One of the interesting developments within the ongoing slowdown in mortgage finance is the extent to which home builders have nourished their financing arms, presumably to stimulate demand for their homes.
Pulte Mortgage, LLC finances 77 percent of the homes, excluding those sold for cash, in their (more…)
Even as President Obama works to help under-water home owners refinance their mortgages, Fannie Mae and Freddie Mac are pursuing loan policies that divide access to credit by lines of wealth.
In Cleveland, Ohio, that divide quickly becomes one of race.
While a shutdown would mean that the Federal Housing Administration will suspend new guarantees of mortgages, it probably won’t change things very much.
FHA guaranteed loans are very important right now. FHA and VA constituted approximately one-third of new mortgages up in 2010, and most of that was from FHA. FHA raised its premiums and this dampened the appetite for those loans. (more…)
While a lot has been said about how banks are moving risk off their balance sheets and on to the Federal Housing Adminisitration, those critiques are really too broad. Yes, banks are relying on the FHA loan program, but others are not.
The FHA charges an upfront premium to borrowers when it makes a loan. The fee is currently 1 percent. There are (more…)
The Dodd-Frank bill requires lenders to retain a five percent risk-retention in loans sold to the secondary market. It is an idea driven by the lessons that we learned from the financial crisis. Give banks a moral hazard by making them hold some skin in the game. It is hoped that they would then respond by not making unsustainable loans.
The bill gives regulators some time to decide how to implement that requirement. The Dodd-Frank bill does offer some guidance. The Merkley Amendment sets an expectation that lenders will hold a five percent stake in any ”qualified residential mortgage.” A “QRM,” as it known, needs risk retention. An exempted loan does not.
First Thoughts
This is a classic example of a rule that could have unexpected consequences. At first glance, it seems like common (more…)
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