It’s likely that Federal Housing Finance Agency Director Mel Watt will announce a number of policy steps aimed at increasing mortgage credit availability when he speaks at the Mortgage Bankers Association Convention & Expo on Oct. 20.
Specifically, the FHFA will reportedly take steps to further clarify lender liability and support the return of the 97% LTV product at the GSEs, Fannie Mae and Freddie Mac.
Analyst at Compass Point Research & Trading say they believe that while the lack of details on the FHFA proposals make it difficult to either quantify or qualify the economic impact of these policy changes, there will be some obvious effects on the industry.
“While we wait for additional details and Director Watt’s upcoming speech, we view this development with cautious optimism as it reinforces our belief that policymakers are willing to embrace initiatives aimed at increasing the flow of mortgage credit,” Compass Point analysts say in a note to clients. “Ultimately, we do not believe that the mortgage credit spigot will be turned on full blast given remaining fundamental and policy overhangs, but our view is that policymakers will take steps to twist the knob a few turns to the left in 2015.”
Private mortgage insurers are obvious beneficiaries, they say.
“We believe that private mortgage insurers are likely to benefit from these policy changes both in terms of volume and margin. Ultimately, the most important policy issues impacting the PMIs will be the finalization of the Private Mortgage Insurance Eligibility Requirements, which we expect by the end of 2014 and the g-fee decision which we expect by mid-Q1 2015,” Compass Point says.
Also benefitting are homebuilders – specifically entry-level homebuilders.
“We believe that lower price point homebuilders are likely to benefit from these policy changes,” they say.
Finally, there are the mortgage originators.
“We remain cautiously optimistic about the expansion of mortgage credit in 2015 and we believe these policy changes are supportive of that position,” Compass Point says. “While it remains to be seen whether these initiatives will have a meaningful impact on the mortgage market, it does show a change in direction for mortgage credit standards after years of tightening.”