The House Financial Services Committee postponed a vote on H.R. 2445 on Wednesday, a bill that would fix the so-called QM Patch that’s set to expire in early 2021.

“We see postponement as disappointing as ensuring lenders can rely on GSE underwriting systems is key to keeping credit box from shrinking,” Cowen Washington Research Group said in a note to clients on Friday.

The bill, which may be considered at a future date, gives originators the option of either relying on Appendix Q in the Qualified Mortgage rule to determine a borrower’s debt-to-income ratio or on standards set by the Federal Housing Finance Agency.

“This did not get a vote though we believe it is still likely to come up for consideration later this year or early next year,” Cowen said in the note. “There is simply no reason why this bill should run into partisan opposition and every reason why consumer groups and business groups should support it.”

The Qualified Mortgage rule issued in the wake of the financial crisis has pages of limits, known as Appendix Q, on when income can count and when it must be excluded, Cowen said. It also details which debts count and which are excluded.

“Our view has long been that if forced to rely solely on Appendix Q that lenders would shrink the credit box for fear that small errors could result in mortgages losing QM status,” Cowen said. “This is why we described the bill as a de facto extension of the QM Patch.”

The QM Patch, which expires in January 2021, permits loans with debt-to-income ratios above 43% to get QM protections such as the “safe harbor” provision that makes it harder for lenders to be sued.

“We continue to believe that giving originators the ability to rely on the automated underwriting systems rather than having to interpret Appendix Q is critical for credit availability,” Cowen said. “Appendix Q is complex with many pages on when income counts and when it does not count.

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Source: HousingWire Magazine

A survey by the National Association of Homebuilders this fall revealed that 80% of American households now believe the nation is suffering from a housing affordability crisis. 

Even more recent, a report last week by the National Association of Realtors revealed that more than 30% of first-time homebuyers used down payment help from family and friends.

Across the housing industry, experts are pointing to new inventory concerns. Economic research consultancy Capital Economics echoed these sentiments in its latest report.

“With volumes low, builders have concentrated on more expensive, higher-margin homes,” the report stated. “By the end of 2017, just 40% of new homes sold for under $300,000. That compares to a share of around 65% in early 2007, when overall house prices were only 7% lower.”

But change may be on the horizon. Economists at Capital Economics are anticipating a rise in new homes sold for under $300,000, from under 50% currently to about 55% by the end of 2020. According to the report, this would boost overall housing starts to 950,000 annualized.

“Tight supply of affordable homes, and a relatively large increase in their price, are encouraging builders back to the starter home sector,” the report said.

However, the report goes on to add, “a slowing economy and tighter credit conditions rule out a substantial shift to cheaper homes.”

For first-time homebuyers, this would be a welcome change. As Millennials continue to enter the housing market and Gen Z joins as well, the lack of affordable homes has been a strain on their homebuying prospects. With both generations battling an unprecedented amount of student loan debt, a comeback in starter homes would create a better chance at homeownership. 

“Admittedly, credit conditions have seen some mild tightening over the past year,” the report states. “But they are a lot more favorable compared to the post-crisis environment. Furthermore, tight supply conditions have led to relatively larger price gains for cheaper homes.”

Of course, a cheaper home could mean sacrificing some square footage.  

“Indeed, new homes have been getting smaller,” Capital Economics reported. “At 2,245 sq.ft. in the second quarter, median floor space for new SF homes was at its lowest since early 2011. Admittedly, smaller homes can be built in costly areas. But the share of new homes sold for under $300,000 hit a three-year high in September. 

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Source: HousingWire Magazine

Green New Deal policies and housing policies are beginning to merge.

Rep. Alexandria Ocasio-Cortez (D-NY) and Senator Bernie Sanders (D-VT), announced yesterday the launch of their “Green New Deal for Public Housing.”

This bill promises $180 billion over 10 years to cut carbon dioxide emissions from public housing across the country.

According to CNBC, roughly 40% of total U.S. energy consumption comes from residential and commercial buildings. The legislation could reduce public housing costs by $97 million per year and cut energy costs by $613 million.

You’re right, @RepAOC. We will ensure a dignified life, with parks, gardens, and community centers, for our public housing residents. We invest $172 billion in retrofits that improve health, safety and comfort—while eliminating all carbon emissions in our public housing. https://t.co/jF04ktTP7G

— Bernie Sanders (@SenSanders) November 14, 2019

“Representative Ocasio-Cortez introduced the Green New Deal for Public Housing Act to establish a prosperous society that provides affordable and modern housing for all,” according to Ocasio-Cortez’s website.

“This legislation serves to train and mobilize the workforce to decarbonize the public housing stock and improve the quality of life for all. It is time that our government invests in our infrastructure, our people, and our future.”

With this promise, solar panels will be added to public housing units as well as other renewable energy resources.

The bill will establish seven federal grant programs to public housing authorities to rehabilitate, upgrade, innovate and transition public housing into zero-carbon homes.

Earlier this year, Ocasio-Cortez and Sen. Ed Markey (D-MA), revealed a Green New Deal resolution, targeting climate change itself.

Sen Elizabeth Warren (D-Mass.) is also a co-sponsor of the housing legislation.

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Source: HousingWire Magazine

Mortgage rates near three-year low are helping to boost homeownership rates for black and Hispanic Americans, the National Association of Home Builders said in a blog post on Friday.

The minority homeownership rate rose to 48.3% in the third quarter, up almost a percentage point from a year earlier, the post said. The 0.9% gain was higher than the 0.4% increase in the overall U.S. homeownership rate, which rose to 64.8%.

“Lower mortgage rates (at a three-year low) and a healthy job market have helped to make homeownership more affordable,” the post said. “These factors are most likely contributing to the recent upticks in the overall and minority homeownership rates.”

The average U.S. rate for a 30-year fixed mortgage declined every month of 2019 until ticking up eight basis points in October. The average was 3.69% last month, rising from a three-year low of 3.61% in September, according to Freddie Mac data. The higher rate seen in October is still more than a percentage point below the 4.83% in October 2018.

Breaking down the minority homeownership rate, the Hispanic rate gained the most in the third quarter, with a 1.6 percentage point increase to 47.9%, NAHB said.

The black homeownership rate posted the second-largest gain, up 0.8 percentage point to 43.3%. It was the largest gain in the black homeownership rate since the third quarter of 2017.

“It is important to note that this quarter’s gain stands in contrast to five out of the six prior quarters, going back to the 1st quarter of 2018, which were marked by significant declines in the black homeownership rate,” NAHB said.

The rate for black Americans fell to 40.6% in 2019’s second quarter, the lowest level ever recorded in the Census Bureau’s quarterly data going back to 1994. It was the lowest rate for black households since the 1950 decennial Census when it was 34.5%.

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Source: HousingWire Magazine

The company says it’s responding to the feedback of consumers who want online options beyond savings products.
Source: American Banker