We spend a lot of energy trying to see around the curve in the mortgage market — what's coming in six or 18 months? As rates rise, how will refi-heavy shops cope with the purchase regime?
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We spend a lot of energy trying to see around the curve in the mortgage market — what's coming in six or 18 months? As rates rise, how will refi-heavy shops cope with the purchase regime?
Taking a longer view of trends can be more difficult. But Freddie Mac has attempted to peer into the future to gauge the behavior of the borrower of tomorrow.
Of course, it helps that they have a trove of data from the three credit bureaus that spans the entire credit-visible universe of consumers under the age of 45, about 115.2 million people. Along with income data, Freddie Mac layered on socio-demographic characteristics including race, ethnicity, education level, gender, and marital status for the individuals living in the housing unit.
In this study, Freddie Mac defined "mortgage ready" as having a credit score of 661 or above, with a back-end debt-to-income ratio not exceeding 25%, no foreclosures or bankruptcies in the past seven years, and no severe delinquencies in the past year. That narrows it down to about 41 million, or 36% of the credit visible under-45 population as of January 2021.
Freddie Mac found that there is a substantial gap between the mortgage readiness of white consumers and Black consumers. While 36% of non-hispanic whites are "Mortgage Ready," only 22% (approx. 3.4 million) of Black consumers are "Mortgage Ready," the lowest among all racial groups.
Based on their calculations, it would take a white consumer an estimated 16.4 years to save up for a 20% down payment. It would take a Black consumer nearly two years longer, an Asian consumer seven years longer and a Hispanic consumer eight years longer — nearly 25 years.
The past 18 months has taught us that being mortgage ready doesn't mean you'll find a home in your area in your price range. In many parts of California, more than a third of the credit visible population is "mortgage ready," but less than 20% can afford a median-priced single-family home in their area.
That scenario is flipped in many parts of the country, especially away from the coasts and large metropolitan areas. In parts of Texas, upstate New York, the Great Lakes region, Louisiana, Mississippi, Alabama and Georgia, prospective borrowers could easily afford a home, but few are mortgage ready.
Does this mean the mortgage borrowers of the future will head further out of cities? Could incentivizing small-dollar mortgages, an issue HUD Secretary Marcia Fudge has expressed interest in, help make homeownership more feasible? Send a note to gkromrei@housingwire.com
They say it's who you know that counts. And at PennyMac, we know a lot of people. So, when you work for us, you'll work in an environment where warm leads are provided, which means less cold calling for you. Hiring Loan Officers. Apply Now!
It will fall to the mortgage originator to send out a clear message to home loan borrowers, letting them know their options and pushing for unfiltered contact with new homebuyers. If the industry doesn't step up its new borrower outreach efforts, it could appear to government regulators that the industry isn't taking the President's mandate seriously.
There aren't enough underwriters in the mortgage industry. Recruiting new talent, streamlining processes and harnessing new technologies is the way of the future, insiders said.
Homebot, the award winning client-for-life portal launched Homebot Home Search, a smart home search experience that captures buyer intent signals, allowing lenders to engage with buyers the moment they start looking for their next home. Learn More!
Fannie Mae is once again back in the credit-risk transfer market with a $984 million note offering through its Connecticut Avenue Securities real estate mortgage investment conduit.
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