HUD changes to help lower housing Costs
The U.S. Department of Housing and Urban Development announced 14 policy changes to its Federal Housing Administration (FHA) Single Family mortgage insurance program aimed at lowering costs, easing regulatory burdens, and improving affordability for Americans using FHA-insured mortgages.
The updates remove outdated requirements, cut administrative burdens, and make FHA financing more efficient for home buyers and lenders. The changes affect FHA policies from mortgage origination through servicing and quality control, including:
• Streamlining Appraisal Field Review Requirements, reducing quality control requirements that average $425 per field review. The change is expected to save industry partners about $3.3 million annually while better aligning FHA with other programs.
• Expanding Flexibility under the Limited 203(k) Rehabilitation Mortgage Insurance Program, by allowing more contractor draw requests and making home rehabilitation projects easier to complete.
• Modernizing FHA Mortgagee Approval and Quality Control, including a permanent exemption for early payment defaults caused by natural disasters from required quality control review samples. This will help reduce mortgage costs, expand borrower access, and support smaller lenders’ participation in the FHA program.
• Eliminating the Duplicative Requirement for Lenders to Use the Important Notice to Homebuyers Form 92900-B, simplifying the closing process.
• Clarifying Loss Mitigation Requirements Governing Trial Payment Plans, to protect the FHA Mutual Mortgage Insurance Fund, prevent abuse, and ensure proactive borrowers are not penalized.
ECONOMIC OUTLOOK
Elliot Eisenberg, Ph.D. is an internationally acclaimed economist and public speaker specializing in making economics fun, relevant and educational. Dr. Eisenberg earned a B.A. in economics with first class honors from McGill University in Montreal, as well as a Master and Ph.D. in public administration from Syracuse University. Eisenberg is the Chief Economist for GraphsandLaughs, LLC, a Miami-based economic consultancy that serves a variety of clients across the United States. He writes a syndicated column and authors a daily 70-word commentary on the economy that is available at www.econ70.com.
Goals Galore
The Friday File: Through the first two-thirds of round-robin play at the World Cup (the first two games), more goals are being scored than in any World Cup since 1958. Goals/match are averaging three, up 23%/game from 2022, and that number had been largely flat since 1958. Maybe it’s the new ball or the hydration stoppages, but the most likely reason, the 50% increase in the number of teams participating.
Call Capitalization
With equities outperforming despite tariffs, wars, and inflation, a rethink is in order. Maybe stretched tech P/E ratios represent an acquisition premium layered onto a growth premium. Perhaps these firms are profoundly valuable because they will buy/copy/partner with competitors (see SpaceX’s recent purchase of Cursor). Investors are buying a claim (call option) on future innovation by start-ups that will necessarily be brought into the orbit of the biggest tech firms.
Regulatory Rationale
Fixing market failures is the primary reason for regulation. There are four major ones. A firm that is too powerful (monopolist) is likely to abuse their position. Negative externalities such as pollution are a second failure. A third is informational asymmetries; here a seller can dupe a buyer or vice versa. A fourth is tragedy of the commons such as overfishing. The key is not to over/underregulate, and that’s tough.
Payment Pain
With the median sales price of an existing single-family house at $409,000 in 25Q4, assuming a 3.5% downpayment and a 6.23% interest rate, the monthly mortgage payment would be $2,420/month, versus $1,240 at the end of 2020. Add taxes, insurance, maintenance, etc. and the total housing cost rises to $3,120/month. To afford that, a buyer needs an income of $120,800, up from just $68,700 five years earlier. Ouch.
Monetary Maestro
Legendary central banker Alan Greenspan died today at 100. He led the Fed for 18.5 years, second longest tenure ever. His successes: allowing the economy to shine in the 1990s, saving the global economy following Long-Term Capital Management’s collapse, his perpetual public inscrutability and coining the phrase “irrational exuberance.” But he totally missed the Housing Bust and relatedly had an irrational aversion to regulation. Was he good, lucky, or both?
Soccer Strongholds
The Friday File: Uruguay produces more top soccer players/capita than any nation at 11.3, then Croatia 4.81, Netherlands 4.58, and Argentina 3.82. After accounting for GDP based on PPP, Europe but especially LatAm massively outperforms. Partly it’s because Europe/LatAm have been playing soccer longer than others. LatAm so outperforms because they generally excel at no other team sports, and LatAm was quickly urbanizing when soccer arrived (1910-1920). Climate may help.
Expensive Equities
By just about any measure, US equity valuations are highly elevated. Dating back to 1900, the trailing P/E ratio is currently at its third highest reading ever. The Shiller CAPE ratio is at it second highest ever, and trend P/E is at its highest level ever. But wait, there’s more. The Price/Book ratio has never been higher, and the Dividend Yield has never been lower. Invest with this in mind.
