Why should homebuyers choose a MassHousing loan? We recently put together a brief video in which our Executive Director, Tom Gleason, explains just that. Have a look:
Housing is frequently mentioned by government leaders and economists as a critical component of our economy. Indeed, when someone borrows money to purchase or refinance a home, it sets in motion a whole host of events that lead to economic activity and jobs. In our most recent annual report, we developed an infographic to help illustrate the economic benefits of MassHousing's home mortgage loans.
We're pleased to be able to share it with you here. (For a larger version, click on the image below.)
A well respected, nationally syndicated, columnist recently wrote that first-time homebuyers now represent a smaller percentage of the homebuying public. He cited statistics showing that first-time homebuyers as a percentage of all homebuyers have recently declined from 40% to between 30% and 35%, with a measurable downward trend in recent months. He went on to cite as reasons higher unemployment in the first-time homebuyer demographic; young people with unprecedented levels of student loan debt; tighter mortgage lending standards; and stiff competition from investors for affordably priced homes.
It was a decidedly gloomy assessment.
But here at MassHousing, we see the first-time homebuyer statistics as a glass that is half full.
Historically, first-time homebuyers have represented a fairly constant number within the homebuying population. Unlike existing homeowners, first-time buyers are unencumbered; that is, they don’t need to sell a house before they can buy another one. As such, the number of first-time buyers as a percentage of all homebuyers rises when home sales slow and homeowners are unable to sell their homes and move up. Conversely, when sales get hot the number of move-up buyers selling their homes goes up, and the number of first-time homebuyers as a percentage of total homebuyers goes down.
The article failed to mention a couple of important points.
First, it is worth remembering that the number of first-time homebuyers peaked right before the real estate market collapsed in 2008, when exotic and subprime mortgage loans were all the rage and buying a home was easy. Since the days of easy money are over, it stands to reason that we are no longer at peak performance for first-time homebuyer purchases.
Second, home sales activity has been increasing steadily over the past year. The result is that more existing homeowners are able to sell their homes and move up (or down in the case of aging baby boomers). As move-up buyers increase, the percentage of first-time homebuyers as a percent of the total market will decline. This occurs naturally in an improving seller's market. The article supports this fact by citing the increasing number of investors buying properties, which in turn frees up homeowners to buy their next home. Increased investor activity and move-up homebuyer activity are signs of a strengthening market.
The high unemployment rate and massive levels of student loan debt to which the author alludes have an undeniable effect on the homebuying psyche of twenty-somethings approaching the prime of their homebuying years. But as the economy improves (and it is improving) jobs will open up, incomes will rise and the result will be improved consumer confidence among recent college graduates.
But the truth is that first-time homebuyers and recent college graduates do not always share the same socio-economic profile. First-time homebuyers are, now, typically older, married, with young families. They are often recent immigrants or second generation Hispanic, Asian and European families. They are the backbone of America’s working class.
Once thought to be perpetual renters, these buyers are today financially stronger, better prepared and better educated. While they are a smaller percentage of the total population their numbers are growing. They will also benefit from the lessons learned from the mortgage crisis. They will not be victims of predatory lenders and "fool's gold" mortgage products.
How do we know this? In 2012 MassHousing had a record lending year, making over $1 billion in loans to predominantly low- and moderate-income customers. They are eager to become homebuyers and are attending homebuyer education classes in record numbers, leaving them better prepared and more qualified than homebuyers just a few years ago.
While conventional wisdom suggests that it’s never been harder to get a loan than it is today, consider this: In the 1970s the minimum downpayment was 10%. Maximum total debt ratios were 33% not 43%. Minimum credit standards would equate to today’s 720 credit score (perfect credit history for two years, and one or two 30-days late in the past three years). First-time homebuyers represented between 20% and 25% of the total homebuying population.
Today our credit standards aim to cap debt at below 43% (with 41% being a more desirable number) and we require a minimum 680 credit score. But MassHousing is still making loans to borrowers with as little as 3% down. We even have a 30-year, fixed-rate mortgage, with no MI with interest rates in the 4s. And we are making record levels of mortgages to first-time homebuyers. Most importantly our delinquency rates and foreclosures are low.
Our borrowers are experiencing exceptional levels of homebuying and homeownership success. If you are a MassHousing borrower the glass isn't just half full, it is overflowing.
MassHousing Executive Director Tom Gleason recently announced that five senior management positions at MassHousing have been filled. All of the new staff members have many years of housing and finance experience and we are thrilled that they have joined the MassHousing team:
Tim Sullivan has assumed the position of Deputy Director for Finance and Rental Programs. Tim most recently served for 15 months as Acting Director of Rental Lending. He was MassHousing's Chief Financial Officer for nine years prior to that. Before he joined MassHousing Tim was the Budget Director for the Commonwealth of Massachusetts.
Monte Stanford is our new Director of Rental Lending. Prior to joining MassHousing Monte ran his own Maryland-based consulting business dealing with federal housing agencies and regulators. He has also worked at PricewaterhouseCoopers where he was senior consultant for mortgage finance and securitization; FannieMae where he was Manager of Multifamily Public Finance; and an internet start-up that focused on federal fiduciaries, as well as state and local housing agencies.
Peter Milewski has assumed the role of Director of Home Ownership Lending. Peter has been the Director of MassHousing's Mortgage Insurance Fund since 1999 and has a career in the mortgage insurance and mortgage origination business spanning 42 years.
Kevin Mello, another MassHousing veteran, has assumed the role of Director of Home Ownership Servicing & Operations. Kevin is a 30-year veteran of the lending and servicing industry and has been with us at MassHousing since 1993.
Finally, on April 1 Karen Kelleher will become MassHousing's General Counsel. Karen most recently served for 12 years as Senior Vice President and General Counsel at The Community Builders, Inc. (TCB), a nationally-recognized non-profit housing developer and manager. Earlier in her career Karen worked as an attorney at Nixon, Peabody, LLC and also at the U.S. Department of Housing and Urban Development.