Some home builders are heralding federal regulators’ move this week to ease mortgage-qualification standards as a key to reviving the entry-level market but at least one is panning it as a return to dangerous lending.
The Federal Housing Finance Agency indicated this week it will expand mortgage availability with changes such as allowing borrowers to make a down payment of 3% of a loan’s value rather than the typical 20% for a high-quality mortgage.
On Thursday, two national builders reporting quarterly results touted the change as key to bringing first-time buyers back into the market. First-time buyers accounted for an average of 29% of new home sales from 2001 to 2011, according to the National Association of Home Builders. But this year that figure has dropped to an estimated 16% , because of tepid job and wage growth, mounting student debt and tight lending standards.