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)
The housing market doesn’t hibernate in the winter. Sellers who list and buyers who buy often find the winter season the most advantageous time to make a move in real estate, according to a new study by the real estate brokerage Redfin. The winter season officially takes place between Dec. 21 and March 20, and real estate professionals should be ready for a season that often brings in more focused and active sellers and buyers.
In an update to a two-year analysis it completed last year, Redfin researchers studied nationwide home listings, sales prices, and time-on-market data from 2010 through October 2014.
The winter tends to net sellers’ more than their asking price during the months of December, January, February, and March than listings from June through November. Listing during those four winter months has resulted in higher percentages of above-asking-price sales than listing during any months, other than April and May.
Researchers say the winter market is less competitive for sellers since many people tend to wait until the spring to list. The smaller inventory of active listings help sellers get more attention from buyers on their properties. Also, many large corporations often transfer employees or hire new ones early in the year, creating opportunities for winter sellers from very motivated purchasers.
Source: “Best Time to List a Home for Sale? Winter, Redfin Says,” Los Angeles Times (Dec. 14, 2014)
The move by Fannie Mae and Freddie Mac this week to offer 3 percent down payment loans may reignite the first-time home buyer market.
The new loans announced by Fannie Mae and Freddie Mac will be fixed-rate mortgages for up to 30 years, available only on a primary residence. Fannie plans to begin issuing the 3 percent loans before the end of the year. Mortgage insurance payments will be required, and qualified buyers will need to complete a financial counseling program.
Freddie Mac plans to start issuing its 3 percent loans to low- and moderate-income borrowers in March 2015. Eligible borrowers will be required to earn less than an area’s median income and will have to pay mortgage insurance and do financial counseling. Monthly payments also will have to fall under 43 percent of the borrower’s income.
Source: “More Americans to Buy Homes with 3 Percent Down,” The Associated Press (Dec. 11, 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
Fannie Mae and Freddie Mac plan to suspend evictions on foreclosed single-family properties nationwide during the holidays, from Dec. 17, 2014 through Jan. 2, 2015.
Legal and administrative proceedings for evictions may continue, as well as pre-foreclosure activities, but families who are living in foreclosed homes will be allowed to remain in their homes during that time.
Freddie Mac says that the foreclosure moratorium applies to all foreclosed occupied single-family homes as well as properties with two to four units that have mortgages owned or guaranteed by Freddie Mac.
“Today’s announcement will bring some holiday relief to borrowers who went through foreclosure and were preparing to move,” Chris Bowden, senior vice president of REO at Freddie Mac, said in a statement. “We strongly urge home owners with financial challenges to start the New Year by calling their mortgage servicer to explore one of the Freddie Mac workout options that have prevented over 1 million foreclosures since 2009.”
Fannie Mae reports that it has completed more than 1.6 million loan workout solutions to help distressed families avoid foreclosure since 2009.
Source: Freddie Mac and Fannie Mae
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
Seventy percent of adults in the U.S. say they’re unfamiliar with down-payment assistance programs for middle-income home buyers in their community, according to a NeighborWorks America survey of 1,000 people. But plenty of help is available.
NeighborWorks organizations provided 6,000 buyers with more than $100 million in down-payment assistance last year. NeighborWorks expects to increase its assistance this year, too. Many local and state organizations offer down-payment assistance as well, and there are specialized programs for military vets through the Veterans Affairs loan program, for first-time buyers through the Federal Housing Administration, and for rural home buyers through the U.S. Department of Agriculture.
“Down-payment assistance programs make home purchasing more accessible for first-time buyers,” says Marietta Rodriguez, vice president of Homeownership Programs and Lending at NeighborWorks America. “In addition, because many down-payment assistance programs require home-buyer education, these purchasers tend to be more successful in the long-term. Research has shown pre-purchase counseling helps reduce mortgage default and equips home owners with the information they need to budget for other expenses and maintain their property.”
Source: NeighborWorks America
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)