Changes to the Housing Industry in 2014

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CF Funding informs readers over changes to the mortgage industry in 2014.

The National Association of Home Builders/First American Leading Markets Index (LMI) was released yesterday, revealing good signs for the housing industry. According to the NAHB, The LMI compares the current levels of three components– employment (BLS – Bureau of Labor Statistics), house prices (Freddie Mac) and single-family building permits (Census)– to their normal, sustainable levels.” The results showed more and more markets are climbing back to normal levels, with an national average at 86 percent. CF Funding is happy to hear this news, as it provides a positive outlook for homebuyers and home sellers in 2014.

Some experts have expressed concerns that the current momentum of the housing industry may lead to a bubble like we saw in 2008. However, David Blitzer (Chairman of the Index Committee, S&P Dow Jones Indices) has given us reason not to worry. He explains that “balloons” in the housing industry are not as dangerous today as they were previously, because "the economy-wide loan to value ratio is down to 49%, not as comfortable as ten years ago, but better and safer for the economy than in the financial crisis." People are in less mortgage debt than they were during the housing crisis of 2008, and less debt allows for less damage.

We are now two days away from the implementation of the Qualified Mortgage (QM) Standards set by the Consumer Financial Protection Bureau, which were designed to avoid another housing crash. These rules require mortgage loans to span no more than 30 years, and loans must be based on a reasonable expectation that the borrower can repay. CF Funding would like to reassure borrowers that most people will not be negatively affected by these new rules. On the other hand, everyone will benefit from a preventative measure to avoid another housing crash.

When it was first proposed about two years ago, the mortgage risk retention rule under the Dodd-Frank Act was much more intimidating than its refined version today, including outrageous requirements such as a 20% down payment. Thankfully, the QM rules have been refined to allow more lenient qualifications for homebuyers.

On February 1st, Janet Yellen will become chairman of the Federal Reserve, as the first woman to lead this position in the Fed’s 100 year history. This new leadership will create changes in the tapering of bond purchases and affect interest rates. According to Bloomberg Businessweek, Yellen is playing with the idea of using “optimal control” to determine interest rates in a scientific manner. This means “the Fed would keep the funds rate low longer, and unemployment would fall faster. Inflation would rise slightly above the Fed’s target, but only for a few years. Overall, that’s much better than the current outlook.”

CF Funding will keep you updated on how these changes may affect you as a homeowner or homebuyer in 2014. Keep up with our newsletter by following us on Facebook at or Twitter

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Giorgio U Ferrero
CF Funding
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