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39 » VISIT US ONLINE @ DSNEWS.COM SURVEY: DOUBTS ABOUT HOUSING PERSIST DESPITE GROWING ECONOMIC CONFIDENCE Americans are growing more and more cheery when it comes to the state of the economy, but their feelings regarding the housing sector remain tepid, according to survey results released recently. Out of a group of 1,000 Americans polled in Fannie Mae's December National Housing Survey, 41 percent said they now believe the economy is "on the right track," up from 36 percent in November, the company reported. While the share of consumers saying the economy is headed in the wrong direction is still high at 51 percent, it continued to trend downward in December, marking five consecutive months of declines. While optimism—likely spurred by continuing job growth—is on the rise, the number of Americans whose household income has fallen off significantly over the last year picked up (hitting 14 percent), and a declining share expect their personal financial situation will improve in 2015. In contrast to December's slightly more positive economic attitudes, consumer sentiment toward the housing market remained subdued for another month, with the share of Americans saying now is a good time to purchase a home falling to 64 percent. By the same token, only 61 percent of consumers said they would buy a house if they were going to move anytime soon—a survey low. "Our survey results show that consumer housing sentiment has, on average, been moving sideways amid some improvement in the general view of the economy," said Doug Duncan, SVP and chief economist at Fannie Mae. Given the kind of long-term commitment homeownership represents, Duncan said he isn't surprised that the housing sector is lagging behind the rest of the economy in terms of consumer confidence. "Many prospective homebuyers want to be certain that their personal finances can withstand potential downside risks to the economy," he said. On one bright note, the share of consumers who think it would be easy to get a mortgage today increased to match the all-time survey high of 52 percent, while the share saying it would be difficult to get a loan dropped to a low of 44 percent. e spread between the two groups is the widest in the survey's history, Duncan said. "While this is a welcome signal, softness in consumer attitudes that drive housing demand will make for a subdued recovery and should persist absent more meaningful and sustained gains in household income," he added. Looking to 2015, 46 percent of respondents said they expect home prices will continue to rise in the next 12 months, a slight increase from November. At the same time, the average home price change expectation fell from 2.6 percent to 2.3 percent. DECLINING DEFAULT RATE LEAVES ROOM TO LOOSEN UNDERWRITING STANDARDS, ECONOMIST SAYS e pristine performance of mortgage loans in the United States with a vintage of 2009 or later is an indicator that underwriting standards could be loosened, according to CoreLogic senior economist Molly Boesel. In an analysis entitled "What's an Acceptable Level of Mortgage Default?", Boesel constructs an argument that there is room to relax lending standards based on her assessment that improved housing market conditions and economic conditions, and not just a tighter credit box, are responsible for improved loan performance since 2009. "Do mortgage vintages really need to be as pristine as they have been in the most recent years?" Boesel asked in her analysis. "While there are many factors besides loan performance that should be considered in the policy decisions around access to credit, it is clear that mortgage originations made in the mid-2000s are still driving the SDQ (serious delinquency) rate, and originations made since 2009 are performing much better." e percentage of mortgages in the United States that were seriously delinquent (more than 90 days past due or either in foreclosure or bank owned) was 4.2 percent in CoreLogic's latest data (October 2014), less than half of the peak percentage of 8.6 in February 2010. Out of all the mortgage loans that were active as of the end of September 2014, only 25 percent of them were originated during the years immediately prior to the housing bust (2004 through 2008) while 77 percent of all seriously delinquent mortgage loans as of September 2014 were originated during those years. When excluding the mortgages originated during 2004 to 2008, the nation's serious delinquency rate drops by half from 4.2 percent down to 2.1 percent, according to CoreLogic. Boesel presented two graphs, one that demonstrated the serious delinquency rate for all mortgages since 2004 and one that shows the serious delinquency rate of "plain vanilla" mortgages (owner-occupied, fully-documented, 30-year-fixed rate, conventional conforming purchase mortgage with mid-to-high credit scores and moderate loan-to-value ratios). e serious delinquency rate was only slightly lower for the "plain vanilla" mortgages, and the loans with a 2005 through 2008 vintage still showed outsized serious delinquency rates, leading her to the conclusion that the impact of tighter lending standards on the declining serious delinquency rate has been minimal. "Given that forecasts for the economy and unemployment rate indicate slow and steady improvement and for house prices to continue to increase at a moderate pace, the excellent performance of current mortgage vintages gives some support to the notion that underwriting could be loosened in a responsible manner that still supports sustainable homeownership," Boesel said in her report. The nation's unemployment rate for December 2014, a decline of a full percentage point from January 2014 when it was 6.6 percent. Source: Bureau of Labor Statistics STAT INSIGHT 5.6%

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