Why Fannie Mae’s 50% DTI For Mortgages Won’t Get To 100,000 Loans

The mortgage giant Fannie Mae reecently raised their Debt-to-income (DTI) ratio from 45% to 50%. The Urban Institute, a left-wing think tank, claimed in a study by Ed Golding and Laurie Goodman that this increase in DTI will increase mortgage lending by 100,000 (mostly to minorities). fannie_mae_raises_dti_limit_0

While Golding and Goodman are very intelligent people, they have forgotten one economic rule: lower credit standards can’t compensate for lack of savings and lack of earnings.

Wage growth (average hourly earnings) and personal savings rate are lower today than they were pre-1980. And wage growth never quite recovered from The Great Recession, although the personal savings rate is higher.

Unfortunately, while homeownership has correlated with home prices from 1995 through 2005, home prices have been rising since 2012 while homeownership has declined.

According to the US Census, black alone homeownership in Q1 2017 is estimated to be 42.7% while white alone is 71.8%. Hispanic homeownership rate is 46.6%. A clear gap between races in homeownership.

With low wage growth and low personal savings rates, it will be hard to raise homeownership rates among minorities unless there is a corresponding increase in loan-to-value (LTV) ratios and/or a decline in required credit (FICO) scores.

The Abduction of the Sabine Women

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Oh Canada! Toronto Existing Home Sales Plunge 37% YoY

OTTAWA, July 17 (Reuters) – The resale of Canadian homes fell 6.7 percent in June from May, the largest monthly drop since 2010 and the third straight monthly decline as sales in Toronto plunged, the Canadian Real Estate Association said on Monday.

And they fell 37%, the third straight decline and the most since January 2009. Owners flooded the market with properties, with listings up 16 percent to 19,614.

Average prices dropped 14 percent in the last three months across the Toronto region to C$793,915, reflecting fewer sales of large homes. That compares with a 1 percent rise over the same period last year. Deals for single-family homes in Toronto and its surrounding regions fell 45 percent and average prices dropped 12 percent from April to C$1.06 million.

For all of Canada, YoY existing home sales also declined. But only by 6.7% MoM.