Fed Gov. Duke: Housing Improving, but Credit Tight for Some Borrowers
America's housing market appears to be in a sustainable recovery, but there is still cause for concern, Federal Reserve Governor Elizabeth Duke said in a May 9 speech at the Housing Policy Executive Council in Washington, D.C.
There's considerable good news. House prices have risen across the country, as 90 percent of local markets have seen gains over the year ending in February. Meanwhile, housing starts and building permits issued have risen by 30 percent since the start of 2012, new and existing home sales have grown by double-digit rates, and real estate agents report more home shoppers, Duke pointed out.
Market still historically weak
Various forces limiting mortgage lending
There is evidence that tight mortgage lending conditions may also be a factor in the contraction in originations. The path to easier credit conditions is unclear, in Duke's view. She noted that some forces constraining mortgage credit availability, such as concerns about economic conditions or house prices, are likely to unwind naturally.
However, if lenders are unsure about the conditions under which they will be required to repurchase loans sold to the government-sponsored enterprises such as Fannie Mae and Freddie Mac, they may not lend to borrowers whose risk profiles indicate a higher likelihood of default. It could require policy changes to resolve such concerns about "putback risk" and about servicing costs, Duke said.
May 22, 2013