Tag Archive for: mortgage

STEPHEN MOORE: Biden’s Killing the American Dream of Homeownership

/in , , , , , , , , /by

In boasting about Bidenomics two weeks ago in Milwaukee, President Joe Biden declared that his policies are “restoring the American dream.” Then he went into his creepy whispering mode and assured us “it’s working.”

Huh?

Isn’t a big aspiration of the American dream owning a home? Biden keeps making first-time homeownership harder for young families for two reasons. One is that the overall jump in inflation and the slower increase in wages and salaries means that homes are more expensive. High home prices benefit those who already own their homes, but much of the increased value is due to general inflation, which reached a high of 9% last year and hurts everyone.

A bigger killer for first-time homebuyers has been the steady rise in mortgage rates under Biden. When he came into office, the mortgage rate was 2.9% nationally. Now it is 7.1%, thanks in no small part to the Federal Reserve’s 11 interest rate increases prompted by the $6 trillion Biden spending and borrowing spree in 2021 and 2022.

So now, according to the mortgage company Redfin, just the increase in interest rates on a 30-year mortgage from 5% to 7% means that a middle-income family that could once afford a median-value home of $500,000 can only afford a home worth $429,000. Great, spend more and you get less house. Or instead of a single-family home, you can only afford a three-room condo or a townhouse. If we compare the rates today versus when Donald Trump was president, the typical homebuyer can only afford a house with a price tag more than $100,000 less than three years ago.

What a deal? Maybe this is one reason the size of a new home is smaller than in the past.

Here’s another way to think about the damage done by Biden policies: If you want to buy a $500,000 home today, which is close to the median price in many desirable locations, your total interest payments will be at least $800 more per month. That means over three decades of payments totaling at least $250,000.

Of course, rents are up nearly 20% as well, so for many 20-somethings, this means sleeping in the parents’ basement.

Biden talks a lot about bridging gaps between rich and poor and blacks and whites. But the group that is most handicapped by these interest rate shocks is minorities. Black homeownership is still less than 50% for black households. The Washington Post calls this “heartbreaking,” but they blame racism, not bad government policies.

There’s one other impediment to homeownership for Generation X and millennials. Many 30- and 40-somethings are hamstrung by their existing and expanding debt. Credit card debt is now $1.03 trillion. Half of all families are expected to have problems paying off this debt each month. Delinquencies are rising, which can mean penalty rates of 20% to 25%.

So, if families can’t afford their existing debt, how will they get a bank to approve a $400,000 or more mortgage loan?

An even bigger question is how in the world can Biden call his economic policies a success?

Perhaps Biden has a secret plan to “forgive” trillions of dollars of mortgage debt, as he has already attempted to do with student loans. But that just shifts the debt burden to taxpayers — hardly a solution.

The Biden administration’s assault on homeownership isn’t just harmful to the families that are being priced out of the market. It’s bad for communities and cities around the country. When families become homeowners and set roots in a town, they are much more prone to care about not just improving their own house and maintaining the upkeep and mowing the lawn and trimming the hedges, but it gives them a stake in the schools and children in the neighborhood and the quality of the public services. In other words, homeownership gives Americans a sense of Tocquevillian civic pride.

Crime is lower, neighbors are friendlier and everyone’s property values rise when they live in a community of owners, not renters.

There is one reason to feel today’s downward spiral can be reversed. Back in 1980 when Jimmy Carter was president, mortgage rates weren’t 7%; they reached above 17%. Voters rebelled against the economic mayhem and chased Carter out of office. Ronald Reagan came into the White House, and with wiser economic fiscal policies, mortgage rates quickly fell in half and then lower still. It can happen again.

Stephen Moore is a senior fellow at the Heritage Foundation and a chief economist at FreedomWorks. He is the co-author of the “Trumponomics: Inside the America First Plan to Revive Our Economy.”

COPYRIGHT 2023 CREATORS.COM

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.

AUTHOR

STEPHEN MOORE

Contributor.

RELATED ARTICLES:

STEPHEN MOORE: Don’t Let The Lockdown Artists Bring COVID Hysteria Back

Author Of Tell-All Book Says Joe Biden Is Insecure About Being ‘Perceived As Stupid’

‘Democrats Agree’: Activists Are Teaming Up To Fight Sex Change Surgeries For Minors In This Blue State

RELATED VIDEO: Less than 35% of Americans think Joe Biden is doing a good job. Bidenomics is a farce.

EDITORS NOTE: This Daily Caller is republished with permission. ©All rights reserved.

All content created by the Daily Caller News Foundation, an independent and nonpartisan newswire service, is available without charge to any legitimate news publisher that can provide a large audience. All republished articles must include our logo, our reporter’s byline and their DCNF affiliation. For any questions about our guidelines or partnering with us, please contact licensing@dailycallernewsfoundation.org.

Study shows seismic shift in lending away from large banks to non-banks

/in , , , , /by

Study shows seismic shift in lending away from large banks to non-banks continued in February By Stephen D. Oliner, Edward J. Pinto and Brian C. Marein.

A new study released by the AEI International Center on Housing Risk found that the seismic shift in home purchase loan originations away from large banks to non-banks continued in February.  Since November 2012, the large bank share has dropped from 61 percent to 33 percent (see the report below).  The share shift was unabated in February as the large bank share dropped 1.2 percentage points from  previous month.  The dramatic decline in the large bank lending share has been met point-for-point by an increase in the non-bank share, which has risen from 24 percent to 51 percent.  Large non-banks and other non-banks each have accounted for about half of the 27 point increase in share.

This shift is due to the fact that non-banks compared to large banks are more thinly capitalized and more lightly regulated, generally face less reputational and litigation risk, and tend to have a shorter term outlook. Additionally, their primary business is generally just mortgage banking as compared to the more diversified business lines of large banks.  Therefore they have a more limited ability to stay on the sidelines.

Key Takeaways:

  • The dramatic decline in agency market share for large banks continued unabated in February, offset by an equally dramatic increase in the non-bank share.
  • Since November 2012, the large bank share has dropped from 61% to 33%, a move of 28 points, including a 1.2 point drop in February, a dramatic decline that has been met point-for-point by a 27 point increase in the non-bank share from 24% to 51%. Large non-banks and other non-banks have participated equally in the increase, accounting for 14 points and 13 points respectively.
  • Large banks have reduced the riskiness of their agency mortgage originations over the past few years. Non-banks, in contrast, have shifted toward riskier loans as they have increased their market share.
  • Loans originated through the retail channel are less risky than loans originated through the broker and correspondent channels. This is true both for large banks and for non-banks. But retail channel loans from non-banks are substantially riskier than such loans from large banks.
  • The bottom line is that large banks attempting to regain market share would have to move well out the risk curve.

Rave reviews for the Wealth Building Home Loan

/in , , , , /by

The Wealth Building Home Loan (WBHL), a new approach to home finance, opened to rave reviews at the American Mortgage Conference held September 8-10.  Six leaders of national stature made favorable comments from the podium.

Lewis Ranieri, considered the “godfather” of mortgage finance, in his keynote address praised the WBHL:  “Fundamentally, what I find exciting is the wealth building nature of the product.  Anyone who knows me knows how concerned I am that too often the mortgage has been utilized as an ATM for a boat or big screen TV, as opposed to building equity; if we’re to meet the needs of Americans who desire a home, this type of SAFE experimentation will be critical.”

Carol Galante, FHA commissioner,David Stevens, Mortgage Bankers Association CEO and former FHA commissioner, Joseph Smith, monitor of the National Mortgage Settlement of the State Attorneys General and Lenders, and James Lockhart, former director of the Federal Housing Finance Agency also made note of the innovative approach taken by the WBHL.

Bruce Marks, CEO of the Neighborhood Assistance Corporation of America (NACA), announced that the WBHL, which provides low-income borrowers a straight, broad highway to building wealth based on a 15-year, fully amortizing, fixed-rate loan, will be available in an initial rollout undertaken by NACA and the Bank of America within 60 days.

Long-time industry observer Tom LaMalfa, in an email, stated:

“In an industry in which few agree on much, there was remarkable agreement on the value of the WBHL among an array of industry leaders speaking at the AMC this week.”

Stephen Oliner (codirector of AEI’s International Center on Housing Risk) and I announced that additional WBHL pilots are in the works with lenders around the country.

Smith spoke extensively about the challenge in providing access to credit and home ownership, particularly among low- and moderate-income borrowers.  He asked:

“[I]s the thirty year fixed-rate mortgage what we need?  Contrary to the opinion of many people whom I admire and respect, the thirty year fixed rate mortgage is neither a Constitutional nor human right…. While it is a proven ‘affordability product’ of long standing, the thirty-year fixed-rate mortgage does not build equity very quickly. Further, a lot of things can happen to a borrower over those thirty years – job loss, health problems, divorce. [a]s Monitor of the National Mortgage Settlement, I have done a lot of listening in the last two and a half years; including to distressed borrowers, the people who represent them, and public officials who deal with the fallout from increased foreclosures and bankruptcies. What I have heard confirms what I know from prior experience: that one or two of those life issues – or, in many, many cases, the trifecta – have resulted in real financial crisis on a large scale. Absent substantial home equity at the outset, the thirty-year fixed rate mortgage increases the fragility of a borrower’s overall financial position and puts the borrower at risk for a very long time.”

Smith went on:

“The traditional answer to the concerns I have just expressed is to require a substantial down payment. That’s certainly effective – for the people who can afford it. But it reduces access to credit and home ownership, particularly among low- and moderate-income borrowers.  If we want to keep homeownership an option for an expanding portion of the population, we should build some additional features into the mortgage product to reduce fragility. At the very least, we should consider the inclusion of product features that allow and even encourage early equity build-up. In that regard, I am pleased to note AEI’s Wealth Building Home Loan.”

Steve and I created the WBHL to serve the twin goals of providing a broad range of homebuyers – including low-income, minority, and first-time buyers – a more reliable and effective means of building wealth than currently available under existing policies, while maintaining buying power similar to a 30-year loan.

A WBHL has a much lower foreclosure risk because of faster amortization and common-sense underwriting. Its monthly payment is almost as low as 30-year, fixed-rate loan while providing the buyer with more than 90 percent of the buying power. It requires little or no down payment and has a broad credit box, meaning sustainable lending for a wide range of prospective homebuyers. While the WBHL is designed to reduce default risk for all borrowers, this is a critical importance for borrowers with FICO scores in the range of 600-660.

The WBHL will help these borrowers reliably and sustainably build wealth.

EDITORS NOTE: The featured image is courtesy of SNMC.