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Voice for Real Estate 69: Student Loan Debt, Homeownership

June 14, 2017

NAR sits down with Fannie Mae as it makes concrete changes to help homebuyers hit hard by student debt. Also, NAR hosts conference on increasing the homeownership rate, which is at a 50-year low. And an NAR report finds that global 

Featured segments

  • Increasing the homeownership rate 
  • Fannie Mae eases way for those with student debt 
  • Foreign buyers like smaller properties in smaller markets 

Transcript

Relief for homebuyers with student debt

NAR and HUD seek solutions to increase responsible homeownership

And international investors see big opportunity in small markets

These stories and more on The Voice for Real Estate.

Hi, I’m Stephen Gasque of the National Association of Realtors.

Since the economic downturn a decade ago, the homeownership rate in the United States has dropped to a 50-year low. It now stands at under 64 percent, down from a high of about 69 percent.

Helping more financially responsible households become successful homeowners has been one of NAR President Bill Brown’s top priorities. That’s because a higher rate of homeownership means stronger communities, a more robust economy, and more households benefitting from rising home appreciation.

At the University of California at Berkeley this month, President Brown hosted some of the nation’s top academic and policy experts on homeownership.

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Tight supply, tight credit, declining affordability, student loan debt, and the lingering impact of foreclosures on some households are among the biggest roadblocks to more people becoming homeowners. But there are steps that can be taken to turn these problems around.

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The Administration has declared June Homeownership Month, and Dr. Ben Carson, secretary of the U.S. Department of Housing and Urban Development, hosted a forum in Washington with the same aim: determining how to safely increase the nation’s homeownership rate.

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NAR Chief Economist Lawrence Yun was a speaker at the forum and said one solution is for builders to put more homes on the market because it’s the lack of inventory that’s keeping households from buying.

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There could be some good news to report soon on the inventory crunch. The Trump administration is working on a rule that could encourage community banks to make more loans available to the small builders, that are historically the main producers of our nation’s single-family homes. We’ll have more on that as that initiative develops.

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It’s a 1.3 trillion dollar problem. That’s how much Americans owe in student loan debt—an average $37,000 per person. It’s making it hard for young households to buy their first house and its even weighing on the credit of older households who are helping their kids pay for school. But Fannie Mae, working with NAR, has just announced a change in its underwriting to make it easier for households with student loan debt to qualify for a mortgage.

First, in calculating a person’s debt-to-income ratio, the company is no longer counting debt obligations that someone else is paying for. That means if a person’s student loan payment, or even car payment, is being made by a parent, that debt obligation is taken out of their DTI equation.

Second, for people making income-based student loan payments—in amounts smaller than what their original repayment agreement called for—the smaller payment is factored into the DTI calculation.

And third, in an upcoming change, the maximum dent-to-income ratio will soon be increased from 45 percent to 50 percent.

NAR sat down with Jonathan Lawless at Fannie Mae on the changes, most of which are now in effect.

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Of course, it’s not just Fannie Mae that’s trying to tackle this problem. Freddie Mac has taken steps as well and FHA could at some point do something as well. We’ll have more on any initiatives as they’re announced.

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Good news for NAR members who work on small commercial transactions. Over the past five years, almost half of real estate professionals who specialize in commercial say they’ve seen an increase in international clients who buy, sell, and lease properties. The data shows that companies and individuals from China, Mexico, the United Kingdom, Canada, and other countries are finding attractive investments in smaller properties in a wide range of markets, not just the major metropolitan areas. NAR Chief Economist Lawrence Yun has more.

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You can get details on foreign investment in commercial properties in a new report called “Commercial Real Estate International Business Trends 2017” on nar.realtor.

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And that’s our show for the week of June 12. You can get more on everything we talked about today at The Voice for Real Estate page on nar.realtor. Thank you for joining us and be sure to join us again as we bring you the latest news on The Voice for Real Estate.