Residential: A libertarian pick for FHFA director could mean more conservative GSEs

A libertarian pick for FHFA director could mean more conservative GSEs

The clock is running out on Mel Watt’s term as director of the Federal Housing Finance Agency (FHFA). Watt will exit his role in January, but a replacement still hasn’t been announced.

Growing speculation points to Mark Calabria as one of the names at the top of the list. Calabria, who currently serves as Vice President Mike Pence’s chief economist, is a housing finance veteran who could take a more conservative approach to government-backed mortgage lending.

Calabria formerly served as director of financial regulation studies at the Cato Institute, deputy assistant secretary of regulatory affairs at the Department of Housing and Urban Development (HUD), and worked on the Senate Banking Committee. He is largely viewed as a libertarian, which Tim Rood, Chairman of The Collingwood Group, a Situs company, says, “doesn’t necessarily bode well for the government-sponsored enterprises (GSEs).”

In a recent article with Inside Mortgage Finance, Rood said, “Mark would certainly hit the ground running as FHFA director.”

“As chief economist, Mark understands that macroeconomics and demographics are far more important to the housing market than the government’s role in housing. If the economy remains strong, I would expect Mark to move quickly to de-risk the GSEs through more conservative underwriting and deeper [mortgage insurance] coverage,” said Rood.

With GSE reform stalled in Congress, administrative and internally led reforms are the most likely to gain traction. This will put the next FHFA director at the center of significant policy discussions and changes. Calabria is likely to advocate for a more temperate role for Fannie Mae and Freddie Mac. He has previously supported a receivership models for FHFA as opposed to a conservatorship. He has also endorsed supplementing the role of the GSEs in housing finance with more private capital.

GSE capital rule is hypothetical, but FHFA gets earful anyway

A risk-based capital plan for Fannie Mae and Freddie Mac is only theoretical as long as the two mortgage giants remain under government control. But the Federal Housing Finance Agency (FHFA) proposal requiring the government-sponsored enterprises to prepare for future crises still elicits strong opinions.

The FHFA has mostly won praise for developing the plan, meant to smooth the transition if Fannie and Freddie are released from their conservatorships. But lenders and other stakeholders are still poking holes in the proposal, calling for a higher level of required capital, changes to risk factors to protect the GSEs in a downturn, and a revamp to the FHFA’s rulemaking process.

Among the more than 70 comment letters received by the agency, several stakeholders also called for greater transparency about how the proposal was formulated.

Read more: American Banker

Case-Shiller: House price growth slows to nearly two-year low

The S&P/Case-Shiller 20-city index was flat on a seasonally adjusted basis in September compared to August, and was 5.1% higher compared to its level a year ago, the lowest annual increase in nearly two years.

The Econoday consensus was for a 0.3% monthly increase for the 20-city index and a 5.3% yearly increase.

Tuesday’s Case-Shiller report covers the three-month period ending in September.

House prices are coming back to earth across the country as sellers and buyers reach an uneasy truce. The 5.1% annual increase is the slowest pace of appreciation since late 2016, but it’s still nearly double the rate of wage gains.

Even though economists have long expected the housing market to reach a lower equilibrium level, they didn’t expect prices to decelerate so sharply.

Read more: MarketWatch

Would CFPB nominee mirror Mulvaney or go her own way?

As she moves closer to Senate approval as head of the Consumer Financial Protection Bureau (CFPB), Kathy Kraninger is still somewhat of a mystery to the agency and industry she would oversee.

Now a senior official at the Office of Management and Budget (OMB), Kraninger has signaled that she favors a pro-free-market, limited government approach to regulation and will hew closely to the vision of her boss Mick Mulvaney, the acting CFPB director who also currently heads the OMB.

But unlike Mulvaney — who before running the CFPB referred to the bureau as a “sick, sad joke” — Kraninger is not linked with such rhetoric, making her views about the agency uncertain.

Her lack of experience on consumer protection issues raises questions about where she would come down on key policy initiatives, such as pending changes to the CFPB’s payday lending rule and a program initiated by Mulvaney to review and revamp the agency’s processes.

Read more: American Banker

Can new manufactured homes, and loans, rebuild the housing market?

Lending on manufactured housing is more complicated and risky than originating mortgages for traditional single-family homes, but several converging trends are driving traditional home-finance companies into the market.

A dearth of entry-level housing, along with new Fannie Mae and Freddie Mac initiatives, are prompting mainstream mortgage lenders to venture into the sector as it is being revitalized by new competition and higher-quality inventory.

Manufactured homes have grown to the point where they now account for almost 10% of U.S. housing starts, and they represent an even larger share of existing inventory in some states.

In addition, their numbers can multiply rapidly because producing and installing manufactured homes is less labor-intensive and faster-paced than site-built homes.

Read more: National Mortgage News

Mortgage loan limits to rise in 2019 to keep pace with home prices

Conforming loan limits got a boost for 2019 in nearly every part of the U.S. The Federal Housing Finance Agency (FHFA), a regulator for mortgage financing giants Fannie Mae and Freddie Mac, announced that conforming loan limits will rise in 2019 to $484,350 in most parts of the country. That marks a 6.9 percent increase over this year’s $453,100.

The FHFA limits set the maximum single-family mortgage amounts that Fannie Mae and Freddie Mac will finance, as well as limits for the Federal Housing Administration program.

“These limits are important for funding home sales in high-cost coastal markets like California, Virginia, and Maryland, but are increasingly important in other markets like Nashville and Denver, along with those in Utah and Wyoming,” the National Association of REALTORS® notes in a release.

Read more: Realtor Magazine

Prudential making a big bet on lower-income housing

These so-called workforce housing units usually are in older buildings that cater to price-conscious renters, paying about $1,000 a month for a one-bedroom unit. Around 6.3 million units, or about 41% of all the rental apartments in the U.S., fall into the workforce category, according to CoStar Group Inc., which tracks buildings that are five units and greater.

Investor appetite for rental apartments has been intense for most of the nearly decadelong property market recovery. But big investors have focused more on high-end apartments, which command higher rents and require less in fix-up costs.

More recently, rental growth of these amenity-rich units has slowed and more institutional investors have become interested in workforce housing where the outlook is rosier.

“There’s still a lot of room to grow on rent,” said Alfonso Munk, chief investment officer of the Americas for PGIM Real Estate, Prudential’s real-estate investment arm.

Read more: Wall Street Journal

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