Fannie Mae is making its housing counseling requirements more flexible so additional borrowers can qualify for its low down payment, affordable loan program called HomeReady.
Borrowers who receive one-on-one counseling from Department of Housing and Urban Development-approved counselors will be exempt from taking the HomeReady online course, according to a Fannie Selling Guide Announcement issued Tuesday.
One-on-one counseling will “assess the borrower’s current financial situation, address credit challenges, develop a workable budget, help determine whether it is the appropriate time to become a homeowner and educate the borrower on the home buying process and responsibilities of homeownership,” according to the selling guide.
In addition, Fannie will no longer require homeownership education for limited cash-out refinancings and will allow an owner-occupant borrower on a HomeReady loan to own other residential properties.
The government-sponsored enterprise also dropped it requirement that buyers of two- to four-unit properties must take an additional landlord education course. Homeownership education will still be required, however.
Fannie will allow down payment assistance and second mortgages from providers that work through HUD-approved nonprofit counseling agencies. The GSE does not purchase the second mortgages, which the agency calls Community Seconds, but the second mortgages can be provided by employers or nonprofits to finance down payments or closing costs on HomeReady mortgages.
All the changes mentioned are effective immediately, the enterprise said, but Desktop Underwriter will be updated later. “Until that time, lenders may disregard any messages that conflict with changes.”
The GSE also wants to make it easier for banks to provide down payment and closing cost assistance to HomeReady borrowers as part of institutions’ Community Reinvestment Act requirements. Lender-funded gifts and down payment assistance may be eligible on HomeReady loans on a “case-by-basis,” according to Fannie. “The assistance, however, cannot be funded through the mortgage transaction and must represent the lender’s own funds.”
Fannie also previewed some HomeReady changes it will be announcing later this year.
Fannie will count one-on-one counseling as a compensating factor in Desktop Underwriter and allow debt-to-income ratios up to 50%. Additionally, lenders will receive a $500 loan level price adjustment credit for delivering those HomeReady loans.
Even though the mortgage industry is finally stepping up and answering the call for more technology innovation in the space, a new survey from Fannie Mae on the pulse of the industry shows its not even close to where it needs to be on the tech side.
On the positive side is the motivation is definitely there, but will it take a game-changer like Uber to get there?
In a new in-depth study, Fannie Mae’s Economic Strategic Research Group surveyed senior mortgage executives in May through its quarterly Mortgage Lender Sentiment Survey, revealing the true status of innovation in the industry.
To properly gauge the market, Fannie Mae surveyed a total of 191 senior executives, representing 169 lending institutions. Larger institutions made up 15% of responses, mid-sized institutions made up 16% to 35% and smaller institutions made up 65%.
Despite continuous calls for mortgage innovation, the survey found that 21% of the industry either “somewhat disagrees” or “strongly disagrees” that “the mortgage industry as a whole is innovating to drive the industry’s operational efficiency.”
These responses from lenders in the Fannie Mae survey help show what’s still blocking change.
- “Really no big innovation in the overall process. Some things around the edges but still mainly a paper and process intensive industry.” – Larger Institution
- “I think the system has made it too complicated for the average person to even understand the mortgage process. This was even before all the changes. The new changes made it worse. Plus the process takes too long.” – Smaller Institution
- “There are too many regulatory roadblocks to common sense business process improvements.” – Mid-sized Institution
- “Lots of confusion about TRID requirements and what is acceptable. Difficult to set up processes if you don’t know what the rules are….” – Larger Institution
The industry is adapting though, and on the other side of that 21%, approximately 79% of lenders do “strongly agree” or “somewhat agree” that “the mortgage industry as a whole is innovating to drive the industry’s operational efficiency.”
Their responses are lot more positive on the future of mortgage technology.
- “There is a growing interest and support in a fully digital mortgage experience, including closing and funding.” – Smaller Institution
- “I believe the industry is moving to simplifying a complex process for the consumer’s benefit. Innovation as opposed to over regulation.” – Larger Institution
- “I think advances are being made, but there needs to be a bigger push in the technology area – apps for devices, acceptance of e-signature and e-recordings.” – Smaller Institution
Nick Stamos, CEO and founder of Sindeo, a mortgage marketplace founded in 2013, recently explained the growing need of technology in HousingWire’s May magazine feature “Digital Disruption” saying, “Consumers in general, not just Millennials, are pushing the home financing industry to go digital because they have already experienced and have come to expect the ease of use and level of service that comes with 24/7 access and a digital experience. Consumer expectations have been elevated because every other part of their lives have been made better through technology.”
It’s no longer a choice for lenders to adopt more technology. “For bank and nonbank lenders to increase loan origination volumes, they will need to better understand and anticipate the driver at the center of market change: digital-savvy borrowers,” Kelly Adkisson, a managing director for Accenture Credit Services, said in the piece.
But according to the Fannie Mae survey, in order for some lenders to get to that place of change, it’s going to take a major disruptor, like Uber, to get there.
To some though, the industry already had a small glimpse of a disruptor: Quicken Loans’ Rocket Mortgage.
“Quicken’s Rocket Mortgage is the perfect example. We may not be there yet but with innovators like Quicken we will be,” a larger institution said in the survey.
America, however, was not a fan; cue headline risk.
After airing, viewers took to Twitter in a panic, claiming that Rocket Mortgage will lead to a repeat of the housing crisis.
Despite the twitter frenzy, Rocket Mortgage Product Lead Regis Hadiaris commented on the situation later saying, “Following the airing of the ad, tens of thousands of Americans visited the site to learn more about Rocket Mortgage or start the loan process. Many were approved to refinance or buy a home.”
If another disruptor like Rocket Mortgage doesn’t happen, innovation isn’t lost.
Lenders cited the growing burden of regulation as just as much of a motivation to change.
After generating loan applications, regulatory compliance ranked as next top priority for lenders.
The survey found that lenders prioritize investing in general regulatory compliance to address pain points related to staying up to date with regulation changes and interpretation. Two-fifths of lenders say the primary goal to invest in this area is to increase automation.
“Costs are skyrocketing due to increased regulatory burden, and the only solution is increased automation. The challenge is the pace of regulatory change makes it extremely difficult to effectively implement the needed technology,” a larger institution said in the survey on how the industry is innovating.
Even Quicken Loans, as a disruptor, said regulatory push is moving the mortgage innovation process along. “By importing and verifying important data, Rocket Mortgage makes the loan origination process safer. Instead of a client faxing in printed copies of statements that can be altered or forged, our system pulls the information in directly from trusted sources eliminating any potential for fraud,” Hadiaris said.
The industry is making progress though. At the Sage Summit annual conference this week, the software company announced a new partnership with U.S. Bank that could have an even deeper impact in moving the financial markets forward. U.S. Bank partnered with Sage to introduce its new product, AP Optimizer.
Now nearly one year in, Fannie Mae announced changes to its growing low-down-payment program in order to expand access to credit for more borrowers.
When the 3% down payment first began, it required at least one co-borrower to be a first-time buyer, but with the adoption of HomeReady last August came the option for both first-time and repeat homebuyers to purchase a home with as little as 3%.
Now, Fannie said a further update expands the program to expand access to credit and promote successful homeownership.
Here are the key changes from the announcement:
- Allowing the occupant borrower on a HomeReady loan to own other residential properties
- Removing the requirement for homeownership education for limited cash-out refinance transactions
- Eliminating the requirement for landlord education for HomeReady loans secured by two-, three, or four-unit properties (homeownership education is still required)
- Deleting references to post-purchase early delinquency counseling requirements to align the post-purchase counseling requirements for all Fannie Mae conventional mortgage loan types as recently described in Servicing Guide Announcement SVC-2016-05
- Accepting homeownership education from Community Seconds or Down Payment Assistance Program (DPAP) providers as long as the providers are HUD-approved counseling agencies and the first mortgage loan involves a Community Second or DPAP.
All of these changes are effective immediately and Desktop Underwriter will be updated in a future release to reflect these changes, Fannie said.
Fannie Mae noted that until then, lenders may disregard any messages that conflict with the changes described above.
When HomeReady was first announced, borrowers were required to complete an online education course to prepare them for the home-buying process and provide post-purchase support for sustainable homeownership.
The education course, called Framework, was provided by the Housing Partnership Network and the Minnesota Homeownership Center and based on the requirements of the HUD Housing Counseling Program and the National Industry Standards for Homeownership Education and Counseling.
In this new announcement, Fannie Mae broadened the options for borrowers to meet the homeownership education requirement.
A borrower can now obtain customized one-on-one assistance from a HUD-approved nonprofit counseling agency, Fannie noted.
“Such assistance will assess the borrower’s current financial situation, address credit challenges, develop a workable budget, help determine whether it is the appropriate time to become a homeowner and educate the borrower on the home-buying process and responsibilities of homeownership,” Fannie Mae stated.
Fannie Mae added that the assistance must meet HUD standards and cover the content detailed on the Certificate of Pre-purchase Housing Counseling (Fannie Mae Form 1017), which must be signed by the counseling recipient (the borrower) and the HUD counselor. The form certifies that the assistance provided meets HUD standards and Fannie Mae requirements, which the lender then must retain in the mortgage loan file.
The changes don’t end there though.
Fannie Mae also outlined in its release several other underwriting and eligibility updates that will be available for HomeReady borrowers later in 2016.
Future changes include:
- Allowing a maximum loan-to-value ratio greater than 95% up to 97% on limited cash-out refinance transactions in DU, per standard underwriting guidelines, including a requirement that the existing mortgage be owned or securitized by Fannie Mae to be eligible.
- Expanding current HomeReady eligibility for buydowns and adjustable-rate mortgage loans to include three-to four-unit properties.
The following additional benefits exclusively for HomeReady loans where borrowers have received customized one-on-one assistance from HUD-approved nonprofit counseling agencies in accordance with the requirements outlined above:
- If the HomeReady loan is delivered with Special Feature Code 184, the lender will receive a loan-level price adjustment credit of $500
- When the lender indicates in DU that the HUD-approved one-on-one assistance was completed, that information will be considered a compensating factor for those loan casefiles with debt-to-income ratios greater than 45% up to 50%.
Official details on these changes will be announced in a future Guide update and DU Release Notes, FannieMae said.
For more information on the HomeReady program, here is a factsheet on the program from Fannie Mae.
July 26 Federal Home Loan Mortgage Corp
July 26 Federal Home Loan Mortgage Corp
* Total mortgage portfolio increased at an annualized rate
of 1.9 pct in June
* Total number of single-family loan modifications were
3,713 in June 2016 and 21,596 for the six months ended June 30,
* Mortgage-related securities and other mortgage-related
guarantees increased at an annualized rate of 5.3%pct in June
* Single-Family refinance-loan purchase and guarantee volume
was $16.6 billion in June
* Aggregate unpaid principal balance (UPB) of
mortgage-related investments portfolio decreased by
approximately $5.3 billion in June
* Single-Family serious delinquency rate down from 1.11 pct
in May to 1.08 pct in June; multifamily delinquency rate
remained flat at 0.02 pct in June
Source text for Eikon:
Further company coverage:
(Bengaluru Newsroom: +1 646 223 8780)
The suite of Web-based applications covers the entire loan lifecycle – from application to closing to servicing. It is designed to not only automate compliance with Freddie Mac’s guidelines, but also help lenders achieve new operational efficiencies, improve loan quality and provide greater certainty about repurchase risk. In addition, each application in the suite delivers actionable data and information to lenders in an automated fashion to help speed the origination process and improve monitoring and reporting on all of their origination and secondary marketing activities.
At the center of the suite is Loan Product Advisor, a revamped version of Freddie Mac’s Loan Prospector automated underwriting system that gives lenders access to the company’s credit requirements, as well as a detailed view of their credit risk. The new version sports all of the features and capabilities that lenders have come to expect but with a fresh, new look and improved functionality, usability and transparency.
Now, actionable underwriting and eligibility feedback is presented in a clear, redesigned Feedback Certificate. In addition, improved navigation allows users to move from section to section in the Feedback Certificate more easily. The certificate also displays new cash-to-close feedback messages that remove the need to verify all cash sources.
The suite also includes enhanced versions of Loan Quality Advisor, the company’s risk assessment and eligibility tool; Loan Coverage Advisor, its comprehensive loan management system; and its Selling System, which is used for pricing, contracting and loan delivery.
In addition, the company is introducing three new solutions: Loan Collateral Advisor, an advanced appraisal scoring tool; Loan Closing Advisor, which helps lenders validate their closing data against the Uniform Closing Dataset for completeness, accuracy of calculated values and data consistency; and the new, suite-wide Business Intelligence capability, which enables monitoring and leveraging of loan data to help lenders produce high-quality loans. Loan Closing Advisor is available now and rolling out through a phased approach. Interested lenders should contact their account representatives. Loan Collateral Advisor will be available later this summer, followed by the Business Intelligence capability in the fall.
To make the applications easier to access, Freddie Mac is bundling all of them together in a central Web portal. That means lenders will be able to access all of the applications in the suite using a single sign-on. As with Loan Prospector previously, all of the applications in the suite are being offered free of charge.
According to Chris Boyle, senior vice president and head of single-family sales and relationship management for Freddie Mac, the goal in rolling out the suite, which took nearly two years to develop, is basically two-fold. “First, we’re trying to create certainty.”
“Our seller/servicer guide outlines all of the terms, conditions and rules for doing business with Freddie Mac. Loan Advisor Suite automates all that in a way that creates transparency, certainty and speed – and at the end of the day, lowers costs,” Boyle tells MortgageOrb. “What we’re doing is delivering our credit policy and our processes in a highly intuitive technology solution as opposed to a paper guide.”
By automating compliance with Freddie Mac’s guidelines, she says, lenders will be able to eliminate certain manual processes and originate loans faster. What’s more, the suite of tools will help improve loan quality, which, in turn, will pave the way to providing lenders with relief from reps and warranties concerns, including the risk of loan buybacks.
“These tools deliver our policies and procedures in a way that is very consumable and uniform across all lenders and servicers,” Boyle says.
The second goal is to create business process efficiencies for lenders. By bundling the applications together on a shared platform and giving them all the same “look and feel,” users will spend less time signing in and out of applications, changing screens, and finding the various buttons used to execute commands. In addition to providing much more user-friendly controls, the built-in Business Intelligence capability means lenders can more efficiently manage and use the loan data associated with each application. Essentially, the suite allows lenders to leverage existing data sets and automate the delivery of pertinent information at key junctures throughout the entire mortgage process so as to “guide” users step by step through each process, delivering key data where needed to drive improved transparency and insights.
The new appraisal application, Boyle says, is a good example of how the suite will help lenders gain new efficiencies.
“Right now, you submit appraisal data into the Uniform Collateral Data Portal, and we analyze it and run it against basic checks for appraisal completeness and reasonableness – but there is not a lot of feedback on the quality of the appraisal or the accuracy of the appraised value. As a result, lenders will perform extensive reviews on all appraisals,” Boyle explains. “But with Loan Collateral Advisor, lenders will get information that can help them build efficiencies in their process and target appraisals with the highest risk for escalated reviews – and lenders will be able to realize real cost savings.”
“Loan Closing Advisor is also a good example of how lenders will improve efficiency through the suite,” Boyle continues. “A lot of lenders, because of the TILA-RESPA Integrated Disclosures rule and because of the mistakes that were made in the origination process, put in what we call ‘QA,’ or quality assurance, before they closed loans. We’re talking about a lot of manpower that’s currently invested in checking these loans before they go to closing. Well, from our perspective, if you’ve got the data and you’ve pulled it through from the very beginning of that loan, you don’t need to continue that expensive process because it’s been pulled through – and if you run it through Loan Closing Advisor, it will tell you there’s an inconsistency in the data that needs to be checked. So, in that regard, you don’t need somebody rechecking a whole loan file – every document and every bit of data – and there’s huge cost savings in all of that.”
Having the guidelines and information baked into each application will also help lenders achieve new efficiencies, Boyle says.
“If a lender already knows from an investor perspective that the appraisal meets the investor’s requirements, then it helps to remove any guesswork,” she says. “If they don’t have any perspective on that, then they have to spend more time trying to get confident that the appraisal will be acceptable. That’s one way to think about it – we’re providing confidence to our customers.”
Andy Higginbotham, senior vice president and head of single-family strategic delivery for Freddie Mac, says the development of the suite is the result of extensive feedback from the lender community. Freddie Mac teamed up with 15 different development partners, including numerous experts who have been involved in the development of origination technology, to get their input on these applications.
Part of the reason so many experts were involved, Higginbotham says, is not only because there are six different applications, each requiring a unique set of expertise, but also because “every lender has its own way of originating loans – there are slight differences between all their processes,” and the various workflows had to be considered when developing certain applications.
A big part of the job, he says, has been figuring out exactly how various lenders will be using the applications. For that reason, all of the applications have been undergoing trial testing in live environments with about 20 different numerous lenders, running in size from big to small, during the past six months or so.
“The whole intent was to develop a comprehensive suite of tools that would address every portion of the loan origination process – and to create utilities, or services, if you will, that could be called upon at the appropriate points during the process,” Higginbotham explains. “We also wanted to create a similar, more user-friendly interface across the suite. Our efforts with Loan Quality Advisor and Loan Coverage Advisor were focused on getting the look and feel consistent with the new tools. While there was some recoding, it was not extensive. And then, of course, we’ve added a layer of business intelligence across everything to bring it all together.”
In terms of software deployment, lenders have two options: They can use the portal to access the applications on an as-needed basis or they can have the suite integrated with their loan origination system (LOS), which facilitates a greater degree of automation.
“The full integration is always going to give a lender the maximum productivity lift – which is one of our two main objectives,” Higginbotham says. “We want to make sure that they’re taking steps out of the process – that they’re not rekeying information and data when they don’t need to. We want to automate their manual checklist processes. And that’s what we do with the tools we provide. And because we use Mortgage Industry Standards Maintenance Organization (MISMO) data sets as our method of translation, we’re already on a common interface approach, which makes the integration a lot less of an effort than it would’ve been in the past.”
Higginbotham adds that Freddie Mac has been working with the LOS providers to develop the integrations.
“They’re not really custom integrations – most of the LOS’ already export a set of data that looks like the MISMO format that we’re all used to seeing,” he explains. “Examples of the data sets that we’re using for the applications include the appraisal data set for Loan Collateral Advisor; the closing data set for our Loan Closing Advisor; and the ULDD, or uniform loan data and delivery set, for our Loan Quality Advisor.”
He adds that leading LOS provider Ellie Mae was able to carry out its integration “within a matter of weeks.”
In addition to the ability to quickly and seamlessly integrate with the leading LOS’, lenders also have the option to use the applications in the suite on a stand-alone, or “a la cart,” basis.
Boyle says although some lenders will opt for the “a la cart” approach, at least initially, “I don’t know why they wouldn’t use the full suite because it doesn’t cost anything – and it gives them a wealth of information. It’s more powerful if you use the end-to-end solution.”
When asked why Freddie Mac is offering the full suite free of charge, Boyle explains that it was never the company’s objective to create a revenue stream from the licensing of software. What’s more, she says, it is really to Freddie Mac’s benefit, in terms of operational efficiency, that lenders use its software.
“The reason we waived the licensing fees for Loan Prospector [last year] is it was never intended to be a revenue stream for us,” Boyle says. “Loan Prospector, and now, Loan Product Advisor, is our credit decisioning model – and we want people to use it so that they have certainty and transparency. We decided, ‘Well, why charge for it, then? If we want them to use it, then why don’t we give it to them?’ That was the reason we took the cost out. And we did that knowing we would come out with an entire suite of tools that would automate the loan manufacturing process as it relates to investor requirements.”
Perhaps most important of all, the launch of Loan Advisor Suite pushes Freddie Mac ahead of the rest of the mortgage industry in terms of technology investment.
“Before 2008, there was a real need to update the mortgage world of technology,” Higginbotham adds. “But then the crisis came along, and with the ensuing regulations, mortgage lenders ended up having to put in more manual processes to ensure loans met new requirements and to reduce repurchase risks.”
“With Loan Advisor Suite, we can give lenders a greater degree of comfort that, later on down the road, buybacks won’t be a concern – that they can avoid that issue via automation as opposed to hiring more checkers to check the checkers.”
South Florida ranks as the nation’s 25th most stable housing market, according to a report Wednesday from mortgage company Freddie Mac.
Palm Beach, Broward and Miami-Dade counties scored 91.7 on Freddie’s Multi-Indicator Market Index for May. That’s up 13 percent from a year earlier.
Freddie Mac determines a composite score for the nation’s 100 largest metro areas after analyzing home loan applications, affordability, mortgage delinquencies and employment. A score of at least 80 is considered stable. A perfect score is 100.
The tri-county region has the highest score of the eight Florida metros included in the report. South Florida’s 91.7 is more than double its all-time low of 45.3 in October 2010.
The U.S. index score in May was 85, up 7 percent from a year ago. Honolulu, Hawaii, and Salt Lake City, Utah, shared the top spot among metros.
Len Kiefer, deputy chief economist for Freddie Mac, said in a statement that “the majority of Southern states showed stronger employment growth than the national average and all of the eight markets in Florida that MiMi tracks are now back to their historic benchmark levels of housing activity.”
In South Florida, prices are on the rise, mostly due to a lack of homes for sale, real estate agents say.
The median prices for existing, single-family homes in all three counties topped $300,000 in June, according to figures last week from local Realtor boards. Median prices for existing condominiums also were higher in June than they were a year ago.
Judy Trudel, an agent in Broward and Palm Beach counties, said some sellers “continue to push the envelope” by asking too much for their homes. But buyers are resisting, and that’s keeping the market from getting out of hand, she said.
“Back in the boom, sellers would put crazy prices on the homes – and get them,” Trudel said. “But [today's] market is pretty healthy. If sellers put a fair and reasonable price on a home, it will sell.”
Powers@Sun-Sentinel.com, 561-243-6529 or Twitter @paulowers
Margaret Dixon, vice president and affiliate broker of Crye-Leike, Realtors, was recently inducted into the Hall of Fame of the Realtors Political Action Committee (RPAC) of the National Association of Realtors. She was recognized for her longtime commitment to RPAC and the Realtor party as well as to investing to protect the real estate industry and the dream of homeownership.
RPAC, a national bipartisan grassroots-based political advocacy organization, is a voluntary political action committee of the National Association of Realtors whose membership consists of Realtors and affiliates interested in actively and effectively protecting the real estate industry and the dream of homeownership by participating in government affairs at the local, state and federal levels.
The RPAC Hall of Fame recognizes dedicated members whose investments total an aggregate of at least $25,000. Across the United States, close to 700 individuals have been inducted into the RPAC Hall of Fame; Dixon is the 11th Tennessean to join the ranks. She has supported RPAC for over 38 years and has been a member of the National Association of Realtors since 1978.
“Although RPAC does not back political parties and does not get involved in presidential politics, it does back congressional candidates who have strong records of supporting homeownership and private property rights,” Dixon said. “RPAC is there to help shape the future of the real estate industry, and I am proud to be a longstanding supporter of these initiatives.”
RPAC is the only political group in the country organized for Realtors and run by Realtors. From 2004 to 2012, RPAC raised over $45 million to support pro-Realtor Party candidates running for Congress. The amount of money RPAC spends to support candidates makes it one of the top three trade association PACs in the nation.
Dixon of Mt. Juliet specializes in assisting her clients primarily in Davidson and Wilson counties. She is Crye-Leike’s Lifetime No. 1 Agent for Middle Tennessee, a distinction attained in 2004 for consistently being named the company’s top sales producer for 10 consecutive years. She was named “Realtor of the Year” in 2010 by the Tennessee Association of Realtors and in 1991, 1996 and 2001 by the Eastern Middle Tennessee Association of Realtors (EMTAR). She currently serves as a director of the National and Tennessee Association of Realtors. She is a certified residential specialist (CRS) and a graduate of the Realtors Institute.
“Realtors are a key part of the American Dream: homeownership. But now, more than ever, Realtors are facing forces from many directions that threaten our profession,” Dixon said. “Property tax burdens, lack of available financing and difficulties in short sales transactions are only a few of the issues that somewhere, every day, Realtors confront when selling a home. RPAC allows Realtors to make sure our concerns about these issues are heard and understood by public officials.
“Now more than ever, it is critical for Realtors across America to come together and speak with one voice about the stability a sound and dynamic real estate market brings to our communities,” she continued. “From city hall to the state house to the U.S. Capitol, our elected officials are making decisions that have a huge impact on the bottom line of Realtors and their customers.”
Dixon is affiliated with Crye-Leike’s Mt. Juliet branch office, located at 1285 North Mt. Juliet Road.
Pending Home Sales Index Shows Summer Increase
Home buyers are out in force, buying up homes just as fast as they come on-market.
According to the National Association of REALTORS®, the June 2016 Pending Home Sales Index posted above its year-ago levels; and the index continues to read above its benchmark value of 100.
A home sale is “pending” once it’s under contract between a buyer and a seller.
It’s not surprising that contract signings are up. With today’s mortgage rates lingering near 3.5%, U.S. rents rising, and lenders offering mortgage guidelines, today’s housing market favors home buyers in a big way.
Low- and no-down payments remain popular, and new programs such as the HomeReady™ mortgage make it even easier to get mortgage-qualified.
Given today’s market conditions, the best deals in housing may be the ones you find today. By this time next year, home prices and interest rates may be higher — and so might your rent.
Click to see today’s rates (Jul 27th, 2016)
Pending Home Sales Index: A Different Indicator Type
The Pending Home Sales Index (PHSI) is a monthly report, published by the National Association of Realtors® (NAR). It measures homes under contract, and not yet closed.
The Pending Home Sales Index is different from most housing market metrics.
Unlike traditional metrics which measure how housing performed in the past, the Pending Home Sales Index forecasts how housing will perform in the future.
The Pending Home Sales Index is forward-looking.
The index tallies U.S. homes recently under contract to project future, closed home sales. This is possible because the National Association of REALTORS® knows that 80% of homes under contract “close” within 2 months of contract.
In June, the Pending Home Sales Index read 111 — up from May’s reading, and the index’s 26th straight month above its baseline reading of 100.
Beating the baseline is a big deal.
When the Pending Home Sales Index crosses 100, it’s an indication that U.S. homes are going to contract at a faster pace than during 2001, the first year in which the index was published.
2001 is generally considered a good year for U.S. housing. The current market, then, by comparison, is exceptional.
Results for the Pending Home Sales Index, mixed by region:
- Northeast Region : +3% from the year prior
- Midwest Region : +1% from the year prior
- South Region : -1% from the year prior
- West Region : -1% from the year prior
For today’s renters, it’s an excellent time to consider buying a home.
Click to see today’s rates (Jul 27th, 2016)
Two Popular Loan Types That Help Buyers
Today’s housing market is getting a nice boost from more home buyers who are getting mortgage-approved.
According to a recent report from loan software company Ellie Mae, about 3-in-4 home purchase loan applications were approved and ”closed” in June. This means the applicant successfully completed the loan process and purchased a home.
In 2014, only sixty percent of applications made it to closing.
Two major loan programs contributed to the high numbers: conventional and FHA.
The same report showed that buyers used FHA for nearly a quarter of all home purchases.
FHA is even more popular among younger home buyers. A related Ellie Mae study showed that loan applicants born between 1980 and 1999 use an FHA loan 37 percent of the time.
First-time home buyers and repeat buyers alike gravitate toward FHA because of its flexibility. It requires just 3.5 percent down and accommodates buyers who have credit scores down to 580.
One of the lesser-known facts about FHA is that home buyers can use it as a 100% loan, if they can secure a downpayment gift. The program allows the applicant to cover the entire downpayment and closing cost amount with a gift.
FHA requires modest mortgage insurance premiums (MIP) that total about $70 per month for every $100,000 borrowed. FHA MIP cost does not rise with lower credit scores, as does conventional mortgage insurance.
Applicants with a credit score below 660 may find that FHA yields a cheaper monthly payment. And, home buyers can cancel their FHA mortgage insurance premium via a refinance when their home gains adequate equity.
A conventional loan is one that is approved to guidelines set forth by mortgage agencies Fannie Mae and Freddie Mac.
This loan type makes up 64 percent of the market according to Ellie Mae.
Conventional mortgages do not require a 20 percent downpayment, as many home buyers assume. Buyers can put as little as three percent down with the Conventional 97 program or the newer HomeReadyTM loan.
Buyers with larger downpayments often choose an 80/10/10 piggyback loan. The home buyer opens a primary mortgage for 80 percent of the purchase price, a ten percent second mortgage, the puts ten percent down.
This loan structure allows the buyer to avoid private mortgage insurance (PMI) while making a reduced downpayment.
Conventional loans are the first choice among many home buyers because they come with low rates and can beat FHA in monthly cost for well-qualified applicants.
What Are Today’s Mortgage Rates?
Across the country, homes are going to contract quickly. Demand from buyers is huge and, because of today’s low rates and rising rents, the pool of potential buyers has stayed strong.
Take a look at today’s real mortgage rates. Your social security number is not required to get started, and all quotes come with instant access to your live credit scores.
Click to see today’s rates (Jul 27th, 2016)
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
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Fannie Mae – Housing Affordability a Key Issue for Six in Ten Americans, Ipsos Poll
With the quadrennial national party conventions as a backdrop, another poll affirms that most Americans are unhappy with inaction by policymakers on a core element of the American Dream – homeownership and access to affordable housing.
Three-quarters of the roughly 1,000 Americans in a poll by Ipsos Public Affairs, released the same week as a poll on housing views by Schoen Consulting (which we featured in a teleconference) said they would be more likely to support a presidential candidate who makes housing affordability a priority and they want the issue spelled out in the platforms of the two major political parties.
The Republican platform takes up the issue in some detail and takes aim at what is termed the “corrupt business model” of Fannie Mae and Freddie Mac. While reforming the mortgage giants has been delayed longer than anyone would have guessed, the next president and Congress should read the public’s sentiments carefully in designing a system that better serves taxpayers, homebuyers and capital markets.
The concern about access to affordable housing in the Ipsos survey tracks closely with what Schoen found. In an op-ed for Fox News, Schoen noted that the 2016 election has been defined so far by issues such as immigration, Islamic terror, and economic inequality but a powerful current of uncertainty and dissatisfaction about housing flows deep in the American psyche. Schoen noted a majority (53%) of American voters believe that “It’s too difficult for people like me to buy a home,” and fully four-in-ten (41%) likely voters agree that “Banks don’t want to provide mortgages to people like me.” In the Ipsos poll, just short of half of the respondents said that they or someone they knew had personally struggled to pay rent or a mortgage over the last year. Similarly, Schoen found almost a quarter (23%) of likely voters or their families have lost their home since the 2008 housing crisis, and 43% know someone who has lost their home since the 2008 housing crisis.
In light of these revelations, it is not surprising that both polls found broad and deep dissatisfaction over the response from policymakers, at all levels of government, and a sense that the presidential campaigns this year have been inattentive to the public’s sense of anxiety about homeownership and affordable rental housing access.
The Republican platform, is explicitly billed as restoring the American Dream. It includes two sections on expanding homeownership, with an emphasis on reforming mortgage financing, winding down Fannie Mae and Freddie Mac and reducing the government’s role in the market via the Federal Housing Administration. The Democratic platform, to be taken up this week, is more skewed toward expanding access to affordable housing. It specifically flags increasing funding for the National Housing Trust Fund and other ways to aide those struggling most to find and keep affordable housing, such as low-income families, the disabled, veterans and the elderly.
To be sure, Investors Unite’s chief concern – following the law and upholding the rights of shareholders in Fannie Mae and Freddie Mac – is too granular for a party platform. Nonetheless, Schoen’s poll did raise the issue. He found that those surveyed think what is happening to shareholders is emblematic of a system that is largely rigged and unfair. When asked about the Net Worth Sweep, a plurality (47%) of likely voters said they believe the sweep takes funds that could be used to increase the availability of mortgages and is a violation of shareholder rights. This perception was especially strong among Black voters. Overall, nearly two-thirds (63%) of likely voters believe the rights of shareholders and investors in Fannie Mae and Freddie Mac should be protected from the government.
Regardless of which party prevails this November, these surveys reveal a nation eager for their elected officials to take up the last and perhaps most important piece of unfinished business from the financial crisis and recession. It is impossible to extrapolate directly from the data but it is reasonable to assume that upending housing finance, carelessly abandoning shareholder rights, and turning Fannie and Freddie over to the whims of big banks without evidence it will help average Americans is not the kind of reform people want.
WASHINGTON, July 26, 2016 /PRNewswire/ — Fannie Mae (OTC Bulletin Board: FNMA) announced enhancements to HomeReady®, the affordable mortgage option designed to meet the diverse needs of today’s borrowers. HomeReady allows borrowers to provide as little as 3 percent down, and was the first affordable lending option to offer creditworthy borrowers the ability to qualify with income from non-borrower household members. HomeReady continues to evolve with enhancements that expand access to credit responsibly and promote successful homeownership.
New enhancements offer:
- Simplified income eligibility – We raised income limits to 100 percent of area median income in all areas, except low income market tracts that have no limit, making it easier for lenders to determine eligibility for HomeReady and helping more homebuyers take advantage of this affordable mortgage option.
- More support for sustainable homeownership – In addition to the popular online course offered by Fannie Mae’s partner Framework, Fannie Mae will accept one-on-one pre-purchase advising from HUD-approved providers to meet HomeReady’s homeownership education requirement. In the coming months, Fannie Mae will offer lenders a $500 credit to encourage borrowers to take advantage of this new personalized support option. Together, these options will help more borrowers succeed in sustainable long-term homeownership with HomeReady.
- Market-driven features – More than 700 Fannie Mae lenders have already adopted the HomeReady mortgage, helping thousands of families become homeowners. HomeReady features continue to evolve to incorporate feedback from lenders, making it a simpler, more effective product for the affordable and underserved market. For a complete list of enhancements, see Selling Guide Announcement SEL-2016-06.
For more information on HomeReady, visit https://www.fanniemae.com/singlefamily/homeready. To learn more about one homebuyer’s journey to owning a home through HomeReady, visit https://youtu.be/NLXtxmlFHrgm.
Fannie Mae enables people to buy, refinance, or rent homes.
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