White discusses tangible actions needed to help homebuyers
Housing affordability has been discussed by brokers, consumers, and even government officials. Rising costs have left everyone scrambling for answers to make sure that the dream of homeownership doesn’t fade.
Everyone has different ideas, and working through which ideas make sense will be the challenge at both the government level and in individual mortgage transactions.
It’s been a major focus of national trade groups like the National Association of Mortgage Brokers (NAMB). Groups like NAMB have spent countless hours on Capitol Hill helping craft housing bills that will address affordability concerns.
Kimber White (pictured top), president of NAMB, joined us recently on an episode of MPA Talk to discuss affordability, our monthly focus. He discussed why affordability has become such a pervasive topic in the industry.
Click here to listen to this episode of MPA Talk.
“Affordability has become a big topic because we have the largest wealth inequality gap in modern history,” White told Mortgage Professional America. “I've been in this business for 40 years, and people talk about the interest rates being in the 15%, 16%, 17% range in the 80s, but the cost of living kept up basically with those homes. We didn't have the insurance, we didn't have the taxes that we have now.”
Income not keeping up
White believes that home prices rose during the pandemic while wages didn’t keep up. That not only made it harder for first-time buyers to get into their first home, but also caused insurance and property tax valuations to soar.
“When you fast forward to where we are now, with the overvaluation at times on homes from the COVID-era equity build,” White said. “Interest rates hovered for a long time in the 7s to around 8%. Yet the income has not kept up. So when we look at between the 80s and now, the income that would need to be kept up to today is nowhere close to that. So that's why this affordability issue has been talked about, but nothing has been done.”
As the age of first-time homebuyers continues to surge, White hopes for tangible, sustainable steps to improve affordability. He said it starts with more assistance programs.
“Number one, we've got to find sustainable ways to get down payment assistance programs,” he said. “Previously, there were down payment assistance programs that were for people of 80% under AMI. There were loans for minority statuses. Affordability crosses all socioeconomic boundaries, so we've got to look at affordability in that respect.
“We've got to get some down payment assistance programs, whether it's working with states, whether it's working with the federal government, that really are down payment assistance programs that work.”
Another major change White would like to see is changes to loan-level price adjustments (LLPA). While he knows they won’t go away, some relief in that area could help first-time buyers.
“We've got to go back and reform LLPAs,” White said. “I understand that we don't want to get rid of LLPA because of the GSEs and the cost, but we have to reform it. We have to give some incentives, even if it's just getting rid of LLPAs to first-time homebuyers. Those are some initiatives that have to be on the table that would help the housing market move.”
Addressing housing shortages
One of the ideas pitched last year that drew the most reaction across the mortgage industry was the 50-year mortgage. White said other things can be done with loan terms that could help as well.
“Why don't we look at taking a 30-year mortgage and look at an interest-only option for part of it?” he said. “In the first five years, you're not paying anything but interest. So why would you not give a small interest-only option that would give them some breathing room over those first five years?”
While there are steps that can help homebuyers improve affordability, one of the biggest impacts would come from a surge in housing inventory. White said that builder incentives to increase inventory would be a big boost to affordability.
“We need to look at incentives for our builders to build,” White said. “We need to get more houses out there. The problem is, we can give all these programs, but where are they going to live? We have a housing shortage. If rates go down in the 5s, that’s great. That's wonderful. But where do the people live?”
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This article is part of our Monthly Spotlight series, which in January focuses on affordability. Full coverage can be found here.
