Top 10 Effects Of The New Mortgage Rules
We may not go 10 for 10, but crystal ball-gazing is fun nonetheless.
In this humble of spirits, we present ten trends to watch out for in 2011, courtesy of Flaherty & Co.’s new mortgage regime:
- Lower purchase and refinance demand will depress mortgage volumes, sparking greater rate competition as lenders battle for less business
- A small portion of home buyers will sprint to buy homes with a 35-year amortization before March 18, followed by downward pressure on home prices after March 18 as the amortization reduction removes market liquidity
- Negative personal consumption and wealth will result thanks to equity take-out restrictions, rising rates and softening home prices
- Unsecured debt usage will increase as homeowners are restricted from accessing as much of their equity, leading to even greater bank profits in unsecured lending
- Default rates will see no material improvement
- No significant improvement will occur in the number of risky borrowers, due to no change in TDS limits or Beacon score requirements
- HELOC rate discounts will be less frequent as some non-bank offerings disappear and HELOC funding costs inch higher
- Banks will pick up mortgage market share
- More private lenders will offer high-interest uninsured 2nd mortgages to 90% LTV
- If amortization restrictions accelerate falling home prices, we’ll see somewhat greater default risk and more negative equity situations among low-equity homeowners