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36 REPORT: NON-MORTGAGE DEBT DRAGGING HOMEOWNERSHIP EVEN WITH LOWER DOWN PAYMENT While lowering the down payment on a mortgage may clear one major hurdle to homeownership, a report released by RealtyTrac revealed that a monthly mortgage payment is affordable to those with additional non- mortgage debt in less than half of the counties in the U.S. In an analysis of housing affordability in 512 U.S. counties with a combined population of 235 million, RealtyTrac discovered that lowering the down payment for a conventional mortgage loan from 20 percent to 3 percent, as has been discussed recently by Federal Housing Finance Agency Director Mel Watt, would still not translate to housing affordability for a majority of those with non-mortgage debt such as student loans or a car payment. "While lower down payments may help pave a quicker path to homeownership for some prospective homebuyers, a bigger obstacle to homeownership is the additional non-mortgage debt many borrowers bring to the table," said Daren Blomquist, VP at RealtyTrac. "For borrowers without additional debt, monthly house payments are affordable in more than 90 percent of U.S. housing markets—whether they make a 20-percent or 3-percent down payment. But for borrowers with the additional debt burden of student loans and car payments, monthly house payments are affordable in less than half of U.S. housing markets with a 3-percent down payment." RealtyTrac found that it would take an average of less than two years to save up for a 3-percent down payment on a mortgage loan compared to 12 and a half years to save up for a 20 percent down payment at an annual savings rate of 5.6-percent (as reported by the St. Louis Federal Reserve). However, once the down payment hurdle is cleared, making the monthly mortgage payment becomes a problem for those with additional debt. RealtyTrac's report found that for those without additional debt, the monthly mortgage payment was still affordable in 92 percent of county housing markets even with just a 3 percent down payment. But for those with an average monthly car payment and an average monthly student loan payment, RealtyTrac found that the monthly mortgage payment was affordable in only 48-percent of county housing markets when a 3-percent down payment was made. e percentage of borrowers in county housing markets who can afford the monthly mortgage payment jumps from 48 percent to 78 percent for those with an average car payment and an average student loan payment when they make a 20-percent down payment, according to RealtyTrac. For those without additional debt who make a 20-percent down payment, housing was affordable in 96-percent of county housing markets. e average car payment was $471 as of Q 4 2013, according to Experian Automotive, and the average student loan payment was $321 for 2012 college graduates with an average student loan debt of $29,400, according to Project on Student Loan Debt. e RealtyTrac report found that according to Down Payment Resource, there are more than 2,300 down payment and closing cost assistance programs available nationwide and that 60 to 80 percent of homes in most areas would qualify for assistance from one of these programs. Also, the report found the average amount of assistance from these programs was $19,720 and could be as high as $50,000 to $100,000 in some high cost areas. "e narrative is that it's too hard to get a loan today, and when first-time buyers believe that, they won't even begin their search. at hurts the overall housing market," Rob Chrane of Down Payment Resource said. "Consumers for the most part have no idea that these programs exist, so they don't think to ask for them. Whatever your situation is, whatever you have for a down payment, you could be in a much better situation if you find out you are eligible for one of these programs." COMPLIANCE, RISK MANAGEMENT ARE TOP LENDER CONCERNS Despite regulators' pledges to work with lenders to help ease their regulatory concerns, a new survey shows worries continue to mount among executives at U.S. banks and credit unions. Wolters Kluwer Financial Services (WKFS) said its Regulatory & Risk Management Indicator increased again to 128, reflecting a 28 percent rise since its baseline score established in January 2013. e indicator gauges top compliance and risk management concerns at hundreds of lenders nationwide. Looking at compliance challenges, 72 percent of banker respondents listed "maintaining compliance with changing regulations" as one of their top concerns, up from 67 percent at the start of last year, while 69 percent said just keeping track of regulations is a major issue at this point. Meanwhile, 71 percent said they worry about having to demonstrate compliance to regulators. "Clearly, banks and credit unions are feeling increased pressure on their ability to comply with regulatory requirements and appropriately manage risk," said Tim Burniston, VP and senior director at WKFS' Risk & Compliance Consulting Practice. On the topic of the Dodd-Frank Act and the Consumer Financial Protection Bureau (CFPB), the combined Truth in Lending Act (TILA)/Real Estate Settlement Procedures Act (RESPA) disclosure rule was the top concern, with 75 percent of respondents ranking it as a worrying issue. Underneath that are the new reporting requirements CFPB demands within the Home Mortgage Disclosure Act (HMDA). Sixty-three percent of bankers surveyed listed the amendments as a significant challenge compared to just 46 percent in January 2013. e top HMDA challenges cited by respondents were "amount of data to collect" (a response given by 30 percent of lenders), followed by "updating technology systems" (21 percent) and "accuracy of data collected" (19 percent). "e rule changes will double to triple our workload ... HMDA already is one of the biggest compliance resource burdens on our bank," said one respondent. When it comes to concerns about risk management, regulatory risk still ranked highest at 63 percent. Following in a distant second was IT risk at 45 percent—nearly double what it was in 2013. As lenders work to respond to the increased regulatory and risk management challenges, resource management has also become a source of worry. According to WKFS, more than one in three respondents said they have hired additional help or transferred staff from other revenue-generating roles in the past year just to help manage growing risk and compliance requirements.

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