Hello LOs!
A long-awaited down payment assistance measure is not in Congress' infrastructure package, which is still struggling to get through the Senate. But Fannie Mae is powerful enough to not need Congress to boost the housing market, which is exactly what they did this week.
According to Fannie's August 4 seller letter, borrowers can now use credit card reward points as eligible assets to be used for down payment, closing costs and financial reserves, as long as it's converted to cash. The letter has the power of law: Lenders can start using the policy immediately.
Saving up for a down payment is thought to be one of the biggest barriers to homeownership.
That barrier is compounded by the unequal distribution of family inheritance, which is skewed toward white families. The Federal Reserve has found that nearly 30% of white families received an inheritance or gift, compared with about 10% of Black families, 7% of Hispanic families, and 18% of families of other races or ethnicities. And when they do receive gifts, white families' are also typically larger.
Without an inheritance, it's difficult to save for a down payment. Renter households are estimated to save only 2.4% of their income each year, according to Moody's Analytics, so it would take a typical renter about 14 years to save up $15,000.
I do expect, given the gridlock in Congress, that we might see more use of the government sponsored enterprises to accomplish goals that might otherwise need a statutory change.
It remains to be seen if Freddie Mac and other federal agencies will take similar steps, but a hallmark of the Biden administration's housing policy has been a remarkable level of coordination between different agencies. Particularly on the end of forbearance, the Federal Housing Finance Agency and the Consumer Financial Protection Bureau appear to be moving in tandem.
So, LOs, since it looks unlikely Congress is going to pass legislation creating a downpayment assistance program anytime soon, how else could the Biden administration use the GSEs to safely lower barriers to homeownership?
Georgia Kromrei
Senior Mortgage Reporter, HousingWire
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