The first rule of GSE reform: ‘Do no harm’

Posted on September 10, 2018 in Uncategorized | Add Your Voice

The first rule of GSE reform: ‘Do no harm’

Collingwood Group Chairman Tim Rood recently sat down with Inside Mortgage Finance to reflect on the conservatorship of the government-sponsored enterprises (GSEs) 10 years later. As the Trump administration and Congress consider options for housing finance reform, Rood said the first rule should be to “do no harm.”

Instead of calls to wind down Fannie Mae and Freddie Mac, clients of The Collingwood Group, a Situs company, “are celebrating the technology innovations from both GSEs that help reduce contingent liabilities and lower the cost to originate,” Rood said.

To read the complete article from Inside Mortgage Finance, click here.

Rental glut sends chill through the hottest U.S. housing markets

Seattle is known for its hip neighborhoods, soaring home prices, and being home to Inc., the world’s most valuable company. So why is its rental housing market experiencing the most severe slowdown in the U.S.?

Seattle-area median rents didn’t budge in July, after a 5 percent annual increase a year earlier and 10 percent the year before, according to Zillow data on apartments, houses and condos. While that’s the biggest decline among the top 50 largest metropolitan areas, it’s part of a national trend. Rents in Nashville and Portland, Oregon, have actually started falling. In the U.S., rents were up just 0.5 percent in July, the smallest gain for any month since 2012.

“This is something that we first started to see two years ago in New York and D.C.,” Aaron Terrazas, a senior economist at Zillow, said in a phone interview. “A year ago, it was San Francisco and most recently, Seattle and Portland. It’s spreading through what once were the fastest growing rental markets.”

Read more: Bloomberg

Fannie Mae weighs in on the housing market

Housing sentiment moved up for the first time since May, according to the August 2018 Home Purchase Sentiment Index (HPSI), a distillation of consumers’ home purchase sentiment from Fannie Mae’s National Housing Survey. The HPSI was 88 points in August, up 1.5 points month over month, and unchanged year over year.

Fannie Mae notes that fewer survey respondents stated that now is a good time to buy a home, with the number who say now is a good time to buy dropping three percentage points to 21 percent, while the net share of those who say it is a good time to sell a home also dropped three percentage points, to 38 percent. Additionally, according to the survey, one percentage point fewer respondents, now at 38 percent, believe that housing prices will go up in the next 12 months.

“Consumers are attuned to the divergence between the slowing housing market and strong macro economy,” said Doug Duncan, SVP and Chief Economist at Fannie Mae. “Consumers were less optimistic this month about both homebuying and home selling conditions, while perceptions of income growth and confidence about job security are at survey highs. After years of robust home price growth outpacing income growth, consumers face significant housing affordability challenges at the low end of the market.”

Read more: DS News

The new mortgage kings: They’re not banks

One afternoon last spring, a dozen or so employees lined up in front of Freedom Mortgage’s office in Mount Laurel, NJ, to get their picture taken. Clutching helium balloons shaped like dollar signs, they were being honored for the number of mortgages they had sold.

Freedom is nowhere near the size of behemoths like Citigroup or Bank of America; yet last year it originated more mortgages than either of them, some $51.1 billion, according to industry research group Inside Mortgage Finance. It is now the 11th-largest mortgage lender in the U.S., up from No. 78 in 2012.

Its rise points to a bigger shift in the home-lending business to specialized mortgage lenders that fall outside the banking sector. Such nonbanks, critically wounded in the housing crisis, have re-emerged to become the market’s dominant players, with 52% of U.S. mortgage originations, up from 9% in 2009. Six of the 10 biggest U.S. mortgage lenders today are nonbanks, according to the research group.

They symbolize both the healthy reinvention of a mortgage market brought to its knees a decade ago – and how the growth in that market almost exclusively has been in its less-regulated corner.

Read more: Wall Street Journal

Zillow: Housing market to favor homebuyers in 2020

After home prices soared due to a lack of inventory and a recovering economy, over three-quarters of experts believe the shift to a buyer’s housing market should come in two years at the earliest, according to Zillow.

While the tide takes some time to turn, industry trends already signal the coming change. Home value appreciation is decreasing and the latest monthly data showed the percentage of listings with price cuts was up year-over-year at 14.2% nationally.

“The most prominent driving force that would shift the market dynamics would be a nationwide recession. In the previous iteration of the survey, we asked the same group of respondents when they expect the next nationwide downturn to occur, and they all pointed to early 2020. Those two things would coincide,” Aaron Terrazas, senior economist at Zillow, said in an interview.

The deficit of housing inventory has notoriously driven demand and prices. It’s declined on a year-over-year basis for 42 straight months. However, the declines are decelerating.

Read more: National Mortgage News

BoE’s Kohn: U.S. should adopt UK-style bank risk buffers and mortgage curbs

The United States should deploy tools to curb unwise mortgage lending and banks’ excessive risk-taking, similar to those used by the Bank of England, former Federal Reserve Vice Chairman Donald Kohn said last week.

Kohn, who now serves on the Bank of England’s Financial Policy Committee, told a conference in Copenhagen that too many countries failed to place curbs on banks, known as counter-cyclical capital buffers (CCyB), during economic upswings.

“Global financial stability would be better assured … if more jurisdictions, including the U.S., adopted a more active use of the CCyB, making sure that banks and other intermediaries retained enough capital in the upswing now going on to safeguard their ability to deliver essential services at reasonable prices in the next downswing,” he said.

On Thursday Eric Rosengren, president of the Federal Reserve Bank of Boston, recommended triggering the CCyB and said U.S. fiscal and monetary policymakers were ill-prepared to battle a future economic downturn.

Read more: Reuters

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