The Three Percent Solution

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54 | Th e M Rep o RT O r i g i nat i O n s e r v i c i n g a na ly t i c s s e c O n da r y m a r k e t SECONDARY MARKET the latest SECONDARY MARKET FHFa details gse goals in 2015 scorecard The future revolves around three goals: maintain, reduce, and build. t he Federal Housing Fi- nance Agency (FHFA) released in mid-Janu- ary its 2015 Scorecard for Fannie Mae and Freddie Mac, outlining the steps the two GSEs are expected to take this year to support the U.S. housing market. As FHFA Director Mel Watt revealed in his first public speech as the agency's chief, the companies' new direction revolves around three main objectives: maintain, reduce, and build. "Fannie Mae and Freddie Mac made significant progress toward achieving the goals in FHFA's Strategic Plan for the Conservatorships last year, and we look forward to building on that progress in 2015," Watt said. The chief goal, maintain (which accounts for 40 percent of the scorecard), largely focuses on efforts to increase access to mortgages for creditworthy borrowers while still sticking to responsible risk management practices. Among the goals in that category are instructions for the GSEs to finalize their rep and warranty frameworks (a process started late last year), encourage more participation from smaller lenders, and continue watching for other hurdles to credit access. Also included on the "maintain" list are instructions to practice loss mitigation strategies by directing eligible homeowners to take advantage of the Home Affordable Refinance Program Home investors lean toward renting Over Flipping With a little more than half of those who bought homes are opting to rent rather than sell, flipping is still more popular in regions with higher home values. t he majority of investors who bought homes at auction in November intend to hold onto them as a source of rental income, according to a report from real estate marketplace Out of all the investors surveyed by the company in November, 50.5 percent said they're going to rent out their properties, while 46.6 percent plan to flip them to another buyer. The preference toward renting was more evident among one- time purchasers, 72.2 percent of whom said they plan to rent out the auctioned home (compared to 50.4 percent of respondents who identified as full-time "real estate investors" and 36.8 percent of those working on behalf of another investor). Isolating online buyers, Auction. com found a preference in the group toward renting rather than flipping, though responses differed by region: Renting was easily the preferred choice for properties in the Midwest and South, barely edging out flipping in the West. Renting was less popular than flipping in the Northeast. While online buyers showed a leaning toward renting, investors bidding at live events were more interested in flipping the proper- ties, with that strategy being the clear choice in the majority of markets where is active. Only Texas, Tennessee, and Georgia bucked that trend. "Real estate investors appear more likely to flip a property in those regions where home values are higher," said Rick Sharga, EVP at "Higher prices can translate to a faster and potentially more significant short-term return on investment. The hold-and-rent strategy seems most popular in mar- kets where home prices are lower, allowing investors to charge a more competitive monthly rental rate and still produce reasonable returns over an extended period of time." Flipping was also the strat- egy of choice among investors purchasing multiple properties per year, being favored by 52.8 percent of smaller-scale investors bidding online and 60 percent of institutional investors (those who buy 50 or more homes annually). For live event bidders, there was slightly more room for the rental crowd, though flipping was still the more popular choice, preferred by 49.8 percent of smaller firms and 55.4 percent of institutional investors.

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