Treasury removes restrictions on investment properties

Suspension of recent PSPA amendments restricting Fannie Mae and Freddie Mac is in line with administration's goal to boost housing supply

The Treasury Department and FHFA announced Tuesday that they are suspending certain requirements that were added in January to the Preferred Stock Purchase Agreements (PSPAs) between Treasury and Fannie Mae and Freddie Mac.

Under those requirements, Fannie Mae had restricted its acquisition of loans secured by second homes and investment properties to 7% of its total single-family acquisitions and applied stricter underwriting to those loans.

Treasury’s statement on the suspension sought to clarify its reasoning for the change.

“The suspension of these PSPA requirements recognizes that FHFA has the authority and responsibility for the Enterprises’ safety and soundness and to foster housing finance markets that support sustainable homeownership, and is not intended to stimulate aggregate housing demand given current conditions in the housing market,” the Treasury stated in a Tuesday afternoon press release.

“Home prices have been accelerating rapidly, with the annual rate of national home price growth at multi-decade highs,” the Treasury release continued. “A principal challenge for the U.S. residential housing market today is inadequate housing supply. The Administration is focused on promoting housing stability, which includes advancing housing policies that can sustainably increase the stock of affordable housing units for rent and ownership.”

Here’s the key to true, sustainable efficiency in the mortgage industry

While the recent movements in interest rates may provide some additional refinancing volume and an ability to take another bite at the apple, rates will undoubtedly rise in the coming years. The industry knows this and is looking for ways to increase profitability while preserving origination volume optionality.

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Lenders and trade group officials raised strong objections to the changes, which were made a week before the Trump administration left office. Objectors noted that the 7% PSPA cap had caused disruptions, particularly since a key provision required a 52-week look-back.

They also complained that the restrictions on the cash window would force lenders to send mortgage-backed securities to the private market, fattening Wall Street’s coffers.

In a March letter to the Treasury, the Mortgage Bankers Association stated: “It is not clear that private market participants currently have the capacity or resources to absorb the entirety of the gap between the Enterprise limits and the volume needed to satisfy underlying demand.

“Based on reports MBA has received from a broad cross-section of lenders, it does not appear that the Enterprises have developed clear details or timelines associated with their plans to ensure compliance with these limits. Lenders have reported, for example, different requirements communicated to them by Enterprise personnel regarding their per-lender limits, the dates by which they must be compliant, and the timeframe over which they are being measured,” the letter states.

in the spring, demand for investment properties and vacation homes had risen 84% year over year – more than double the demand for a primary home, according to a report from Redfin.

Early industry reaction to the suspension was very positive.

The Community Home Lenders Association put out a statement of support: “CHLA commends in the strongest possible way FHFA Director Sandra Thompson for suspending the January PSPA restrictions on higher risk loans, investors and second homes, and small lender cash window access.”

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Fed holds rates steady for the sixth straight time

By Didier Malagies • 02 May, 2024

The Federal Reserve ’s Federal Open Markets Committee (FOMC) maintained its short-term policy interest rate steady at a range of 5.25% to 5.5% for a sixth consecutive meeting on Wednesday. “The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%,“ the FOMC said in a statement. “In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities.“ During their last meeting in March , policymakers indicated that they still envisioned three interest rate cuts in 2024. But with inflation remaining sticky and unemployment staying below 4%, these expectations are becoming less likely. Recent economic data hasn’t given the Fed confidence that inflation will continue to decline. Strong inflation data in the first quarter, coupled with a robust labor market , have postponed expectations for the first Fed rate cut. In April, Fed Chairman Jerome Powell, speaking at the Washington Forum , made it clear that rate cuts were not imminent due to the strength of the economy. The economy has maintained surprising momentum despite the current level of short-term rates. With the unemployment rate below 4%, companies are steadily adding workers and real wage growth is observable as inflation eases. Although upward movements in inflation are noteworthy, considerable progress toward the Fed’s 2% target has been made. “It’s unlikely that the next policy rate move will be a hike,” Powell told journalists on Wednesday during the FOMC’s press conference. “In order to hike the rates, we would need to see persuasive evidence that our policy stance is not sufficiently restrictive to bring inflation sustainably down to 2% over time. That’s not what we are seeing at the moment.” While Powell emphasized the unlikelihood of future rate hikes, he also remained vague about the Fed’s future interest rate trajectory. “We didn’t see progress in the first quarter. It appears that it will take longer for us to reach that point of confidence,” Powell said. “I don’t know how long it will take. … My personal forecast is that we will begin to see progress on inflation this year. I don’t know that it will be enough to cut rates; we will have to let the data lead us on that.” In a new development, the Fed announced an easing of its quantitative tightening policy. Starting in June, the rate-setting body will lower the roll-off rate of its Treasury securities from $60 billion to $25 billion per month. This means that while the Fed will not begin selling Treasurys in June, it will allow fewer of them to mature. It will not alter its roll-off rate for mortgage-backed securities (MBS), which will remain at $35 billion per month, according to Xander Snyder, senior commercial real estate economist at First American. “The FOMC did not change the ongoing passive roll-off of its MBS holdings but did note that any prepayments beyond the continuing $35 billion cap would be reinvested in Treasuries,” Mike Fratantoni, senior vice president and chief economist for the Mortgage Bankers Association, said in a statement. “We expect mortgage rates to drop later this year, but not as far or as fast as we previously had predicted.” In addition, Powell reiterated the Fed’s commitment to carrying forward the Basel III endgame regulations in a way that’s faithful to Basel and also comparable to what the jurisdictions in other nations are doing. Since the March FOMC meeting, Freddie Mac’s average 30-year fixed mortgage rate has increased from 6.74% to 7.17%. Before the next FOMC meeting on June 12, two additional inflation readings are expected. “While it’s a possibility, I don’t think that we’ll see much change in mortgage rates following this Fed meeting, because the Fed has been willing to let the data lead at this stage in the cycle,” Realtor.com chief economist Danielle Hale said in a statement. “In order to see mortgage rates drop more significantly, the Fed will need to see more evidence that inflation is slowing.” For homebuyers and sellers, this suggests that housing affordability will remain a top consideration, possibly driving home purchases in affordable markets, predominantly in the Midwest and South, according to Hale.

Inflation and Mortgage

By Didier Malagies • 29 Apr, 2024

Depending on where you live there is an opportunity in certain areas that you can get $2,500 towards the closing costs. You also get a lower rate and monthly PMI. Programs open up to you where there is down payment assistance and also the 1% down program available. The Gov't is printing 1 trillion every 100 days, and the costs of everything are out of control. The time will come when they will be printing a trillion every 30 days. Credit cards, car loans, and student loans are at unprecedented levels is it time to refinance your home to save money and then do another refinance as a rate term when the pivot happens at some point in the future the cost of everything is going up and not stopping and you will see inflation continue to gain ground once again. Time to put the house in order with a refinance to consolidate debt. A phone call or an email away to go over your present situation and see what makes sense with the present home values tune in and learn https://www.ddamortgage.com/blog didier malagies nmls#212566 dda mortgage nmls#324329

Retiring at age 65 is no longer feasible, older investors say

By Didier Malagies • 22 Apr, 2024

Retirement at 65 has been a longstanding norm for U.S. workers, but older investors believe that not only is such an outcome unfeasible, but they’re likely to face more challenging retirements than their parents or grandparents. This is according to recently released survey results from Nationwide , with a respondent pool that included 518 financial advisers and professionals, as well as 2,346 investors ages 18 and older with investable assets of $10,000 or more. The survey follows other ongoing research into the baby boomer generation as it approaches “ Peak 65 .” The investors included a subset of 391 “pre-retirees“ between the ages of 55 and 65 who are not retired, along with subsets of 346 single women and 726 married women, Nationwide explained of its methodology. Seven in 10 of the pre-retiree investors said that the norm of retirement at age 65 “doesn’t apply to them,” while 67% of this cohort also believe that their own retirement challenges will outweigh those of preceding generations. Stress is changing the perceptions of retired life, especially for those who are closest to retirement, the results suggest. “Four in 10 (41%) pre-retirees said they would continue working in retirement to supplement their income out of necessity, and more than a quarter (27%) plan to live frugally to fund their retirement goals,” the results explained. “What’s more, pre-retirees say their plans to retire have changed over the last 12 months, with 22% expecting to retire later than planned.” Eric Henderson, president of Nationwide Annuity , said that previous generations who observed a “smooth transition” into retired life do not appear to be translating to the current generation making the same move. “Today’s investors are having a tougher time picturing that for themselves as they grapple with inflation and concerns about running out of money in retirement,” Henderson said in a statement. The result is that more pre-retirees are changing their spending habits and aiming to live more inexpensively. Forty-two percent of the surveyed pre-retiree cohort agreed with the idea that managing day-to-day expenses has grown more challenging due to rising costs of living, while 27% attributed inflation as the key reason they are saving less for retirement today. Fifty-seven percent of respondents said that inflation “poses the most immediate challenge to their retirement portfolio over the next 12 months,” while 41% said they were avoiding unnecessary expenses like vacations and leisure shopping. Confidence in the U.S. Social Security program has also fallen, the survey found. “Lack of confidence in the viability of Social Security upon retirement (38%) is a significant factor influencing pre-retirees to rethink or redefine their retirement planning strategies,” the results explained. “Over two-fifths (43%) are not counting on Social Security benefits as much as previously expected, and more than a quarter (27%) expect to receive less in benefits than previously anticipated.” The survey was conducted by The Harris Poll on behalf of Nationwide in January 2024.