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Are New Homebuyers Feeling the Effects of TRID?

saving-homesOver five months after the implementation of the TILA-RESPA Integrated Disclosure rule, first-time buyers are still enduring its consequences with closing delays on home purchases.

The American Enterprise Institute (AEI) International Center on Housing Risk found that the share and volume of first-time homebuyers rose marginally year-over-year in January 2016.

According to AEI's First-Time Buyer Mortgage Share Index (FBMSI) released Monday, first-time buyers accounted for 56.1 percent of primary owner-occupied home purchase mortgages with a government guarantee in January 2016. This number is up from 56.0 percent last January, but down from 56.7 percent in December 2015.

AEI credits " the implementation of the TILA-RESPA Integrated Disclosure (TRID) rule, which delayed the closing on some home purchases in late 2015" as the leading cause for the slowdown in first-time buyer activity.

"We expect activity to rebound in next month’s release. Despite the recent distortion to loan volume, the use of leverage continued to grow, with the Agency FBMRI (which measures the stressed default risk of first-time buyer loans) showing a significant increase over the prior January," the report stated.

First-time buyers accounted for 56.1 percent of primary owner-occupied home purchase mortgages with a government guarantee, up a shade from 56.0 percent the prior January.

Improvements in the labor market, riskier mortgage lending, and continuing low mortgage rates kept the first-time buyer share moving upward through December 2015.

“On a year-over-year basis, the first-time buyer share increased only modestly in January, with the rise likely suppressed by the implementation of TRID,” said Edward Pinto, codirector of the American Enterprise Institute’s (AEI’s) International Center on Housing Risk. “Once this impact abates we expect the housing market, particularly at the entry-level, to exhibit strong demand, in combination with shortness of supply, which will continue to drive home prices up faster than incomes and inflation.”

The share of first-time buyers within the Federal Housing Administration (FHA) was just over 80 percent, while Freddie Mac's share was approximately 40 percent, the data showed. Fannie Mae's share of first-time buyers has consistently been near 43 percent.

According to the report, the combined FBMSI totaled about 50.7 percent in January, up from 50.6 percent last year and down from last month when it was 51.2 percent.

Click here to view the full report.

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