lender is quickly out of business.

Mortgage applications today are fully documented. No more of the “stated” this or “stated” that with regard to income and assets. Loans made to those with poor credit are relegated to the hard money industry with higher rates and shorter terms. The CFPB has laid down some harsh guidelines that eliminate interest-only loans, long term amortization more than 30 years and balloon payment loans. There are lenders who may still issue such loans but doing so give up certain legal protections, which few are prone to do.

The quality of loans and the rise in rental income is no accident, it’s due to a substantial shift in lending. Those who qualify for a mortgage today are a very low risk, keeping foreclosures and the negative effects of such safely at bay. It’s looking good for real estate for a long time.