Saturday, October 22, 2011

Origination News - NAR: Lower GSE Loan Limits Already Hurting Home Sales

Realtors are beginning to find that the lower GSE loan limits, which became operative Oct. 1, are having a negative impact on both homebuyers and sellers.

In a survey of 1,300 agents, the National Association of Realtors found some sellers had to lower their price in markets where mortgages backed by Fannie Mae, Freddie Mac and the Federal Housing Administration are no longer available.

Ten percent of the agents representing buyers said their clients faced higher mortgage rates and 25% needed a larger downpayment because only private mortgages are available in those high-cost markets. (Nearly 80% of the agents in the survey represented homebuyers.)

Some Realtors reported their clients decided to look for a lower-priced home so they could qualify for a government-backed loan. And 8% said their clients gave up their home search entirely.

In testifying before a congressional panel, NAR president-elect Moe Veissi noted that his group is beginning to see signs of how consumers are adjusting to private mortgage products in 600 counties impacted by the lower loan limits.

Survey figures indicate that the higher rates and downpayment requirements on private mortgages are “leading to a loss of interest in real estate sales,” Veissi ­testified.

He noted the research is preliminary and the NAR will provide the House Financial Services Committee with a report once its results are fully analyzed.

In his testimony, Veissi warned that full privatization of the secondary market risks eliminating 30-year FRMs while increasing credit costs for consumers.

He is urging lawmakers to resist efforts by some key Republican congressman to fully privatize the secondary mortgage market. Such a course of action would “jeopardize any chance” of a recovery in the housing market,” the Realtor said.

At the same hearing Annaly Capital Management executive Michael Farrell stressed that institutional and foreign investors are attracted to Fannie Mae, Freddie Mac and Ginnie Mae MBS because of the government guarantees against credit losses.

“Many, if not most, investors in agency MBS won't invest in private-label MBS at any price or only in reduced amounts because of their need for liquidity or the restrictions of their investment guidelines,” Farrell testified.

It is unclear how many, or at what price these investors would participate in a newly revived and “deeper” private-label MBS market, according the mortgage REIT CEO.

“Analysts at Credit Suisse have estimated that U.S. housing could lose roughly $3 trillion to $4 trillion in funding from domestic and foreign investors if agency MBS were replaced by credit-sensitive products. The impact of this loss could have adverse consequences for the housing market and the economy for years to come,” Farrell said.

U.S. consumers owe roughly $10.5 trillion on their home mortgages with $6.8 trillion of it residing in MBS.

by Brian Collins Origination News Oct 18, 2011

Origination News - NAR: Lower GSE Loan Limits Already Hurting Home Sales

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