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» VISIT US ONLINE @ DSNEWS.COM 13 existing home sales to slow even further this year, perhaps remaining about flat relative to 2017 due to a lack of inventory. is means that purchase volumes will remain fairly flat for lenders but for the bump in volume they will see from rising home prices. How do these trends compare to what we have seen historically? Historically, credit policy tends to lean into house price booms, expanding credit and exacerbating price increases on the upstroke. is time is no different and credit policy is allowing prices to grow faster than incomes. e pricing correction, when it comes, could be large, and borrowers with high DTIs and high loan-to-value ratio mortgages will have less ability to withstand even a mild recession. Tax reform and increases in government spending have recently juiced the economy past sustainable levels, increasing the likelihood of a recession in about two years' time. Mortgage professionals need to remain vigilant that they are not relying solely on continued house price growth as the basis of their expectations about future loan performance. What can we expect to see in the housing market as we move into the latter half of 2018? If the credit box continues to expand as it did in 2017, then there is no doubt that home prices will continue to climb for the rest of 2018. Real wage growth is also expected to add demand to the housing market by the end of the year. In combination, these trends will keep pressure on prices without providing much relief in terms of affordability. Only expanding our housing stock will provide more affordable housing. However, the accumulation of local government restrictions on building will continue to impede the creative expansion of our housing supply, even in the presence of record-high prices. How can lenders provide products to their borrowers to help insulate them from market fluctuations? Lenders should seek to make their borrowers resilient and able to adapt to a changing economy and housing market. Faster amortizing mortgages—for example, a 20-year versus a 30-year loan— help households build equity faster and increase the possibility that borrowers can ride out a downturn in prices. At the same time, no individual or lender can hold back the rising tide of credit availability and the pressure that competition puts on your business. As an industry, lenders need to be speaking out and ask that government agencies hold the line on credit policy. It can be done. e Rural Housing Services, for example, has an NMRI score that is about flat over the last five years. Ultimately, our housing supply is created locally. Lenders should also be part of their local process for regulating and planning for housing. ey should educate local officials and help them find ways to expand supply. Although surprising to some, we don't need subsidies to build "affordable" housing. We simply need to allow market actors, by right, to build economical housing in much greater quantities that we currently permit. Even in- cremental density increases—up-zoning from single family to duplexes or four-unit to eight- unit buildings—can make a big difference for the ability of a community to accommodate households at a wide range of prices and rents. "As an industry, lenders need to be speaking out and ask that government agencies hold the line on credit policy. It can be done. The Rural Housing Services, for example, has an NMRI score that is about flat over the last five years." THE LEADER IN DEFAULT SERVICING NEWS Help shape the next issue of DS News. Drop us a line at Editor@DSNews.com.

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