September 7, 2016

In Case You Missed It: A Look at Recent National Housing Policy News

MBA president: The next President needs a housing policy director

While the past eight years have been dominated by the housing crisis, it’s time to turn a new page and create policy that will reflect the evolved housing market, according to a blog for The Hill by David Stevens, Mortgage Bankers Association president and CEO. During the past eight years, policy makers have focused on policies that help families in distress, however now we are well beyond the crisis, the blog states. Part of turning this new page should be creating a position for a point person responsible for coordinating and executing on the new policy. In short, the administration needs a change in approach towards housing, and that will fall to the next president to lead, according to the blog.

How Would a Fed Rate Hike Affect the Mortgage Industry?

The August jobs report from the Bureau of Labor Statistics fell short of expectations, leaving many to pull back on their predictions that the Federal Reserve will raise short-term interest rates in September. Many analysts and industry participants are saying December is more likely for a Fed rate hike if the economy shows sufficient improvement. December would make it exactly one year since the Fed’s historic liftoff from near zero interest rates, where the rates had been for the past nine years. Meanwhile, mortgage rates have hovered above their historic lows for the past few months and have been below four percent for the whole year (Freddie Mac reported the average 30-year FRM at 3.46 percent for the week ending September 1, only 15 basis points above the all-time low). What effect will a Fed rate hike have on the mortgage market? Refinances are popular and are likely going to stay that way from the time up until the Fed raises rates and even for a time afterward. The refi market is going to remain hot up until the time they raise rates. At the time they do increase rates, it's going to remain relatively hot from a refinance perspective based on how low rates are currently. Estimates vary as to how many borrowers are eligible to refinance, generally from seven to eight million. A rate hike by the Fed might prompt some of those borrowers eligible to refinance to take advantage of it.

GSEs to Offer New Refinancing for High LTV Borrowers

The Federal Housing Finance Agency said Fannie Mae and Freddie Mac will implement a new refinance offering aimed at borrowers with high loan-to-value ratios. FHFA also announced that the Home Affordable Refinance Program, which was set to expire this Dec. 31, will be extended through September 2017. The new refinance offering is more targeted than HARP, but as with HARP, eligible borrowers are not subject to a minimum credit score, there is no maximum debt-to-income ratio or maximum LTV and an appraisal in many cases would not be required. Unlike HARP, there are no eligibility cut-off dates connected with the new offering and borrowers will be able to use it more than once to refinance their mortgage. Borrowers with existing HARP loans are not eligible for the new offering unless they have refinanced out of HARP using one of the GSEs' traditional refinance products.

Mortgage Debt Continues to Grow

Reports indicate that the outstanding amount of housing-related debt (of both home mortgages and equity lines of credit) totaled $8.8 trillion in the second quarter of 2016, according to the Household Debt and Credit Report released by the Federal Reserve Bank of New York. That number is 2.6%, or $225 billion, greater than the level from one year ago. However, the outstanding amount of home equity lines of credit declined by 4.2% ($225 billion) greater than the level one from last year marking the 26th consecutive quarter of annual declines.

MBA: 2Q Commercial/Multifamily Delinquencies Remain Low

Delinquency rates for commercial and multifamily mortgage loans remained low in the second quarter, the Mortgage Bankers Association reported in its Commercial/Multifamily Delinquency Report. MBA said based on unpaid principal balance of loans, delinquency rates for each group at the end of the second quarter were as follows:

  • Banks and thrifts (90 or more days delinquent or in non-accrual): 0.66 percent, a decrease of 0.07 from the first quarter;
  • Life company portfolios (60 or more days delinquent): 0.11 percent, an increase of 0.05 from the first quarter;
  • Fannie Mae (60 or more days delinquent): 0.07 percent, an increase of 0.01 percentage points from the first quarter.
  • Freddie Mac (60 or more days delinquent): 0.02 percent, a decrease of 0.02 percentage points from first quarter;
  • Commercial mortgage-backed securities (30 or more days delinquent or in REO): 4.04 percent, an increase of 0.17 percentage points from the first quarter.

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