Loosening credit standards, demographics, pent-up demand, and attractive affordability and housing valuations are on track to promote a healthier housing market for the rest of 2015 in the homebuilding and construction sectors, according to an analysis from Fitch Ratings released Wednesday.
"Regulators have eased some lending standards while also proposing changes (such as the FHA reducing private mortgage insurance premiums on its loans) that could provide more access to previously excluded potential buyers," Fitch says.
Recent Credit Loosening Regulatory Actions:
- The Federal Housing Authority (FHA) released guidelines on May 22, 2015 to clarify requirements for lenders in an effort to increase mortgage access. These changes subject lenders to agree to follow specific guidelines in the FHA's guidelines instead of using vague language.
- The Consumer Financial Protection Bureau (CFPB) on July 21, 2015 issued an amendment to the Know Before You Owe mortgage disclosure rule that requires easier-to-use mortgage disclosure forms that clearly lay out the terms of a mortgage for a homebuyer and gives homebuyers three days to review financial documents to ensure loan terms and fees have not changed at the last minute.
- In April 2015, Fair Isaac announced that it would be establishing a new credit score. Currently in a pilot program, the score is expected to be available to more lenders later this year. Some 15 million previously unscorable consumers can now be scored based on alternative data provided FICO by Equifax, Inc. and LexisNexis Risk Solutions. With the new score, consumers who receive a credit card and handle their payments responsibly for at least six months will receive regular FICO scores.
- At a National Association of Realtors symposium in early April 2015, HUD Secretary Julian Castro said the FHA is exploring the use of alternative scoring models. Most assuredly, still-tight standards reflect banks' concerns that they will have to buy back delinquent mortgages from Fannie Mae, Freddie Mac, and the FHA years after their origination, sometimes due to minor documentation inconsistencies.
- For the fourth straight quarter, more U.S. lenders eased loan approval standards as compared to the number of banks tightening up, according to the Fed Senior Loan Officer Opinion Survey on Bank Lending (released in early May 2015).
"Generally, we believe growing strength in the economy, employment and demographics should positively influence housing in 2015," Fitch said. "Total housing starts are projected to expand almost 14 percent to 1.11 million as single-family starts advance 12.5 percent and multifamily volume gains 7.3 percent. New home sales should improve about 20 percent while existing home sales should rise about 4 percent."