The Federal Housing Finance Agency is taking the right steps to increase the availability of mortgage credit and reduce the uncertainty about loan putbacks, according to homebuilders.
"We are encouraged by the proposed changes at FHFA, which have the potential to improve mortgage availability, particularly for first-time homebuyers," said Richard Dugas, the chairman and chief executive of the Pulte Group.
During a conference call on the company’s third-quarter earnings, he said the moves show that the Obama administration recognizes that housing could be a bigger driver of economic growth.
Larry Nicholson, the president of the Ryland Group, said the message coming from Washington is "all positive for the housing industry."
He said new low-down-payment products from Fannie Mae and Freddie Mac will help entry-level buyers. He also praised changes to representations and warranties that are designed to make it clearer when the government-sponsored enterprises could force a lender to buy back a loan.
"When we get some bright lines on putbacks that will provide some relief for lenders. So I do think it will have an impact," Nicholson said during his firm's third-quarter earnings call.
FHFA director Mel Watt unveiled several proposals earlier this week to improve access to credit. Both homebuilder CEOs ran into questions from investors and analysts during their respective conference calls about the plans.
Both builders have mortgage banking subsidiaries that originate and sell their loans into the secondary market. Pulte Mortgage LLC originated nearly 2,900 single-family loans in the third quarter and Ryland Mortgage Co. originated nearly 1,050 loans.
Dugas took a more cautious view and said he doesn't expect "dramatic changes" any time soon.
"But over time if some of these ideas get put into practice, it certainly has potential to affect activity, particularly for the entry level category," the Pulte CEO said. "If more first-time buyers enter the market, housing could get exciting again."
Nicholson is hoping the GSE regulators can implement the changes fairly quickly, particularly the introduction of the new low-down-payment loan products.
"The real question is implementation and when does it happen," the Ryland CEO said. "We would hope to see in it in the early part of next year, which I think could have a huge impact on the spring selling season."
The Pulte CEO noted that press coverage about lender easing could also prompt borrowers to finally apply for a mortgage.
"There is certainly some evidence that people think that credit is tighter than it actually is," Dugas said.
