As the new year gets underway, there are four housing issues consumers should keep a close eye on: Jobs, Foreclosure Delays, Washington, and Lending Standards and Rates.
- Jobs: If the job market improves, the demand for housing picks up, and many other challenges facing the housing market can more easily take care of themselves. However, if it doesn’t, home prices will decline further, and more homeowners will fall underwater.
- Foreclosure Delays: In September 2010, some of the nation’s largest lenders suspended foreclosures due to potentially fraudulent document-handling procedures. Regulators and state prosecutors have launched a series of reviews, and investigations could shed more light on abuses, such as misapplied or excessive fees by servicers, their attorneys, or other third-party vendors. If foreclosures are more difficult and expensive to process, banks and investors could step up bulk sales of loans or foreclosure alternatives such as short sales.
- Washington: This month, the Obama administration is set to issue an initial set of recommendations for how to remake Fannie Mae, Freddie Mac, and the broader mortgage market. Meanwhile, regulators also are writing new rules on provisions outlined in the Dodd-Frank Act that will clarify how banks must retain some of the risk on loans that are bundled and sold off as securities and define what constitutes a “qualified residential mortgage” that is exempt from such rules.
- Lending Standards and Rates: The government continues to dominate the mortgage-lending landscape, with more than nine in 10 new loans backed by Fannie Mae, Freddie Mac, or government agencies such as the Federal Housing Administration. While some analysts have raised red flags over the FHA’s finances and say that loans with 3.5 percent down payments are leading the agency to take on too much risk, others worry about tighter lending standards that could further pinch demand.
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