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Politics, Housing, & the Winds of Uncertainty

Politics, Housing, & the Winds of Uncertainty

What is the impact of a presidential election on the housing market? The best answer may just be, “Not that much.” Every 4 years, analysts drudge up their deep histories of real estate data in order to ferret out the likely impacts of the presidential election season on the housing market. Some claim that election years have a significant negative impacts (particularly on home prices),[1] while others struggle to find any effects at all.[2]

In general, the average growth in home sales during an election year runs the same direction—that is, election years are either slightly higher or lower than a typical year, but rarely cut the opposite direction. The exception to this rule, which is perhaps the most significant discernable impact of presidential elections on California’s housing market, comes at the end of the year. Going back to 1990 on a monthly basis, California home sales actually contract by roughly 2% during the last 4 months of the year. However, during the past 5 election cycles, the final months of the year have been consistently upbeat. In fact, with the exception of December 2004, every single month of the final quarter saw robust growth in home sales during the election year. As such, perhaps the most w e can say with confidence is that as the presidential elections reach their conclusion, the winds of uncertainty are swept away—for better or worse—and people can go about their home-buying and selling activities again.

On average, some months during an election year perform better than the long-run average for that month, while others are worse (again, on average). This suggests that overall economic and market conditions dominate the decision to buy and sell a home, rather than the recurrence of the election cycle. A naïve analysis might even point out that sales and price growth “seem” higher during an election than the typical year. For example, during the last 5 election cycles (1992-2012) growth in home sales out-performed its long-run average in 56 of the 72 months observed or roughly 78% of the time.

This is perhaps counter-intuitive as studies like the 2012 Movoto analysis point to detrimental effects on housing as a result of increased political uncertainty associated with presidential elections. However, this type of naïve analysis fails to control for other market conditions like whether the economy was growing at an above- or below-average pace at the time, whether we were in a recession, availability of mortgage credit, labor market conditions, and many other factors. Given these confounding factors, it is difficult to determine whether the fact that home sales grew slightly faster or slower is truly driven by the election cycle or other unobserved factors. However, in the final months of the year, home sales move in the complete opposite direction of their long-run trend-suggesting more concrete differences as election seasons wind down.

The pattern for home prices is similar. Despite Movoto’s claims, C.A.R. finds little evidence of a negative effect on home prices during an election year. In fact, home price growth during the past 5 election cycles is actually slightly better than the long-run average. Again, the effects are most pronounced during the final months of the year when demand, and therefore upward pressure on prices, are boosted following the election.

Many researchers have tried to pin down the effects of our political elections on California’s housing market. There are some indications that elections do bolster the final months of an election year as uncertainty fades and the state gets back to business, but the more likely conclusion is that presidential elections don’t have much impact on the Golden State’s housing market at all.

CALIFORNIA HOUSING MARKET MAINTAINS MOMENTUM

CALIFORNIA HOUSING MARKET MAINTAINS MOMENTUM

Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 410,090 units in May, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide. The statewide sales figure represents what would be the total number of homes sold during 2016 if sales maintained the May pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.

The May figure was up a slight 0.6 percent from the revised 407,560 level in April and down 3.2 percent compared with home sales in May 2015 of a revised 423,700. The year-to-year decline was the first back-to-back sales decline since November 2014.

“While May home sales edged up slightly, we are seeing a moderation, driven by tight housing inventory and reduced affordability,” said C.A.R. President Pat “Ziggy” Zicarelli. “Affordable areas, such as the Inland Empire and Central Valley, where housing supply is relatively more abundant, are outperforming the San Francisco Bay Area, where thin housing availability is hampering home sales. In fact, eight of that region’s nine counties experienced a sales decline from the previous year.”

A change in the mix of sales and a continued mismatch between supply and demand pushed the median price of an existing, single-family detached California home 1.8 percent higher in May to $518,760 from $509,590 in April. May’s median price was 6.3 percent higher than the revised $487,960 recorded in May 2015. The median sales price is the point at which half of homes sold for more and half sold for less; it is influenced by the types of homes selling as well as a general change in values. May marked the second consecutive month that the median price was above $500,000; it is still below the pre-recession peak of $594,530 reached in May 2007.

“The California housing market is growing modestly so far this year, with home sales running 2 percent higher year to date,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “Fundamental drivers, such as household formation and economic growth will continue to move housing demand forward. However, constrained inventory, low affordability, and regional disparities will be a drag on this year’s market outlook, which is forecast to see a 1.3 percent growth in sales and a 5 percent increase in the median home price.”

Other key points from C.A.R.’s May 2016 resale housing report include:

• C.A.R.’s Unsold Inventory Index, which indicates the number of months needed to sell the supply of homes on the market at the current sales rate, dipped slightly to 3.4 months in May from 3.5 months in April. The index stood at 3.5 months in May 2015. The year-over-year dip was due primarily to a drop in inventory as overall active listings increased 5.8 percent from April 2016. The long-run average home supply is 6.1 months, indicating inventory levels are running at roughly 60 percent of normal.

• The median number of days it took to sell a single-family home slipped in May to 27.3 days, compared with 27.7 days in April and 27.9 days in May 2015.

• According to C.A.R.’s sales-to-list price ratio*, tight inventories also appear to be driving final sales prices closer to listing prices, with sales prices rising to 99.7 percent of listing prices statewide in May from 99.3 percent in April.

• The average price per square foot** for an existing, single-family home statewide was $249 in May 2016, up from $244 in April and $238 in May 2015.

• San Francisco County had the highest price per square foot in May at $856/sq. ft., followed by San Mateo ($826/sq. ft.), and Santa Clara counties ($638/sq. ft.). The counties with the lowest price per square foot in May include Siskiyou ($121/sq. ft.), Madera ($123/sq. ft.), and Plumas ($125/sq. ft.).

• Mortgage rates were essentially flat in May, with the 30-year, fixed-mortgage interest rate averaging 3.60 percent, compared with 3.61 percent in April and 3.84 percent in May 2015, according to Freddie Mac. Adjustable-mortgage interest rates slipped, averaging 2.81 percent in May, down from 2.83 percent in April and 2.89 percent in May 2015.

WHAT WOULD MOTIVE RENTERS TO BUY

WHAT WOULD MOTIVE RENTERS TO BUY

Nearly half of renters (48 percent) plan to buy a home in the future, with 10 percent saying that they plan to buy within a year. For those not planning to buy, an improvement in finances, lower housing prices, and saving enough for a downpayment would motivate them to buy now.

Of the 28 percent of renters who don’t plan to buy in the future, 50 percent said they can’t afford to buy, 20 percent will not buy because they prefer to rent, 19 percent said they can’t qualify for a mortgage, and 15 percent lack a downpayment. Job uncertainty (9 percent), economic uncertainty (12 percent), and housing market uncertainty (6 percent) were among other reasons renters cited for not buying a home.

Homeownership remains important to renters, with nearly half (45 percent) rating it 8 or higher in importance on a scale of 1-10, with 10 being extremely important. The average was 6.8. Nearly all renters (95 percent) see advantages to homeownership; freedom to do what you want with your home, building equity, and having permanence and stability were the top benefits mentioned by renters.

One of the surprising findings of this survey is that more than one in four millennial renters said they plan to purchase a home that will accommodate their parents, and about one in five millennials indicated they plan to pool funds with family members to buy a home.

Primarily reflecting cultural values, Hispanic renters were more likely to buy a home that will accommodate their parents and/or adult children than any other ethnic group, with 46 percent indicating so, compared with 35 percent of blacks, 32 percent of Asians, and 29 percent of whites. Hispanics and Asians place a strong value on family, and tend to live with multi-generations under one roof more so than other ethnic groups.

APRIL CALIFORNIA PENDING HOME SALES TREND HIGHER BUT INVENTORY CONCERNS REMAIN

APRIL CALIFORNIA PENDING HOME SALES TREND HIGHER BUT INVENTORY CONCERNS REMAIN

LOS ANGELES (May 23) – Led by the Central Valley, California statewide pending home sales reversed a three-month decline and posted higher in April, but a persistent shortage of homes for sale may dampen the upcoming spring homebuying season, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today.

C.A.R.’s April Market Pulse Survey** also reflected a slowdown in market activity with a decrease in floor calls, open house traffic, and listing appointments/client presentations, likely due to the tight inventory and low affordability conditions constraining the California housing market.

Pending home sales data:

• Statewide pending home sales rose in April on an annual basis, with the Pending Home Sales Index (PHSI)* increasing 4.1 percent from 135.9 in April 2015 to 141.6 in April 2016, based on signed contracts. April’s annual increase was the strongest thus far this year, and the PHSI is now at its highest level since March 2012.

• California pending home sales also rose on a monthly basis more than is typical for April, which average 1.3 percent between 2008 and 2015. The PHSI increased 4.5 percent from an index of 135.4 in March. When adjusting pending sales for typical seasonal patterns, pending sales actually increased 9 percent from March. Despite the uptick, inventory concerns remain as statewide listings are 4.2 percent below where they were a year ago.

• At the regional level, pending sales were up on an annual basis in all major regions of the state, with the Central Valley Region’s index reaching an all-time high, thanks to its high affordability and ample inventory. The Southern California region also saw a healthy uptick in pending sales from a year ago, driven by double-digit increases in Orange County and Riverside.

• For the Bay Area as a whole, pending sales were down 5.1 percent from March and up 1.6 percent from April 2015. Within the core areas of the Bay Area, including San Francisco and Santa Clara counties, pending sales actually saw an increase over last year of 9.4 percent and 15.8 percent, respectively.

• The pending sales index in Central Valley posted an increase of 35.3 percent from March and 2 percent from April 2015.

• While pending home sales in Southern California as a whole were down 5.5 percent from March, they rose 4.8 percent from a year ago. Los Angeles County posted an annual gain of 3.4 percent, while Orange County experienced a robust 10.3 percent gain.

Year-to-Year Change in Pending Sales by County/Region

County/Region/State    Apr-16    Apr-15    Yearly % Change
Los Angeles    94.2    91.1    3.4%
Monterey    80.2    70.5    13.7%
Orange    87.6    79.4    10.3%
Sacramento    81.8    81.9    -0.2%
San Francisco    96.7    88.4    9.4%
Santa Clara    115.6    99.8    15.8%
SF Bay Area    170.0    167.3    1.6%
So. CA    108.7    103.8    4.8%
Central Valley    130.2    127.7    2.0%
California    141.6    135.9    4.1%

April REALTOR® Market Pulse Survey**:

In a separate report, California REALTORS® responding to C.A.R.’s April Market Pulse Survey saw a decrease in floor calls, open house traffic, and listing appointments/client presentations, likely due to the tight inventory and low affordability conditions constraining the California housing market. Floor calls and listing appointments both reversed three months’ growth in April. Open house traffic declined also but has been in positive territory since the beginning of the year.

• The share of homes selling above asking price in April shrank for the first time since December 2015, slipping to 32 percent from 34 percent in March and 36 percent in April 2015. Conversely, the share of properties selling below asking price rose for the first time in four months to 40 percent. The remainder (28 percent) sold at asking price.

• For the homes that sold above asking price, the premium paid over asking price declined for the second straight month to an average of 9.6 percent, down from March’s 9.8 percent and 10 percent in April 2015.

• The 40 percent of homes that sold below asking price sold for an average of 12 percent below asking price in April, down from 9.6 percent in March and 11 percent a year ago.

• Nearly seven of 10 properties for sale received multiple offers in April, indicating the market remains competitive. Seventy-two percent of properties received multiple offers in April 2015.

• The average number of offers per property decreased for the first time in three months to 2.9 in April, down from 3.3 in March and 3.6 in April 2015.

• With home prices leveling off in recent months, more sellers are adjusting their listing price to become more in line with buyers’ expectations. About one in four (23 percent) of properties had price reductions in April, down from 28 percent a year ago.

• Low housing inventory continued to be REALTORS®’ biggest concerns, cited by one in three (33 percent), while 16 percent indicated declining housing affordability, and 14 percent stated overinflated home prices.

• REALTORS® remained somewhat optimistic about market conditions over the next year, with the index increasing slightly from 60 in March to 61 in April. However, optimism is waning as the index is down from 73 a year ago, indicating fewer REALTOR® respondents are positive about the market.

Home-buying season kicks off slowly as thin housing supply constrains California home sales in April

Home-buying season kicks off slowly as thin housing supply constrains California home sales in April

Statewide median home price climbs, breaking $500,000 for first time in nine years

– Existing, single-family home sales totaled 406,800 in April on a seasonally adjusted annualized rate, down 2.6 percent from March and 5.4 percent from April 2015.

– April’s statewide median home price was $509,100, up 5.3 percent from March and 5.1 percent from April 2015.

– The supply of available homes on the market is operating at roughly 60 percent of normal inventory levels.

LOS ANGELES (May 16) – While sales remained above the 400,000 benchmark level, California existing home sales fell from the previous year in April as tight housing inventory continues to impede the housing market, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today. April marked the second worst start to a spring home-buying season since the housing recovery began in 2009.

Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 406,800 units in April, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide. The statewide sales figure represents what would be the total number of homes sold during 2016 if sales maintained the April pace throughout the year.  It is adjusted to account for seasonal factors that typically influence home sales.

The April figure was down 2.6 percent from the revised 417,580 level in March and down 5.4 percent compared with home sales in April 2015 of a revised 430,030. The year-to-year decline was the first in five months and the largest sales drop since August 2014.

“The statewide median home price rising above $500,000 for the first time in nine years will undoubtedly exacerbate housing affordability for California home buyers,” said C.A.R. President Pat “Ziggy” Zicarelli. “As home prices continue their upward trend, especially in high-cost, major metropolitan regions, home buyers are looking to maximize their housing dollars by moving to even further outlying regions. For example, Bay Area buyers who were previously seeking homes in areas adjacent to San Francisco, such as Solano and Sonoma counties, now are looking even further in Sacramento, Stanislaus, and San Joaquin counties, as Bay Area adjacent counties become less affordable.”

An imbalance between supply and demand pushed the median price of an existing, single-family detached California home 5.3 percent higher in April to $509,100 from $483,280 in March. April’s median price was 5.1 percent higher than the revised $484,370 recorded in April 2015. The median sales price is the point at which half of homes sold for more and half sold for less; it is influenced by the types of homes selling as well as a general change in values. April marked the first time in nine years that the median price has risen above the $500,000 level; it is still below the pre-recession peak of $594,530 reached in May 2007.

“Thin housing supplies were the driving force behind April’s sales drop with the most inventory constrained markets feeling the largest declines,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “In the San Francisco Bay Area, sales were down in eight of the region’s nine counties, with only Napa – which had a five-month supply of homes for sale – posting a modest 1 percent gain. As home buyers continue to move inland to find affordable housing, inventory will eventually be depleted, putting upward pressure on home prices.”

Other key points from C.A.R.’s April 2016 resale housing report include:

• C.A.R.’s Unsold Inventory Index, which indicates the number of months needed to sell the supply of homes on the market at the current sales rate, slipped to 3.5 months in April from 3.6 months in March. The index stood at 3.4 months in April 2015. The negligible year-over-year improvement was driven entirely by the reduction in home sales as listings fell even further from their 2015 levels. The long-run average home supply is 6.1 months. Even with the minimal annual increase, inventory levels are running at roughly 60 percent of normal.

• The median number of days it took to sell a single-family home fell in April to 27.7 days, compared with 29.9 days in March and 28.8 days in April 2015.

• According to C.A.R.’s sales-to-list price ratio*, tight inventories also appear to be driving final sold prices closer to listing prices, with sales prices rising to 99.3 percent of listing prices statewide in April from 98.8 percent in March.

• The average price per square foot** for an existing, single-family home statewide was $244 in April 2016, up from $227 in March and $234 in April 2015.

• San Mateo had the highest price per square foot in April at $832/sq. ft., followed by San Francisco ($829/sq. ft.), and Santa Clara ($635/sq. ft.).  The counties with the lowest price per square foot in April include Siskiyou ($109/sq. ft.), Madera ($124/sq. ft.), Tulare ($125/sq. ft.), and Kings ($125/sq. ft.).

• Mortgage rates dipped slightly in April, with the 30-year, fixed-mortgage interest rate averaging 3.61 percent, compared with 3.69 percent in March and 3.67 percent in April 2015, according to Freddie Mac.  Adjustable-mortgage interest rates slipped, averaging 2.83 percent in April, down from 2.9 percent in March and 2.73 percent in April 2015.

Strong wage growth and level home prices buoy California housing affordability

Strong wage growth and level home prices buoy California housing affordability

Twenty-two regions see improvement, with eight of nine Bay Area counties posting higher

• Thirty-four percent of California households could afford to purchase the $465,280 median-priced home in the first quarter, up from 30 percent in fourth-quarter 2015 and unchanged from 34 percent in first-quarter 2015.

• A minimum annual income of $92,571 was needed to make monthly payments of $2,314, including principal, interest, and taxes on a 30-year fixed-rate mortgage at 4.01 percent interest rate.

• Forty-one percent of home buyers were able to purchase the $389,910 median-priced condo or townhome. An annual income of $77,575 was required to make a monthly payment of $1,939.

LOS ANGELES (May 9) – Higher wages and lower seasonal home prices combined to push California housing affordability higher in the first quarter of 2016, compared to the previous quarter, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today. Affordability was flat when compared to the previous year as rising home price offset income gains.

The percentage of home buyers who could afford to purchase a median-priced, existing single-family home in California in first-quarter 2016 rose to 34 percent from the 30 percent recorded in the fourth quarter of 2015 and was unchanged from first-quarter 2015, according to C.A.R.’s Traditional Housing Affordability Index (HAI).  This is the 12th consecutive quarter that the index has been below 40 percent and is near the mid-2008 low level of 29 percent.  California’s housing affordability index hit a peak of 56 percent in the first quarter of 2012.

C.A.R.’s HAI measures the percentage of all households that can afford to purchase a median-priced, single-family home in California.  C.A.R. also reports affordability indices for regions and select counties within the state.  The Index is considered the most fundamental measure of housing well-being for home buyers in the state.

Home buyers needed to earn a minimum annual income of $92,571 to qualify for the purchase of a $465,280 statewide median-priced, existing single-family home in the first quarter of 2016.  The monthly payment, including taxes and insurance on a 30-year, fixed-rate loan, would be $2,314, assuming a 20 percent down payment and an effective composite interest rate of 4.01 percent.  The effective composite interest rate in fourth-quarter 2015 was 4.07 percent and 3.97 percent in the first quarter of 2015.

The median home price was $483,810 in fourth-quarter 2015, and an annual income of $96,790 was needed to purchase a home at that price.

Condominiums and townhomes were also more affordable compared to the previous quarter. Forty-one percent of California households earned the minimum income to qualify for the purchase of a condominium or townhome in the first quarter of 2016, up from 39 percent from the last quarter of 2015. An annual income of $77,575 was required to make monthly payments of $1,939.

Key points from the first-quarter 2016 Housing Affordability report include:

• Compared to affordability in fourth-quarter 2015, 22 of 29 counties tracked saw an improvement in housing affordability, three experienced declines, and four were unchanged.

• Affordability improved greatly in the Bay Area, with eight of nine counties seeing an improvement. Southern California, Central Coast, and the Central Valley also saw higher affordability, compared to the previous quarter.

• Housing affordability in Southern California improved from the previous quarter in every county, with Los Angeles, Ventura, and San Diego counties leading the way.

• During the first quarter of 2016, the five most affordable counties in California were Kings (58 percent), San Bernardino (57 percent), Merced (55 percent), and Kern (55 percent).

• San Francisco (13 percent), San Mateo (16 percent), and Santa Cruz (18 percent) counties were the least affordable areas of the state.

California REALTORS® vote to support $1.3 billion affordable housing proposal

California REALTORS® vote to support $1.3 billion affordable housing proposal

The Board of Directors of the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) voted last Friday to support a $1.3 billion proposal by California Assembly members to create affordable housing programs.

“With a historically low homeownership rate of 54 percent and record high rental costs, the dream of owning a home in California is evaporating. Our teachers, nurses, firefighters, police officers, and other middle class workers should be able to afford to live in the communities they serve,” said C.A.R. President Pat “Ziggy” Zicarelli. “C.A.R. recognizes the urgency of California’s housing crisis and is fully supporting the proposal by the Assembly Housing and Community Development Committee to invest a portion of our state’s budget surplus to address this housing crisis.”

C.A.R. formed an Affordable Workforce Housing Task Force in August 2015 to examine existing policies in California designed to expand the availability of “affordable housing” and to make recommendations to increase the availability of affordable work force housing in California.

This budget proposal includes:

• $400 million for homeownership and rental housing opportunities – $200 million for a new workforce housing grant program to provide funding for down payment assistance, homeownership assistance and rental housing for individuals making 120 percent of the area median income;  $200 million for the CalHome Program which provides grants and loans to local governments and non-profit organizations for rehabilitation of existing homes, mortgage assistance, acquisition, site development, and pre-development/construction of homes.

• $60 million for seismic retrofits of soft-story homes. Personal income tax credits for 30 percent of qualified cost incurred for a seismic retrofit.

• $75 million for farmworker housing: $50 million to finance the construction, rehabilitation, and acquisition of owner-occupied and rental units for ag workers; $25 million for the construction, rehabilitation, and acquisition of rental housing for farmworkers and their families who make up to 60 percent of the area median income.

• $500 million for the rental housing for lower income working families – $300 million in low income housing tax credits to enable private developers to create more than 3,000 homes and leverage $300 million in federal tax credits and $600 million of federal tax exempt bonds, which would otherwise go unclaimed; $200 million to fund the construction, rehabilitation, and acquisition of 5,700 multifamily rental homes, serving 62,500 families and individuals at 60 percent of the area median income or below.

• $300 million for shelter programs – $200 million for multifamily supportive housing; $60 million for the Medi-Cal Housing Program to provide rental assistance for people who are homeless and enrolled in Medi-Cal; and, $40 million to assist persons at risk of becoming homeless with homeless prevention assistance and rapid rehousing.

Leading the way…® in California real estate for more than 110 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States with 185,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.

Homebuilder sentiment stays unchanged for a 4th straight month

Builder sentiment held steady in May at 58 for a fourth straight month, according to the Housing Market Index from the National Association of Homebuilders and Wells Fargo.

Economists had forecast that the index climbed to 59, according to Bloomberg.

That level shows that sentiment is still in positive territory. “However, builders are facing an increasing number of regulations and lot supply constraints,” said NAHB chief economist Robert Dietz in the release.

Dietz said last month that the busy spring home buying season should boost market activity. In Monday’s report for May, the index gauging sales expectations rose three points, while those measuring current sales conditions and buyer traffic held steady.

Freddie Mac joins forces with Ellie Mae to streamline the mortgage process

Freddie Mac and Ellie Mae are joining forces to bring greater automation to the industry in the latest installment of the government-sponsored enterprises’ initiative to updates its tools and services.

As a result, Ellie Mae is integrating Freddie Mac’s Loan Product Advisor into Encompass, its mortgage management solution, this summer in conjunction with Freddie Mac’s phased rollout of their Loan Advisor Suite.

“We are very pleased with the progress we’ve made so far with Ellie Mae and are looking forward to the enhancements to Encompass coming this summer,” said Andy Higginbotham, Senior Vice President of Single-Family Strategic Delivery at Freddie Mac. “Having Encompass tightly integrated with our industry leading Loan Advisor Suite will bring greater certainty and significant operational efficiencies to our lender customers.”

The announcement comes on the heels of Freddie Mac announcing Loan Advisor Suite in late March, which would provide lenders with “actionable feedback” throughout the loan production process, thereby helping lenders lend more often and with more confidence.

The tools announced in March, which included the additions of Loan Closing Advisor, Loan Product Advisor, and Business Intelligence to the previously announced Loan Advisor Suite, transformed Loan Advisor Suite into a flexible, end-to-end loan delivery solution that executives with the GSE say can increase lender efficiency and provide earlier insight into representation and warranty relief.

Freddie Mac first mentioned the Loan Advisor Suite at the Mortgage Bankers Association’s 102nd Annual Convention & Expo that took place last October,

According to Freddie Mac, Loan Advisor Suite is a “flexible, end-to-end loan quality solution,” which has been in development for the last year in collaboration with national, regional and local lenders and industry vendors.

While the announcement of Loan Product Advisor at the MBA Secondary convention in New York City focused on the integration of Loan Product Advisor into Encompass, the new tool is available, for free, to all lenders.

The new tool will roll out this summer and was designed to not only speed up the underwriting process but to also require minimal training due to the similarities to its previous look in Loan Prospector.

Higginbotham previously explained to HousingWire that when lenders start using the new program, they will be able to cure any loan issues during the origination process rather than post-closing, which will help lenders’ bottom lines and help ensure “clean” loans are delivered to Freddie Mac.

Higginbotham further explained at the MBA conference that although Loan Product Advisor wasn’t designed specifically for compliance, they are getting a lot of positive feedback from lenders that it is helping reduce compliance issues.

Freddie added that while they are not here to fix TRID, they are here to make sure all the data is accurate.

Higginbotham noted that the program would continue to be updated as lenders start to use the product and give more feedback. The product now is based on feedback from Freddie’s work with 15 lenders on creating the tool.

And while compliance isn’t Freddie’s primary goal in creating the tool, due to positive responses from lenders on the matter, Freddie noted that it would be open to making that a focus in future update, possibly in the form of partnering with others who have compliance as their focal point.