How mortgage, housing industries tackled affordability in 2022
December 29, 2022 12:26 PM
This past year started much like the way 2021 ended, with home prices continuing to surge, further limiting what the average American could afford.
And despite some recent price moderation, the surge in housing costs over nearly three years has made the affordability issueeven more daunting than it already was prior to the pandemic.
"You're not in the bidding wars that we were a year ago, but it's not like people are dropping their prices significantly," said Jeff Taylor, managing director at diligence, compliance and technology services provider Mphasis Digital Risk.
With fewer homeowners opting to move under current economic conditions, inventory has opened up slowly, but inflation and elevated rates have kept things quite challenging for today's shoppers.
"The median household income in most markets can now no longer afford a median home price and I think that's really the result of a prolonged period of rising home prices, now conflating with higher interest rates," said Geoffrey Cooper, vice president of product development at Mortgage Guaranty Insurance Corporation.
Mortgage and housing industries recognize the need to provide more affordable options, particularly as they try to expand available opportunities for minority communities and shrink the homeownership gap between the Black and white populations.
Here are some of the trends National Mortgage News covered regarding affordability trends over the past year, which should provide clues about lies ahead in 2023.
And despite some recent price moderation, the surge in housing costs over nearly three years has made the affordability issue
"You're not in the bidding wars that we were a year ago, but it's not like people are dropping their prices significantly," said Jeff Taylor, managing director at diligence, compliance and technology services provider Mphasis Digital Risk.
With fewer homeowners opting to move under current economic conditions, inventory has opened up slowly, but inflation and elevated rates have kept things quite challenging for today's shoppers.
"The median household income in most markets can now no longer afford a median home price and I think that's really the result of a prolonged period of rising home prices, now conflating with higher interest rates," said Geoffrey Cooper, vice president of product development at Mortgage Guaranty Insurance Corporation.
Mortgage and housing industries recognize the need to provide more affordable options, particularly as they try to expand available opportunities for minority communities and shrink the homeownership gap between the Black and white populations.
Here are some of the trends National Mortgage News covered regarding affordability trends over the past year, which should provide clues about lies ahead in 2023.
Special-purpose credit programs move into the spotlight
After the Department of Housing and Urban Development explicitly stated that special-purpose credit programs do not violate fair lending practices at the end of 2021, the housing industry saw the emergence of pilot programs aimed at increasing investment in underserved minority communities and boosting Black homeownership rates. Fannie Mae, TD Bank, Bank of America and Black-owned Legacy Home Loans were among the institutions introducing SPCPs in 2022, while Freddie Mac announced its intentions to offer one in 2023. In the final week of the year, Rocket Mortgage unveiled its own pilot program.
But it's not a simple process to put one together, which led the Mortgage Bankers Association and National Fair Housing Alliance to introduce a toolkit designed to assist lenders in creating such programs.
Bank of America's process of putting its pilot program together began almost two years ago, said Kathy Cummings, the bank's senior vice president and a fair lending theory, strategy and strategic relationships executive.
"We designed this program to be for the long haul. regardless of where the market goes — excess inventory, low rates, high rates, this is a long game," she said.
"This wasn't designed to be an overnight product. It was designed to help those folks that never envisioned themselves as homeowners."
No two SPCPs are alike, but what may lead to further growth of SPCPs is the assurance that the government-sponsored enterprises would make the sale of loans originated in the programs available on the secondary market. At the Mortgage Bankers Association annual conference in October, Freddie Mac CEO Michael DeVito indicated his agency's willingness to expedite review of newly created SPCPs to ensure they meet the criteria for securitization.
Read more aboutSPCPs here .
But it's not a simple process to put one together, which led the Mortgage Bankers Association and National Fair Housing Alliance to introduce a toolkit designed to assist lenders in creating such programs.
Bank of America's process of putting its pilot program together began almost two years ago, said Kathy Cummings, the bank's senior vice president and a fair lending theory, strategy and strategic relationships executive.
"We designed this program to be for the long haul. regardless of where the market goes — excess inventory, low rates, high rates, this is a long game," she said.
"This wasn't designed to be an overnight product. It was designed to help those folks that never envisioned themselves as homeowners."
No two SPCPs are alike, but what may lead to further growth of SPCPs is the assurance that the government-sponsored enterprises would make the sale of loans originated in the programs available on the secondary market. At the Mortgage Bankers Association annual conference in October, Freddie Mac CEO Michael DeVito indicated his agency's willingness to expedite review of newly created SPCPs to ensure they meet the criteria for securitization.
Read more about
Down payment assistance programs receive more attention
Although down payment assistance funding is not new , more businesses looked at their potential to help consumers get into homes.
"More banks are starting to participate and providing what I call lender-funded down-payment assistance programs," said Michael Innis-Thompson, head of community lending and development at TD Bank.
"The traditional ones have been city, state or government-supported programs, and banks are providing their own programs, which can be coupled with programs that are available in the market."
But borrowers still might not be getting the word, even as brokers began featuring them on their platforms. Now that the refinance boom is over, though, we shouldn't be surprised to see marketing of grants and programs increase, Cooper said.
"There's just more of a focus on how we can help serve the first-time home buyer market."
Read thefeature story on downpayment assistance programs here.
"More banks are starting to participate and providing what I call lender-funded down-payment assistance programs," said Michael Innis-Thompson, head of community lending and development at TD Bank.
"The traditional ones have been city, state or government-supported programs, and banks are providing their own programs, which can be coupled with programs that are available in the market."
But borrowers still might not be getting the word, even as brokers began featuring them on their platforms. Now that the refinance boom is over, though, we shouldn't be surprised to see marketing of grants and programs increase, Cooper said.
"There's just more of a focus on how we can help serve the first-time home buyer market."
Read the
Fannie Mae, Freddie Mac introduce equitable housing plans
Fannie Mae and Freddie Mac have made affordability and increased homeownership opportunities a focal point of their strategies in 2022. Among their many initiatives in 2022 to help more consumers become eligible was to make inclusion of rent payments and other cash-flow measurements in underwriting easier.
In early 2022, both government-sponsored agencies released three-year equitable housing plans to address homeownership disparities. In addition to SPCPs and inclusion of alternative underwriting data, closer examination of appraisal data figures into the plans.
Affordability efforts at the GSEs might also receive a boost with the addition in December of housing expertPriscilla Almodovar as CEO .
Readabout the Fannie Mae and Freddie Mac plans here.
In early 2022, both government-sponsored agencies released three-year equitable housing plans to address homeownership disparities. In addition to SPCPs and inclusion of alternative underwriting data, closer examination of appraisal data figures into the plans.
Affordability efforts at the GSEs might also receive a boost with the addition in December of housing expert
Read
Industry pushes for action on FHA insurance premiums
A reduction in mortgage insurance premiums on Federal Housing Administration-backed loans has been a long-time goal for many in the mortgage industry.
"We keep thinking that they're going to do it, but it hasn't happened yet," Taylor said.
The waiting continues at the end of 2022, but pressure continues to grow, withseveral groups applying ongoing pressure on the agency to cut premiums over the past several months. But any chance of it happening won't arrive until a new federal budget for the current fiscal year is in place, according to FHA Commissioner Julia Gordon.
Learn more aboutefforts to reduce premiums here.
"We keep thinking that they're going to do it, but it hasn't happened yet," Taylor said.
The waiting continues at the end of 2022, but pressure continues to grow, with
Learn more about
FHFA eliminates some fees for certain borrowers
At the Mortgage Bankers Association, Sandra Thompson, director of the Federal Housing Finance Agency, announced the elimination of several fees that would provide immediate benefits for underserved borrowers, as well as those choosing some of Fannie Mae's and Freddie Mac's affordable-lending products.
First-time homebuyers at or below 100% of area median income and below 120% AMI in high-cost areas will qualify, as well as borrowers who opt for HomeReady and Home Possible loans, which are among Fannie Mae and Freddie Mac's most affordable lending products.
The FHFA said one in five borrowers would likely be eligible for the fee waivers.
Read more aboutthe announcement here.
First-time homebuyers at or below 100% of area median income and below 120% AMI in high-cost areas will qualify, as well as borrowers who opt for HomeReady and Home Possible loans, which are among Fannie Mae and Freddie Mac's most affordable lending products.
The FHFA said one in five borrowers would likely be eligible for the fee waivers.
Read more about
New assistance programs emerge
The rapid and sudden surge in interest rates in the first half of the year provided a challenge to housing agencies and administrators of home buyer assistance programs, like the one OceanFirst Bank introduced in the spring.
"We were running some Excel spreadsheets here and working with a couple of nonprofits doing development, and thinking, 'Well, how can these people qualify? Are they being priced out now?'" said Janet Bossi, director of consumer and residential lending at the Toms River, New Jersey-based bank.
Despite the sudden market shift brought on by rising rates, proposals and new funding programs that would assist first-time buyers came in, usually introducedon the state or local level.
Readhere about one such program.
"We were running some Excel spreadsheets here and working with a couple of nonprofits doing development, and thinking, 'Well, how can these people qualify? Are they being priced out now?'" said Janet Bossi, director of consumer and residential lending at the Toms River, New Jersey-based bank.
Despite the sudden market shift brought on by rising rates, proposals and new funding programs that would assist first-time buyers came in, usually introduced
Read