Lenders give Mixed Reviews to new GSE, FHA Initiatives, Homeowner Education

Lenders appear at least moderately encouraged by new effortsrnon the part of Fannie Mae and FHA to lower the costs and increase thernavailability of mortgage financing. rnFannie Mae’s most recent quarterly Mortgage Lender Sentiment Survey,rnconducted in February found about 2/3s of lenders thought the initiatives wouldrnbe beneficial.</p

Fannie Mae introduced a new 97 percent home mortgage laternlast year and a similar program was unveiled by Freddie Mac starting thisrnmonth.  In January FHA reduced its annualrnmortgage insurance premiums (MIP) by 0.5 percent on new loans.  Fannie Mae’s Economic & Strategic ResearchrnGroup surveyed senior mortgage executives in February to examine lenders’ viewsrnabout the expected impact of these initiatives.</p

Lenders had earlierrntold Fannie Mae that the top two causes of mortgage volume declines in 2014rnwere tighter credit underwriting standards and weak consumer demand.  This confirmed prior findings from Fannie Mae’srnNational Housing Survey^TM (NHS) in which young renters said thatrngathering a down payment and affording the monthly mortgage payment are two ofrnthe top barriers to obtaining a mortgage. The GSE and FHA initiativesrnseek to address these lender and consumer concerns.</p

Fannie Mae said about two out of threernlenders responding to the Lender Sentiment Survey expect that the GSEs’ 97% LTVrnproducts and the FHA’s MIP reduction will somewhat increase mortgagernoriginations, while one-third of lenders surveyed do not expect those offeringsrnto have much impact.  The majority ofrnrespondents think that these initiatives will be good for consumers andrnlenders.</p

Eighty-one percent of institutionsrnsurveyed reported planning to offer GSE-eligible 97% LTV loans sometime thisrnyear, though the expected impact on their own firm’s origination volume is morernmuted than their expectations for the impact on the overall mortgage market inrnthe future. Forty-four percent of those planning to offer GSE-eligible 97% LTVrnloans expect them to somewhat increase their firm’s origination volume while 54rnpercent expect no change.  </p

The new 97 percent financing productrnrequires consumers to first complete a homeownership counseling programs so thernsurvey also asked lenders for their view on these programs.   Ninety-one percent of lenders reportedrnoffering or referring consumers to homeownership education and counselingrnprograms, primarily to help them better manage their finances.  However opinions of the programs wasrnmixed.  Only 33% say they have value, 36%rnsay they do not, and 31% are neutral. </p

Mid-sized and smallerrnlenders are more likely than larger lenders to say there is less value inrnhomeownership education and counseling programs.  Steve Deggendorf, Fannie Mae’s DirectorrnBusiness Strategy, who reported on the survey results said that given these mixed perceptions “therernappears to be an opportunity to investigate whether it is possible to enhancerncounseling strategies to generate, improve, and more clearly demonstraternconsumer, lender, and investor benefits.”

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