An Uphill Climb

first_img The Week Ahead: Nearing the Forbearance Exit 2 days ago Subscribe An Uphill Climb Data Provider Black Knight to Acquire Top of Mind 2 days ago Previous: Rent and Affordability Next: Search for New Wells Fargo CEO Taking Shape Data Provider Black Knight to Acquire Top of Mind 2 days ago About Author: Tom Lamalfa Tom Lamalfa has spent the past 40 yearsstudying mortgage finance as a researcher,analyst, and consultant. Past interests haveincluded the revenue and expense structuresof the various mortgage production channels,mortgage brokers, the GSEs, and thedomestic economy. He has been a longtimechampion of GSE reform and followslegislative developments in Washington,D.C. LaMalfa’s firm, TSL Consulting,specializes in survey research.  Print This Post About Author: Edward J. Pinto Tagged with: Fannie Mae Freddie Mac American Enterprise Institute (AEI)Resident Fellow Edward J. Pinto is theCo-Director of AEI’s Center on HousingMarkets and Finance. He is currentlyresearching policy options for rebuilding theU.S. housing finance sector and specializesin the effect of government housingpolicies on mortgages, foreclosures, and onthe availability of affordable housing forworking-class families. Governmental Measures Target Expanded Access to Affordable Housing 2 days ago Share Save Related Articlescenter_img The Best Markets For Residential Property Investors 2 days ago Fannie Mae Freddie Mac 2019-04-16 Seth Welborn Servicers Navigate the Post-Pandemic World 2 days ago in Daily Dose, Featured, Government, News Sign up for DS News Daily Demand Propels Home Prices Upward 2 days ago Home / Daily Dose / An Uphill Climb Demand Propels Home Prices Upward 2 days ago The Best Markets For Residential Property Investors 2 days ago April 16, 2019 2,581 Views Governmental Measures Target Expanded Access to Affordable Housing 2 days ago In late January, Sen. Mike Crapo, the Chairman of the Senate Banking Committee, released a Housing Reform Outline. The two over-arching goals presented were: make housing more affordable and protect taxpayers. The outline addresses five topics: guarantors, regulation of the guarantors, Ginnie Mae’s (new) role, the requirements necessary to transition to the new system, and a new plan to deal with affordable housing.Before laying out the numerous reasons why the Housing Reform Outline is flawed, a muchabbreviated review of Congress’ past efforts to make housing more affordable and protect taxpayers is in order (spoiler alert: they have all failed).Let’s start in 1954 when Congress first authorized the Federal Housing Administration (FHA) to insure 30-year mortgages for the purchase of existing homes. Back then, the median home sold for about twice median income, the homeownership rate was about 60 percent, and foreclosures were virtually non-existent.Flash-forward to 1992 when the median home sold for 2.85 times median income, foreclosures were once again common (for example, the percentage of FHA loans in foreclosure was 7 times higher in 1992 than in 1954), and, while the home-ownership rate was up to about 64 percent, this increasingly required two incomes.Why focus on 1992? That was the year Congress passed the Safety and Soundness Act covering Fannie Mae and Freddie Mac (the GSEs). This act instigated a congressionally mandated explosion in leverage. Since 1995, we have had two gigantic housing booms. The first began in 1995 and crashed in 2006. The second began in 2012 and continues to grow.The Affordable Housing (AH) Mandates in the 1992 Safety and Soundness Act forced the GSEs to abandon their traditional role as the secondary market for prime loans and instead required them to go into direct competition with both FHA—then the government’s subprime lender—and private subprime lending. In 1992, the GSEs’ purchase loan stress event mortgage risk index (MRI) was 36 percent of FHA’s MRI in the same year. By 2007, the GSEs’ MRI had risen so it was now 80 percent of FHA’s 1992 rate. Congress had accomplished its unstated goal—it now had multiple subprime government mortgage insurers, all with the goal of making homes more “affordable.”However, Congress’ effort to make housing more affordable backfired; it had made them less affordable. The home-price-to-income ratio had risen from a reasonably affordable 2.85 in 1992 to an unaffordable 4.07 in Q1 2006. Further, the homeownership rate was now in a free-fall as millions of homes financed with unsustainable loans were foreclosed upon.Congress decided to double down. In 2008, it passed the Housing and Economic Recovery Act, which strengthened the GSE AH Mandates and gave the Federal Housing Finance Agency (FHFA), the GSEs’ new regulator, expanded powers to set GSE underwriting policy. Then, in 2010, it passed the Dodd-Frank Act, which gave substantial power over the mortgage market to the newly created Consumer Financial Protection Bureau (CFPB).By Q1 2012, the house-price-to-income ratio had returned to a more normal level of 2.93. In January 2013, using its newly minted powers under the Dodd-Frank Act, the CFPB exempted government agencies from key parts of its Ability to Repay rule. As my colleague Peter Wallison and I observed at the time, it was entirely foreseeable that this action would launch yet another unsustainable home price boom. By Q3 2018, the house-price-to-income ratio was back up to 3.51 and heading higher.These policies have driven up the price of low- and low-medium priced (largely entrylevel) homes the fastest. Since Q4 2012, prices of these homes have increased by 47 percent compared to 28 percent for medium-high and high-priced (largely move-up) homes. Said another way, entry-level buyers are now paying about an extra $21,000 to buy a low- or lowmedium priced home.As the chart below demonstrates, congressionally mandated credit loosening fueled these two booms, thereby making homes less, not more affordable. The parallels between these two housing policy-induced booms are striking.Given this history, let us now return to Senator Crapo’s outline to examine its flaws. First, it provides an explicit federal guarantee for all (FHFA) approved guarantors. This not only puts the taxpayers even more on the hook for losses, it has the potential to expand the scope of federal mortgage guarantees outstanding beyond the already massive $6.7 trillion. History teaches us that whenever a federal full faith and credit imprimatur is extended, moral hazard results, with taxpayers the likely losers.Second, this proposal provides a further expansion of the federal government’s role and control of residential mortgage finance, rather than a reduction of that role and control. It accomplishes this by privatizing Fannie Mae and Freddie Mac and setting them up as guarantors benefiting from the new explicit imprimatur. The GSEs enter the market with the inherent advantages of ongoing companies that have been operating in the sector for decades. Any and all other would-be guarantors would be starting from zero, almost assuring few, if any, competitors.Third, the newly proposed solution for affordable housing creates the same problems that the existing structure does—namely, merely substituting one type of subsidy for another. While eliminating the affordable housing goals and duty-to-serve rules is common sense for the reasons noted earlier, its proposed replacement, the Market Access Fund, suffers from the same flaws. Both approaches add leverage and thereby exert upward pressure on house prices, particularly, as noted, for entry-level buyers. It bears repeating: these affordable housing policies make homes less, not more affordable.A fourth flaw is setting Ginnie Mae up as operator of the securitization platform. By all accounts, Ginnie already faces serious operational difficulties and is in need of a major systems makeover. These include serious upgrades to its platform; an issuer portal; a more robust counterparty risk-management program; and upgraded safeguards against issuer failures. Is Ginnie Mae really up to the assigned task, which would likely quadruple its issuances? How much time and money will have to be spent to get Ginnie Mae fully up to speed?Last, the proposed new structure will cause Ginnie Mae securities prices to decline and FHA rates to rise if the explicit government guarantee—now exclusive to Ginnie Mae securities—is extended to all securities issued by all approved guarantors. Suddenly, the guaranteed market grows nearly threefold but at the expense of FHA borrowers. This may well lead to unseen economic consequences.Given the past congressional failures already noted, an appropriate path forward is to use the tools already granted to the administration and regulators to address the many failings of the current governmentcentric approach. This could be done by the Treasury Department working with the FHFA, the FHA, and the CFPB.With respect to the GSEs, the FHFA director/conservator might make the following additions/revisions to the GSE Single-Family Scorecard for 2019:»» Tightened GSE underwriting on primary purchase homes so as not to compete with FHA. This includes not acquiring high CLTV (greater than 95 percent) and high debt-to-income (greater than 43 percent) loans.»» Reduce GSE single-family financing activity not directly related to the acquisition of conforming mortgages made to purchase a primary residence, by setting a goal to substantially reduce such loans so that owner-occupied home-purchase loans at conforming loan limits account for 90 percent of GSE loan acquisitions for calendar year 2023. This goal would be achieved in annual steps and would be accomplished through tightened underwriting, increased guarantee fees, or restrictions on acquiring loans unrelated to the acquisition of conforming mortgages made to purchase a primary residence. Specifically, this would include cashout refinance (25 percent of 2017 acquisition volume), high-cost loan limit (3 percent of 2017 acquisition volume) and freeze conforming loan limit at $453,100 (2018 limit), second home and investor acquisitions (9 percent of 2017 acquisition volume), and non-cash out refinance (15 percent of 2017 acquisition volume).»» GSEs to submit justification for all program and product expansion approvals that have been given while in conservatorship. Those that compete with the private sector should be terminated.»» FHA and the CFPB have their respective roles also. In short, they need to end or revise policies that are procyclical during home price booms. In sum, there’s nothing new in this latest effort to restructure the mortgage finance system. It will not eliminate or reduce the amount or cost of the federal government’s debt. Neither will it reduce moral hazard or promote financial stability. It will certainly not assist low- and moderate-income households by making homeownership more affordable.Given the past failures of congressional action, the obvious solution is to take measured and deliberate administrative action now to implement GSE reform. In five years, the government’s role will have been substantially reduced without any significant market disruption. At that point, a reasonable legislative solution that helps first-time buyers and protects taxpayers will be more visible and doable legislatively. Servicers Navigate the Post-Pandemic World 2 days agolast_img read more

Filling the savings gap

first_imgShould employers be able to force staff to join pension schemes?  Simon Kent reportsKeith Astill Head of corporate personnel, Nationwide Nationwide agrees that effective action is needed to encourage people tosave sufficiently for retirement. We cannot pretend, however, that it will beeasy to persuade all employers that it would be in their interests to makescheme membership compulsory, however supportive they may be – in theory – ofpeople making better provision for retirement. Many employers are already struggling to maintain good quality occupationalschemes, and may feel that making all employees join will only increase thosecosts, which may result in the accelerated closure of schemes. If compulsory membership is merely an option rather than an obligation forall employers who run occupational schemes, the proposal has much merit. Many employers will wish to ensure their staff have access to the bestpension schemes affordable. But if compulsory membership is introducedalongside other initiatives, such as concurrent membership of other types ofsavings or pension arrangements, then employers may be able to continue with aslightly less generous form of defined benefit scheme, such as Nationwide’sCareer Average Revalued Earnings (CARE) plan. It is often argued that the low-paid cannot afford contributions to anoccupational scheme. There is never an easy solution to this problem, but webelieve that as long as contributions are deducted from pay at source, pensionscheme members can make appropriate personal budget adjustments. This, of course, was the position prior to the abolition of compulsoryschemes in the late 1980s. There cannot be sensible pension provision withoutsome immediate financial strain. To pretend otherwise would be disingenuous. We will either improve the pensions of our national workforce, or we couldpretend it will improve by using terms of encouragement alone. The lattercourse of action has already proven a failure, with the identification of ahuge savings gap. It would be entirely possible to sweeten the pill for low-paid members byallowing them a higher rate of pension tax relief – such as long-term savingscontributions, as opposed to the tax relief allowed on the more readilyaccessible accounts, such as ISAs. Keith Galliford Divisional director, RebusHRThe current proposal would reinstatethe situation removed by Parliament in the 1980s, whereby employers could makeit a condition of employment that staff joined the company pension scheme. Sucha move would kick-start people to consider their retirement, and would bebeneficial provided that both employee and employer contributions are pitchedat reasonable levels. Although many will criticise this as a curtailment of freechoice, experience indicates that in the absence of compulsory schemes,individuals do not commit to long-term pension investment. This is particularlytrue in periods of falling stock market values. Stella Eastwood Head of pensions policy, BTThe difficulty with compulsorymembership is that many employees choose not to join employers schemes forvalid reasons.  They may have otherfinancial priorities, for example, or have chosen an alternative way ofproviding for their financial security in retirement.  Another issue, is that the introduction of compulsorymembership may in fact cause many employers to reduce future benefit provision.This would not be a problem for BT, as we have always experienced a very hightake-up rate for our schemes. But for other employers, where the take-up hasbeen far lower, the additional cost of a significant increase in scheme membershipcould easily prove too much to bear, and have the opposite effect to thatintended.Ian Booth Deputy director of HR, National Children’s HomesNCH has a contributory superannuationscheme which all employees can join. Scheme membership is voluntary, and we donot believe that it would be desirable or appropriate to make membershipcompulsory. NCH has recently reviewed its pension scheme, which includedconsultation with the employees’ representatives, and it was not suggested atany point that the scheme should have compulsory membership.Steve Harvey Director, people, profit and loyalty, Micosoft UKI don’t think our employees should beforced to pay into a pension scheme, because they are bright, intelligentpeople, and we are lucky to hire them. What we can do, is make them financiallyaware, and then leave it to personal choice. We’re going down the flexible benefits route – we want to offerbenefits which fit in with that specific part of our employees life-cycle atthat time. We want to put our employees in control of their own lives. A bigpart of that is the ‘work-life balance’, but it’s also how we educate people,and how they manage stress in their lives. And part of that commitment ismaking sure financial stress doesn’t exist. Filling the savings gapOn 1 Sep 2002 in Personnel Today Related posts:No related photos. Comments are closed. Previous Article Next Articlelast_img read more

Richfield’s Hayden Harward Places First At Cedar Invitational

first_imgSeptember 29, 2018 /Sports News – Local Richfield’s Hayden Harward Places First At Cedar Invitational Tags: Aspen Workman/Avery Foster/Brianne Beard/Cannon Anderson/Carli Begay/Carson Utley/Cason Southwick/Cody Rivers/Daran Beard/Dustin Bistline/Dylan Bistline/Elena Torgersen/Hannah Steele/Hayden Harward/Jake Church/Jamie Holt/Justin Reidhead/Justus Reitz/Kanab/Keenan Janke/McKenna Alger/Nathan Bowman/Nick Woolsey/Nora Foster/Richfield Cross Country/SeOnna Southwick Brad James Written by FacebookTwitterLinkedInEmailCEDAR CITY, Utah-Friday, various Mid-Utah Radio Sports Network school athletes competed at the Cedar High Cross Country Invitational, with Richfield’s Hayden Harward excelling above all of them.In the boys’ 3-mile run, Harward won the individual title, posting a time of 15:14.50, netting his second overall win of the season for the Wildcats.Harward’s contributions helped the Wildcats place 10th overall, with a collective score of 263. Other Wildcats who placed included Nick Woolsey (42nd place, 16:41.70), Justus Reitz (73rd place, 17:37.50), Cody Rivers (93rd place, 18:14.20), Cannon Anderson (94th place, 18:16.00), Carson Utley (101st place, 18:44.50), Cason Southwick (102nd place, 18:47.50), Keenan Janke (104th place, 19:04.80) and Daran Beard (111th place, 20:09.70).Kanab’s boys also excelled, placing 13th overall and netting a score of 410. For the Cowboys, Nathan Bowman finished 89th overall, posting a time of 18:03.60. Other Cowboys to place included Dustin Bistline (91st place, 18:12.70), Dylan Bistline (95th place, 18:19.00), Jake Church (103rd place, 18:56.40) and Justin Reidhead (110th place, 20:09.40).For the girls, Richfield placed 7th overall in the standings with 228 points. SeOnna Southwick was the highest-placing Wildcat, finishing in 36th place (19:56.90). Also placing for the Wildcats were Jamie Holt (45th place, 20:14.50), Nora Foster (57th place, 20:44.70), Avery Foster (64th place, 21:07.60), Aspen Workman (66th place, 21:10.10), McKenna Alger (84th place, 23:00.10), Carli Begay (85th place, 23:09.20), Hannah Steele (86th place, 23:09.60), Elena Torgersen (95th place, 24:38.30) and Brianne Beard (97th place, 24:53.40).last_img read more