One of the major obstacles that mortgage lenders face in the current environment is that many potential borrowers feel they would not be eligible for a mortgage loan if they applied – so they never do.
This is partly due to stricter lending standards resulting from new regulations as well as lenders' own internal overlays designed to protect them from potential lawsuits and loan buybacks. In addition, media reports showing that the U.S. job market and overall economy remain weak, despite some recovery since the Great Recession, are causing many potential borrowers to believe that now is not a good time to purchase a home. Â
Lenders are well aware of this shift in attitude. A survey of mortgage executives conducted by private mortgage insurance provider Genworth Financial during the Mortgage Bankers Association's (MBA) Secondary Conference in February shows that 66% believe that many eligible borrowers do not feel they can realistically purchase a home.
‘Everything that private mortgage insurance stands for is about helping more borrowers become homeowners,’ says Rohit Gupta, president and CEO of Genworth MI, in a release. ‘Many qualified borrowers are uncertain about their own eligibility so it's critical for our industry to be proactive about encouraging homebuyer education as a tool to help borrowers fully understand how the home buying process will work for them.’
The survey also reveals that most lenders feel it will take more time for the Federal Housing Administration (FHA) to get its reserves to the required levels than was originally expected, following the recent reduction to FHA's mortgage insurance premiums: About 65% of executives say it will take between one and three years for the FHA to reach its required capital levels due to the cut enacted in January.
Additionally, 88% of respondents do not foresee a major impact to FHA indemnification levels as a result of the premium reductions, believing they will either remain flat or increase by 1% to 5% over the next 12 months.
Interestingly, 53% of senior executives say their businesses will be impacted by the Private Mortgage Insurance Eligibility Requirements (PMIERS) while only 38% of non-senior executives expressed the same concern.
Senior executives also showed more concern (44%) than the rest of the industry (37%) about the anticipated revisions to the PMIERs by government-sponsored enterprises Fannie Mae and Freddie Mac with regard to lender paid mortgage insurance premium plans.
In related news, Genworth recently revamped its homebuyer education website so that it is more user-friendly. The new course is self-paced and contains seven fewer required registration fields than the industry average, the company reports. It is also the first fully mobile platform of its kind and the first to conform to the national industry standards for homeownership education and counseling.