Mortgage giants Fannie Mae and Freddie Mac, two government-sponsored enterprises, will likely be guaranteeing a lot fewer new loans over the next decade, as the private sector steps up its role, according to a new report by the Congressional Budget Office.
During and after the financial crisis — from 2008 to 2013 — Fannie Mae and Freddie Mac backed about 60 percent of new mortgages. However, the CBO report predicts a big change: The two firms likely will only back about 40 percent of new mortgages by 2024 as private sources of capital take their place.
Fannie and Freddie’s market share is already showing signs of shrinking. In the first half of 2014, they backed about 50 percent of new mortgages.
Neither Fannie Mae or Freddie Mac issue loans directly. Instead, they purchase loans and resell them in bundles. In 2011 and 2012, they increased the fees they charge to guarantee mortgages, which reduced their advantage over private-sector firms.
Source: “Fannie Mae, Freddie Mac to Lose Market Share to Private Capital: CBO,” Reuters (Dec. 16, 2014)
After four weeks of decreases, the 30-year fixed-rate mortgage inched up slightly this week, but stayed near yearly lows under 4 percent, Freddie Mac reported in its weekly mortgage market survey.
Freddie Mac reported the following national averages for the week ending Dec. 11:
- 30-year fixed-rate mortgages averaged 3.93 percent, with an average 0.5 point, rising from last week’s 3.89 percent average. Last year at this time, 30-year rates averaged 4.42 percent.
- 15-year fixed-rate mortgages averaged 3.20 percent, with an average 0.5 point, rising from last week’s 3.10 percent average. A year ago, 15-year rates averaged 3.43 percent.
- 5-year hybrid adjustable-rate mortgages averaged 2.98 percent, with an average 0.5 point, rising from last week’s 2.94 percent average. Last year at this time, 5-year ARMs averaged 2.94 percent.
Source: Freddie Mac
Mortgage giants Fannie Mae and Freddie Mac announced Monday that first-time home buyers can now qualify for loans with down payments as low as 3 percent. That will expand credit for qualified home shoppers who may have been sidelined the last few years because of higher down-payment requirements, analysts say.
Freddie Mac launched Home Possible Advantage, a conventional mortgage with a 3 percent down-payment requirement geared to low- and moderate-income borrowers. It’s a conventional mortgage with a maximum loan-to-value ratio of 97 percent. To qualify, first-time home buyers are required to participate in a borrower education program.
With Fannie Mae’s 3 percent down-payment offering, borrowers must still meet standard eligibility requirements, including underwriting, income documentation, and risk management standards. Any buyer can take advantage of Fannie’s loans as long as at least one co-borrower is a first-time buyer. Private mortgage insurance may be required.
“Our goal is to help additional qualified borrowers gain access to mortgages,” says Andrew Bon Salle, Fannie Mae executive vice president for single-family underwriting, pricing, and capital markets. “This option alone will not solve all the challenges around access to credit. Our new 97 percent LTV offering is simply one way we are working to remove barriers for creditworthy borrowers to get a mortgage.”
The National Association of REALTORS® applauds the move by the Federal Housing Finance Agency, which oversees Fannie and Freddie.
Source: Fannie Mae and Freddie Mac
The 30-year fixed-rate mortgage sunk to a 3.89 % average this week, its lowest level since May 30, 2013. That translates to loan savings for home buyers and refinancers.
Freddie Mac reports the following national averages for the week ending Dec. 4:
30-year fixed-rate mortgages: averaged 3.89%, with an average 0.5 point, dropping from last week’s 3.97% average. Last year at this time, 30-year rates averaged 4.46%.
15-year fixed-rate mortgages: averaged 3.10 percent, with an average 0.5 point, dropping from last week’s 3.17 percent average. A year ago, 15-year rates averaged 3.47 percent.
5-year hybrid adjustable-rate mortgages: averaged 2.94%, with an average 0.5 point, dropping from last week’s 3.01% average. Last year at this time, averaged 2.99%.
Source: Freddie Mac
Fannie Mae and Freddie Mac’s new lending guidelines went into effect Monday, which are expected to help loosen up the tight credit standards that home buyers and refinancers have faced in recent years.
The guidelines clarify when lenders will be penalized for making mistakes on mortgages they sell to the mortgage financing giants. Following the financial crisis, Fannie and Freddie forced banks to repurchase tens of billions of dollars in loans that they say did not meet their standards. It caused many lenders to tighten their lending, except to the most creditworthy borrowers with the highest credit scores. Lenders have blamed the lack of clarity from Fannie and Freddie on the tight credit conditions that have made it difficult for home buyers to qualify for a mortgage.
Fannie and Freddie’s latest lender guidance is “going to be big, but it’s going to take time” to see the full impact of the changes, Laurie Goodman, director of the Housing Finance Policy Center at the Urban Institute, told The Wall Street Journal. Earlier this year, the Urban Institute estimated that up to 1.2 million additional home loans would be made annually if mortgage availability was at “normal” levels.
Source: “Mortgage Lenders Set to Relax Standards,” The Wall Street Journal 11/28/14
Renters need to brace themselves: Apartment rent is expected to continue to outpace inflation next year. It’s a landlord’s market, which means strong demand continues to give landlords justification to hike rents.
Rent growth will likely reach 3.9 percent in 2015, only a slight dip from 4 percent this year, according to a recent forecast released by the National Association of REALTORS®. For at least two more years, vacancy rates for rental apartments are expected to remain low.
“Low housing inventory and the sizable demand for rentals will continue to spur multifamily construction as well as keep rents rising above inflation through next year,” says Lawrence Yun, NAR’s chief economist.
2 California metros saw the lowest vacancy rates for rental apartments in the fourth quarter, according to NAR:
Orange County, Calif.: 2.2%
Source: “Apartment Rent to Outpace Inflation Next Year: NAR,” MarketWatch (Nov. 24, 2014)
The Federal Housing Finance Agency announced a new policy that will permit some foreclosed home owners to purchase the homes back that they once had lost at fair market value.
To regain ownership, the ex-owners must be able to pay the full current value of the property, and they still must wait at least three years after their foreclosure to regain ownership, which is required to purchase any home using a Freddie Mac or Fannie Mae–guaranteed loan following a foreclosure.
The FHFA, the regulator of Fannie Mae and Freddie Mac, says the new policy likely will lower the principal on the loans of the former home owners if they elect to buy their former homes back. Prior to the policy, the FHFA had required borrowers who had gone through foreclosure and who wanted to buy back their home to pay the entire debt they owed on the mortgage, even if it was much higher than the home’s current value.
“This is a targeted but important policy change that should help reduce property vacancies and stabilize home values and neighborhoods,” says FHFA Director Melvin L. Watt. “It expands the number of potential buyers of REO properties and is consistent with the enterprises’ practice of requiring fair-market value for those properties.”
The new policy applies only to buyers’ former primary residence. Second homes and investor properties are not eligible.
Source: “Regulator OKs Some Fannie, Freddie Foreclosure Buybacks at Fair Value,” Los Angeles Times (Nov. 25, 2014) and the Federal Housing Finance Agency
Mortgage financing giant Fannie Mae dropped its mortgage rate forecast for next year about two-tenths of a percentage points from its prior forecast, projecting 30-year fixed rates will remain lower than initially thought, at about 4.3 percent next year.
This will cheapen the borrowing costs for home buyers and refinancers, helping to make home ownership more affordable. However, with the forecasted rate drop, Fannie Mae economists didn’t adjust the forecast for total home sales for 2015.
“The housing market continues to grind its way upward, but we don’t expect a breakout performance in 2015 as the fundamentals remain somewhat muted,” says Doug Duncan, Fannie’s chief economist. “We believe that mortgage activity in 2015 will be very similar to 2014.”
But will another year of low rates spur more home buying?
“The relatively lower rates after the spikes of the early 80s did stimulate buying,” says David Crowe, chief economist at the National Association of Home Builders. “This time around, the low rates are still not as low as they [recently] were so the relative advantage is not as great. … [Also] the current situation is much more driven by the availability of mortgage credit than the cost.”
Source: “Fannie Cuts Mortgage-Rate Outlook, But Home Buyers May not Bite,” MarketWatch (Nov. 20, 2014)
Fixed-rate mortgages fell back near yearly lows again this week, lowering borrowing costs for home buyers and refinancers. The 30-year fixed-rate mortgage averaged 3.99 percent this week, Freddie Mac reports in its weekly mortgage market survey.
“If you are planning to buy a home in the next year, it’s better to do it sooner rather than later,” Frank Nothaft, Freddie Mac’s chief economist, said in the VIDEO noted below.
Freddie Mac reported the following national averages for the week ending Nov. 20:
- 30-year fixed-rate mortgages averaged 3.99 percent, with an average 0.5 point, dropping from last week’s 4.01 percent average. The 30-year fixed-rate mortgage dipped to 3.97 percent in mid-October, its lowest average so far this year.
- 15-year fixed-rate mortgages averaged 3.17 percent, with an average 0.5 point, decreasing from last week’s 3.2 percent average. A year ago, 15-year rates averaged 3.27 percent.
- 5-year hybrid adjustable-rate mortgages averaged 3.01 percent, with an average 0.5 point, falling slightly from last week’s 3.02 percent average. A year ago, 5-year ARMs averaged 2.95 percent.
Video at: https://www.youtube.com/watch?v=s9-KO08p6Gc
Loan demand was on the rise last week, posting a strong rebound that was driven mostly by applications to purchase a home, the Mortgage Bankers Association reports in its seasonally adjusted weekly mortgage market survey, reflecting the week ending Nov. 14. The increase in demand came despite interest rates mostly staying flat for the week.
Total application volume, reflecting applications for home purchases and refinances, climbed nearly 5 percent. Refinance applications rose 1 percent week-to-week, while applications for home purchases, viewed as a gauge of future buying activity, surged 12 percent. It was the highest level for purchase applications since July, the MBA reports.
“The MBA and other data are showing strength in the market for new homes, likely reflecting the boost from continued job growth in recent months,” says Michael Fratantoni, the MBA’s chief economist.
Meanwhile, the 30-year fixed-rate mortgage declined slightly last week to 4.18 percent from 4.19 percent the week prior, the MBA reports.
Source: “Weekly Mortgage Applications Jump Unexpectedly,” CNBC (Nov. 19, 2014)