FHFA New Credit Score Rules

 The Federal Housing Finance Agency will have new guidelines for credit score models for lenders. These new guidelines will have a positive impact on many that were not approved for a loan in the past. Freddie Mac and Fannie Mae will be given the new guidelines to follow when determining if they can accept a mortgage from a lender.

Money is freed up by Freddie Mac and Fannie Mae when the agencies purchase mortgages from lenders. The lenders will then have more money freed to make home loans. Currently, Freddie Mac and Fannie Mae can only purchase conventional loans that meet certain criteria. These scores and criteria are determined by FHFA and mortgage lenders have been using FICO scores 2, 4, and 5 (these are considered outdated models).

“The mortgage industry didn’t have a choice in the matter. They were essentially forced to use older FICO scores by the FHFA. All other types of lenders have long since moved on from those legacy scoring models,” explains credit expert John Ulzheimer.

Under the new guidelines, lenders can use more up-to-date FICO scores, FICO 10T, and VantageScore. VantageScore is FICO’s direct competitor. Lenders will now only have to proved credit reports for two of the three major credit bureaus. FICO 10T and VantageScore being picked up by the new guidelines is the biggest change in a positive way.

These two sources will gather data from more sources included payments for rent, utilities or cell phone service. VantageScore also requires a shorter credit history, FICO has a six month-minimum for credit history. The source also has scores that show up for 37 million Americans that do not show up under FICO. Surprisingly these that show up only on VantageScore, more than 13 million have a credit score above 620.

Using the updated credit score modeling will also help with the racial homeownership gap. According to the Urban Institute around 53 million Americans do not have FICO scores (when using the older scoring models). Out of these 53 million, 29.5% of Black households and 27.3% of Hispanic households compared to only 16.7% of white households.

If you are in the market for a new home, check with lenders to see when you can take advantage of this updated policy. Meanwhile, choose a Realtor who can help you with the homebuying process.

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Appraisal System Updating Is a Top Priority to Lenders

 

The hot housing market has changed many things and one thing lenders want to see is appraisal modernization. A survey published in May by Fannie Mae, found that mortgage lenders see value in appraisal modernization, specifically in the implementation of non-traditional appraisals and inspection-based appraisal waivers. This was based on a survey conducted on senior mortgage executives. The survey concluded that 188 out of 200 (94%) feel that appraisal modernization will help reduce the loan origination cycle time.

The appraisal process time is one of the biggest obstacles the mortgage industry is facing. Right now, it is causing huge delays and higher costs. There are also fewer appraisers who are experienced in understanding more complex collateral assignments. Currently, the appraisers cannot get to all the houses that need to be appraised. Appraisal costs are going up due to the impact this has on the industry. The modernization will also amplify appraisal capacity and lower borrowing costs.

The survey also shed light on some other issues that are even more important for the lending industry. A digital portal for consumer loan applications was number one or two on many lenders' lists. There were also concerns mentioned about roadblocks that challenged adapting new modernization tools. These were speed or lack of speed, of integrating these tools with loan originating systems.

The pandemic also has played a hand in the issues the industry is facing when it comes to appraisals. Hybrid appraisals are now allowed under the FHFA (Federal Housing Financing Agency). Appraisers can now conduct them remotely using public records (tax appraisals and listings) for purchase loans. HUD (Department of Housing and Urban Development) extended its timeline on using hybrid appraisals because of the impact from the pandemic.

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The Impact Current Mortgage Rates Have on Home Purchases

 

The is a relationship between mortgage rates and purchasing power. The lower the mortgage rate, the higher your purchase power. Rising mortgage rates will increase your monthly payments.

According to Freddie Mac, the average 30-year fixed mortgage rate is above 5%. Professionals in the industry are saying that they are more than likely going up. If you are thinking of purchasing a home, now is the time before your purchasing power is too impacted.

Your mortgage rate will determine how much your monthly payments will be which in turn shows how much home you can afford. For example, if your monthly mortgage payment is between $2,100 - $2,200 with the current mortgage rate, you would be able to purchase a home for over $400,000. If the mortgage rates were to increase to 5.75% you would be looking at a house between $360,000 to $380,000.

"Get preapproved with where rates are today, but also consider what would happen if rates were to go up, say another quarter of a point, . . . Know what that would do to your monthly costs and how comfortable you are with that, so that if rates do move higher, you already know how you need to adjust in response," says Danielle Hale, Chief Economist for realtor.com.

If you are ready to purchase, find a trusted Realtor and mortgage lender who can help you through the buying process. Remember, mortgage rates are predicted to be rising, which will impact your purchasing power.

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Several To Follow Tips For Single Homebuyers

 Just because you are single doesn't mean owning a home is not a reality. In fact, Freddie Mac reported that 28% of all households are sole-person. That is roughly 36.1 million and is still increasing.

“Our calculation suggests that there will be an additional 5 million sole-person households in the United States by the next decade. This means 42% of the household growth will be contributed by sole-person households," concludes Freddi Mac.

Here are several tips to follow if you are single and want to make the dream of homeownership come true.

1. Know Your Credit Score

When you purchase a home solo, you will only have your credit score to depend on. In order to qualify for a loan, you will need stable finances and good credit history. According to Investopedia, since lenders are only looking at one score it needs to be in tip-top shape. They recommend reviewing your credit report before starting the lending process.

Knowing where your credit score falls will help your decision on if and when you should take that leap of faith in purchasing. If your credit is not so good, focus on improving it before starting the home buying process.

2. Explore Down Payment Options

A down payment is another factor to consider. If you do not have enough saved up, there are down payment programs that can help you determine how much and how to save for a home. A loan officer can help you determine which loan program best suits your personal financial needs.

3. Think About Your Future Home and Your Needs

There are so many homes to choose from when it comes to styles and options. Spend time thinking about what type of home will fit your lifestyle. Here are some questions to think about when considering what type is best for you. Do you want a short commute to and from work? Do you want a big yard for a pet or space for outdoor entertaining? Do you want an extra bedroom for guests? Do you want a home office due to working from home? Do you want a condo with lower maintenance than a detached home?

The process seems daunting and can be a challenge but with a Realtor on your side, it becomes a much easier process. A professional sales agent can help you make the best choice for the right price.

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High-Performance Home Appraisal Guide

Photo by John Tekeridis from Pexels

  

High-performance homes are becoming more and more popular, but is the market up to date with appraisals for these specialty homes? Builders, sales agents and homeowners can take several steps to ensure local appraisers, lenders and the general public about what makes your durable, energy-efficient, healthier home stand out from the competition.

Step 1:

Make sure to highlight the home's high-performance features when marketing the home. This can be done by advertising, educating, teaching, highlighting and displaying these high-performance features.

When advertising, make sure to include the features that make the home more comfortable, energy-efficient and water-efficient. Point out how these will help lower utility bills. For tips on verbiage to use or ideas on what to highlight, check out Home Performance Counts.

Educate and teach others about the results of an Energy Rating Index (ERI) which includes the Home Energy Rating System (HERS) score or Home Energy Score (HES). All sales agents and sales staff should know what an ERI, HERS and/or HES rating means and how to articulate the ratings to consumers and others in the industry.

Features such as independently verified green home certifications should be highlighted in the marketing materials. The National Green Building Standard is a great example that should be put on flyers and web pages. During open houses, display the ERI, HERS or HES ratings and an explanation of the potential energy savings. Also, display certification plaques that show the home is approved by the National Green Building Standard.

Step 2:

Buyers should choose a lender who is familiar with high-performance homes. Local mortgage lenders who have a separate appraisal panel of trained professionals with experience valuing high-performance homes are critical to get the value your above-code home deserves. It is important for a lender to choose an appraiser that is on the Appraisal Institute’s green registry. This way both the lender and appraiser will not be hesitant to appraise the home higher for its energy-efficient upgrades.

Step 3:

The sales contract for a high-performance home should include Residential Green and Energy Efficient Addendum. What this means is the high-performance features that are behind the walls and cannot be seen will be included. This documentation will help the appraiser fully understand the higher price when it comes to an above-code home.

Step 4:

Just like interviewing a sales agent, interview the appraiser before you choose them to appraise the home. Not only ask about their appraisal experience but also ask if they are familiar with ERI scores and HERS ratings. Find out what classes or courses they have taken on high-performance valuation.  The Federal Housing Administration, the U.S. Department of Veterans Affairs, Fannie Mae and Freddie Mac all require that the appraiser has requisite knowledge prior to accepting the assignment, and the only way to enforce that is to ask about their knowledge and experience upfront.

Including these steps in the appraisal process will ensure a high-performance home will be given the right amount the home is worth. Choosing a sales agent who is versed in energy-efficient homes will help buyers with the home buying process.

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Affordable Housing Funds Receive $1 Billion

 The current housing market is on fire and will have even more support with the $1.09 billion disbursements for Fannie Mae and Freddie Mac. The Federal Housing Finance Agency (FHFA) has never authorized such a large amount. In fact, this is double what was given last year.

The Federal Housing Finance Agency (FHFA) was established in 2008. The goal for the agency is to make sure that regulated institutions make good on their commitment. It is also there for a safe place for liquidity and funding for the housing finance market throughout the economic cycle.

Along with the agency, as part of the Housing and Economic Recovery Act (HERA) of 2008, congress created the Housing Trust Fund (HTF) and Capital Magnet Fund (CMF). Their purpose is to support affordable housing. HERA directed the Enterprises to set aside 4.2 basis points of each dollar of unpaid principal balance of its total new business purchases and then allocate those reserved funds following each fiscal year for. The funding is divided with the HTF receiving 65% and the CMF receiving 35%.For 2021 more than $700 million will be given to the U.S. Department of Housing and Urban Development (HUD) and the Department of the Treasury for the CMF will receive $383 million.

This is good news for the housing industry altogether. Now is a great time to purchase a home if you are in the market or thinking of buying a home.

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Third Week in a Row of Record Low Mortgage Rates

Freddie Mac reported the first week in July,  a 3.03% decline in the average rate on a 30-year fixed-rate mortgage. This was a dip from 3.07% the week prior and 3.13% just two weeks before.  In fact, the 30-year fixed-rate averaged around 3.75% this time last year. The 15-year fixed-rate mortgage

reported at 2.51% at the beginning of July, down from 2.56% the week ending June and 3.75% this time last year.

Since the inception of Freddie Mac’s reporting in 1971, the beginning of July 2020 ranked the lowest levels they have seen to date making this the third consecutive week of record lows. The Primary Mortgage Market Survey reported the U.S. Weekly averages as of July 16, 2020, were 2.98% for a 30-year fixed-rate mortgage, 2.48% for a 15-year fixed-rate mortgage and 3.06% for a 5/1-year ARM. Freddi Mac reports that “these low rates have been capitalized into asset prices in support of the financial markets.”

Lower rates are making homes for sale more affordable. Homebuyers are ready to buy as the shut-in orders are lifted. The National Association of Realtors released data showing a jump of 44.3 percent in May of pending home sales. In June home purchases rose 20.7% from the decrease from the pandemic. According to the NAR’s existing homes rose last month to a seasonally adjusted annual rate of 4.72 million.

“The summer is heating up as record-low mortgage rates continue to spur homebuyer demand,” said Sam Khater, Freddie Mac’s Chief Economist.

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Home Loans On The Increase For Six Consecutive Weeks

As the pandemic stay-at-home orders are now being lifted around the United States, more and more people are looking to purchase a home. The mortgage rates have now dropped even more since the pandemic hit at the beginning of 2020.

The 10-year Treasury yield has consistently lead the mortgage rates but this has not been the case since the coronavirus has produced an economic downturn. The unpredictable economy has fueled

unpredictable mortgage rates. On a good note, the parallel between mortgage rates and bond yields is improving.

“Financial volatility has notably decreased in recent weeks, resulting in steady improvements in the stock market, and more predictable — albeit modest — movements in bond markets,” Zillow ZG, 1.50% economist Matthew Speakman said. “The eased strains in financial markets have also resulted in mortgage rates remaining fairly flat in the last couple of weeks and are generally calmer following the turmoil experienced in the early days of the coronavirus outbreak.”

The end of May has shown “the lowest level since Freddie Mac began tracking this data starting in 1971.” Freddie Mac reported the week ending May 28 the average 30-year fixed-rate was 3.15%, a drop of nine basis points from the week before. This will make the third report in a row that has shown historical low-interest rates. The 15-year fixed-rate also dropped to 2.62% which was a drop in eight basis points.

Homebuyers are ready to buy and are looking to purchase a home in the next several months. According to the Mortgage Bankers Association, the amount of mortgage applications has been on the rise making the volume of purchase loans up 54% from early spring. This is a great time to purchase a home and sales should see a rebound from the pandemic.

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A Busy Mortgage Market for the Fall

Freddie Mac reported a small bump up in the 30-year rate in their last data released, however it is predicted that the rates will come down this fall. According to the latest data, the 30-year fixed-rate average is now at 3.65 percent with an average 0.6 point and the 15-year fixed-rate is now at 3.14 percent with an average 0.5 point.

Many lackluster economic views are putting pressure on the mortgage rates to fall. Bankrate.com reported that close to three-quarters of economic experts predict the rates will fall this week. The U.S.

Treasuries rose and yields have fallen. The 10-year bond dropped to 1.6 percent at the beginning of Oct. 2019 and just two weeks ago, it was reported at 1.8 percent. When U.S. bonds dip, the mortgage rates usually follow.

“Fueled by low rates and solid home-buyer demand, this fall’s mortgage market continues to be busy,” said Bob Broeksmit, MBA president and CEO. “Mortgage applications for both refinances and home purchases increased last week, and the year-over-year gains were even more impressive. With rates expected to stay around 4 percent, overall activity in the final three months of 2019 should stay solidly above last year’s levels, when borrowing costs were much higher.”

The Mortgage Bankers Association reported that mortgage applications are on the rise. Their report shows an 8.1 percent increase from the previous week’s report. The report also relayed a 14 percent jump in the refinance index and a 1 percent jump in the purchase index.

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National Mortgage Rates Are at a Near 3-Year Low

According to Sam Khater, Freddie Mac’s chief economist, the lower mortgage rates are getting positive results from home buyers across the nation. Mortgage applications for home purchases are rising steadily and have seen the highest year-over-year change since the fall of 2017.

Here is a look at the national averages with mortgage rates Freddie Mac reported for the week ending July 25, 2019:

The 30-year fixed rate mortgages averaged 3.75% with an average 0.5 point. This was a dip from the week prior which was at an average of 3.81%. July of 2018 reported 30-year rates averaged 4.54%.

The 15-year fixed mortgages reported as the following. They averaged 3.18%, with an average 0.5 point. Again, this was a lower than last week’s which reported 3.23% average. This time last year the 15-year rates averaged 4.02%.

The average 5-year hybrid adjustable-rate mortgages was 3.47%, with an average 0.4 point. Another fall from last week’s 3.48% average. A year ago the 5-year hybrid adjustable-rate mortgages (ARMs) averaged 3.87%

“While the improvement has yet to impact home sales, there’s a clear firming of purchase demand that should translate into higher home sales in the second half of this year,” Khater says.


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Job Growth and Lower Mortgage Rates Boosting Single-Family Housing

This year the housing industry has been on an uphill victory. According to NAHB Chief Economist Robert Dietz newsletter, Eye on the Economy, there are two main factors that are helping the single-family housing sector.

Job growth has been on a positive path in 2019. It is reported that there is a historically low unemployment rate at 3.7%. In June 2019 there were 224,000 jobs added to the country’s workforce.

The first six month of the year saw an average of 172,000 new jobs per month.

In the residential construction industry alone the increase was 21,000 jobs in June. The average for the first six month of the year in residential construction stands at 5,800 per month. Since the recession, there have been a total of 923,800 positions added in residential construction.

Also to aid in the booming housing industry is lower mortgage rates. Freddie Mac reports that the averaging 30-year fixed-rate is 3.8%. This is the fifth straight month that mortgage rates have fallen making this one of the best times to finance a home.

A recent industry survey shows that the mortgage loan applications for both purchase and refinance surged in the first week of June 2019.

In the most recent survey put out by the Freddie Mac’s research team it states that this “will help sustain the momentum in the housing market in 2019.”

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