DSNews delivers stories, ideas, links, companies, people, events, and videos impacting the mortgage default servicing industry.
Issue link: http://digital.dsnews.com/i/1526767
53 September 2024 J O U R N A L between the properties of those who applied for a second mortgage and those who did not. The study also showed that first- time homebuyers (FTHBs) and those with the lowest ability to afford a home have been disproportionately affected by the housing affordability crisis. This was determined by piggybacking home transactions between FHA loans and conventional financing. By the end of 2017, the median property value of homes purchased using FHA loans backed by the gov- ernment was $34,600, or 17% less than that of homes purchased without such loans ($168,600 against $203,200). They were $19% less expensive in June 2022 ($237,800 compared to $292,800), saving $55,000; two years later, in June 2024, the difference increased to $64,000 ($255,000 versus $319,000). When comparing houses purchased with traditional financing, there is a com- parable link. The typical purchase price of piggybacked properties was $265,000 in June 2022, which was $135,000 or 33% less than the median price of non-pig- gybacked acquisitions. By June 2024, the difference had grown to 36%, with the median price of piggybacked homes be- ing $262,000, while the median price of a non-piggybacked purchase was $410,000. Piggybacked Home Purchases Remain Over-Leveraged A closer examination of the loan-to- value (LTV) ratios for homes purchased using piggybacks revealed that the buyers of these homes are overly burdened. Before accounting for the total amount borrowed with a piggyback loan, the median origination loan-to-value ratio for piggybacked FHA loans is 98.19. The typical origination loan-to-value (LTV) range for conventional loans has been 80–90. The LTV on conventional loans has continuously been more than 90 throughout the past 12 months, with a peak ratio of 94.5 in June 2024. Homeowners frequently have zero or even negative equity after deducting the amount borrowed through piggyback loans. For borrowers with FHA loans, the combined LTV, or CLTV, was 1.022; for borrowers with conventional loans, it was 1.0. Many borrowers are more vulnerable to nonpayment and default in the event of an unforeseen, unfavorable impact on job or family finances if they have little or no equity in their homes. The resilience of the job market and the stability of the U.S. economy will be key factors in determining how well these over-leveraged loans perform overall. But even with widespread predictions that house prices will rise further, the U.S. economy will continue to grow while inflation declines, and there will likely be a much-awaited September Federal Reserve policy rate