Home Depot CFO looking forward to proposed mortgage reforms

November 20th, 2014

Wider access to mortgages helps consumers, home builders and home construction supply vendors.

Home Depot CFO Carol Tomé has said she believes mortgage reforms proposed by the U.S. Federal Housing and Finance Agency, Fannie Mae and Freddie Mac could help her industry, according to MarketWatch.

Recently, the FHFA and two government-sponsored enterprises announced plans to expand the availability of low-down-payment mortgages, with some loans requiring only 3 percent down. The home improvement supply retailer and others like it have much to gain when consumers have greater access to home loans. If financing is available, builders can sell more homes, which in turn means lumber and other construction supply sales can go up.

“While this has yet to turn into additional liquidity in the mortgage underwriting market, the news has been very good and we believe that could be a real bolster to our industry,” Tome said during a conference call, according to MarketWatch.

Throughout 2014, lending standards have been tight as the mortgage industry sought to reduce risk and comply with aspects of the Consumer Financial Protection Bureau’s Qualified Mortgage rule. This led to the elimination of many loan products that catered to borrowers who were creditworthy though they didn’t have a sizeable amount saved for a down payment. The proposed reforms could bring back these financing options and open the market for many consumers who have been sidelined.

Fannie Mae CEO quiets criticism
Although more low-down-payment mortgages are beneficial for borrowers, some industry analysts have not been as warm to the idea, with a few citing these mortgages as part of the problems that led to the housing downturn. However, a report from the Urban Institute showed borrowers who get these loans are no more likely to default than those who can provide a 20 percent down payment.

Additionally, Fannie Mae CEO Tim Mayopoulos said these loans can perform as well as other financing options, according to a separate MarketWatch report. During a conference call following the GSE’s third quarter earnings report release, Mayopoulos explained the company had experience working with these types of loans and understands how to mitigate risk.

“We want to make sure that we are offering the full range of products to as many creditworthy borrowers as possible,” Mayopoulos said.

He said these loans aren’t a panacea for all the housing market’s borrowing obstacles, but the proposed reforms are a good place to start.