TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/105753
feature or ig i nat ion ANALYTICS se r v ic i ng a na ly t ic s in the housing market recovery," Capital Economics noted. Confirming the firm's projections, Capital Economics commented definitively on mortgage banking's most critical component: lenders' bottom lines. "The bottom line is that the U.S. housing recovery is sustainable," the group concluded. "The key point is that the fundamentals of housing valuations and affordability are very favorable, reflecting a market that has adjusted." To Transform or Conform? S e c on da r y M a r k e t delinquency continues to fall, however, Capital Economics anticipates put-back risk will fade. What does the research group believe will serve as the chief catalysts shaping the market's climate? "All in all, if we are right that the economy will continue growing, it's reasonable to expect lenders to loosen the reins somewhat. The upshot is that we think mortgage-dependent buyers will gradually play an increasing role sustainable recovery, DeMarco believes the conversation on loan limits and the GSEs should turn to whether or not the loans that can be bought back are too costly, providing an advantage for higher-income borrowers who may not need the help. "Who are the intended beneficiaries of the taxpayers' support? This needs to be on the table and discussed so that we make sure we have the right policies," DeMarco elaborated. Though the FHFA's director is currently under fire from the White House for refusing to permit the GSEs to grant principal reductions, DeMarco stated emphatically that he remains committed to his post, commenting, "I will continue to pour everything I have into this job for as long I am asked by the president to continue to serve." As for the nuts-and-bolts of the extending existing statutes for conforming loan limits, most of the U.S. will operate under a limit of $417,000 for one-unit properties, a figure that dates from October 1, 2011. And in the country's most expensive markets, conforming loan limits will remain as high as $625,500. Reiterating his position on the FHFA's decision, DeMarco concluded, "I am cautiously optimistic that the signs of stability— and, in some areas, strength—that have started to emerge in certain sectors of the housing market are signals that it is beginning to recover." In fact, the analysts note, some of the most popular investment cities (such as Phoenix) are quickly becoming "no-go" areas for institutional buyers as the local markets recover. Even though the number of "overheating" cities is fairly small, there is a lesson to take away from those markets. "What should be clear from all this is that the housing recovery cannot be driven by investors indefinitely," Capital Economics stated. "The very recovery that investors are driving will eventually price them out of the market." In order to keep the market healthy, credit conditions are going to have to loosen so the current heightened demand can actually make an impact. Citing a recent survey released by the Federal Reserve, one of the biggest factors keeping today's credit market tight is the risk of put-back requests from Fannie Mae and Freddie Mac. As the economy shows improvement and mortgage The FHFA's decision to confirm existing conforming loan limits removed at least one lingering variable from the nation's housing market, but the agency's director took the opportunity to speak out on the changes he's championing for Fannie and Freddie. T he Federal Housing Finance Agency (FHFA) recently announced that the maximum conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac in 2013 will remain at existing levels, generating cautious optimism in the housing industry. However, the significance of the FHFA's decision stretches beyond the ramifications of loan limits and into the future of the GSEs, with the agency's director, Edward DeMarco, using the declaration as a platform to discuss plans for restructuring Fannie and Freddie. "Clearly there is no simple solution, and a number of fundamental questions will have to be answered. FHFA is taking a number of steps that have potential to transfer some credit risk to the private sector," DeMarco said in a statement to the Exchequer Club. "We will continue to make progress in this area, but if policymakers are serious about limiting the government's role, more direct action may be needed to have significant near-term effects," he added. "It is vital to the long-term 64 | The M Report "If the 1990s downturn is any guide, it will be a few years after [this year] before the homeownership rate really starts to improve." — Edward DeMarco, FHFA director health of our country's housing and financial markets that our elected leaders seek to bring the conservatorships to a conclusion, and to define the government's role and requirements for housing finance in the future." The conforming loan limits, which received a bump in many markets during 2008, were originally established as a post-crisis strategy targeting greater stability for housing. Now that the nation is headed toward a more