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45 » VISIT US ONLINE @ DSNEWS.COM DATA SHOWS CREDIT ACCESS IS LOOSE FOR FIRST-TIME BUYERS, BUT LOANS ARE RISKIER Based on the risk profile of first-time homebuyers in March, credit access is not as tight as is widely reported, but the loans are riskier, according to data released this week by the American Enterprise Institute's (AEI) International Center on Housing Risk. e March 2015 First-Time Buyer Mortgage Risk Index (FBMRI) released in April found first-time homebuyers with an agency guarantee (FHA, VA, or Rural Housing Service) during the month had a median down payment of just 3 percent, which equates to about $3,900, and a median FICO score of 705, slightly below the median of 713 for all individuals in the United States with a FICO score. For first-time buyers with an FHA-guaranteed loan, the median FICO score fell to 671. "One hears practically every day that first- time buyers have limited access to mortgage debt," said Stephen Oliner, co-director of AEI's International Center on Housing Risk. "e FICO data show this isn't true—many borrow- ers with weak credit profiles are buying homes." Overall, the FBMRI stood at 15.14 percent for March, a series record and a year-over-year increase of 0.5 percentage points. e FBMRI for agency mortgage loans is nearly 6.5 percent- age points higher than the mortgage risk index for repeat homebuyers. e higher risk for first-time buyers can be attributed in large part to risk layering, accord- ing to AEI. In March, 68 percent of mortgages for first-time buyers had a combined LTV of 95 percent or higher and 96 percent of those mort- gages had a 30-year term. Because of the low down payment and slow amortization, it will take years for these buyers to gain a significant amount of equity in their house without sub- stantial price appreciation, according to AEI. Also, one-fifth of first-time buyers taking out mortgages had a FICO score lower than 660, which is the traditional definition of a subprime mortgage, according to AEI. One- quarter of first-time buyers had total debt-to- income ratios higher than 43 percent, which is the limit established by the Qualified Mortgage rule. Mortgages taken out by repeat homebuy- ers were less risky because they had a smaller share of buyers with FICO scores lower than 660 and a much smaller share with a combined LTV of 95 percent or higher. ese data that suggest credit is not as tight for first-time homebuyers stand in contrast to the National Association of Realtors' (NAR) assertion that "interested homebuyers continue to find it challenging to obtain financing under tougher and more cautious credit standards." "e first-time buyer MRI hit a series high of 15.14 percent in March, moving deeper into the high risk loan category," said Edward Pinto, co-director of the AEI's International Center on Housing Risk. "Notwithstanding this fact, the NAR and Urban Institute continue to call for the making of even riskier loans to first-time buyers, many of whom would be lower-income and minority buyers." Also released in April, the March 2015 First-Time Buyer Mortgage Share Index found first-time buyers accounted for 56.6 percent of government-guaranteed primary owner- occupied purchase mortgages, which was a slight year-over-year decline from 57.1 percent reported in March 2014. "March's results continue to show that first- time buyer volume and share remain strong, showing little variance beyond seasonal trends," Pinto said. "is indicates the path to increased home building and home sales is stronger job and wage growth, not loosening of lending standards." HOUSING ALLIANCE TARGETING SLOW RECOVERY AREAS FOR LOSS MITIGATION OUTREACH EVENTS Areas of the country that have been slow to recover from the recession will be the focus of HOPE NOW's outreach efforts to offer loss mitigation options to struggling homeowners in 2015, according to an announcement from HOPE NOW. HOPE NOW is an alliance among counselors, mortgage companies, investors, and other mortgage market participants, formed in 2007. e alliance's outreach events put homeowners face-to-face with servicers and counselors to work out a loss mitigation solution and avoid foreclosure. ese outreach events are also an opportunity to learn more about local housing task force efforts and state programs that offer assistance. "Our industry members comprehensively review all at-risk families for multiple options, when going through the loss mitigation process, and attempt to apply the most viable solution for each situation," said Eric Selk, executive director of HOPE NOW. "Although the housing market has made a recovery on a national level, there are still pockets of the country experiencing a slower recovery and that has been the focus of HOPE NOW's efforts in 2015." Selk said HOPE NOW members have seen a great deal of repair in many of the markets the alliance visited in the past, such as San Bernardino in southern California. A HOPE NOW outreach event in San Bernardino in 2010 brought out about 700 families; by comparison, an outreach event in San Bernardino in March 2015 drew only about 300. "e reason for lower attendance is twofold— lower delinquency numbers across the board and more homeowners already in some stage of the loss mitigation process," Selk said. "Despite the shifting dynamic of outreach events, our members are still committed to the face to face component as part of their overall outreach strategy." HOPE NOW is also planning an outreach event in June in St. Louis, though no date is set yet. "ere are plans to bring servicers together with non-profit partners in several other cities in 2015 as well," Selk said. "HOPE NOW also continues to work with members on initiatives related to mortgage originations, abandoned properties and neighborhood stabilization." HOPE NOW reported 147,000 non- foreclosure solutions offered by the industry to struggling homeowners in February 2015, including permanent loan modifications, short sales, and deeds-in-lieu of foreclosure. February's total of non-foreclosure solutions was more than five times the number of completed foreclosures for the month (28,000). Since HOPE NOW began reporting the data in 2007, the number of non-foreclosure solutions offered by the industry total approximately 23.5 million.

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