State housing finance agencies are well positioned to benefit from the entry of millennials into the housing market, according to a report by Moody's Investors Service.
Of the 87.5 million millennials 24 to 34 years old, there are 15 million millennial households that do not own a home, "presenting a sizable untapped market for HFAs," Moody's said in an Aug 19 report.
The report also says the average age of housing finance agency borrowers is 30, "putting millennials in the sweet spot of potential borrowers."
State housing finance agencies buy loans from participating lenders that they can sell to Fannie Mae or securitize through Ginnie Mae (Freddie Mac has not purchased such loans since 2013). The HFAs also provide down payment and closing-cost assistance, which makes the agencies' financing programs attractive to millennial homebuyers, according to Moody's.
The Connecticut HFA, for example, rolls this down payment and closing-cost assistance into a 30-year second lien with the same interest rate as the first mortgage.
"Around 15% of millennial homebuyers finance 100% of the purchase of price of their homes, although this percentage will likely grow as more millennials enter the market," Moody's said. "HFAs that capture even a small percentage of the increasing millennial homebuyer market will see a material impact on loan originations and revenues."
