Getting Through the Mortgage Winter
The mortgage industry is looking favorably on the latest Federal Reserve Board easing plan.
The Ben Bernanke-announced decision to maintain its buying of mortgage-backed securities to keep interest rates low “may help get us through the winter” through a short rally in interest rates, Mortgage Bankers Association president David Stevens told attendees of the recent New England Mortgage Bankers Conference in Newport, R.I.
But, Stevens told attendees, once the rally is over and the Fed actually does give up the easing, it’s time to get ready for “a long lasting paradigm shift.”
That shift, of course, is from refinancings to purchase mortgages. Stevens amusingly referred to a mindset of “mirror fogging refis” to describe the waves of refi borrowers to be had in recent years merely by answering a telephone. That has withered in recent months as rates have risen and will again when the Fed stops propping up the market (and the home loan market in particular).
But, not all the projections are grim, Stevens said, even though the MBA is projecting a stiff drop in originations next year, from $1.6 trillion in 2013 to just $1 trillion in 2014. However, that projection includes an enormous drop to $388 billion in refis, even as there is “a steady growth in the purchase market.”
And, estimated rising household formation projections for 2010 to 2020 will create “a massive demand for housing,” especially among underserved populations.
Stevens noted what he called a “bifurcation” in access to credit. Year-over-year growth in mortgages of $150,000 or less were down 4% last year, he said, while in the jumbo ranges above $727,000 growth has been 57%.
Stevens also referred to MBA’s ideas for reform of the government sponsored enterprises, though he broke no news on that ground, distributing the MBA’s pamphlet “Key Steps on the Road to GSE Reform” to the approximately 1,000 attendees of the show.
Some of their key recommendations: Freddie Mac and Fannie Mae “should make their individual mortgage-backed securities fungible for delivery to the TBA market.” In addition, they should add up front risk sharing options to their back end risk sharing plans.
The MBA also would like to see a continued viable secondary market access for smaller lenders, and have input into the proposed Common Securitization Platform.