Expert: Rising interests rates, tougher lending standards ahead

BOULDER – Home-loan interest rates will rise, new federal regulations will require more of mortgage lenders, and the demand for housing will increase in the coming year, according to Brad Blackwell with Wells Fargo Bank.
Bradwell delivered his predictions in his keynote address, The National Picture: Residential Markets in 2014, on Thursday during the Boulder County Business Report’s annual Boulder Valley Real Estate Conference & Forecast held at the Stadium Club on the University of Colorado-Boulder campus.
Blackwell, in charge of portfolio lending at Wells Fargo, expects interest rates, now in the 3.5 percent range for a 30-year fixed home loan, will increase to 4.5 percent next year, if the federal government begins to taper its purchase of mortgage-backed securities. The feds have been buying $40 billion worth of those securities per month, a practice it started in 2009 to help stimulate the economy.
He said federal regulations that will require lenders to obtain independent third-party verification of a borrower’s ability to repay a loan will go into effect Jan. 14.
“Commercial and FHA loans won’t change, but people who are self-employed will find it harder” to secure a loan, Blackwell said.
Blackwell expects federally sponsored Freddie Mac (Federal Home Loan Mortgage Corp.) and Fannie Mae (Federal National Mortgage Association) will “go away, and be replaced with a system that will make taxpayers less at risk.” He said dissolving Freddie and Fannie requires a Congressional act.
He said to expect the federal government to lower conforming loan limits from $417,000 to $400,000.
Blackwell predicted that the housing market will continue to become stronger because more buyers are becoming financially able buy that next home¸ and more first-time buyers are becoming financially eligible.
“Realtors are in a good place as we head into the next decade,” he said. “Property is beginning to appreciate. More people have the ability to buy as they begin to attain equity in their existing homes.” He said sellers who had lacked confidence to move will gain confidence as real estate values increase.