United Kingdom’s new Help to Buy program provides housing lessons here

help to buyer imageJust four weeks ago, the United Kingdom launched their new Help to Buy program, a set of new policies and options that reduce the down payment on a home. Demand for the program has been strong with already more than 2,000 early applications for the home buying option. Mortgage lenders report that 80 percent of the applications have been from first-time homebuyers.

Why this program? Why the demand?

In a recent article, David Cameron, Prime Minister of the United Kingdom, said the program was designed for “responsible people who work hard, put in the hours and can afford a mortgage — but can’t afford sky-high deposits.” He said most applicants are young and have an average household income. Once the program became available, it began to move the housing industry in England again, resulting in home sales that may never have happened otherwise, reducing mortgage bills, and unlocking home building.

What can we learn?

Many renters are on the sidelines not because they want to be, but because they believe they can’t buy now. Once incentives and programs are made available, and they are aware of them, it drives interest and demand, especially for young buyers and new households.

In fact, this demand has been steadily increasing in the U.S. keep reading

Will new mortgage regulations help or hurt buyers?

mortgage, QM, QRM, down paymentLast week, a new QRM (Qualified Residential Mortgage) proposal was issued by federal regulators, but headlines touting it as a victory are premature. This is not a time for complacency as the final rule is still uncertain. We are still looking into the potential impact to prospective homebuyers. No matter what, there will be many details important for agents and brokers to understand once the rulings are finalized.

QM (Qualified Mortgage) is already finalized and outlines the steps lenders are required to take to ensure a homebuyer’s ability to repay. QRM will address risk retention, requiring lenders to keep a certain percentage of mortgages on their books. Loans that meet the QRM definition will be exempt and can be sold in the secondary mortgage market.

Here’s the latest:

  • Six federal agencies issued a notice revising the QRM rule proposed in 2011 to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act. The new proposal would define QRM to have the same meaning as QM (as defined by the Consumer Financial Protection Bureau).
  • The agencies also announced a second alternative for QRM that contradicts the first approach by maintaining the requirement for lenders to hold some of the credit risk if a loan is sold with less than a 30 percent down payment.
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The future of housing finance on horizon

home, home loan, mortgageHousing once again became a hot marketplace topic when President Obama laid out his plan for the future of housing finance last week. He urged Congress to take action on  housing legislation before year end.

As the market improves, there’s now focus on what should happen next to meet long term market needs. With a wide range of opinions on how much or how little government should be involved, we offer a few critical points to consider when forming your own opinion:

Government Sponsored Enterprises (GSEs)

The Fannie/Freddie model of private gains and public loses is obsolete. Will the huge dividends now being returned to the Federal coffers by the GSEs slow momentum for reform?

Limited government role

A limited government role in housing finance as a backstop and to leverage the deep, liquid credit markets Fannie Mae and Freddie Mac developed over several decades will keep borrowing costs from increasing, preserve the option of a 30-year fixed rate mortgage, and ensure responsible, creditworthy first-time homebuyers have the opportunity to buy a home.

Private market

Decrying the irresponsible lending practices that caused the unprecedented housing crash, and then declaring that all housing finance should rest entirely on the private market is contradictory. keep reading