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http://www.marketwatch.com/story/home-depot-cfo-very-encouraged-by-regulators-mortgage-reform-work-2014-11-18?siteid=rss
Home Depot CFO ‘very encouraged’ by regulators’ mortgage-reform work

By Ruth Mantell
Published: Nov 18, 2014 2:33 p.m. ET

An executive at Home Depot praises the work of regulators on the issue of mortgage availability.
WASHINGTON (MarketWatch) — The financial chief of home improvement behemoth Home Depot on Tuesday said she is “very encouraged” by recent progress by regulators on mortgage availability.

The Federal Housing Finance Agency, which regulates mortgage-finance giants Fannie Mae FNMA, +1.22% and Freddie Mac FMCC, +2.03% is pushing forward with plans aimed to increase mortgage lending.

“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,” Carol Tomé, chief financial officer of Home Depot HD, -1.38% , said during a conference call after the company reported third-quarter earnings and revenue that rose from the year-earlier period.

Tomé’s tone during Tuesday’s call was a switch from a somewhat darker view earlier this year when she said that “something’s got to move,” and that the company would pay close attention to any progress on reform. The company’s profits and revenue could receive a bump up if more prospective home buyers are able to get loans.

“Mortgage financing reform is really important for our industry,” Tomé said Tuesday.

Also see: MarketWatch’s housing statistics page

Like other players in the housing market, Home Depot’s prospects improve when residential prices rise — owners are more willing and able to spend on improvements. Companies also profit when there’s more home buying and turnover.

Greater access to credit can support home prices and buying. However, one of the most stubborn challenges for the U.S. housing market’s rebound has been the strict credit standards that lenders erected in the financial meltdown’s wake.

“The mortgage market remained extraordinarily tight this year, holding back the recovery in home sales. We think the risk is that access to financing remains difficult,” said Michelle Meyer, senior U.S. economist at Bank of America Merrill Lynch.


Last month the country’s top two mortgage lenders reported that they saw only slight mortgage growth in the third quarter. Looking broadly at the U.S. mortgage market, the availability of home loans is far below pre-bubble levels, according to a gauge from the Mortgage Bankers Association.

Here’s the problem: Many lenders are worried about financial and legal risks attached to originating mortgages. To help ease concerns, the FHFA recently announced that it’s clarifying rules about when lenders are on the hook for bad mortgages.

And to help a larger pool of borrowers obtain loans, FHFA is enabling the government sponsored enterprises to back mortgages with very low down payments. Allowing Fannie and Freddie to buy mortgages with loan-to-value ratios as high as 97% has attracted a fair share of criticism, with worries over whether these mortgages are particularly likely to fail. However, Fannie’s CEO told reporters that low-down-payment mortgages “can be safely and responsibly made,” and that the company has “substantial experience with these loans.”

Elsewhere in the housing market, builders are optimistic about the market for single-family homes, more so than one might expect given recent rates of actual construction. Data released Tuesday showed that home-builder confidence this month was near the highest level in nine years. It could be that the builders who survived the housing meltdown feel particularly capable of navigating a still-choppy market.

Wednesday morning, the government will report on new-home construction, and economists polled by MarketWatch expect that the pace of residential starts was just about unchanged in October compared with the prior month. Housing starts have run higher over the past year, driven by apartment building. On a per-unit basis, putting up a single-family home costs more and creates more jobs than building apartments.

On Thursday the National Association of Realtors will report on existing-home sales for October, and economists forecast a modest pull back from September’s pace. But there could be a pick up next year as jobs, wages and the broader economy strengthen.



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