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Freddie Mac has made some progress with the fee-based repurchase alternative pilot it announced last year and is anticipating it will have some measurable results within the next several months."We expect by the end of second quarter 2024/early third-quarter 2024, we'll have a good amount of feedback and early indicators to see if the pilot is doing what we expect," said Sonu Mittal, head of single-family acquisitions for the government-related mortgage investor.The qualitative goal that results will be measured against whether the program Freddie is testing "is helping us continue to improve manufacturing quality and reduce the waste in the system," Mittal said.Pilot results could help determine whether the approach could be applied not only more broadly at Freddie but at larger competitor Fannie Mae at a time when their regulator seeks to harmonize how they handle representations and warranties on loans.Loan buybacks the two government-sponsored enterprises require of mortgage companies in order to remedy certain defects have long been a point of tension, particularly when instances are high and expansive as they were following the recent pandemic housing boom.In addition to Freddie's test, both GSEs have taken other steps to reduce the strain on their loan sellers while defending the need to engage in a process that remedies for loan flaws. Mortgage Bankers Association considers the pilot to be the closest to industry requests.Around 14 mortgage companies of varying sizes have agreed to test the sliding-scale fees based on the non-acceptable quality rate for performing loans, according to reports from the Mortgage Bankers Association's MBA Newslink that Mittal confirmed. Other actions like Fannie's revival of a discontinued defect notification, relabeled as a disclosure related to "potential" flaws, are still a step in the right direction, said Pete Mills, senior vice president of residential policy and member engagement, Mortgage Bankers Association.Fannie previously discontinued the previous version of the notification due to considerations around cost and low usage rates, but after repurchases became more common and costly, interest grew, particularly among smaller lenders. That convinced Fannie to rethink the decision."The notice provides more time, and provides time without being under the guise of repurchase demand. So that's good," Mills said. "But it does not go so far as Freddie in terms of a rethinking of the entire process. We're very interested in the outcome of the pilot and think it holds promise."While the MBA would like Fannie to consider adding a pilot like Freddie's, the GSE had no plans to pursue one at the time of this writing. Fannie does plan to review any results with the FHFA and consult its regulator about next steps.Meanwhile, the defect notice and other steps aimed at improving risk management in this area for both sides of the loan trade have contributed to a reduction in some repurchase related statistics.Repurchase volumes have been lower than their peak in 2022 but are still above immediate pre-pandemic levels, according to data the MBA analyzed from the Mortgage Bankers Financial Reporting Form, a disclosure government agencies require their counterparties to fill out.The quarterly average for the amount of repurchased or indemnified loans based on the unpaid principal balance was $849,000 when last measured, according to the MBA's recent chart of the week. That third-quarter 2023 number is down from nearly $1.43 million in 1Q22. The average share of originations repurchased in 3Q23, at 0.17%, was down from its peak of 0.29% in 4Q22.Just prior to the pandemic, the average balance of repurchased/indemnified loans rarely rose above $600,000 and 0.12% based on UPB and the percentage of originations, respectively. Closer to the period when the Great Recession occurred, repurchases were higher and reached averages above $700,000 in UPB or 0.31% of originations at times.Meanwhile, Freddie has reported near-term improvement in its numbers around defect or "non-acceptable quality" rates it attributes to collaborative work with all 1,700 of its sellers to reduce loan flaws in other ways outside of the pilot."We peaked on NAQ rate and repurchase notices issued in the first quarter of 2023. So since then, we've been on a downward trend, and now we are flattening out. If you look at where we are, it's an over 60% improvement in both NAQ rates and repurchase notices," Mittal said.If the results of Freddie's pilot are in line with early indications and expectations, it could potentially reduce lender costs for performing loan issues too, he said.In a repurchase, taking a loan back and selling it in the scratch-and-dent market for flawed loans has been costing sellers around 10% to 20% of the loan amount. So if they had a $400,000 mortgage repurchased, they might have to pay $40,000 to $80,000 for just one loan.Sliding scale fees lenders pay in Freddie's pilot based on the percentage of flawed performing loans they have overall instead would be a quarter of one basis point, or .000025%, of their portfolio value in a particular vintage if their quarterly NAQ rate for it is in the 2-5% range.So if a lender delivered $3.75 billion in loans to Freddie in a fiscal period, for example, they could end up paying $93,750 across the entire portfolio for a particular origination year. Lenders interested in the pilot should register their interest with Freddie but understand that it's unlikely to know whether there'll be an opportunity to add other sellers until later this year."We'll know more in Q3 what our path forward is," Mittal said.

A day after targeting the title insurance industry, the Biden Administration has put the rest of the real estate finance process in its crosshairs.On March 8, the Consumer Financial Protection Bureau posted a blog inviting consumers to tell it how "junk fees" in the closing process affect them.While not able to speak to the specifics of the posting, nor about any possible actions the regulator might take, the Community Home Lenders of America "is thrilled that they're jumping into this," Scott Olson, its executive director, said in an interview. "We've actually used this phrase [junk fees] ourselves a couple of years or so ago" he said in regards to click fees lenders are charged by third party vendors, which are passed on to consumers. Others in the industry had a hard time understanding where the CFPB was coming from."The CFPB's blog post is baffling and reveals little understanding of how the mortgage market works or awareness of its own regulations that provide for full fee transparency and limits on what can be charged," Bob Broeksmit, president and CEO of the Mortgage Bankers Association, said in a lengthy statement."The fees mentioned are clearly disclosed to borrowers well before a home purchase on forms developed and prescribed by the Dodd-Frank Act and the CFPB itself," he added, referring to the TILA-RESPA Integrated Disclosures, also known as TRID. One of those disclosures, the loan estimate, is given when the borrower contacts the originator and is supposed to be used to shop.The other form – the closing disclosure presented at the end of the process – must be within certain tolerances of the data provided on the loan estimate."In 2020, the CFPB issued a report praising its own rule for improving consumers' ability to locate key information, compare terms and costs between initial disclosures and final disclosures, and compare terms and costs across mortgage offers," Broeksmit said.But in Olson's view, "transparency is not the same as competition."The CHLA has been supportive of the use of title insurance alternatives like attorney opinion letters, that could reduce costs to borrowers."We think that opening up the line of sight on some of these things is reasonable where there really is not competition," Olson said.CHLA plans to "comment vigorously" to the CFPB, he continued, adding that it has done so regarding competition and fees charges in the not-so-distant past, particularly in regards to the Intercontinental Exchange purchase of Black Knight.As far back as 2003, if not even earlier, the government has had so-called mortgage junk fees in its crosshairs. Mel Martinez, Department of Housing and Urban Development secretary under President George W. Bush, said in a speech before the National Community Reinvestment Coalition almost exactly 11 years ago that members of Congress did not understand that reform proposal would help consumers understand the mortgage process and the costs involved so they don't become "victims" of junk fees and broker abuse.The CFPB, in its recent post, took its own shot at the lender policy portion of title insurance, saying the borrower has no control or options."Instead of paying this fee themselves, lenders make borrowers pay the cost," said the blog posting authored by Julie Margetta Morgan, associate director. "The amount that borrowers pay for lender's title insurance is often much greater than the risk."The CHLA has been supportive of the use of title insurance alternatives like attorney opinion letters, that could reduce costs to borrowers."We think that opening up the line of sight on some of these things is reasonable where there really is not competition," Olson said.The American Land Title Association issued commentary on the CFPB blog."Reform of mortgage closing costs is unnecessary," the ALTA response said. "The contradictory use of the term 'junk fee' conflicts with the White House's own definition, which cites the lack of disclosure of the fee being charged."Credit reports also were specifically mentioned as a problem area in the CFPB posting, claiming the business lacks competition and choice."The CFPB has heard reports of recent costs spiking 25% to as much as 400%," the agency said. "At the same time, we estimate that nationwide credit reporting companies made over $1.3 billion annually."CFPB is also looking for consumer comment on the payment of discount points, although the posting does not distinguish between temporary and permanent rate buydowns."We are paying particular attention to the recent rise in discount points," the posting said. "A higher percentage of borrowers reported paying discount points in 2022 than any other years since this data point was first reported in 2018."The agency said 50.2% of home purchase borrowers paid some discount points in 2022, with the median dollar amount being $2,370, up from 32.1% and $1,225 one year earlier.

Consumer sentiment regarding home prices will play an important role in who Americans choose for president in 2024, according to new research from Redfin.More than half of U.S. households — 53.2% —  said their election decision will be influenced by housing affordability, the online real estate brokerage determined in a February survey. Among that group, 17.9% completely agreed that affordability would affect their choice, while 35.3% somewhat concurred.  The results point to the significant extent current housing market challenges are impacting the American public, as interest rates, rising prices and limited availability all make homeownership more difficult to achieve, said Redfin Chief Economist Daryl Fairweather."While the economy is strong on paper, a lot of families aren't feeling the benefits because they're struggling to afford the house they want or already live in. As a result, many feel stuck, unable to make their desired moves and life upgrades," she said in a press release.The Redfin-commissioned research was conducted by Qualtrics, which surveyed approximately 3,000 U.S. homeowners and renters.At the other end of the scale, though, 19.9% of survey respondents said housing affordability had no sway over their presidential election decision-making, while another 26.9% also disagreed with the view, but to a lesser degree.   But whether or not they think home prices will ultimately affect their vote, 64.2% of respondents said the lack of affordability made them feel negative about the economy, running counter to monthly reports that generally point to a strong national post-pandemic recovery.In his State of the Union remarks last week, President Biden appeared to recognize how housing challenges might tax consumers in 2024. His speech included several proposals aimed at improving affordability, including tax credits and buyer and seller incentives, as well as an announcement of a pilot to eliminate title insurance requirements for some refinances. He also reiterated plans for expanding U.S. housing supply, which would go furthest in addressing current challenges, Fairweather said. "If 2 million homes are actually built over the next several years like President Biden is proposing, that's where the rubber will meet the road in addressing housing affordability."While critical of some components of the president's proposals, the National Association of Realtors welcomed his supply goals. "The administration's increasing focus on housing production, however, signals a positive turn, as the housing shortage is the root of our affordability crisis," said NAR President Kevin Sears.

The Department of Housing and Urban Development's Secretary Marcia Fudge announced Monday plans to step down from her role and retire from public service.In a published statement, Fudge said she has "mixed emotions" regarding leaving her post, but will do so starting March 22. In a separate interview with USA Today, Fudge said her decision to resign was mostly personal and stemmed from her desire to spend more time with her mother, Marian Garth Saffold, and other relatives in Ohio.Some have speculated, however, that an additional reason for her resignation may have been a lower than expected budget allotted to the department for 2024.Fudge, a lifelong Democrat, has been a public servant for over five decades. Her career includes services as a U.S. Representative for the 11th Congressional District of Ohio in Congress from 2008 to 2021.During her tenure at HUD, Fudge has worked to simplify the point of entry to homeownership  for borrowers and has focused on addressing homelessness, funding more than 2 million units of public housing and multifamily housing, a press release said.Some of her accomplishments include the creation of the Property Appraisal and Valuation Equity (PAVE) taskforce, lowering mortgage insurance premiums and incorporating positive rental history into FHA's underwriting.Adrianne Todman, HUD's deputy secretary, will become Acting HUD Secretary after Fudge's departure.President Joe Biden and others commended Fudge for her service."From her time as a mayor, to her years as a fierce advocate in the U.S. House of Representatives, Marcia's vision, passion, and focus on increasing economic opportunity have been assets to our country," wrote Biden in a statement. " I'm grateful for all of her contributions toward a housing system that works for all Americans, and I wish her well in her next chapter."David Dworkin, CEO of the National Housing Conference, said she "surpassed all expectations, including her own.""Throughout her leadership, Secretary Fudge has been a steadfast advocate for equitable housing policies, championing initiatives aimed at alleviating homelessness, expanding access to affordable housing, and fostering sustainable communities," Dworkin wrote in a statement. "During the pandemic, HUD's actions helped hundreds of thousands of people who she will never know but who will never forget what was done for their families. Secretary Fudge's decision to reduce FHA's mortgage insurance premium has positively impacted millions of individuals, helping mitigate America's housing affordability challenges."HUD secretary's exit comes right before the election season ramps up, with President Biden and Donald Trump expected to face off in November.

Uncertainty around the future of Newrez's retail operations pushed some veteran originators to seek greener pastures at rival competitors.Following the departure of the company's head of retail James Hecht and some divisional managers to OneTrust Home Loans, others have also started transitioning out. Some managers and loan officers have jumped to organizations like Union Home Mortgage, CrossCountry Mortgage and The Money Store.Some former staffers said their departures were prompted by unclear messaging from Newrez regarding how they'd recommit to retail, after efforts to sell the channel failed in 2023."The fact that they keep trying to sell the retail channel sends a confusing message where you're saying you're committed to retail, but then these things come out, and that's why my confidence started eroding," said one loan officer who recently left Newrez. "Last I heard, they're now pushing for a hybrid model between retail and direct-to-consumer where they'll pull leads out of their servicing portfolio…."John Abraham, a top originator and producing manager, announced last week that he was jumping to The Money Store. Abraham spent over a decade at Caliber, which became a part of Newrez in 2021. The branch manager, whose team of three also transitioned to The Money Store, will serve as a vice president and producing manager based in Illinois, and will focus on driving loan volume growth at the shop, a press release said.The veteran originator would not go into detail regarding why he left his old employer, but acknowledged he was aware of the lawsuit against Hecht.Union Home Mortgage has also seen a notable influx of former Caliber/ Newrez originators in recent weeks, including the addition of Steve Kriegbaum, a veteran branch manager at Caliber. As of February, Kriegbaum became a sales manager at UHM, according to the Nationwide Licensing System. Movement of originators seems to have sped up after a bombshell suit was filed by Newrez against Hecht revealing he was tasked in late 2023 to explore a potential sale of Newrez's retail mortgage business. Currently the lender is trying to bar Hecht from continuing his employment with OneTrust.  Newrez accuses Hecht of staging a ruse in which he abruptly left to a direct competitor and brought his colleagues, a handful of divisional managers, along with him.Newrez has expressed its recommitment to growing retail.The mortgage lender is "100% committed to the distributed retail channel," an executive said Feb. 1. They also highlighted that "connecting our servicing portfolio and our servicing leads on a localized basis is really the differentiator on how we connect with our customers."Rithm, the parent company of Newrez, reported that its originations and servicing segment posted a net loss of $120.9 million in the final three months of 2023, down from a gain of $421.5 million in the third quarter. Originations posted a $7.7 million gain in profits, up from $7 million the prior quarter. Servicing saw a $210.6 million gain in the fourth quarter, down from $444.5 million the quarter prior.

In January, investors including TPG Angelo Gordon, LibreMax Capital and Lord Abbett & Co. got a shock.The firms had bought into a bond deal arranged by Goldman Sachs Group Inc. in 2021 that financed the purchase of dozens of apartment buildings in San Francisco, one of the nation's priciest markets. But by the end of 2022, the companies that borrowed the money had defaulted and the loan backing the securities was eventually sold off at a deep loss.Then Midland Loan Services Inc, a go-between that intervenes for bondholders when assets struggle, delivered more bad news: Investors weren't going to get $164 million they had coming to them — for at least a little while, as questions surrounding the fate of the deal were worked through. Holdbacks can happen in commercial mortgage bonds, but this one was unusually large, big enough to expose multiple classes rated investment grade by Kroll Bond Rating Agency to possible losses.The step has drawn attention on Wall Street as a potential new X-factor risk in the $1 trillion market for commercial mortgage-backed securities. The real estate market is already contending with a historic downturn, but some investors now worry that servicers will make surprise decisions that end up significantly hurting their returns in deals.Stav Gaon, a strategist at Academy Securities Inc., says the holdback in the Midland deal is likely the largest ever seen in that corner of the US securities market, and raises the odds investors will face additional hurdles as other deals lapse into default."This is a risk investors did not expect," Gaon said, stressing that there may well be a good explanation for the large amount held back. "There's no reason to think that something like this won't happen again."More than a month after its attention-grabbing disclosure, Midland, a unit of PNC Financial Services Group Inc., has not offered many details on why it held back the large sum, nor is it obligated to. The main theory is that Midland, fearing bondholders might file a lawsuit, retained the funds in order to pay for unforeseen expenses related to litigation, according to people with knowledge of the situation.  A Midland spokesperson declined to comment for this story. The company previously said in a statement that "while PNC typically does not comment on specific transactions, we can share that based on the unique attributes of SASB (single asset, single borrower) deals and specific factors related to this portfolio, the size of the holdback is appropriate."Spokespeople for Angelo Gordon, LibreMax and Goldman Sachs declined to comment. Lord Abbett didn't respond to requests for comment. Big lossThe commercial mortgage bond is backed by a loan that two borrowers, Veritas Investments and Baupost Group, took out in 2020 against more than 60 apartment complexes in San Francisco, according to loan documents. Goldman Sachs bundled the loan into commercial mortgage backed securities in 2021. In 2022 and 2023, many apartment landlords nationally found themselves bleeding cash. The most aggressive Federal Reserve rate hiking in decades had boosted financing costs for real estate owners, one of the key factors erasing profits even though rents had been rising in many markets.Amid these headwinds, Veritas and Baupost defaulted on the $675 million loan. Midland was appointed to oversee the increasingly troubled debt in November 2022, according to a Kroll report. Veritas and Baupost declined to comment.Midland's job — as a special servicer — was to extract maximum value from the loan, through steps such as selling or renegotiating it, and pass the money on to bondholders.The servicer proposed selling the loan for a minimum price of around $515 million. But Angelo Gordon, LibreMax, and Lord Abbett raised concerns that that price was too low, according to people familiar with the matter and a Kroll report that didn't identify the specific noteholders. It is unclear why Midland elected to sell when it did, but market veterans say that, when loans default, it's not always clear whether the best way to recoup value for bondholders is to sell the loans at current market prices, wait for prices to improve, or pursue some other option such as foreclosing on the underlying properties. Such decisions are especially fraught in markets undergoing big changes in valuations, as was the case in last year's multifamily commercial real estate sector.Despite the objections, Midland ended up selling the loan to Brookfield for net proceeds of around $513 million, triggering a loss of nearly 25% on the original value of the loan. That meant that two classes of bondholders most exposed to the risk — those holding the class G note and some of the class F note — would take losses, according to a note by Gaon. Brookfield declined to comment.Then, Midland's holdback exposed additional bondholders to potential losses, including those holding the class E, D and some of the C notes, respectively rated BB-, BBB-, and A- by Kroll.The credit markets have largely defied speculation that the Federal Reserve's interest-hike hikes would cause a surge of defaults as companies were weaned from a long era of easy money. Such concerns flared after the collapse of Silicon Valley Bank and two other banks set off fears of a credit crunch, only to fade after the economy proved surprisingly resilient. Recently, with investors anticipating that the Fed will start cutting rates this year, they've demanded smaller yield premiums on some commercial mortgage-backed bonds, a sign of easing concern.But distress has been building across the real estate industry. Landlords are offloading office buildings at half off, or even $1, as remote work becomes the norm. More recently, problems are brewing in the multifamily apartment sector. Potential distress in that sector topped $67 billion as of last quarter, surpassing the $55 billion of distress in the office sector, according to an MSCI report.This looming mountain of distress has made Wall Street especially sensitive to conflicts like the one involving the portfolio of San Francisco apartment debt. If interest rates remain high and more deals get into trouble, then special servicers are likely to find themselves acting as referees on more and more deals.JPMorgan strategist Chong Sin wrote in a note that in the Midland deal factors including the lack of explanation and the large size of the holdback could contribute to investors growing less confident about the securities. Investors are still determining what incentives servicers may have in resolving deals in the future."This reminds investors that they don't have as much control as they think they do," said Liza Crawford, co-head of securitized research at TCW. "It opens the door to a new level of risk that could materially disrupt investors' expected returns."

Left to right: Jim Follette, Mike Hogan Pennymac elevated two executives with the promotions of Jim Follette and Mike Hogan, who will be responsible for delivering enhanced digital capabilities through the combined efforts of servicing and technology divisions. In the newly created position of chief digital officer, Follette will oversee technology initiatives aimed to improve the customer experience as well as expand commercial market opportunities, particularly for its proprietary servicing platform. Since joining Pennymac 12 years ago, Follette has held multiple roles across the Westlake, California-based company and was most recently its senior managing director and chief mortgage operations officerHogan steps up to the role of chief information officer, responsible for developing and providing a range of technology-backed mortgage solutions to customers. Before his promotion, he held the role of managing director of capital markets technology, tasked with building automated processes and strengthening infrastructure.  

A majority of adjustable-rate mortgage borrowers rue their decision to take out the loans, but even more plan to stick with them, according to new research.The rise of interest rates since 2022 to more than two-decade highs drove the sentiment, as ARM borrowers find a substantially different financial environment today versus the last 10 years, the report from home equity investment platform Point said. Approximately 70% of ARM holders, including homeowners in both the introductory and variable-rate phase, said they now regret their choice. The sharp increase in monthly payments is hitting many households already dealing with higher costs from elevated inflation over the past two years, as well as their other debts. "When you add on top of that, a sharp increase in mortgage payments – which, for the vast majority of homeowners, is going to be by far their largest monthly expense -- it can definitely put a big strain on their finances," said Shoji Ueki, head of marketing and analytics at Point.Point's research, conducted in January, surveyed borrowers who took out adjustable-rate mortgages between 2013 and 2023. The popularity of ARMs historically grows in higher-rate environments, as buyers aim to lower initial monthly payments. At the start of the 10-year period in February 2013, the average 5/1 ARM rate was 2.63% and fell to a low of 2.37% in December 2021, according to Freddie Mac. In early 2019, introductory rates for those loans averaged 3.9%. But as those borrowers exit fixed terms this year, they may see them rise two percentage points to 5.9%, with the rate tied to the current benchmark Secured Overnight Financing Rate. The annual rate of increase is capped at 2% and 6% overall for the duration of the loan.If the SOFR benchmark remains near current levels, their rate would jump up to 7.3% in 2025. For an approximately $250,000 loan, monthly mortgage payments would leap 39% from from $1,181 in 2023 to $1,637 by 2025. Seven years into their loan, borrowers will have paid more cumulatively than they would have had they chosen a 30-year fixed mortgage, with a rate of 4.45%, Point determined. But despite the significant ramp-up in potential monthly payments over the next 24 months, an even larger 82% share of respondents said they planned to keep the ARMs they had, while 10% said they were uncertain. Although their reasons vary, borrowers may have few choices if circumstances have changed. While refinancing into a 30-year fixed mortgage is an option, it might not be available to homeowners who already missed payments, Ueki noted.   "[If] you're delinquent and as a result, your credit score suffered, it can be tough to find other financing options," he said. Refinancing at current rate levels may limit the financial benefit over the full life of the mortgage once transaction costs and extra years are added in as well.  Others may choose to keep their ARMs and make regular payments in expectation rates will fall over time. "That's, of course, a guessing game as well."   The rapid pace at which mortgage rates rose in 2022 and 2023 caught many off guard, even among those who fully understood the risks, Ueki said. Between late 2021 and late 2023, the average 30-year interest rate more than doubled from near 3% and currently sits at 6.88%. "We heard a lot of survey responses that definitely got into sentiment that they did not realize that their monthly payments could increase to this degree." At the same time, there appears to be a lack of detailed knowledge of refinance terms, even among the borrowers who intend to take one once their introductory rate ends. Among that particular subset of borrowers, 71% were not certain their monthly payments would increase or decrease when transitioned to a fixed rate.   While variable-rate mortgages helped create conditions leading up to the Great Financial Crisis, underwriting standards have tightened since. The rate of home equity accrual in the last three years might be providing some assistance to borrowers, allowing homeowners to apply for second liens to help with payments if they qualify, according to Ueki. In the fourth quarter of 2023, Corelogic determined American homeowners had gained $1.3 trillion in equity annually. Over the past two years, just as interest rates began their surge, loans with 3-year fixed introductory periods were the most popular type of ARM, with a 47% share relative to total volume. Five-year introductory rates accounted for 31%, with 7-to-10 year terms making up 22%.  But in the peak years of 2020 and 2021, 5-year fixed terms were predominant at 41%, followed by the 3-year at 36%. ARMs with 7-to-10 year terms garnered 23% of volume.

US Vice President Kamala Harris, from left, President Joe Biden, and House Speaker Mike Johnson, a Republican from Louisiana, during a State of the Union address at the US Capitol in Washington, DC, US, on Thursday, March 7, 2024. Election-year politics will increase the focus on Biden's remarks and lawmakers' reactions, as he's stumping to the nation just months before voters will decide control of the House, Senate, and White House. Photographer: Al Drago/BloombergAl Drago/Bloomberg Housing industry participants gave a mixed reaction to the Biden Administration housing initiatives mentioned in the State of the Union speech Thursday night."On the surface, the president's proposals all seem reasonable, though it's unclear what some of them would actually end up looking like if enacted into law," LendingTree Senior Economist Jacob Channel said in an email. "Moreover, these proposals are unlikely to be met with universal praise."The attention to housing affordability problems is welcome, but ignores the role government mandates at all levels play in creating the inventory shortage, a statement from Ed DeMarco, president of the Housing Policy Council, said."Adding more individual, demand-side tax credits and limits on pricing for legitimate closing costs will further increase house prices and the cost of providing credit," DeMarco said. "Simply put, demand continues to outpace supply and subsidizing more demand inflates house prices."Instead, the White House should examine how the "deep and complex regulatory environment" drives up housing costs and limits supply, DeMarco said.The National Multifamily Housing Council had a similar reaction to DeMarco's, coming out in support of expanding use of the low-income housing tax credit program, but lamenting the lack of regulatory relief."We are very disappointed that the Administration has, at the same time, chosen to focus on creating a heightened regulatory regime that will reduce consumer choice by limiting fee for service arrangements," a press release from the organization declared. "These efforts are concerning because they will hurt renters by undermining the Administration's objectives of lowering housing costs, driving new housing development and creating more affordable rental housing."The government should not be blaming housing providers for the affordability crisis, because it is counterproductive and will not solve the problem, NMHC added."The increased federal investment in housing supply as the president proposes and a regulatory environment which incentivizes more investment in rental housing will make a difference," the group said.Those who supported the initiatives pointed to the wealth-building effect homeownership provides.The Center for Responsible Lending noted that the down payment assistance the White House wants mirrors a prior proposal it made, as well as the Downpayment Towards Equity Act that passed the House of Representatives in 2021."Targeted first-generation down payment assistance would open doors of opportunity for families who have not benefited from intergenerational transfer of wealth," said Mike Calhoun, CRL president, in a press release. "This policy would expand the economic security that homeownership brings, and it would help narrow the racial homeownership and wealth gaps."Meanwhile, the Community Home Lenders of America targeted Biden's pitch for the mortgage relief tax credit for praise."In a time of historically high mortgage rates, such affordability initiatives are critical in empowering first-time and low-income borrowers in purchasing a home and building generational wealth," a statement from Scott Olson, CHLA executive director, said.Ed Pinto, co-director of the AEI Housing Center, said if this credit were to be implemented, it would make housing less affordable."This proposal would increase demand for starter homes, which are already in short supply, thereby driving up prices," Pinto said. In addition, many of the 3.5 million beneficiaries would have been able to buy a home without the credit. "These families will have additional purchasing power to bid up the price of homes."The down payment assistance proposal suffers from the same issues, Pinto added.But for Rob Chrane, the CEO of Down Payment Resource, the frustration is that existing resources are being underutilized, because consumers are unaware that this help is available.He pointed to the 2008-2009 first-time home buyer tax credit, which was successful because the word got out."Why did they know it?" Chrane said in an interview. "Because, the government's housing stakeholders — trade orgs, real estate community, mortgage lending community, they all used their collective megaphones and blasted out a very simple message."It worked because the program was extended. That messaging can be used to promote the approximately 1,700 DPA programs already in existence."Again, it's a simple public service announcement, 'down payment help is available; see if you're eligible,'" Chrane said. "That's news to most people."Down Payment Resource did a study with the Urban Institute that found almost 80% of Federal Housing Administration borrowers that lived in the nation's 10 largest metro areas who closed a loan in 2022 were eligible for some form of DPA.But based on FHA's annual report to Congress only 15% actually utilized DPA."I'm not saying we shouldn't do some of these things, but what does it cost to promote something that's already there?" Chrane asked.As for the controversial title waiver program, Bose George, an analyst from Keefe, Bruyette & Woods came out with a follow-up note to one issued before the speech stating he didn't expect the pilot to get any meaningful traction in the market.The pilot program would waive the requirement for a lender's title insurance policy on a limited set of refinances purchased by the government-sponsored enterprises."We expect any title pilot to have modest usage," George wrote. "We think any attempt at a broader reduction in the use of title insurance will likely run into meaningful political opposition related to charter creep since the related risk will be moving to the GSEs."Fitch Ratings analysts Douglas Baker and Christopher Grimes concurred, stating "The ultimate usage of this product and the impact on title insurance policy issuance and premium volume remain uncertain. Similar efforts have not had a material impact on the industry, including Fannie Mae's Title Waiver Pilot which the American Land Title Association reported as being abandoned in August 2023."Fitch is not expecting any impact from the pilot to the title insurers it rates.LendingTree's Channel noted past mortgage industry opposition to eliminating title fees."Opponents of such a proposal argue it will make transactions riskier for homeowners," Channel said. "Of course, many who oppose this measure have financial incentives to keep insurance fees high…so, take from that what you will."The National Fair Housing Alliance doesn't think the Biden Administration goes far enough."While the President's remarks in his address pinpointed some of the challenges presented by the nation's fair and affordable housing crisis, there is still much work to be done," Nikitra Bailey, the NFHA executive vice president said in a statement.Specifically HUD needs to update the Fair Housing Initiatives Program to remove administrative barriers, streamline the process, and ensure funds flow to communities more quickly. The government must crack down on discriminatory tenant screening algorithms and other AI that perpetuates bias. It needs to order the Federal Home Loan Banks to increase their investments in affordable housing development by increasing the amount of funds they contribute to 20% of their profits.The White House also needs to finish the work of the PAVE Task Force on appraisal bias and ensure Fannie Mae and Freddie Mac implement protocols that promote fair housing throughout the country, NFHA said.In general, much of what the White House is proposing needs to be approved by Congress."Given how dysfunctional Congress is, the unfortunate truth is that many of the things we need to do to make housing more affordable probably won't be implemented anytime soon," Channel said.But no matter which side of the aisle Americans are on, it is a positive that housing is back as a topic in the political debate, said Marty Green, a principal at the law firm of Polunsky Beitel Green."This industry is too critical to our economy and as a wealth builder for Americans to be ignored," Green said. "It will be interesting as we move closer to the November election whether we see meaningful proposals for policy support that addresses the chronic undersupply of new homes."

Former FHFA Director Mark Calabria signing books at the 2023 Digital Mortgage Conference. Photo credit: Jacob Kepler Depending on the outcome of the next presidential election and alignment between the heads of key agencies, a exit from government conservatorship for Fannie Mae and Freddie Mac could be closer than many think.Former Federal Housing Finance Agency Director Mark Calabria said Thursday that if the FHFA and Treasury were to pick up the effort from where he and previous Treasury Secretary Steve Mnuchin left off during the first Trump administration, it could happen in a couple years or so."From everything that we did, and what I believe needs to be finished, it can be done," Calabria, senior advisor at the Cato Institute and author of a book on the pandemic-era FHFA, said Thursday, expanding on remarks he made at a Commercial Real Estate Finance Council event this week.He acknowledged a lot of stars would have to be aligned and logistical issues would have to be addressed including the asset-liability imbalances the government-sponsored enterprises have and the Treasury's senior preferred shares, but said there are mechanisms for handling them."You have a huge overhang on the liability side of the balance sheet, and that needs to be crammed down, so you either cram it down explicitly, or you essentially swap everything to common stock and let the market cram it down," he said.Calabria favors the second approach."Ultimately, I think it's better to let the equity markets determine what that value is," he said.But even if there's a second run of the Trump administration, Calabria said it's not a given that the exit will be a top priority given that tax reform would likely take precedence for the Treasury.Conservatorship may be even far less likely if President Biden stays in office, but Calabria said he wouldn't rule it out even in that circumstance.That said, if Janet Yellen remains Treasury secretary, it's unlikely based on her testimony and actions, he speculated.It would be more likely if Mnuchin were to return to the post, Calabria said. Mnuchin told CNBC on Thursday that he would consider serving again if Trump is elected.For his part, Calabria said he doesn't think he necessarily needs to be involved for an exit to happen."I have a high degree of comfort that there are a number of people that can come in, in a different administration, and complete the work I started. So I don't necessarily feel like 'only Mark can do it.' I have a sense that the groundwork has been laid," he said.However, Calabria added that he would consider serving if called upon."If I was asked to serve, it would be hard for me to say no to a president that wants me to have some sort of positive impact," he said.But he stressed that his interest in such a position has changed over time."I would certainly admit, to a degree, that while at the White House in 2018, I threw my hat in the ring for the FHFA job and thought it was something I could do. I'm not out there throwing my hat in the ring and saying, 'me, me, me,' because I don't think it needs to be me," Calabria said.Another possible factor in whether or how Fannie and Freddie exit conservatorship could be the strength of the single- and multifamily housing markets, he said. Signs of weakness seen in apartment market indicators like delinquencies, starts and rents could have equivalents that materialize soon in single-family homes too, according to Calabria, who expects to see trends in the two markets converge.He thinks that elevated debt-to-income ratios, particularly in the Federal Housing Administration-insured market, could be a concern given that both high loan-to-values and low FICO credit scores are simultaneously allowed for those loans.While the mortgage market often watches the FHA market for signs of broader credit issues, Calabria said the signs may be less visible due to "FICO inflation" from temporary pandemic relief for consumers and related policies. Restrictions on reporting delinquencies in credit reports, and loss mitigation initiatives during the COVID-era "kick the can down the road" regarding decisions about whether a loan needs to proceed to foreclosure, he said.He noted that pandemic specific assistance drawn up during his time at the FHFA "was never meant to be permanent" although there was some thought it could inform what might be done in the future or potentially "put on the shelf" for potential use in another emergency.Calabria agrees with others who say credit concerns now emerging aren't on the order of the Great Recession, which was preceded by a period where underwriting was particularly loose and foreclosure prevention was far less efficient, but said they shouldn't be ignored."For people who say, 'well, it's not going to be 2008, I ask, 'would half of 2008 be pleasant?' My annoyance with that general kind of commentary is sometimes what they're saying is we shouldn't care at all, and I think that's ridiculous. You don't need 2008 to care about the market."Calabria also said he is concerned about disaster risk and the related rise in insurance costs to a degree, noting that it's a circumstance that arises in part from consumer preferences for coastal living."You don't have to be a climate alarmist, but set that debate aside," he said. The reality is that more of us continue to live by the ocean. You don't even really need to get some of the broader debates of climate, this is a real issue regardless, because of where we choose to live."