Freddie Mac announced a new program to help renters build up their credit profiles and help make them more creditworthy. The initiative provides a means for owners or managers of multifamily properties to report on-time rental payments to the three major credit bureaus. The move aims to help a portion of the more than 45 million U.S. adults who have no credit score.

Less than 10% of renters currently see their on-time rental payment history reflected in their credit scores. That could be preventing some from accessing credit or qualifying for some of the best rates.

“Rent payments are often the single largest monthly line item in a family’s budget, but paying your rent on time does not show up in a credit report like a mortgage payment,” says Michael DeVito, CEO of Freddie Mac. “That puts the 44 million households who rent at a significant disadvantage when they seek financing for a home, a car, or even an education. While there remains more to do, this is a meaningful step in addressing this age-old problem.”

Freddie Mac’s initiative uses technology from Esusu Financial Inc. to allow multifamily operators to report on-time rental payment data from property management software platforms to the three credit bureaus. It will automatically unenroll renters when missed payments occur, which could then hamper credit profiles, Freddie Mac reports.

“At present, the most common way for rents to be reported to the credit bureaus is when there is a missed payment that has gone to a collections agency,” says Alexis Sofyanos, senior director of Equity in Multifamily Housing at Freddie Mac. “Freddie Mac wants to flip that script, so that renters who pay their rent on time and in full each month get credit for doing so, while also putting in safeguards for the most vulnerable.”

Freddie Mac announced it also will provide closing cost credits on multifamily loans for owners of rental properties who agree to report on-time rental payments through the Esusu platform.

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Mortgage rates are expected to continue to rise after the Federal Reserve’s announcement Wednesday that it would taper its purchases of bonds and mortgage-backed securities. Will those anticipated higher rates price out more home buyers? While some would-be buyers may back off, analysts say, that would allow more persistent buyers to push through.

Higher mortgage rates—pushing above 3% for the 30-year fixed-rate mortgage—could help lessen the competition. “That could make home buying less expensive if buyers aren’t spending as much on their homes and engaging in crazy bidding wars—possibly a welcome lifeline for many first-time buyers who’ve been barred from homeownership by record-high prices,” realtor.com® reports.

The median price for an existing-home has posted double-digit annual gains. In September, the existing-home sale price rose to a median of $352,800, up 13.3% compared to a year earlier, the National Association of REALTORS® reports.

NAR has predicted the 30-year fixed-rate mortgage will likely average 3.6% by mid-2022.

“It’s going to be less affordable a year from now than where we are today,” Leonard Kiefer, deputy chief economist at Freddie Mac, told realtor.com®.

During the first week of January, the 30-year fixed-rate mortgage bottomed out at a 2.65% average. The 30-year fixed-rate mortgage averaged 3.14% for the week ending Oct. 28, Freddie Mac reports.

Realtor.com® offers the following example: A $380,000 home with a 2.65% mortgage rate would have a payment of about $1,225 a month on a 30-year loan, assuming a 20% down payment. At a 3.14% rate, the payment will rise by about $80 a month. Over the 30-year loan, owners could pay nearly $29,000 more.

However, mortgage rates averaging 3% are still historically low. Also, higher mortgage rates may cause some of the competition in the housing market to cool. “Prospective home buyers should actually be praying for rates to start creeping up,” Katie Gatti, a personal finance consultant and the founder of Money with Katie blog, told realtor.com®. Price increases would then likely moderate as well.

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Offering slight relief to home buyers this week, the 30-year fixed-rate mortgage fell to a 3.09% average. But rates may rise again soon.

Housing analysts largely expect mortgage rates to increase in the following months due to the Federal Reserve’s announcement this week that it will slowly reduce its monthly bond purchases.

“While mortgage rates fell after several weeks on the rise, we expect future upticks due to strong economic data and as the Federal Reserve pulls back on its stimulus,” says Sam Khater, Freddie Mac’s chief economist. “That said, the housing market remains favorable for consumers, as rates remain below pre-pandemic levels and continue to support sustainable purchase and refinance opportunities.”

The National Association of REALTORS® forecasts the 30-year fixed-rate mortgage to average 3.5% by the second quarter of 2022.

Freddie Mac reports the following national averages with mortgage rates for the week ending Nov. 4:

• 30-year fixed-rate mortgages: averaged 3.09%, with an average 0.7 points, falling from last week’s 3.14% average. Last year at this time, 30-year rates averaged 2.78%.
• 15-year fixed-rate mortgages: averaged 2.35%, with an average 0.6 points, decreasing from last week’s 2.37% average. A year ago, 15-year rates averaged 2.32%.
• 5-year Treasury-indexed hybrid adjustable-rate mortgages: averaged 2.54%, with an average 0.3 points, dropping from last week’s 2.56% average. A year ago, 5-year ARMs averaged 2.89%.

Freddie Mac reports average commitment rates along with average points to better reflect the total upfront cost of obtaining the mortgage.

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Homeowners are keeping up with their mortgage payments or arranging for loan modifications with their service providers. But housing analysts say that while the real estate market still faces pandemic-related fears about a wave of delinquencies, higher home prices are helping to alleviate some of those concerns.

The overall delinquency rate fell to the lowest level since the onset of the pandemic, CoreLogic, a real estate data firm, reports. “However, the decrease in delinquencies masks the serious financial challenges that a part of the borrower population has experienced,” Molly Boesel, economist at CoreLogic, writes for CoreLogic Insights. “In the months prior to the pandemic, only one in five delinquent loans had missed six or more payments. In August 2021 one in two borrowers with missed payments were behind six or more months. Fortunately, large increases in home prices [have] given most borrowers a large home equity cushion, making foreclosure far less likely.”

The nation’s overall delinquency rate was 4% in August, which reflects homeowners in some stage of delinquency, considered to be 30 days or more past due on their mortgage payments, according to CoreLogic. That is a decrease of 2.6% from August 2020. Delinquencies, however, are still slightly above the early pre-pandemic rate in 2020 of 3.6%.

All states posted annual decreases in their delinquency rates in August as the employment rate continues to improve across the country. The states with the highest delinquency rates include Louisiana, Mississippi, New York, New Jersey, and Maryland, according to CoreLogic.

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Home buyers and homeowners got another chance this week to lock in historically low rates. The 30-year fixed-rate mortgage averaged 2.98%, Freddie Mac reports.

“Despite the re-acceleration of economic growth, the recent bond rally drove mortgage rates down for the second consecutive week,” says Sam Khater, Freddie Mac’s chief economist. “These low mortgage rates, combined with the tailwind of first-time home buyers entering the market, means that purchase demand will remain strong into next year. However, affordability pressures continue to be an ongoing concern for home buyers.”

Freddie Mac reports the following national averages with mortgage rates for the week ending Nov. 10:

• 30-year fixed-rate mortgages: averaged 2.98%, with an average 0.7 point, dropping from last week’s 3.09% average. Last year at this time, 30-year rates averaged 2.84%.
• 15-year fixed-rate mortgages: averaged 2.27%, with an average 0.6 point, dropping from last week’s 2.35% average. A year ago, 15-year rates averaged 2.34%.
• 5-year hybrid adjustable-rate mortgages: averaged 2.53%, with an average 0.4 point, dropping from last week’s 2.54% average. A year ago, 5-year ARMs averaged 3.11%.

Freddie Mac reports average commitment rates along with average points to better reflect the total upfront cost of obtaining the mortgage.

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The rapid rise in home prices over the past year is prompting Fannie Mae and Freddie Mac to revisit the maximum size of home mortgages they will back for 2022, possibly increasing to nearly $1 million in some areas, The Wall Street Journal reports.

That would mark a sharp jump compared to this year: The government-backed enterprises currently back single-family mortgages to $548,250 in many parts of the country and to $822,375 in pricier areas, such as California and New York.

The Wall Street Journal is reporting that the baseline levels are expected to jump to about $650,000 in many areas and to just under $1 million in high-cost areas.

However, the actual caps won’t be released by the Federal Housing Administration, which oversees Fannie Mae and Freddie Mac, until Nov. 30. The new limits would take effect in January 2022.

Freddie Mac and Fannie Mae update their loan limits annually. They use a formula that factors in average home price increases nationally.

Home prices have surged since the pandemic. The median single-family existing-home sales price jumped by 16% to $363,700 in the third quarter compared to a year earlier, according to the National Association of REALTORS®.

Fannie and Freddie guarantee about half of the $11 trillion mortgage market. Neither entity issues loans directly. Instead, they purchase loans from lenders and package them into securities that are then sold to investors. Mortgages within Fannie Mae and Freddie Mac’s limits are referred to as conforming loans.

Fannie Mae and Freddie Mac’s share of the mortgage market has comprised nearly 60% of all new mortgages during the pandemic, up from 42% in 2019, according to the Urban Institute.

Some housing analysts are expressing concern over Fannie Mae and Freddie Mac increasing their threshold prices and saying the government’s role in the mortgage market is becoming too big. But others in favor of the increases say that it helps borrowers in more expensive markets to be able to afford rising prices.

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Military families with Veterans Affairs loans are losing out in the competitive housing market. Sellers are showing preference to buyers with more conventional financing or all-cash offers that they believe will offer a faster and smoother closing.

Ninety-four percent of real estate professionals surveyed said sellers are most likely to accept an offer with conventional financing over a government-backed loan, according to an April 2021 survey conducted by the National Association of REALTORS®.

But sellers may have some outdated concerns over VA loans, Caitlin Turkovich, branch manager specializing in VA loans at Union Home Mortgage in Las Vegas, told CNBC. VA loans are partly guaranteed by the U.S. Department of Veterans Affairs and offer zero percent down financing.

“VA loans are actually the easiest to qualify for if you have entitlements,” Turkovich told CNBC. Entitlements refer to the amount the VA will repay if the borrower defaults.

Turkovich says buyers using VA loans should work with a lender who specializes in VA loans to help clear up possible misunderstandings and outline specifics in buyer preapproval letters.

Also, Turkovich says VA loan buyers can take other steps to try to stand out, like by making a 5% down payment. That matches the minimum for some conventional mortgages, and it also drops the VA loan funding fee from 2.3% to 1.65%, she notes.

VA loan buyers also may make their offer stronger by offering earnest money—such as 5% versus the standard 1%, Cedric Stewart, a real estate professional with Keller Williams in Rockville, Md., told CNBC. “The largest earnest money deposit is another instrument to communicate an ease in the relationship,” Stewart said.

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Rising mortgage rates don’t seem to be scaring off home buyers. Mortgage applications to purchase a home, viewed as a gauge of homebuying demand, increased 2% last week, the Mortgage Bankers Association reported Wednesday.

Homebuilders are reporting stronger buyer traffic too after a brief lull earlier this fall, according to a recent builder sentiment report released by the National Association of Home Builders.

“Purchase applications increased for both conventional and government loan segments, as housing demand continues to show resiliency at a time—late fall—when homebuying activity typically slows,” says Joel Kan, the MBA’s associate vice president of economic and industry forecasting. “The second straight increase in purchase applications suggests that stronger sales activity may continue in the weeks to come.”

Still, purchase applications for mortgages are 6% lower than the same week a year ago, when the housing market was even more unseasonably lively.

Mortgage rates are at their highest level in more than three weeks and continued to move higher at the start of this week, the MBA reports. The average contract interest rate for 30-year fixed-rate mortgages last week rose to 3.20%, up from 3.16% the previous week, the MBA reports. As rates rise, refinance demand has plummeted and is 31% lower than the same week a year ago.

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