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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 68 July 2024 J O U R N A L program's scope, mission, and secondary market implications. FHFA's receptiveness to feedback through the New Products and Activities Final Rule has produced a pilot rollout that is limited in size and duration, mitigates the impact on the private-label securitization market for second liens, focuses on borrowers with lower loan balances, and will encourage participation by smaller lenders that do not have easy access to liquidity for closed-end seconds," Mortgage Bankers Association (MBA) President and CEO Bob Broeksmit, CMB said. "MBA and its members will remain engaged with FHFA and Freddie Mac to monitor the results of the pilot and ensure that it remains available to lenders of all sizes and business models and avoids disrupting the developing private-label securitization market for second liens." Upon the pilot's conclusion, FHFA will analyze the data on Freddie Mac's purchases of second mortgages to deter- mine whether the objectives of the pilot were met. FHFA has determined that any increase to the volume or extension of the duration of the pilot, or a conversion of the pilot to a programmatic activity, would be treated as a new product that is subject to public notice and comment and FHFA approval. Any subsequent approval would be informed by the preliminary results of the pilot. FANNIE MAE REDUCES HOME SALES PREDICTIONS A ccording to the Fannie Mae Economic and Strategic Research (ESR) Group's June 2024 analysis, affordability restrictions continue to limit the number of buyers wanting and able to make home pur- chases, despite an increase in for-sale home listings. As a result, the ESR Group reduced its total home sales prediction to 4.82 million in 2024, marking a moder- ate 1.3% annual rise vs. the previously projected 2.8%. "The economy appears to be slowing, and recent readings offer hope that inflation is cooling after progress on that front stalled in the first quarter—a trend that will likely need to be sustained for the Fed to feel comfortable cutting rates," said Doug Duncan, SVP and Chief Economist at Fannie Mae. "Additionally, the labor market is showing signs of a gradual slowdown, with the unemployment rate creeping up to 4% in the June report." Despite the recent increase in listings, home sales have remained weaker than ex- pected, indicating that many homeowners are no longer willing to delay moving due to the so-called "lock-in effect"—possibly due in part to consumers' general upward recalibration of mortgage rate expectations following the pandemic's historically low mortgage rates. While the number of homes for sale remains low by historical standards, the monthly supply of inventory is progres- sively growing, which the ESR Group sees as consistent with a slowing of home price increases. The ESR Group also reduced its 2024 real GDP growth forecast to 1.6% on a Q4/Q4 basis, citing downward revisions to Q1 2024 GDP data and recent data showing decreasing income and spending growth. While recent inflation data has been positive, the ESR Group believes the Federal Reserve will need to see three consecutive cold reports to be confident that inflation is reverting to its 2% goal. Given the sustained durability of non- farm payroll growth and unpredictability in inflation readings, the ESR Group now expects the Fed to lower rates only once this year—in December—rather than the previously forecast two rate reductions. Fannie Mae predicts continued growth in new house building and sales, which will remain strong in the coming months. According to the report, home- builders have sufficient margins to make concessions to move inventory, even in markets with increasing existing home inventories compared to the past. In April, the month's supply of new dwell- ings reached 9.1, the highest level since November 2022. However, if inventory expansion in Sun Belt markets, which account for a significant chunk of new sales, continues, our predictions for new home sales and construction may suffer. Further, multifamily construction is expected to remain modest due to slow rent increases in major areas and limited financing options. Although the existing development pipeline is expected to be exhausted by 2025, Fannie Mae expects a dearth of housing supply compared to population trends will continue to drive multifamily home construction. "Unfortunately, we're still not fore- casting a ramp-up in housing activity," Duncan said, "which will require some combination of continued household income growth, a further slowing of home price appreciation, or a decline in mortgage rates to bring affordability within range of many waiting first-time and move-up homebuyers." HUD'S PUSH TO STRENGTHEN MANUFACTURED HOUSING I n a time when housing supply and affordability issues continue to run rampant in the market, the U.S. Department of Housing & Urban Development (HUD), through the Federal Housing Administration (FHA), has announced the launch of its new Manufactured Home Community loan product, which will provide an FHA-in- sured financing option for the purchase, refinance, and revitalization of manufac- tured home communities. HUD's action will help entities preserve, stabilize, and revitalize man- ufactured housing as a vital source of affordable housing. "With this product, HUD aims to support resident-owned communities and other mission-focused owners who are committed to high-quality, affordable manufactured housing that is not at risk of exorbitant land rent increases that jeopardize the stability of their homes and futures," Assistant Secretary for Housing and Federal Housing Commis- sioner Julia Gordon said. HUD estimates that more than 5,000