New FHFA refinance option could benefit 2 million lower-income borrowers - Movement Mortgage Blog

According to CNBC, starting this summer, eligible borrowers will be able to refinance their mortgage at a reduced interest rate and lower monthly payment. The Federal Housing Finance Agency, which oversees mortgage-backers Fannie Mae and Freddie Mac, estimates homeowners could save an additional $100 to $250 a month. 

“This new refinance option is designed to help eligible borrowers who have not already refinanced save between $1,200 and $3,000 a year on their mortgage payment,” said the agency’s director, Mark Calabria, in a public statement.

To be eligible for the new refinance program, borrowers must have a mortgage backed by Fannie or Freddie for their house — which they must live in — and have income at or below 80% of median income in their area. They also must have missed no payments in the previous six months and no more than one in the previous 12 months. The mortgage can’t have a loan to value ratio above 97% and they must have a debt-to-income ratio below 65% or a FICO credit score of at least 620.

Lenders, meanwhile, would be required to reduce the borrower’s monthly mortgage payment by at least $50 and a 50-basis-point reduction (half a percentage point) in their interest rate.

Additionally, lenders – who will have the choice to participate in the program – would need to waive the current adverse market refinance fee for borrowers whose loan balance is no more than $300,000. And if the borrower is ineligible for an appraisal waiver, the lender would need to provide a credit of up to $500.

 

Studying the relationship between homebuying and wealth

A couple of real estate and finance experts are digging into three year’s worth of data to uncover how today’s housing market conditions could be creating an environment that intensifies the already significant homeownership and wealth gap between people of color and white Americans, according to the MReport.

Jessica Lautz, National Association of Realtors (NAR) VP of Demographics and Behavioral Insights, and Michael White, Nottingham Trent University Professor and Director of the Centre of the Built Environment have published a paper called Mind The Gap, which examines the purchase price differences among homebuyers who purchased a primary-residence property and how the purchase price can lead to further wealth gaps through equity in homeownership.

They found that Hispanic and Black Americans purchased homes 11.2% and 10.6% less expensive, respectively, than white Americans when controlling for household income, home size, location, and down-payment help from family. Another group whose wealth stands to suffer as a result of home purchase prices is student-loan borrowers. Homebuyers who had student debt purchased homes that were 18.8% less expensive than those without student debt, the research found.

“Homeownership is one of the best ways to build wealth and purchasing homes that are significantly less expensive can lead to lost wealth accumulation – and possibly lost homeownership – across generations,” the researchers reported.

Lautz and White suggest a number of policy steps – including financial literacy, refinancing student loans, expansion of mortgage financing through alternative credit scoring models and expanding public awareness of low down payment programs – that may help mitigate the homeownership gap. Their full report is available through NAR.org. 

 

Framing lumber price skyrockets, adding additional $36k to new homes

Per the National Association of Home Builders, lumber prices have tripled over the past 12 months and have caused the price of an average new single-family home to increase by $35,872 – up from the NAHB’s calculated $24,000 extra HousingWire reported back in February. 

“This unprecedented price surge is hurting American home buyers and home builders and impeding housing and economic growth,” said Chick Fowke, NAHB chairman. “These lumber prices are clearly unsustainable. Policymakers need to examine the lumber supply chain, identify the causes for high prices and supply constraints and seek immediate remedies that will increase production.”

In February, Fowke said the continued successful rollout of the COVID-19 vaccine should do wonders for lumber prices, as more plants will reopen in Canada and the U.S. — thus, increasing inventory and driving overall prices down. And with more homes being built, overall sentiment and builder confidence should rise, Fowke said.

Low inventory is still a thorny issue as April turns to May, but more new builds appear to be in the pipeline, according to Doug Duncan, Fannie Mae chief economist.

“The supply of existing homes for sale and an elevated level of new homes sold — but not yet constructed — should help bolster a strong construction pace of new housing starts moving into the spring buying season,” Duncan said. Read the entire article on HousingWire to learn more.

 

Weekly Mortgage Rate Update

In light of the rising COVID caseloads globally, U.S. Treasury yields stopped moving up a month ago and have remained within a narrow range as the market digests incoming economic data. 

The good news is that with rates under three percent, refinancing continues to be attractive for many borrowers who financed before 2020. But, for eager buyers, especially first-time homebuyers, inventory continues to be extremely tight and competition for available homes to purchase remains high.

The Freddie Mac weekly survey shows the average rate for a 30-year fixed mortgage is 2.98%, which is 0.01 points higher than last week, and down 0.25 points from this time last year. 

 

mm

About the Author:

Movement Staff

The Market Update is a weekly commentary compiled by a group of Movement Mortgage capital markets analysts with decades of combined expertise in the financial field. Movement's staff helps take complicated economic topics and turn them into a useful, easy to understand analysis to help you make the best decisions for your financial future.