A report from the Wall Street Journal. “Fannie Mae and Freddie Mac are pulling back on some mortgages meant to make homeownership more affordable, their latest effort to rein in risk at the behest of their regulator. The two companies are cutting back on the proportion of loans they back to borrowers with small down payments, for example, and mortgages to deeply indebted borrowers. The regulator, the Federal Housing Finance Agency, says it wants Fannie and Freddie to be prepared for a possible economic downturn. ‘Some of this really is a reflection of the increased emphasis and focus on: let’s do what we need to do to get out of conservatorship,’ FHFA director Mark Calabria said in an interview.”
“Fannie and Freddie don’t make loans. Instead, they purchase loans from banks and other lenders and package them to sell to investors, then guarantee payments on them. David Battany, executive vice president for capital markets for Guild Mortgage Co., a San Diego-based lender, said Fannie and Freddie are rejecting some of his firm’s loans that they once would have agreed to back.”
“Mr. Calabria said he wants to make sure the companies won’t require another bailout. He said he also wants Fannie and Freddie to avoid making loans that may go bad during a downturn. ‘I think there’s a lot of evidence that we’re near the top of this cycle,’ Mr. Calabria said. ‘It would be counter to their mission where we get borrowers into loan products that would leave them vulnerable in a downturn.’”
“Fannie and Freddie also have been tapping the brakes on loans made to borrowers who devote more than 43% of their monthly incomes to mortgage payments and other debt. Fannie backed a higher volume of these loans last year, accelerating a multiyear rise, but the company pulled back in early 2019, according to people familiar with the matter. Freddie took those actions as well. Fannie and Freddie have now shrunk the share of these loans in their businesses for three straight quarters, according to industry research group Inside Mortgage Finance.”
From Vail Daily in Colorado. “In today’s environment, lending standards are still tighter than they were a dozen years ago. But, Nicholle Jackson, a broker at the Valley Home Store said, there are mortgages available for 3%, 5% or even no money down. While qualifying for a mortgage is harder than it was in 2007, loans are more available than they were in, say, 2010. But the Home Store has a powerful tool to get people into homes: the Eagle County Down Payment Assistance Program.”
“Bill Holm is a broker with Fortius Realty. That firm is now finishing off the Two Rivers project at Dotsero. Holm said he doesn’t lose many buyers because they can’t qualify for a mortgage. ‘People that are serious about it can get in. Lending is more accessible for people these days,’ Holm said. Between down payment assistance programs and fixed-rate mortgages available below 4% interest, there are opportunities. Those programs open up the mortgage market ‘to people who couldn’t afford it two years ago,’ Holm said.”
The Shawnee Mission Post in Kansas. “For several months, I have been bombarded with commercials on XM radio about refinancing and home equity lines of credit. Where HELOC’s can get to you into trouble are when all of the available equity in a home is pulled out for a remodeling project, for example. When all of a homeowner’s available equity is accessed and then spent on an improvement, or to pay off revolving debt, or to purchase a new car, the homeowner is then subject to market conditions.”
“What do you mean subject to market conditions? Most banks will allow a homeowner to access up to 85 percent of their available equity when obtaining a HELOC. And that seems like a safe number, until the market heads into a downturn. I remember a similar boom in HELOC’s before the recession. I also remember meeting with homeowners right after the recession began who had maxed out their HELOC and suddenly found themselves upside down in their home.”
“Meaning they owed more on their home than it was worth at the time. In many cases, I witnessed seller’s writing checks at the closing table in order to sell their home. That’s right. Instead of getting a proceeds check from the sale of their home, they were writing a check for the emaining balance of their mortgage that was not satisfied by the sale.”
From Houston Agent Magazine in Texas. “Cash-strapped Generation Z and millennial veterans are taking advantage of VA loans that allow them to purchase with no down payment, no mortgage insurance, flexible credit guidelines and the industry’s lowest average interest rates. More than 624,000 veterans and service members have utilized their VA home loan benefits in fiscal year 2019, according to new data from the Department of Veterans Affairs.”
“VA purchase loans have increased for the eighth-straight year and are up 43 percent compared to five years ago. In Houston, VA purchase loans were up 13.69 percent from fiscal year 2014. ‘Younger veterans and service members are fueling the continued growth of this historic loan program,’ said Chris Birk, Director of Education for Veterans United Home Loans. ‘This benefit was built to help boost access to homeownership for those who serve, and it’s helping a new generation of veterans and military families put down roots in communities across the country.’”
“According to the Veterans United Home Loans study, Generation Z and millennial buyers accounted for nearly half – 45 percent – of all VA purchase loans in FY 19, the only two generations to see year-over-year growth in these loans. That number is expected to go up in January 2020, when changes to VA loan limits take effect. These changes, which allow borrowers to purchase above their county loan limit without having to factor in a down payment, are a huge win for veterans, especially those living in expensive housing markets.”
“VA refinance loans were also up 44 percent in FY19 compared to five years ago. VA loans continue to have the lowest average interest rate on the market, according to data from Ellie Mae. The VA has now backed more than 8 million loans over the last two decades, with nearly 70 percent coming within the last 10 years.”
A press release at Yahoo Finance. “Even with foreclosure rates dropping as a whole, some states were not as lucky. For example, these states saw an increase in the third quarter of 2019: Montana: 33%, Georgia: 32%, Washington: 16%, Louisiana: 15%, Michigan: 12%. Furthermore, many large metropolitan statistical areas throughout the country experienced foreclosure rate growth during the third quarter: Atlanta, GA: 37%, Columbus, OH: 27%, San Antonio, TX: 24%, Portland, OR: 22%, Tucson, AZ: 21%.”
“What Will 2020 Bring? Much the same as in 2019, some states and cities will suffer more than others. ‘Even when foreclosure rates dip – which is a good thing on many fronts – there are still opportunities for those interested in investing. In 2020, there will remain cities and states that have more available properties than others. For example, it makes sense to believe that New Jersey, Illinois, and Florida will continue to have some of the highest foreclosure rates in the country, said Simon Campbell of BankForeclosuresSale.”
“Just the same, some cities never seem to escape a foreclosure rate increase, and that trend should remain in the new year. ‘Last year, Atlantic City, New Jersey, and Rockford, Illinois, had some of the highest foreclosure rates in the country,’ Campbell added. ‘We don’t yet know how these areas will perform in 2020, but I’d guess that you’ll see these three cities in a similar position during Q1 and possibly beyond.’