Mortgage – HousingWire

The VA’s little-known program for Native American veterans

Posted: 20 Apr 2022 12:59 PM PDT

A Department of Veterans Affairs lending program for Native American veterans has been severely underutilized, a government watchdog found.

According to a report the Government Accountability Office published this week, the VA's Native American Direct Loan program only resulted in 89 loans originated in the continental U.S. from 2012 to 2021. This represents less than 1% of the estimated potentially eligible population of 70,000 veterans, the watchdog agency said.

The GAO said that the VA lacked the staff to run the lending program and failed to inform communities that it exists. Federal law requires the VA to implement an outreach program in consultation with tribal organizations to inform Native American veterans about the program.

The GAO's investigation also found that the VA does not collect useful data related to the program’s outreach, loan processing, and negotiations of program participation agreements with federally recognized Indian tribes.

The VA did not immediately respond to a request for comment.

The GAO's report said that from 2012 to 2021, 91 loans were originated in Hawaii using the program. In the entire country, 180 loan originations resulted from the program from 2012 to 2021.

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The GAO launched its investigation after members of Congress, advocacy organizations and other stakeholders started raising questions about the effectiveness of the program’s outreach efforts.

The program has existed since 1992, when Congress required the VA to help eligible Native American veterans purchase, construct or improve homes on tribal territories, which are subject to legal restrictions, the report said. The Department of Housing and Urban Development and the United States Department of Agriculture have similar programs.

But HUD and the USDA have had relatively more success than the VA in approving federally recognized Indian tribes to participate in their programs. As of July 2021, HUD and the USDA had approved at least 100 more eligible tribal entities than the VA program.

In response to the GAO’s investigation, the VA pointed to the lack of examples of other lending programs with participation results dramatically more successful than its own. The GAO replied that the other programs do not consistently collect data on whether a borrower is a veteran, and besides that, the “differences in program and other requirements limited the benefits of such comparisons.”

Part of the problem with the VA’s program, the GAO argued, is a procedural bottleneck. The VA program has an additional step for approving tribal entities, which requires tribes to sign a memorandum of understanding. This memorandum authorizes a tribe to serve as a trustee, in turn protecting the VA's financial interests in case of foreclosure and resale of collateral.

The watchdog says that this complicated and lengthy step severely limits the number of Indian tribes that can participate. The report said that as of of September 2021, 70% of federally recognized Indian tribes in the nation did not have memorandums of understanding, a step the HUD and the USDA do not require.

Another issue, the GAO said, is that the VA did not have a dedicated team running the Native American Direct Loan program until a year ago. Instead, staff in VA's regional loan centers worked on the program on an as-needed basis.

In September 2021, the VA created a team of seven members to run the program. But there has been no detailed plan that outlines the programs priorities or the departments outreach goals, the report said.

Going forward, the watchdog recommended the VA comprehensively assess what it needs to monitor and oversee program outreach and memorandum of understanding negotiations. The watchdog said that the department's current data systems are missing certain information such as the status of the negotiations, which results in inaccurate and untimely data.

The GAO also recommends the VA holds focus groups to collect feedback from Native American veterans on ways to improve. The agency also recommended the VA develop and implement processes to routinely and consistently review the program's documents to help ensure that they are accurate.

By making those changes, the GAO wrote, the VA will be “better positioned to realize the intended benefits of its new [Native American Direct Loan] staffing structure and recognize—and act on— opportunities to meet the housing needs of Native American veterans.”

The post The VA’s little-known program for Native American veterans appeared first on HousingWire.

Fannie Mae cuts origination projection, forecasts recession in 2023

Posted: 20 Apr 2022 09:36 AM PDT

Fannie Mae has lowered its mortgage origination forecasts for 2022 and 2023 due to the Federal Reserve’s (Fed) aggressive inflation-fighting monetary policy and corresponding volatility in the mortgage market.

Fannie’s Economic and Strategic Research (ESR) Group dropped its projected single-family mortgage origination volume for 2022 from $3 trillion to $2.8 trillion. It also downsized the 2023 forecast from $2.7 trillion to $2.4 trillion. To compare, in 2021, the total was $4.5 trillion.

Higher interest rates reduce borrowers’ appetite for refinancing, which is expected to decline from 58% of the mix in 2021 to 32% this year. In volumes, it represents $889 billion and $558 billion, respectively. Fannie Mae estimates that with rates at 5%, only 2.3% of all outstanding loan balances have a refinance rate incentive of at least 50 basis points.

Purchases will also decline in a more challenging landscape, from $1.93 trillion in 2022 to $1.85 trillion in 2023, both downward revisions from Fannie’s last month’s forecast.

“Mortgage rates have ratcheted up dramatically over the past few months, and historically such large movements have ended with a housing slowdown. Consequently, we expect home sales, house prices, and mortgage volumes to cool over the next two years,” Doug Duncan, Fannie Mae senior vice president and chief economist, said in a statement.

According to Duncan, households with a 30-year fixed mortgage rate of 3% are unlikely to give that up in favor of a rate closer to 5%, a “lock-in” effect that will weigh on home sales.

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Fannie Mae expects a 7.4% decline in home sales for 2022, followed by a 9.7% reduction in 2023 – previously, it expected a 4.1% drop this year and 2.7% in the next year. The house prices growth forecast is at 10.8% in 2022 and 3.2% in 2023.

Regarding the overall economy, the ESR Group downgraded the 2022 GDP forecast by 0.2 percentage points to 2.1%, as record-high job openings are bringing near-term resilience to the economy, despite higher interest rates and the impacts of the war in Ukraine.

But, for 2023, the scenario is more challenging. Fannie Mae changed its GDP forecast from a growth of 2.2% to a decline of 0.1%. According to the agency, a “soft-landing” – when inflation subsides without economic contraction – is possible, but historically such an outcome is an exception, not a norm.

Fannie’s predictions show that, after peaking at 8.5% in March, inflation may be reduced to 5.5% in the fourth quarter of 2022. The unemployment rate is expected to reach 6% at some point in 2024, a change similar in magnitude to the 1990 and 2001 recessions.

“Data from U.S. economic history suggest that successfully negotiating a ‘soft landing’ requires monetary tightening to be pre-emptive rather than responsive,” Duncan said. “As such, we’ve updated our 2023 forecast to include a modest recession, but one that we do not expect to be similar in magnitude or duration to the recession of 2008.”

According to Fannie Mae, the mortgage credit quality is far superior in the current period, the residential real estate and the mortgage finance system are less leveraged now, and servicers are better equipped to deal with delinquencies.

The post Fannie Mae cuts origination projection, forecasts recession in 2023 appeared first on HousingWire.

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Thursday, April 21, 2022