Executive stresses housing affordability must be sustainable
A slew of new ideas has been floated in the mortgage industry and by the government to make housing more affordable, especially for first-time buyers who remain on the sidelines.
Some of those ideas involve extending the mortgage term further to lower the monthly payment, making it easier for borrowers to qualify. Others involve reducing loan-level pricing adjustments, which can make things more expensive for lower-credit-score borrowers.
Dozens of ideas, including ways to reduce fees, taxes, and insurance, are being discussed at all levels of government. One executive is happy to see so much discussion.
Miki Adams (pictured top), president of CBC Mortgage Agency, said that while it’s great there are new ideas to consider, she urges decision-makers to ensure affordability is sustainable.
“Ideas like extended loan terms are good in that they reflect the urgency,” Adams told Mortgage Professional America. “There's a recognition of the urgency of solving an affordability crisis, but long-term solutions really have to focus on sustainability. Extending debt over decades can reduce monthly payments, but it also increases total cost and financial risk.
“More realistic solutions include increasing access to responsible down payment assistance, supporting housing supply, and investing in borrower education. When we take these approaches, buyers can enter the market sooner, while maintaining long-term financial stability. No matter what their approach is, it needs to focus on long-term sustainability.”
Increasingly complex market
Adams said something has to be done to help people who might consider themselves “forever renters” realize that owning a home isn’t out of reach. Because so many in the industry recognize the problem, lots of potential solutions are being suggested.
“I'm very optimistic about the level of innovation and collaboration we're seeing across the mortgage industry,” Adams said. “I'm excited to hear us talking about different opportunities for housing solutions. More engagement around manufactured housing, lenders, brokers and housing organizations are more focused than ever.”
Part of the conversation regarding ways to get first-time homebuyers into a home is finding flexible solutions for borrowers, according to Adams.
“Affordability and housing supply are going to continue to be a challenge, I think, for years, but we are all engaged right now in trying to find solutions,” she said. “We'll all need to lean into education, flexibility and partnerships to help borrowers navigate what's become an increasingly complex market.
“We need to make sure that borrowers understand all the options. With flexibility, we are working together in the industry and in Washington to explore ways we can create more flexibility to make homeownership affordable and sustainable. There's a lot of work to do, but a lot to look forward to as well.”
Reducing red tape
When Adams talks about flexibility, it’s not just about lending products; it's about housing products as well.
One of the housing types discussed by the National Association of Mortgage Brokers (NAMB) president Kimber White is manufactured housing. He would like to see more affordable houses being built, and manufactured housing is one way to accomplish that goal.
However, in many areas, the construction of manufactured housing is subject to significant regulations that can slow or halt construction. One area where Adams thinks regulations could be relaxed is in energy efficiency standards.
“There's also the reduction of energy efficiency regulations for manufactured homes,” she said. “That's another one that's being discussed, and I think that's important too. Manufactured housing is just such an awesome opportunity for affordable housing, and if you're unnecessarily creating more regulatory burden around it, then fewer regulations could be an improvement.”
It’s a topic Adams has been discussing. Reducing red tape for construction projects of all types is part of the goal of two housing bills currently making their way through Congress. She is hopeful that these changes can include manufactured housing as well.
Adams said that while regulations might lead to more savings down the road, they don’t do any good if the consumer can’t afford the house up front.
“That was sort of the conversation I was in last week about energy efficiency in manufactured housing,” she said. “We talked about how the Department of Energy mandates the energy efficiency requirements for manufactured homes, and HUD does the rest of it. And the argument is that you need energy efficiency mandated by the DOE over the long term, which will reduce monthly expenses because you'll have energy savings.
“But at the same time, if you can't get into the home, what good are those energy efficiencies? You've got to get people into homes and let them start building that equity.”
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