The Federal Housing Finance Agency (FHFA) will revise the treatment of active single-family mortgages backed by government-sponsored enterprises Fannie Mae and Freddie Mac for which borrowers elected a COVID-19 forbearance under the Enterprises’ representations and warranties framework, according to its newest media release.

“Under the updated rep and warrant policies, loans for which borrowers elected a COVID-19 forbearance will be treated similarly to loans for which borrowers obtained forbearance due to a natural disaster,” the FHFA said. “As a result, loans with a COVID-19 forbearance will remain eligible for certain rep and warrant relief based on the borrower’s payment history over the first 36 months following origination.”

FHFA Director Sandra L. Thompson argued that homeowners, who needed more time to keep up with housing costs during the pandemic, benefited from a mortgage forbearance plan that would reduce or suspend mortgage payments.

“Forbearance was an invaluable tool for borrowers experiencing financial hardship due to the COVID-19 pandemic,” Thompson said. “Servicers went to great lengths to implement forbearance quickly amid a national emergency, and the loans they service should not be subject to greater repurchase risk simply because a borrower was impacted by the pandemic.”

The Enterprises’ existing rep and warrant policies with respect to natural disasters allow the time the borrower is in forbearance to be included when demonstrating a satisfactory payment history in the first 36 months following origination, the FHFA noted. These policies will now expand to loans for which borrowers elected a COVID-19 forbearance.

Thompson stressed the importance of helping current and prospective homeowners manage present housing conditions at the Mortgage Bankers Association Annual Convention last week.  “In a housing market like this one, it is all the more important that both our policies and the industry’s efforts align to support existing and aspiring homeowners,” Thompson said. “That is why I believe a model based on partnership and mutual feedback is necessary for us to achieve our shared goal of promoting affordable and sustainable housing opportunities.”

If you’re considering becoming a homeowner, it could help to shop around to find the best mortgage rate. Visit Credible to compare options from different lenders and choose the one with the best rate for you.

MORTGAGE RATES KEEP CLIMBING, BUT BUYERS CAN FIND THE BEST DEALS BY DOING THESE TWO THINGS: FREDDIE MAC 

Mortgage rates affecting affordability, buyers advised to build up down payments

Mortgage rates are continuing their ascent. The average 30-year fixed-rate mortgage rose to 7.63% for the week ending Oct. 19, according to the Freddie Mac’s latest Primary Mortgage Market Survey. This time in 2022, the 30-year fixed-rate was below 7%. 

Buyers may do well for themselves by browsing for the best home loans and making a considerable down payment. Freddie Mac’s Chief Economist Sam Khater said “in this environment, it’s important that borrowers shop around with multiple lenders for the best mortgage rate.”

Freddie Mac announced last week the launch of DPA One®, a new tool that strives to help mortgage lenders quickly find and match borrowers to down payment assistance programs nationwide. 

“DPA One delivers a one-stop shop at no cost that brings lenders and their borrowers greater detail and visibility into these programs, while seamlessly connecting the right assistance program with the lender, housing counselors and borrowers who need this assistance the most,” Sonu Mittal, Freddie Mac’s senior vice president of and head of single-family acquisitions, explained.

“With research showing down payment is the single largest barrier to first-time homebuyers attaining homeownership, borrowers should also ask their lender about down payment assistance,” Khater said.

If you’re looking to buy a home, you could still find the best mortgage rates by shopping around. Visit Credible to compare your options without affecting your credit score.

MANY AMERICANS PREPARING FOR A RECESSION DESPITE SIGNS THAT SAY OTHERWISE: SURVEY

Housing market showing lackluster activity

By end of 2023, there is likely to have been around 4.1 million existing home sales in the U.S., which would mark the weakest year of home sales since the Great Recession of 2008, according to a Redfin report. 

Redfin’s Economic Research Lead Chen Zhao said current conditions have led to buyer and seller hesitancy across the board. 

“Buyers have been in a bind all year,” Zhao said. “High mortgage rates and still-high prices are making it harder than ever to afford a home, shutting many young people out of homeownership and causing homeowners to reevaluate whether 2023 is the right time to move. Mortgage rates are staying high longer than anticipated, keeping away everyone except those who need to move and pushing our sales projection for the year down to a 15-year low.

“The last time home sales were this low was during the Great Recession,” Zhao continued.

Redfin agents suggest that buyers invest in newly built properties which are performing more strongly than existing-home sales. Newly constructed homes saw sales increase 1.5% year-over-year in September as prices dropped about 4%, according to Redfin’s data. 

Based on the findings from a National Association of Realtors (NAR) report, the total amount of home sales decreased by 2% from August to September and have dropped 15.4% since September 2022.

Looking to reduce your home buying costs? It may benefit you to compare your options to find the best mortgage rate. Visit Credible to speak with a home loan expert and get your questions answered.

AFFORDABILITY KEEPING YOU FROM OWNING A HOME? HERE’S HOW YOU CAN GET READY

Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.

Source: foxbusiness.com

Apache is functioning normally

Average mortgage rates on 30-year fixed home loans continued their march towards 8% this week as the Treasury yield surpassed 5%. Rates have been steadily climbing for seven straight weeks, the longest consecutive increase since Spring 2022, according to Freddie Mac‘s Primary Mortgage Market Survey.

The average 30-year, fixed-rate mortgage rose to 7.79% as of Oct. 26. That’s up 16 basis points from the previous week and up 71 basis points from 7.08% a year ago, the survey showed.

HousingWire’s Mortgage Rates Center showed Optimal Blue’s average 30-year fixed rate for conventional loans at 7.83% on Thursday, compared to 7.78% the previous week.

“Rates have risen two full percentage points in 2023 alone and, as we head into Halloween, the impacts may scare potential homebuyers,” Sam Khater, Freddie Mac’s chief economist, said in a statement.

“Purchase activity has slowed to a virtual standstill, affordability remains a significant hurdle for many and the only way to address it is lower rates and greater inventory.”

Elevated rates are making a dent in the mortgage volume

As mortgage rates keep climbing, mortgage applications sank to their lowest level since 1995.

According to Bob Broeksmit, president and CEO of the Mortgage Bankers Association (MBA), the lack of inventory and the affordability challenges are the main culprits, steering prospective home shoppers to the sidelines. 

“We expect mortgage volume to decline nearly 30% this year to $1.64 trillion, before an expected 19% rebound in 2024 as rates finally start to trend downward,” Broeksmit said in a statement.

The housing market remains resilient

However, recent home sales readings stressed the resiliency of the housing market as buyers kept shopping despite the challenging environment.

This week, new-home sales and pending-home sales posted month-over-month gains in September. However, Realtor.com Senior Economic Research Analyst Hannah Jones expects home sales activity to hover at a low level until the end of 2023.

The National Association of Realtors (NAR) also forecasts that existing-home sales will drop by 17.5% in 2023, reaching an annualized rate of 4.15 million units sold. 

For mortgage rates to improve, investors will need reassurance that the Fed will pause its contractionary policy at its next meeting next week, Jones said in a statement.

Source: housingwire.com

Apache is functioning normally

While existing homebuyers have been battling high mortgage rates for months — which are now at 8% — the builders are wooing buyers with lower rates and incentives. Today, the new home sales data beat expectations and surprised people. However, sales have been rising slowly for some time. 

Using a low bar of sales from last year, the builder’s incentives have created more sales growth and their significant advantage is that they’re offering lower rates to move homes. Imagine what the existing home sales market would look like if mortgage rates were below 6%. We certainly wouldn’t be trending below 4 million existing home sale today if that was the case.

From CensusNew Home Sales: Sales of new single‐family houses in September 2023 were at a seasonally adjusted annual rate of 759,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 12.3 percent (±16.6 percent)* above the revised August rate of 676,000 and 33.9 percent (±22.9 percent) above the September 2022 estimate of 567,000..

As you can see in the chart below, new home sales are slowly growing, There’s nothing gangbusters here, but new home sales have been slowly moving higher for some time. This is very different from the housing bubble years, where sales were booming like crazy and got close to 1.4 million. Currently, the seasonal adjusted annual rate of sales is just 759,000. 

From Census: For Sale Inventory and Months’ Supply The seasonally adjusted estimate of new houses for sale at the end of September was 435,000. This represents a supply of 6.9 months at the current sales rate.

Here’s my model for understanding the builders.

  • When supply is 4.3 months and below, this is an excellent market for builders.
  • When supply is 4.4-6.4 months, this is just an OK market for builders. They will build as long as new home sales are growing.
  • When supply is over 6.5 months, the builders will pause construction. 

We have been able to build more single-family housing, and single-family permits have been slowly rising, which offsets the multifamily weakness that should be here for some time now, as we can see in the chart below. The monthly supply of new homes is falling from the recent peak but needs more work to return to pre-COVID-19 levels.

One of the things I like to do is break down the monthly supply data into subcategories. We have a lot of homes in the pipeline that still need to get built; this is why the builders are making deals. As we see in the monthly supply data, they had a spike last year and are forced to create incentives to move homes. Here’s how the supply breaks down: 

  • 1.4 months of the supply are homes completed and ready for sale — about 75,000 homes.
  • 4.0 months of the supply are homes that are still under construction — about 255,000 homes
  • 1.7  months of the supply are homes that haven’t been started yet — about 105,000 homes

75,000 new homes ready for sale

One of the data lines that very few people know about, but is critical to the inventory story in the U.S., is how many new homes are built and ready for sale! It’s not a lot now, nor has it ever been a lot. Even during the housing bubble crash years, we never got above 200,000. Most active listings’ inventory growth comes from the existing home sales market.

Keep things simple with today’s new home sales report: the builders confidence has been falling for months as rates have risen; many builders can’t pay down rates, and the ones that do are taking a hit on their profit margins.

However, the builders’ profit margins are still higher today than in the previous decade. This is the first time this century that we have seen a noticeable gap between purchase application data and new homes because, as we all know, the builders are singing: Baby, it’s cold outside…come inside for lower rates.

Source: housingwire.com