Cool Tools News Spool

Tag: Freddie Mac

  • Freddie Mac predicts uncertain future for housing

    For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

    by G. Steven Bray

    Freddie Mac recently released its housing outlook for 2017, and I think the key word is uncertainty. While the economy remains mildly expansionary, we’re faced with a plethora of unknowns that make it likely that last year, which was the best for housing in a decade, will be a high point.

    The most obvious source of uncertainty is the election result. The new administration has promised lower taxes and regulation, increased infrastructure spending, and tougher trade policies, but the details are yet to be determined. Some economists have suggested the policies will be inflationary. Other have suggested recessionary. I suggest it’s way too early to tell.

    Freddie economists note that the proposed lower tax rates may reduce the appeal of the mortgage interest deduction (MID) and suggest that could impact housing demand. I think that’s a stretch. I’ve never met a homebuyer who based his decision on the MID.

    Another area of uncertainty for TX is foreign investment in real estate. 10% of US foreign residential purchases occurred in TX. Foreign investment is impacted by currency fluctuations and capital controls of other countries, among other factors, and those are starting to limit the availability of foreign investment capital.

    Finally, Freddie economists suggest that mortgage rates, which start this year higher than last year, will continue to rise. However, as they note, global events, such as the Brexit, helped contain US rates last year. The calendar is loaded with potential surprises this year, and they could keep a lid of US rates again.

  • Use your real estate commission as your down payment

    For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

    by G. Steven Bray

    Today’s news spool is going to cover a couple loan guideline changes that may help you in your business.

    As I reported several weeks ago, FHA is changing its treatment of deferred student loans to be consistent with other loan programs. If a student loan appears on a homebuyer’s credit report without a corresponding payment, we can use 1% of the loan balance as the effective payment for qualifying the buyer. Previously, we had to use 2% of the balance. FHA originally said the effective date for the change was 6/30, but it recently clarified to say that lenders MUST start using the lower percentage on 6/30. We can (and we will) start using the lower amount immediately.

    If you’re buying a home, and you’re representing yourself in the transaction, Fannie Mae and Freddie Mac will allow you to use your commission on the transaction for a conventional loan.

    Fannie is a bit more restrictive. While you can use the commission to cover closing costs, you have to demonstrate sufficient funds to close not counting the commission, and your commission counts towards the limit on interested-party contributions. This is the percentage (like 6%) we quote you when you ask, “How much can the seller contribute towards closing costs.”

    With Freddie, the commission can count towards your funds to close. Additionally, you can use your commission to cover closing costs and down payment, and it does not count towards the contribution limit. Thus, you can get the seller to contribute the max towards your closing costs and use your commission to cover the rest.

  • Freddie Mac housing index shows recovery continues

    For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

    by G. Steven Bray

    Freddie Mac’s MiMi index, or Multi Indicator Market Index, continues to point to a recovering housing market. The latest index covers the spring buying season, and shows the nationwide index increased to 79.2. While this value still indicates a borderline weak housing market, it is a sizable improvement from last year and from the previous month. By comparison, the index high was 121.16 in 2006.

    More than half the states have MiMi values in the stable range of 80 to 120. Texas ranks 7th nationwide with a MiMi value of 87.6. This represents a 5% improvement over last year.

    Of Texas metros, Austin leads the pack and remains in the top 5 nationally with a value of 92.8. Values for other TX metros include DFW at 83.9, El Paso at 84.9, Houston at 86.7, The Valley at 89.1, and San Antonio at 86.5.

    The biggest drag on MiMi values for TX metros is the number of purchase applications. This probably is more indicative of tight supply than market weakness. Thus, I think it’s safe to say the housing markets may be stronger than indicated by their MiMi scores.

  • Healthiest housing market since 2001

    For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

    by G. Steven Bray

    I read an interesting report from Nationwide Insurance’s economics group this past week that claimed the housing market is the healthiest it’s been since 2001. Let’s take a look at how they came to this conclusion.

    The report’s authors calculate a value they call the Leading Index of Healthy Housing Markets (LIHHM) using employment, demographic, mortgage, and home price data for the national and individual housing markets. They claim a market’s score, which ranges from 75 to 125, indicates the relative health of that market. A score of 100 is neutral, and scores above 100 indicates a healthy market.

    The current value for the national market is 109.8, which the authors conclude indicates a housing market unlikely to enter another downturn soon. Further, they find that only two of 373 metro areas have negative scores at this time. Positive contributors to the index included employment gains and higher home prices. In addition, they cite a pick-up in household formation.

    Interestingly, these results are a bit at odds with Freddie Mac’s Multi-Indictor Market Index (MIMI). The national MIMI score in Jan was 74.6, a level Freddie says indicates a weak housing market.

    Regardless of which report you believe, what may be more interesting is the trend, and both indices show year-over-year improvement.

    Click here for the Nationwide Insurance report.

    Click here for the Freddie Mac report.

  • Fannie/Freddie bringing back 3% down mortgage

    For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

    by G. Steven Bray

    I guess FHFA Director Mel Watt was serious about allowing lower down payments. Fannie Mae announced today it immediately will start buying mortgage loans with down payments as low as 3%. I haven’t heard all the details yet, but let me tell you what I have seen.

    First, I don’t know of any lenders yet that are offering the loan program. That may take a couple weeks. And I wouldn’t be surprised to see significant credit overlays to make qualifying a little harder that what I’m going to summarize below. Lenders still are skittish of buy backs and figure homebuyers with little skin in the game are more likely to default.

    But let’s assume lenders step up. Fannie says it will accept credit scores as low as 620, but the program is only available to first-time homebuyers, being those who haven’t owned a primary residence in the past 3 years. I understand the program has income limits, but I don’t have details at this time. And, of course, the program requires mortgage insurance, but that shouldn’t be a problem as several PMI companies say they’re willing to insure the loans.

    Freddie also has announced it will resurrect a 3% down program, but it won’t start until 3/23. Freddie’s program will be more restrictive. It will limit the program to those who never have owned a home and will require homebuyer counseling. It also may require higher credit scores.

    Follow my videos for further details on the programs and for information about lender adoption.

  • Will we see lower down payment conventional loans?

    For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

  • New Freddie tool predicts housing market performance

    Click here for a link to the Freddie Mac Multi-Indicator Market Index tool.

    For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

  • Senate considers the future of Fannie and Freddie

    For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.