From different housing industry stakeholders
In December 2021, Fannie Mae released a report analyzing 1.1 million home purchase loans the Enterprise acquired in 2020. The analysis, “Barriers to Entry – Closing Costs for First-Time and Low-Income Homebuyers,” focused on the transaction costs associated with obtaining a mortgage and purchasing a home. Fannie Mae found that closing costs are especially high for first-time, low-income and minority homebuyers relative to their home purchase price and savings committed to the transaction. The paper closes with potential solutions that could reduce or eliminate closing costs as a barrier to homeownership.
In March 2022, Fannie Mae released an update to this report with a working paper that examined the biggest costs to homeownership. Fannie Mae outlined the key findings in a blog post titled, “What are the biggest costs of homeownership? (Hint: It’s not what you might think).” The authors write that “[t]he largest contributors to housing costs are consistently non-mortgage ongoing costs, which collectively are about half of total borrower costs over the ownership period. Indeed, the largest non-mortgage expenses for all borrowers are utilities, property taxes, and home improvement expenses.” They then state that “Private mortgage insurance is also a small component of costs, ranging from one to three percent of total costs.”
Authored by the Rosen Consulting Group and released by NAR in June 2021, the “Housing is Critical Infrastructure: Social and Economic Benefits of Building More Housing” report finds that construction of new housing in the past 20 years fell 5.5 million units short of long-term historical levels.
The report outlines the causes of the supply shortages and offers potential solutions for both federal and local-level policymakers to consider. The housing supply deficit includes about 2 million single-family homes, 1.1 million units in buildings with two to four units and 2.4 million units in buildings of at least five units.
In 2017, the Urban Institute released a report, “Sixty Years of Private Mortgage Insurance in the United States.” It examined the private MI industry’s history of providing risk protection against low down payment loans, and the positive role private MI has served for homebuyers and the mortgage finance system overall.
The report’s chartbook, which was updated in 2019 and again in 2021, notes the important role private MI plays in helping to ensure low- to moderate-income and first-time homebuyers have access to the conventional mortgage market. It details that private MI is more affordable than FHA-backed loans for most combinations of FICO scores and loan-to-value ratios of 95, 90, and 85 percent.
Urban’s analysis also finds that, compared to conventional borrowers without private MI, borrowers with private MI tend to have slightly lower credit scores, higher LTV ratios, and slightly higher debt-to-income ratios, and are more likely to be first-time homebuyers. In other words, private MI is highly effective in allowing more qualified borrowers enter the mortgage market and achieve homeownership, while significantly reducing losses to the GSEs, which in turn reduces risk to taxpayers.
The Brookings Institution published a report in February 2021, “Government-sponsored enterprises at the crossroads: The value of the Treasury’s interest in the GSEs should be used to increase affordable housing and advance racial equity, and the GSEs should be regulated as utilities.” Authored by Michael Calhoun, President of the Center for Responsible Lending, and Lewis Ranieri, Chairman and CEO of Ranieri Solutions, who assert that “[a] utility structure should be implemented permanently in order to secure the GSEs as an emergency backstop during a crisis, enhance operation of the GSEs in regular times, and advance the GSEs’ public mission.”
The Urban Institute published a report in January 2021, “The Future of Headship and Homeownership,” which examined projected trends in homeownership in the United States through 2040 based on current housing policies.
The report found that the United States will likely see modest declines in homeownership, mostly for Black households, and that decreasing the racial homeownership gap would require expanded financial education, re-examining the mortgage qualification process, and implementing programs that sustain homeownership for borrowers with less wealth, especially people of color.