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60 | 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 HUd secretary talks Opportunities, challenges for Housing in 2015 Renters desiring to be buyers are in a positive position, but saving for a down payment might prove problematic for some. H ours after President Obama delivered his annual State of the Union address, HUD Secretary Julián Castro took a slightly smaller stage to discuss his department's efforts to boost homeownership in 2015. In a live-streamed "fire- side chat" with Zillow Chief Economist Dr. Stan Humphries, the secretary reiterated that 2015 will be a "year of housing op- portunity," reusing a phrase he coined in a recent National Press Club appearance. Castro based his optimism on what he called a "confluence of factors" he believes will encour- age more potential homebuyers to take the plunge this year, includ- ing a leveling off in home prices, lower entry barriers to mortgage credit, and falling costs—helped by an imminent reduction in Federal Housing Administration (FHA) annual mortgage insur- ance premiums and the Federal Housing Finance Agency's (FHFA) directive for Fannie and Freddie to accept mortgages with lower down payments. "All of those things add up to greater opportunity to move from renting to buying in 2015," Castro said. When it comes to making the transition from renting to owning a home, he acknowledged that there are challenges, particularly as rising rental costs make it dif- ficult for consumers to save up for a down payment. Stagnant wages have also presented a problem in that area, though Castro asserted that they're "moving in the right direction." Another major challenge the secretary addressed was the issue of credit availability, which he said has kept a lot of mortgage applicants with "what histori- cally would have been considered pretty good credit" from buying a home. Through November, the average FICO score for an approved loan application in 2014 was about 726, according to mort- gage services provider Ellie Mae. In addition to the FHA premium cut and the push for lower down payment options, Castro high- lighted HUD's "Blueprint for Credit Access," an initiative to expand credit offerings to qualified borrow- ers through counseling programs and clarified lending rules. Though some critics have argued that opening up mortgages to a larger pool of borrowers will degrade loan quality, Castro main- tained that won't be the case. "Policies have fundamentally changed to create safeguards so that we can offer the opportunity to own a home for people who are ready and responsible to buy," he said. Regarding the government's role in the mortgage market, the secre- tary was hesitant to offer an idea of what he believes is an appro- priate amount of presence, though he did say he supports efforts to bring in more private capital. However, he added that he believes the government has a role to play, particularly in serving low- to moderate-income borrow- ers and in providing a backstop for the securities market, two functions he said are "vital pieces of housing finance going forward." "We have to remember how we were able in the United States to build up the homeownership rate to where it is today," he said. "FHA certainly played a signifi- cant role in that, and for our part at HUD, we hope it continues to." Judge rejects Proposed delay for Fannie, Freddie suits Margaret Sweeney nixes federal attempts to halt investors' legal actions against the two GSes. a U.S. Court of Federal Claims judge ruled that lawsuits brought about by Wall Street investors in Fannie Mae and Freddie Mac can continue, according to media reports. Judge Margaret Sweeney denied the government's attempt to stay court proceedings in the case, gaining a victory for Fairholme Funds and its CEO, Bruce Berkowitz, who sued the government in 2013 over the sweeping of GSE profits into the U.S. Department of Treasury. The plaintiffs in the suit claim that sweeping of GSE profits equates to taking private prop- erty for public use without "just compensation," a practice forbid- den by the Fifth Amendment of the U.S. Constitution. After the decision, Fairholme plans to continue gathering information for the case in order to bolster their argument that the Court of Federal Claims, not the U.S. District Court in Washington, D.C., has jurisdic- tion over the case. "We are very pleased that the court has allowed discovery to continue," said David Thompson, attorney for Fairholme Funds. "We look forward to receiving all the relevant internal documents from the government and depos- ing the key officials responsible for the net worth sweep." The case was on hold pend- ing Fairholme's appeal of U.S. District Judge Royce Lamberth's decision in September to dismiss the GSE investor's suit against the government. At that time, the judge also dismissed a similar suit brought about by Perry Capital. Lamberth ruled that the government had been given the authority by Congress under the Housing and Recovery Act to sweep GSE profits into Treasury. The decision represented yet another setback for the govern- ment in the ongoing saga of law- suits regarding GSE profits. Last week, U.S. District Judge Royce Lamberth denied Treasury's mo- tion to reverse Pershing Square Capital Management's voluntary dismissal of one of its lawsuits against the government.