Executive Perspectives Blog
Today's consumers persistently overestimate the size of a down payment they need to finance a home. Just how deep-rooted the myth of the large down payment is was made plain in some recent research from Zelman & Associates in New York, which found respondents, on average, believe lenders require equity of 11 to 15 percent.
Owner-occupants buy about two-thirds of the foreclosed homes sold by HomeSteps®, Freddie Mac's REO sales unit. That's an average we shoot for because we believe a strong emphasis on selling to owner-occupants can help stabilize communities and local home prices. But as the housing recovery took hold, it became a challenge to maintain that average. Fewer REO homes were going on the market. Buyers looking for a house to live in began losing ground to well-heeled investors looking for single-family homes they could rent.
The U.S. housing finance system is never static. As the details of possible future systems are debated on Capitol Hill and the Internet, the current system continues to change while financing billions of dollars in single- and multifamily mortgages every month. Freddie Mac's approach to mortgage finance is changing in ways intended to maintain liquidity for borrowers while posing less risk to taxpayers.
This week, Freddie Mac reported strong first quarter 2014 financial results, which marks our 10th consecutive quarter of profitability. Net income was $4.0 billion and comprehensive income was $4.5 billion - which means that we'll be returning an additional $4.5 billion to taxpayers in June. This brings the total we've returned to taxpayers to more than $86 billion, $15 billion more than our cumulative draws from the Treasury.
April marks the beginning of the homebuying season, and for the first time in well over a decade, home sales – not refinancings – are expected to dominate the market. But a few stubbornly persistent myths about buying a home are likely to keep some potential buyers on the sidelines. Let's knock down those myths with the facts.