Game Change

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the latest or ig i nat ion ORIGINATION Would-Be Buyers Favor Low Down Payments, Fixed Rates a na ly t ic s se r v ic i ng LendingTree survey breaks down the mindset of today's potential borrower. A Mortgage Credit Loosens in May S e c on da r y M a r k e t A new index shows credit availability opening up. A new index from the Mortgage Bankers Association (MBA) and AllRegs shows credit availability relaxed slightly from April to May. The Mortgage Credit Availability Index (MCAI) feeds current mortgage underwriting parameters into a single index number to measure credit availability from month to month. It is calculated using several metrics related to borrower eligibility and underwriting criteria for more than 85 lenders and investors. "For lenders, the MCAI will provide an industry-wide summary statistic regarding the trend in mortgage credit availability. For policymakers, the MCAI can be a helpful gauge regarding the impact of policy changes on the availability of mortgage credit," said Mike Fratantoni, MBA's VP of research and economics. 60 | The M Report According to the association, the MCAI grew to a value of 108.9 in May, an increase from 108.6 in April and a continuance of trends in the last several months. Both figures are up from the survey benchmark of 100 in March 2012. If the index had been tracked in 2007, MBA said, it would have measured roughly 800. Also of note: The number of loan programs that allow for loan-to-value (LTV) ratios of 95 or higher has also been trending upward, largely due to participation in the Home Affordable Refinance Program (HARP). Some investors have lowered their requirements with regards to minimum credit score, the group noted. "HARP lending continues to be an important component of the market. The availability of these very high-LTV loans is one of the factors leading to the MCAI showing an increase over the past year," Fratantoni said. plurality of prospective homebuyers responding to an industry survey anticipates down payments of less than 15 percent when they purchase a new home. Forty-four percent of respondents anticipate low down payments of no more than 15 percent, while 34 percent foresee paying between 15 and 24 percent of the purchase price at closing. Nineteen percent say they will put down more than 25 percent of their home purchase price when they buy their next home, according to the survey conducted this May by Research Data Technology on behalf of Charlotte, North Carolina-based LendingTree. Data was collected from 600 people planning to purchase a new home sometime in the next year. About 57 percent or respondents will be first-time homebuyers. When it comes to the type of mortgage prospective homebuyers prefer, the plurality—45 percent—favors a 30-year, fixed-rate mortgage loan. The 15-year, fixed-rate mortgage was the second-most popular choice, with 36 percent of respondents expecting to obtain this type of loan. Seven percent plan to apply for an adjustablerate loan. The greatest frustrations with the mortgage process include timeconsuming paperwork, complex loan terms, and the borrower's own uncertainty about whether he or she is receiving a fair deal. At the same time, the greatest obstacles to obtaining a mortgage and purchasing a home are prospective buyers' financial situations and ability to obtain sufficient funds for a down payment, according to LendingTree's survey. A majority of survey respondents anticipate rising home prices and rising interest rates over the next 12 months, meaning time is of the essence for those planning to purchase a home. Sixty-four percent of prospective homebuyers believe interest rates will rise in the next 12 months, and 68 percent believe home prices will rise during the same time period. "Increasing home prices are providing wouldbe sellers with the confidence needed to take action, while rising interest rates are placing a sense of urgency on potential homebuyers," said Doug Lebda, founder and CEO of LendingTree. "Together, this creates a unique window of opportunity for buyers and sellers to take advantage of the market while home prices and rates are still reasonably affordable," Lebda said. 45% Share of prospective homebuyers who favor a 30year, fixed-rate mortgage.

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