But there is likely to be a rise in arrears and lower underwriting standards
Mortgage performance should remain solid next year as strong employment, projected income growth, and low interest rates continue to be supportive according to Fitch Ratings.
However, there are some challenges ahead with a slower pace of growth expected next year and Fitch expects arrears of at least 3 months to increase to around 1.5%, although that is still low by historic standards.
The firm forecasts that US mortgage lending will decline by about 5% in both 2020 and 2021 as refinancing activity slows. Non-qualified mortgage lending will rise as lenders and investors become more comfortable with loans that do not meet GSE standards.
Therefore, Fitch is predicting that underwriting standards will be eased including lower documentation, higher debt-to-income (DTI) ratios, and lower credit scores.
GSE mortgage acquisitions could fall significantly if the exception allowing them to buy higher DTI loans is not extended beyond its scheduled 2021 expiry. However, on the issue of regulatory and administrative changes to Fannie Mae and Freddie Mac, no changes are expected ahead of the election in 2020.
Fitch calls for US home price growth of 3%, just above CPI inflation, supported by solid job growth, a high household savings ratio and low mortgage rates, but tempered by slower GDP growth, cooling home prices in higher priced markets, and affordability constraints.
