November 1, 2017

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

Freddie Mac Finds 'Widening' Affordable Rental Shortfall

A new research report released by Freddie Mac finds that the already-acute shortfall of affordable rental apartments has widened "considerably" over the past six years.  The report looked at loans Freddie Mac Multifamily financed multiple times between 2010 and 2016. It found 11.2 percent were affordable to very low-income households--those with incomes no greater than 50 percent of area median income--at the first financing.   At the second financing, rents had increased so significantly that just 4.3 percent of the same units were affordable to very low-income households. This represented a 60-plus percent reduction in the number of units deemed affordable to very low-income households.  Freddie Mac Multifamily said increasing rents and stagnant household incomes are behind the problem, which it said could become worse unless the affordable apartment supply grows to match increasing demand from lower-income renters.  Previous Freddie Mac research found rising costs of land and construction have also widened the supply gap.

Three Market Updates from the MBA Annual Convention:

Urban Wire:  America Isn’t in a Housing Bubble, but Some Cities Might Be

Are we in a housing bubble?  We think of a housing bubble as house price growth that isn’t sustainable because it isn’t consistent with underlying fundamentals, like income and job growth. To determine whether a bubble exists, we must look at both factors: the change in house price levels and the underlying fundamentals.  Nationally, over the past five years, the increase in house prices has outpaced inflation by 34 percent cumulatively since 2012. Though noteworthy, the increase is less than half the pace seen between 1997 and 2006, which saw house price growth outpace inflation by 87 percent.  This study reviewed data from the 37 largest metro areas.  The Washington MSA compares favorably with other large metro areas and shows little risk of a price bubble.

Bill Introduced to Eliminate FHA Life of Loan Insurance Premium

A bill, entitled the Making FHA More Affordable Act, has been introduced by Rep. Maxine Waters, D-Calif., the ranking member on the House Financial Services Committee.  The bill would repeal the life of loan requirement and reinstate the FHA’s previous policy of requiring borrowers to pay mortgage insurance premiums until the outstanding principal balance reaches 78% of the original home value.  The FHA changed its policy and instituted the life of loan policy back in 2013, as part of an effort to improve the health of the FHA’s flagship fund, the Mutual Mortgage Insurance Fund.  Now, with the MMI Fund on better footing, Waters is pushing for the elimination of the life of loan policy to benefit low and moderate income homebuyers.  The bill is supported by the National Association of Realtors (NAR) and several other industry groups.

The Hill:  Stevens Will Step Down as Head of Mortgage Bankers Group Next Year

David Stevens, who is recovering from cancer, announced that he will step down as head of MBA in September 2017.

MBA President:  GSE Reform is Within Reach

At the end of the Mortgage Bankers Association (MBA) national convention in Denver, President David Stevens made a surprise announcement that he would retire effective Sept. 30, 2018.  Prior to this, however, he fielded questions from VantageScore President Barrett Burns and MBA members during a Q&A breakout session. Stevens answered several questions covering a range of issues, but much of the discussion focused on reform of government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, a pressing issue in the mortgage industry at this time.

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