You’ve probably heard plenty of news about the coronavirus already, whether it’s about schools and businesses closing, people stocking up on food and supplies, or the stock markets tanking. It’s likely you’re reading this from home. But what you might not have heard of yet is the affect it has on the housing market.
According to an article from the Mortgage Bankers Association, the Federal Reserve is planning to purchase mortgage-backed securities (MBS) to help bolster the housing market. Mortgage-backed securities are essentially bonds consisting of home loans. These are normally bought by private investors who make money in the form of interest rates, otherwise known as mortgage rates. However, private investors are withdrawing from the mortgage market to avoids risks amid economic uncertainty. If it weren’t for the Federal Reserve taking their place, fewer home loans would be able to be issued, and mortgage rates would skyrocket.
The President and CEO of the Mortgage Bankers Association (MBA), Robert Broeksmit, said that the Federal Reserve’s plan will help protect homeowners from the indirect effects of the coronavirus. “MBA applauds the Fed for announcing its intent to increase the scale and scope of its purchase of agency MBS and agency commercial MBS. This will not only protect consumers by stabilizing mortgage rates for home purchases, but it will also help homeowners to refinance their loans and support multifamily real estate markets. Both are powerful forms of stimulus for the economy that have been slowed due to unprecedented market volatility,” Broeksmit said.
Put simply, the economic impact of the coronavirus should stay away from the housing market as the Federal Reserve swoops in. This is not only good for the overall housing market, but is also good news for individual homeowners as well.
While it’s no secret that the economy isn’t doing very hot for the time being, the good news is that steps are being taken to protect the housing market. We aren’t seeing a repeat of the ’08 financial crisis. If anything, we could see a decrease in foreclosures. “A critically important program will be to provide support to impacted homeowners through forbearance,” Broeksmit also said, suggesting that lending institutions allow homeowners to put off their mortgage payments until they secure their own finances.
In another article from the MBA, it explained how the Federal Housing Finance Agency (FHFA) is easing lending requirements to ensure that people can still secure financing from home. “By providing ‘alternative flexibilities’ to satisfy appraisal requirements and employment verification requirements through May 17—an issue that the Mortgage Bankers Association has emphasized with FHFA in recent discussions—FHFA said it would allow for homes to be bought, sold and refinanced in the coronavirus environment,” says Mike Sorohan, a writer for the MBA.
In short, steps taken by the Federal Reserve and the Federal Housing Finance Agency should help the housing market weather the storm. While many other industries are shutting down to avoid spreading the coronavirus, housing is in a much better spot, relatively speaking.
Sorohan, Mike. “Fed Bolsters Efforts to Stem Economic Impact of Coronavirus.” MBA Newslink, Mortgage Bankers Association, 23 Mar. 2020, http://newslink.mba.org/servicing-newslink/2020/march/fed-bolsters-efforts-to-stem-economic-impact-of-coronavirus/
Sorohan, Mike. “FHFA Authorizes GSEs to Support Additional Liquidity in Secondary Mortgage Market; Provide Flexibility in Appraisals, Employment Verifications.” MBA Newslink, Mortgage Bankers Association, 23 Mar. 2020, http://newslink.mba.org/servicing-newslink/2020/march/fhfa-authorizes-gses-to-support-additional-liquidity-in-secondary-mortgage-market-provide-flexibility-in-appraisals-employment-verifications/