Moody's: Increased Equity Borrowing Reduces Home Price Appreciation Benefits – NMP Skip to main content

Moody's: Increased Equity Borrowing Reduces Home Price Appreciation Benefits

Phil Hall
Mar 01, 2017

Increased borrowing by homeowners against their properties is having a deleterious impact on the credit-positive effects of rising home prices on residential mortgage-backed securities (RMBS), according to a new report from Moody’s Investors Service.
Moody’s noted that while current underwriting standards and operational practices will help mitigate the negative effects of this trend—especially if home prices show continue their seemingly endless increases—the risks could increase as loan products used for equity extraction regain favor.
“Rising home prices generally help lower default risk and loss severities, and therefore are credit positive for RMBS transactions,” says Peter McNally, a Moody’s analyst. “Rising prices, however, can also entice borrowers to extract equity from their homes and increase their debt load, adding risk to RMBS deals.”
McNally noted that an increase in cash-out refinancings in RMBS tied to newly originated loans—either private-label securitizations and Fannie Mae/Freddie Mac credit risk transfer transactions—could create a new risk because these loans are more likely to default than rate/term refinancings and purchase loans. “However, whether cash-out refinancings will boost risks in individual RMBS deals depends on the loans’ other characteristics,” McNally added.
Mar 01, 2017
OpenClose Launches Mobile Assist

OpenClose, a fintech provider of mortgage software solutions for banks, credit unions, and mortgage lenders launched its native mobile app platform, Mobile Assist.

Dec 07, 2021
Deephaven Heightens Foreign National DSCR Program

Deephaven is amping up its Foreign National DSCR Program as a response to the increase in the real estate investment market.

Dec 07, 2021
Revolution Mortgage Opens Second Mortgage Branch In Cincinnati

Columbus, OH-based Revolution Mortgage announced the opening of its second branch in Cincinnati and 14th branch in Ohio.

Industry News
Dec 06, 2021
Nations Lending Teams Up With NBA Legend Dennis Rodman On Integrated Brand Campaign

Nations Lending, a full-service national mortgage lender, announced the launch of its first integrated brand campaign starring NBA Champion and All-Star Dennis Rodman.

Sales and Marketing
Dec 06, 2021
Black Couple 'Erased Themselves' From Home, Receives Higher Appraisal

Paul Austin and his wife, Tenisha Tate-Austin are looking to take legal action after receiving a higher appraisal on their home only after “white-washing” their home by removing any trace of themselves.

Industry News
Dec 06, 2021
Manufactured Housing: The New Affordable Alternative

While the housing market is grappling with widespread affordability and supply, manufactured homes are gaining ground as a new alternative. 

Industry News
Dec 03, 2021