|Tax Reform & Regulatory Relief: Bookmarks of Economic Growth Agenda
The housing industry has been on a roller-coaster ride over the past few weeks as key legislative proposals affecting the housing market have been moving through Congress. As the House and Senate conferees are working rapidly to finalize sweeping tax reform legislation, regulatory reform, although receiving far less coverage, has also seen recent action on Capitol Hill. Both initiatives are the cornerstone of the Trump administration’s agenda for unleashing economic growth and opportunity, and both spark a moderate level of optimism in the purchase and rental housing markets, the mortgage industry and the development sector.
“Just the speculation of the potential impact of tax reform has contributed to recent economic growth,” says Collingwood Group Chair Tim Rood. “At the end of the day, buying a home is an emotional decision as much as it is as a financial decision. If the tax bill makes people wealthier (through tax savings), improves the job market (by increasing consumer confidence), and owning a home remains financially competitive with renting, then the housing market will be fine. Macroeconomics trumps (no pun intended) tax policy and housing policy every time.”
With an “agreement in principle” announced Wednesday, and nearing the finish line expected by the middle of next week, the conference committee’s current version of the Tax Cuts and Jobs Act (TCJA) is expected to support a stronger housing market. The details, expected any day, are reported to include several provisions considered to be acceptable, even promising, to the industry.
Favorable to housing development, the bill repeals the corporate alternative minimum tax. Also included, an increase in the standard deduction from $12,700 to $24,000 for married couples and from $6,350 to $12,000 for single filers, thus supporting greater savings for a down payment or to ease renter cost burden.
The proposed scaling back of the mortgage interest deduction splits the difference between the $500,000 House limit and the $1 million Senate cap, allowing homeowners to deduct the interest on up to $750,000 in mortgage debt. Critical to maintaining the support of Sen. Susan Collins (R-Maine), a recent revision to allow for the deduction of property taxes up to $10,000 was expanded to also allow the inclusion of state and local income or sales taxes.
The future of tax-exempt private activity bonds (PAB) still remains uncertain, but trade associations representing the development finance industry, including affordable single- and multifamily housing, hospitals and airports, are keeping up their fight for this critical financing tool. PABs were preserved in the Senate, scrapped in the House, but as a key source of infrastructure financing may have a lifeline.
Recent activity on the regulatory reform/relief front has also provided reason for optimism in the mortgage industry and for consumers. On Dec. 5, the Senate Banking Committee approved the Economic Growth, Regulatory Relief and Consumer Protection Act of 2017 (S. 2155), bipartisan legislation focused on rolling back or eliminating key parts of Dodd-Frank that have contributed to challenging credit conditions.
With nearly 20 co-sponsors on both sides of the aisle, the bill’s goal to reduce regulations for community banks and credit unions had broad support. The housing industry, including MBA, NAHB and the Independent Community Bankers of America, also gave broad support, acknowledging the likelihood of the legislation to improve consumer access to mortgage credit. S. 2155 would also raise the threshold for systemically important financial institutions (SIFI) to $250 billion in assets from the current $50 billion level.
Although House Financial Services Committee Chairman Jeb Hensarling’s (R-Texas) much more aggressive Financial CHOICE Act, (H.R. 10), passed the House in June, the lack of bipartisan support has caused this legislation to stall in the Senate.
The Voice of Housing will not publish over the holidays. Voice of Housing will resume publication in the second week of January. We wish you a happy holidays and a happy new year.
Agency Lenders Still Rule the Multifamily Loan Market
Apartment property owners still look to the lending programs of Fannie Mae and Freddie Mac when they need permanent financing.
“Freddie and Fannie are again the number one multifamily lenders,” says Brian Eisendrath, vice chairman, CBRE Capital Markets. “They remain the most competitive on the overall package.”
Despite growing competition from banks, Fannie Mae and Freddie Mac continue to dominate the multifamily lending market. They offer relatively high levels of leverage, low interest rates and certainty of execution to a broad range of borrowers.
Fannie Mae and Freddie Mac held 37 percent ($467 billion) of all mortgages on multifamily properties outstanding as of Sept. 30, 2017, according to data from the Federal Reserve’s Mortgage Debt Outstanding report. In comparison, banks hold 35 percent ($445 billion) of multi-family mortgages.
The agency lending programs attract borrowers with attractive terms. For example, 85 percent of the deals funded by Freddie Mac so far in 2017 have included an interest-only period, in which the borrower paid interest on the loan but not principal, according to analysis from research firm CoStar of the latest data from Freddie Mac’s mortgage portfolio in the second quarter. Their interest rates are also often a few basis points lower than the competition’s.
read more: NREI
Average Down Payment For U.S Home Purchase Reaches High of $76,645
According to ATTOM Data Solutions Q3 2017 U.S. Residential Property Loan Origination Report, the median down payment for single family homes and condos purchased with financing in the third quarter was $20,000, up from $18,161 in the previous quarter and up from $14,400 in Q3 2016 to a new high as far back as data is available, Q1 2000. The average down payment also rose to a high of $76,645 in Q3, 2017.
The loan origination report is derived from publicly recorded mortgages and deeds of trust collected by ATTOM Data Solutions in more than 1,700 counties accounting for more than 87 percent of the U.S. population. Counts and dollar volumes for the two most recent quarters are projected based on available data at the time of the report.
The average down payment of $20,000 was 7.6 percent of the median sales price of $263,000 for financed home purchases in the third quarter, up from 7.1 percent in the previous quarter and up from 6.1 percent in Q3 2016 to the highest level since Q3 2013 — a four-year high.
“Buying a home has become a full-contact sport in many markets across the country, and buyers with the beefiest down payments — not to mention all-cash buyers — are often able to muscle out those with scrawnier savings,” said Daren Blomquist, senior vice president with ATTOM Data Solutions. “Despite the increasingly competitive nature of homebuying, the number of residential property purchase loans nationwide increased to a 10-year high in the third quarter.”
read more: World Property Journal
15-Month High for Ginnie’s HMBS Issuance
Although overall issuance eased at the Government National Mortgage Association, issuance of reverse mortgage securities was the highest it’s been in 15 months.
As of Nov. 30, there were $1.9036 trillion in outstanding mortgage-backed securities at Ginnie Mae, according to monthly operational data released Monday.
The Washington-based organization’s book of business continued to grow from $1.8941 trillion one month earlier and $1.7506 trillion one year earlier.
Last month’s total consisted of $0.1077 trillion in multifamily pools and $1.7959 trillion in residential MBS. The residential portion included $0.0533 trillion in jumbo MBS and $0.0550 trillion in home-equity conversion mortgage MBS.
The data indicate that $39.201 billion in MBS were issued on behalf of the government-owned corporation last month. Business declined from $40.140 billion during October and $48.949 billion in November 2016.
read more: Mortgage Daily
Homeowners and Appraisers More Aligned Than Ever
Homeowners and appraisers perspectives of home values are almost in sync, according to Quicken Loans’ National Home Price Perception Index (HPPI) released Tuesday. However, homeowners, on average, have a higher opinion of their home values than appraisers do.
Although the HPPI reports the average appraised values are merely 0.67 percent lower than the average owners’ estimates in November — this represents the narrowest gap in 2017. In addition, November is also the sixth consecutive month the margin between the two values has narrowed.
According to Bill Banfield, Quicken Loans EVP of Capital Markets, it’s encouraging to see the opinions from homeowners and appraisers more aligned on a national level.
“Appraisals are one of the most important data points when applying for a mortgage,” Banfield said. “If an appraisal is lower than expected when refinancing, the homeowner will need to bring more funds to closing, or might even need the mortgage to be restructured. The more homeowners and appraisers agree, the smoother the process is.”
read more: M Report
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