Home affordability in US at record levels, S&P report finds, driven by rising use of federal home loan mortgage programs; rated home builders expected to report higher sales volumes, pricing gains in 2013

Allison Oesterle

NEW YORK , October 11, 2012 (press release) – According a report that Standard & Poor's Ratings Services recently published, home affordability is at record levels, in part, due to home buyers increased use of federal home loan mortgage programs. After surveying the U.S. homebuilders that we rate with mortgage finance subsidiaries, we believe those companies will post higher sales volumes and pricing gains in 2013, despite historically tight lending requirements for conventional residential mortgages.

We asked the homebuilders to provide data on the percentage of their home sales financed in-house, average FICO scores, loan-to-value ratios, and use of federal home loan programs in their origination portfolios over the past 18 months. "Overall, we found that federally guaranteed or insured mortgage loan products, with low down payment requirements, currently account for roughly 50% of our surveyed homebuilders' mortgage originations," said credit analyst, Susan Madison.

We expect federally insured or guaranteed home loan programs to remain a significant support for rated builders' home sales over the next year, particularly those that target entry-level buyers or lower cost geographic markets. However, in our view, the increased reliance on federal home loan mortgage products increases homebuilders' business risk profile to some degree. With a greater reliance on government backed financing, homebuilders' exposure to regulatory and policy shifts increases.

We published the full report, "Federal Loan Programs Support Sales For U.S. Homebuilders And Offset Tight Lending Standards," on Oct. 8, 2012.

The report is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to research_request@standardandpoors.com. Ratings information can also be found on Standard & Poor's public Web site by using the Ratings search box located in the left column at www.standardandpoors.com. Members of the media may request a copy of this report by contacting the media representative provided.

Standard & Poor's Ratings Services, part of The McGraw-Hill Companies (NYSE:MHP), is the world's leading provider of independent credit risk research and benchmarks. We publish more than a million credit ratings on debt issued by sovereign, municipal, corporate and financial sector entities. With over 1,400 credit analysts in 23 countries, and more than 150 years' experience of assessing credit risk, we offer a unique combination of global coverage and local insight. Our research and opinions about relative credit risk provide market participants with information and independent benchmarks that help to support the growth of transparent, liquid debt markets worldwide.

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