Much is being written about the decline in young, first time homebuyers (Washington Post Article). Why are fewer young people deciding to buy? Well, how about the burden they carry from their student loans which had the rates increased and can only be obtained through government financing? No more competition.
Fewer jobs, more uncertainty, higher cost of living, all contribute to the hesitancy of our young people toward homeownership. The American dream ain’t quite what it used to be.
Also, consider that FHA was created to provide assistance and financing for low to moderate income and first time homebuyers, but recently FHA has priced themselves right out of the market. Increased the upfront mortgage insurance premium to 1.75% of the loan amount while eliminating the refund when a loan gets paid off, increased the annual recurring premium to 1.10% of the loan amount, and increased the requirement for the annual premium to paid for the life of the loan.
All this adds up to an increased cost of obtaining the financing which was intended to assist first time home buyers, and an increased cost of homeownership. Regardless of the reduced down payment requirements, FHA loans are just too expensive for many buyers today; especially those just starting out.
So where have you gone Joe DiMaggio? Our nation turns its lonely eyes to you the lender. Yup, everyone now looks to the lenders to do something to turn things around. Why aren’t lenders making more loans, and more credit available to young and first time homebuyers? Maybe because the new QM and ATR rules and the fear of getting hit with federal lawsuits loom large if lenders don’t get things just right. Not to mention what they just went through with buy backs, indemnification, and CFPB and DOJ enforcement actions. Is it any wonder that lenders just might be a little leery of any marginal lending at this point; even when FHFA announces plans for an increased LTV loan, and an easing of some underwriting standards? Here we go again!
If there is a viable opportunity to lend and to make some money in doing so, good lenders will find a way. It’s just that this time I think they’ll tread a little more carefully when they lend. I sure hope so.