Post by unlawflcombatnt on May 25, 2010 14:47:29 GMT -6
from Businessweek.com via Patrick.net
Bloomberg
FHA Home-Financing Volume Sign of ‘Very Sick System’
Mon, May 24, 2010,
By Jody Shenn and John Gittelsohn
"Loans guaranteed by the Federal Housing Administration, the U.S.-owned mortgage insurer, may be involved in more home-purchase transactions than borrowing financed by Fannie Mae and Freddie Mac.
FHA lending last quarter may have topped the combined volume of government-supported Fannie Mae and Freddie Mac in a home-lending market that’s still a “government-financed market,” David Stevens, the agency’s head, said today at a conference in New York, citing research by consultant Potomac Partners.
“This is a market purely on life support, sustained by the federal government,” he said at the Mortgage Bankers Association conference. “Having FHA do this much volume is a sign of a very sick system.”
The FHA, which backs loans with down payments as low as 3.5 percent, insured $52.5 billion of home-purchase mortgages in the first quarter, compared with $46 billion of purchases of the debt by Fannie Mae and Freddie Mac, according to data compiled by Washington-based Potomac Partners.
The FHA and Fannie Mae and Freddie Mac, which regulators seized in 2008, have been financing more than 90% of U.S. home lending after a retreat by banks and the collapse of the market for mortgage bonds without government-backed guarantees.
Credit Scores
Fannie Mae and Freddie Mac executives said at the conference that their tightening of mortgage-underwriting guidelines since the housing slump worsened in 2008 hasn’t been as severe as some observers believe. FHA has been taking steps to shore up its program after being left with “terrible portfolios” from 2007 and 2008, Stevens said.
Freddie Mac has mainly “eliminated” its financing of certain “esoteric products,” Donald J. Bisenius, executive vice president of the McLean, Virginia-based company’s single- family credit-guarantee business, referring to debt such as low- documentation lending or so-called option adjustable-rate mortgages with growing balances.
The company’s “parameters around” 30-year fixed-rate loans still allow for relatively low down payments and credit scores and high debt-to-income ratios, he said.
“It’s not obvious to me that the credit box has shrunk as much as the numbers might suggest,” Bisenius said....
more than half of Fannie Mae loans for home purchases have been to “low-to-moderate income families,” Pallotta said.
Issuance of so-called non-agency home-loan securities will eventually revive because “the government can’t continue to be 95-plus percent of the market,” John Herbert, a director at Credit Suisse Group, said at the conference. One policy change that’s likely in the future is an unwinding of the boost in recent years to the loan limits for Fannie Mae, Freddie Mac and FHA, to as much as $729,750 in high- cost areas currently, he said. That should then spur more private mortgage-bond deals, Herbert said."
Bloomberg
FHA Home-Financing Volume Sign of ‘Very Sick System’
Mon, May 24, 2010,
By Jody Shenn and John Gittelsohn
"Loans guaranteed by the Federal Housing Administration, the U.S.-owned mortgage insurer, may be involved in more home-purchase transactions than borrowing financed by Fannie Mae and Freddie Mac.
FHA lending last quarter may have topped the combined volume of government-supported Fannie Mae and Freddie Mac in a home-lending market that’s still a “government-financed market,” David Stevens, the agency’s head, said today at a conference in New York, citing research by consultant Potomac Partners.
“This is a market purely on life support, sustained by the federal government,” he said at the Mortgage Bankers Association conference. “Having FHA do this much volume is a sign of a very sick system.”
The FHA, which backs loans with down payments as low as 3.5 percent, insured $52.5 billion of home-purchase mortgages in the first quarter, compared with $46 billion of purchases of the debt by Fannie Mae and Freddie Mac, according to data compiled by Washington-based Potomac Partners.
The FHA and Fannie Mae and Freddie Mac, which regulators seized in 2008, have been financing more than 90% of U.S. home lending after a retreat by banks and the collapse of the market for mortgage bonds without government-backed guarantees.
Credit Scores
Fannie Mae and Freddie Mac executives said at the conference that their tightening of mortgage-underwriting guidelines since the housing slump worsened in 2008 hasn’t been as severe as some observers believe. FHA has been taking steps to shore up its program after being left with “terrible portfolios” from 2007 and 2008, Stevens said.
Freddie Mac has mainly “eliminated” its financing of certain “esoteric products,” Donald J. Bisenius, executive vice president of the McLean, Virginia-based company’s single- family credit-guarantee business, referring to debt such as low- documentation lending or so-called option adjustable-rate mortgages with growing balances.
The company’s “parameters around” 30-year fixed-rate loans still allow for relatively low down payments and credit scores and high debt-to-income ratios, he said.
“It’s not obvious to me that the credit box has shrunk as much as the numbers might suggest,” Bisenius said....
more than half of Fannie Mae loans for home purchases have been to “low-to-moderate income families,” Pallotta said.
Issuance of so-called non-agency home-loan securities will eventually revive because “the government can’t continue to be 95-plus percent of the market,” John Herbert, a director at Credit Suisse Group, said at the conference. One policy change that’s likely in the future is an unwinding of the boost in recent years to the loan limits for Fannie Mae, Freddie Mac and FHA, to as much as $729,750 in high- cost areas currently, he said. That should then spur more private mortgage-bond deals, Herbert said."