SoFi, Fannie Mae coordinate loan option balancing student debt and mortgages

Dive Brief:

A new loan option coordinated by SoFi Lending Corp. and the government-sponsored Fannie Mae lets homeowners refinance their mortgage and use that equity to pay down their student debt, according to Housing Wire. The Student Loan Payoff ReFi combines mortgage and student loans into a single payment, taking advantage of lower mortgage interest rates.
So far, Fannie Mae is only offering the opportunity through SoFi, which states that the deal could help an estimated 8.5 million households in the U.S. that are seeking to pay off student debt obligations.
Average homeowners with existing co-signed student loans usually owe around $36,000, while homeowners with Parent PLUS loans have an average of $33,000 of debt to pay off, according to Experian data cited by SoFi in a press release.

Dive Insight:

Student debt has been important factor in understanding residential market trends, as many first-time homebuyers saddled with student loans say the payments make it difficult to save up for a down payment, requiring them to defer buying a home.

In June, a joint report from the National Association of Realtors and SALT/American Student Assistance found that 71% of would-be homeowners who have student loans and make their payments on time said that debt is preventing them from purchasing a home, and more than half expect that delay to last longer than five years. Four in 10 said student loan debt is keeping them living with family.

The survey also found that for young homeowners paying off student debt, nearly 30% said they couldn't afford to sell their current home and buy another one because of their student loans, which often affect their credit scores, and that they were unable to pay more than the minimum on their mortgages.

As a result, the share of young homebuyers remains low, although it is growing. The national homeownership rate hovers near a 51-year low at 63.5% in the third quarter of 2016. Individuals under the age of 35 — the millennial generation — accounted for 35.2% of homeowners during the period, consistent with a year ago. Economists told Construction Dive in October that first-time homebuyers account for 33% of home sales today, down from their pre-recession share of 40%.

However, first-time homebuyers took their largest share of previously owned home sales in more than four years in September, a sign that the group's buying power is slowly returning.