DSNews delivers stories, ideas, links, companies, people, events, and videos impacting the mortgage default servicing industry.
Issue link: http://digital.dsnews.com/i/1541210
MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 28 November 2025 C O V E R S T O R Y U-shaped yield curve for all of 2025. If the Federal Reserve's actions in late 2025 and continuing into 2026 normalize the yield curve, that would be a positive for FHLBank members, and community lenders more broadly, and increase the availability of credit. That said, the Fed has been shrinking its balance sheet since mid-2022—quantitative tightening (QT)—and has signaled this will continue until December 1, 2025, further draining banking system reserves and offsetting some of the interest rate easing. Stablecoins also pose a threat to bank deposits: increased adoption could divert deposits from traditional depositories, further tightening bank sector liquidity, especially at smaller institutions. In this environment, the FHLBanks' countercyclical liquidity is especially important: through advances, AMA mortgage purchases, and letters of cred- it, the System will continue ensuring that community lenders have liquidity to meet the needs of the households, the small businesses, and the communities they serve. Q: How important do you view income-based policy levers (e.g., first-time-buyer assistance, down-payment support, rental subsidies) as the market shifts in 2026? COMEAU: Income-based policy le- vers—such as first-time-buyer assistance, down-payment support, and rental subsidies—are important today and will continue to be critical tools in 2026. The Harvard Joint Center for Housing Studies (JCHS) 2025 State of the Nation's Housing report noted that home prices in early 2025 had risen 60% since 2019, and the median existing single-family home sales price in 2024 was $412,500, a new high. The median 2024 home price was five times the median household income, far above the traditional affordable price-to- income ratio threshold of 3:1. In 2026, a combination of factors will continue to pose challenges for first-gen- eration and first-time buyers: elevated home prices, rising insurance premiums and property taxes, and interest rates on 30-year fixed-rate mortgages that, while down from their peak, remain well above the ~4% average that prevailed for more than a decade from 2009 to early 2022. In this environment, closing-cost assistance, down-payment grants, and interest-rate buydowns are key tools for expanding access to homeownership and creating opportunities for families to build generational wealth. The FHLBanks will continue to play a vital role in unlocking new path- ways to homeownership and housing affordability. Through their Affordable Housing Program (AHP) and volun- tary funding initiatives, the FHLBanks provide grants that help bridge the affordability gap for homeownership— including first-time homebuyer grants, down payment assistance grants, home rehabilitation grants, and various other programs. Likewise, low-interest CICA (Community Investment Cash Advance) and CIP (Community Investment Pro- gram) advances and competitive AHP grants for affordable rental housing developers support the expansion of af- fordable rental housing supply—anoth- er pillar for affordable housing access. There is no silver bullet to solve the housing affordability crisis, but the FHLBanks—working through their 6,400 member institutions and housing-partner networks across the country—will remain an integral part of the solution. By expanding access to funding, lowering barriers to entry, and helping increase housing supply, the FHLBanks help their members strengthen communities and bolster depositor and borrower confidence in uncertain economic times. Q: How do you assess the risk that a slower housing market could create secondary ripple effects (e.g., on community banks, housing-related credit, regional economies) in 2026? COMEAU: In 2025, housing starts, home sales, and mortgage originations have held steady at low levels—roughly 1.3 million annual starts and 4 million existing-home sales—and 2026 will begin in a similar fashion. Mortgage vol- umes will likely remain muted, though refinancing could increase if interest rates move lower. Home prices have flattened. The S&P CoreLogic Case-Shiller National Home Price Index (HPI) dipped below 2% year-over-year in June 2025, after having been elevated for nearly two years. Slower HPI appreciation is a mixed bag: it limits wealth gains by homeowners but increases affordability for prospective homeowners when HPI appreciation is below the growth in wages. Homebuyers lost significant ground from 2020 to 2023 as HPI growth outpaced wage growth. Nationally, prices are stable, but the national average masks a bifurcation in markets: HPI gains are continuing in some metros (Buffalo, NY; Rochester, NY) while declining in others (Cape Coral, FL; North Port, FL). Meanwhile, the Federal Reserve is expected to continue to cut rates several more times over the next 12 months, help- ing normalize the yield curve, which has been U-shaped in 2025. A normal yield curve means healthy lending margins and increased capacity for community lenders to extend mortgage credit. If liquidity be- comes tight, the FHLBanks will be there with counter-cyclical liquidity to ensure members have the funding they need to ensure homes are built, families find footing, and communities are positioned to prosper. Q: If you single out one critical housing market dynamic to watch in 2026, what would it be and why? COMEAU: As we entered the fall of 2025, Mark Zandi at Moody's Analyt- ics reported that 49.2% of consumer spending was from the top 10% of income earners, the highest share going back to 1989. That concentration of spending reflects strong wealth effects among high-income households fueled by recent highs in the stock market, cryptocurrencies, and gold. A market