Some States Offer Incentives for First-Time Homebuyers
Efforts to help potential first-time home buyers save for down payments using special tax-favored accounts have been gaining traction in state legislatures.
Three states passed legislation this year authorizing the accounts: Iowa, Minnesota and Mississippi. Three other states had previously approved them: Colorado, Montana and Virginia.
“Locally driven initiatives and incentives to promote first-time homeownership have a long history of producing qualified borrowers,” says Tim Rood, Chair of the Collingwood Group. “As of August 2017, the first-time homebuyer share of GSE/FHA purchase loans was roughly 57.4 percent, with FHA driving performance with 81.8 percent of its originations going to first-time homebuyers; the need continues for such creative solutions to improve the nation’s stagnant homeownership situation.”
Down payment accounts may be helpful, said Adriann Murawski, state and local government affairs representative with the National Association of Realtors, because rising home prices have made it harder for buyers to come up with the money for them. The association and its state counterparts have actively promoted legislation creating the accounts as a way to help spur homebuying.
A recent report from the Urban Institute found that 53 percent of renters said that they couldn’t afford the down payment to buy a home.
Rules for the accounts vary by state but, in general, the measures allow first-time homebuyers to save for a down payment — and related expenses like closing costs — in dedicated savings accounts. In some states, savers get a tax break for their contributions by deducting the amount they’ve saved that year from their state income tax returns. In others, like Minnesota, the contribution is not deductible. Instead, savers can subtract interest earned on the savings from their taxable income, a less generous approach since because rates for basic savings accounts remain low.
read more: NYT
2017 America’s Rental Housing Report
This Thursday, Dec. 14, the Harvard Joint Center for Housing Studies will release its 2017 America’s Rental Housing report with an event and live webcast from The Newseum in Washington, DC.
Demand for rental housing in the US has grown over the past decade, with a particular increase in demand from older adults and high-income households. Tight rental markets, however, present challenges for low- and moderate-income renters who face rising rents, low vacancy rates, and widespread cost burdens. The center’s 2017 report shows that addressing the challenges facing renters — particularly low-income renters — requires bold leadership and hard choices from both the public and private sectors.
U.S. Sen. Maria Cantwell, D-Wash.
To watch the webcast, visit the HJCHS website on Thursday at 1:00 p.m. EST.
For the Next Housing Crisis, Lessons From the Last One
Could a new study ease the next housing crisis?
When the housing bubble burst in 2008, federal policy makers thought they could limit the economic damage by helping to reduce amounts of principal owed on many mortgages, thus preventing foreclosures — especially for the millions of people who saw the value of their homes fall below the value of their mortgages.
But, according to a new working paper, lowering principal had very little effect on defaults for underwater borrowers. Moreover, it turned out to be a very expensive initiative. The federal government spent about $4.6 billion on principal reduction to prevent foreclosures from 2010 to 2016, but the policy’s impact was so small, each avoided foreclosure ended up costing taxpayers at least $800,000, says Pascal Noel, an assistant professor at University of Chicago Booth School of Business, and co-author of the paper with Peter Ganong, an assistant professor at University of Chicago’s Harris School of Public Policy.
This new research sheds light on what went wrong with the government’s efforts to help underwater borrowers in the 2007-09 recession, which by early 2010 included more than 11 million people or about 24% of residential properties with mortgages, according to Core Logic, a data and analytics company.
“If borrowers’ mortgage balances were much higher than their home value, policy makers and academic researchers worried the borrowers might decide to walk away, ” says Noel. But a more effective policy to help those homeowners and give the economy a boost, he says, might have been to temporarily lower the underwater homeowners’ mortgage payments, freeing up cash flow and thus spurring consumer spending.
read more: WSJ
Housing Industry Applauds FHA Move to Stop Insuring Mortgages with PACE Loans
Last year, several of the housing industry’s largest trade groups voiced concern over the Obama administration’s decision to allow the Federal Housing Administration to begin insuring mortgages that also carry liens created by the Property Assessed Clean Energy program, also called PACE.
A coalition of the groups, which included the Mortgage Bankers Association and the National Association of Realtors, asked FHA and the Department of Housing and Urban Development to reconsider the change.
On Thursday, the Trump administration reversed the Obama administration’s decision on PACE loans and said that FHA will stop insuring mortgages on homes that also carry PACE liens.
Unsurprisingly, the same groups that asked for a change to the PACE rules last year are in favor of the Trump administration’s decision.
“MBA applauds HUD’s announcement and fully supports these reforms. PACE liens pose a real danger to secured lenders and to the MMI fund because they erode the underlying collateral due to their priority lien position in the event of default,” MBA President and CEO David Stevens said in a statement.
read more: Housingwire
What Homebuyers Want
Despite current market challenges, there are some housing attributes a borrower just isn’t willing to give up. In the latest ValueInsured Modern Homebuyer Survey conducted in the last week of October 2017, the survey asked potential homebuyers what they are least willing to give up in a new home.
The first attribute is a nicer home that needs fewer upgrades or renovations — with 31 percent of all first-time and upgrades homebuyers reporting this is the one value they won’t give up.
It makes sense that a newly renovated home would make up the majority of what a borrower wouldn’t sacrifice, especially considering the potential cost of upgrades. One part of the house a borrower should look out for is a newly modeled garage, as the cost to remodel a garage can be high.
According to data from Fixr.com, a provider for cost guides, comparisons and term cheatsheets for hundreds of remodeling, installation and repair projects, the national average to fix up a 600-square-foot two-car garage could cost up to $6,500.
read more: M Report
Fitch: These 4 Things Keep Driving up the Cost of Mortgage Servicing
Fitch Ratings RMBS department recently held a servicer roundtable event at the Hearst headquarters in New York.
At that roundtable, several senior representatives from key RMBS servicers actively participated in perspective and strategy discussions relating to servicer impact on bond performance.
The biggest takeaway for HousingWire readers? The cost of mortgage servicing, at least those collateralized into bonds, keeps rising — a trend not likely to end.
So what keeps driving up the cost of mortgage servicing?
The participants identified the four main areas of pain points (cost-wise) as follows:
- Prioritization of compliance ahead of performance management;
- Contribution of regulation to higher servicing costs;
- Increase in number of states performing servicer reviews;
- Effectiveness of transition from HAMP to proprietary modifications.
And it is that second point, that is the biggest ouch of all.
In an environment of ongoing regulatory scrutiny, servicers said they expect to continue making significant investments in compliance. “There was a general consensus among the servicers that investments in regulatory tracking and monitoring systems have taken priority over areas that can drive improvements in loan performance management,” according to the Fitch write-up of the roundtable.
read more: Housingwire
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