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The Biden Administration Campaign promise to expand affordable housing took a significant step forward when President Joe Biden replaced Mark Calabria, director of the Federal Housing Finance Agency (FHFA) last week – a move that housing experts say has a significant impact on mortgage lending. and housing market will impact.
The FHFA, which serves as the gateway to housing for low- and middle-income buyers, controls more than $ 6.3 trillion in the US mortgage markets. The White House appointed Sandra Thompson as assistant director of the FHFA, which oversees the state-sponsored enterprises (GSE). Fannie Mae and Freddie Mac.
“There is a widespread lack of affordable housing and access to credit, especially in communities of color,” Thompson said in a statement, alluding to the GSE’s role as a facilitator of equal and affordable housing. “It is the duty of the FHFA, through our regulated facilities, to ensure that all Americans have equal access to safe, decent, and affordable housing.”
The move came last week, hours after the US Supreme Court ruled that the president has authority to remove the FHFA director in a case called Collins vs. Yellen. Calabria, appointed head of FHFA by former President Donald Trump, has been vigorous pushing for the end of Fannie and Freddie’s Conservatory, which was supposed to protect GSE’s assets after the recent financial crisis.
With Calabria leaving, the FHFA is expected to realign its conservatory priorities to addressing the growing problems of housing inequality and the significant lack of affordable housing in the US
GSEs need to move to affordable housing
The goals of the FHFA and the GSEs have evolved since the FHFA was founded in 2008.
When the housing market gained a foothold, the FHFA and GSEs served to provide the housing market with liquidity and Support affordable housing for buyers and tenants. The goal was for the GSEs to eventually leave the conservatories – a goal strongly pushed by Trump and Calabria.
However, when Covid-19 struck, the GSEs played an important role in helping Homeowners and tenants keep their apartment when shops closed and the economy began to crash. Forbearance and eviction policies were quickly implemented to keep people inside their homes.
GSE’s response to Covid-19 has been significant, which is why many housing professionals prefer not to push the administration to push the companies out of the conservatory administration. This is especially true as there is no alternative that can usefully address the current housing affordability issues as home prices have skyrocketed.
“I would expect that now that Calabria is gone, there will be more emphasis on affordable housing and manpower housing and less on ending conservatories,” says Evan Blau, partner at Cassin & Cassin LLP’s Lending and Affordable Housing Agency.
David Dworkin, President and Chief Executive Officer of the National Housing Conference, agreed, saying that the GSEs are the best institutions for dealing with the myriad of problems facing the housing market. These include falling home ownership rates and the racial wealth gap, which is intrinsic in connection with the old discriminatory housing policy. Dworkin points out that without the GSEs, mortgage borrowers would have to rely on a private label securities market unprepared for these problems.
“The main problem with the private label securities market is the legal structure and the difficulty of managing defaulting loans responsibly,” says Dworkin. “Nothing was done to resolve that.”
Credit standards are likely to relax
Credit requirements have eased since lenders restricted borrower requirements due to the 2008 housing crisis, according to the Housing Credit Availability Index (HCAI), which measures the percentage of mortgages at risk (loans that are more than 90 days past due). A lower HCAI means lenders have tightened their credit requirements, while a higher HCAI indicates looser lending standards.
However, when Covid struck, the credit box shrank again. The HCAI for mortgages through the GSEs decreased to 2.5% in the fourth quarter of 2020. This is too modest, says Laurie Goodman, vice president of housing finance policy and founder of the Housing Finance Policy Center at the Urban Institute. Goodman says that when the FHFA was under Calabria, “credit became excessively scarce, preventing otherwise responsible borrowers from getting their homes.”
However, Goodman expects the FHFA, now under Thompson as interim director, to relax credit standards to expand the pool of those who can qualify for a mortgage.
Options for first-time home buyers
Although the new FHFA leadership could signal wider access to affordable housing in the future, today’s homebuyers don’t necessarily have to wait. There are government programs, government-sponsored and private programs designed to help first-time buyers and low-income home buyers.
The Federal Housing Administration (FHA) and U.S. Department of Agriculture (USDA) loans are two popular programs for people who don’t have a large down payment or have poor credit ratings. U.S. Veterans Affairs (VA) loans are also a popular option because they do not require a down payment. However, you must be an Eligible Service Member or relative of a Service Member.
Borrowers should also explore to explore below Payment assistance programs (DPAs). There are thousands across the country, many of which do not have to repay the borrower. However, there are often contingencies with DPAs, such as the homebuyer having to stay in the house for a period of time before help can be given.
Here are a handful of programs for first-time home buyers:
- FHA loans
- USDA loan
- VA loan
- HUD’s good neighbor next door
- Fannie Mae’s HomePath Ready Buyer Program
- FHA Section 203 (k)
A skilled, helpful lender can guide you through your options based on your salary, credit profile, and goals.