The U.S. housing market is showing additional signs of slowing as homebuilders scale back new single-family construction in response to elevated mortgage rates, higher construction costs, and softer buyer demand. Although the nation continues to face a long-term housing shortage, many builders are becoming increasingly cautious about launching new projects until affordability improves and consumer confidence strengthens.
After months of elevated borrowing costs, homebuyers received a bit of encouraging news as mortgage rates edged lower, providing a modest boost to affordability during the busy summer homebuying season. While the decline is relatively small, housing professionals say it could encourage more buyers who have been waiting on the sidelines to begin shopping for homes or move forward with pending purchase decisions.
The U.S. Department of Housing and Urban Development announced a series of policy changes designed to streamline the Federal Housing Administration’s single-family mortgage programs, a move officials say will reduce unnecessary regulatory burdens, lower costs, and expand access to homeownership opportunities for qualified borrowers. The changes are part of a broader effort to modernize FHA policies while addressing affordability challenges that continue affecting prospective homeowners across the country.
The future of mortgage giants Fannie Mae and Freddie Mac has once again moved to the forefront of housing finance discussions as questions mount about whether the Trump administration will ultimately move forward with long-discussed plans to return the companies to private ownership. While the idea of ending federal conservatorship has been debated for years, recent developments have created fresh uncertainty about both the timing and likelihood of such a move.
The U.S. mortgage market maintained a relatively steady performance in April as delinquency rates showed little monthly movement, signaling that most homeowners are continuing to meet their mortgage obligations despite ongoing affordability concerns and elevated borrowing costs. While the overall numbers suggest stability across much of the housing sector, industry analysts say several warning signs beneath the surface continue attracting attention from lenders, servicers, and economists.
The Federal Housing Finance Agency (FHFA) has proposed a rule to add public disclosure requirements for the Enterprise Regulatory Capital Framework (ERCF) for Fannie Mae and Freddie Mac. The proposed rule would implement quarterly quantitative and qualitative disclosure requirements for the enterprises related to regulatory capital instruments, risk-weighted assets calculated under the ERCF’s standardized approach, and risk management policies and procedures.
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Fannie Mae and Freddie Mac reported earnings declines from the second to third quarter of 2021, but both experienced increases in year-over-year earnings. Fannie Mae announced that its net income for the quarter was $4.8 billion, down from $7.2 billion during the second quarter of 2021. The company booked net income of $4.3 billion in the third quarter of 2020.
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Fannie Mae economist expect mortgage originations to remain above pre-pandemic levels in 2022. The company’s Economic and Strategic Research Group released its latest commentary this week, in which it revised downward its full-year 2021 projection for GDP growth for the third consecutive month.
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August was a decent month for the housing and mortgage markets following a few slower months earlier this summer. Freddie Mac reported this week that its total mortgage portfolio increased at an annualized rate of 23.7 percent in August. The ending balance for the portfolio was $3.093 trillion, compared with $2.576 trillion a year ago.
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The Federal Housing Finance Agency (FHFA) has proposed amending the Enterprise Regulatory Capital Framework (ERCF) for Fannie Mae and Freddie Mac. The proposed amendments, released last week, would refine the prescribed leverage buffer amount (PLBA) and the capital treatment of credit risk transfers (CRT).
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Fewer first-time homeowners and buyers of newly constructed homes are relying on FHA financing. According to a recent blog post by the National Association of Home Builders (NAHB) based on U.S. Census data, more than 76 percent of new home sales in the second quarter of this year were financed with conventional loans.
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The Federal Housing Finance Administration (FHFA) has established higher low-income housing goals for Fannie Mae and Freddie Mac over the next three years. FHFA announced the new benchmarks for mortgage purchases by the GSEs last week. In the same announcement, FHFA introduced two new single-family home purchase subgoals to replace the existing low-income areas subgoal.
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Fannie Mae and Freddie Mac doubled their year-over-year net income during the second quarter of 2021. Fannie’s net income for the quarter was $7.2 billion, an increase of 181 percent over the $2.5 billion net income in the second quarter of 2020. The company’s recent quarter also produced a 43 percent increase over the $5 billion booked in the first quarter of 2021.
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To stay busy, mortgage underwriters and mortgage processors need people to buy houses. For that to happen, the real estate market needs to provide enough inventory to meet demand. As anybody in the mortgage and real estate industries can attest, that hasn’t been the case lately.
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In the housing market, there continues to be growing optimism regarding selling a home and more pessimism about buying. Fannie Mae released its latest monthly Home Purchase Sentiment Index last week. The survey found that 64 percent of respondents thought the current environment makes it a bad time to buy a home, up from 56 percent the previous month.
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Written By: Stacey Sprain
As an FHA originator, processor or underwriter, it’s likely that in the ongoing foreclosure market you’ll run across a HUD REO loan at some point. The purpose of this multi-part article is to provide you with some useful information to help in your endeavors.