Aug
25
Foreclosure Sales Dominate Market
August 25, 2011 | Mortgage News | Leave a Comment
While the ratio of foreclosure sales nationwide fell during the second quarter of this year, distressed sales as a whole continue to have a significant influence on the mortgage market.
RealtyTrac reports bank-owned properties made up 31 percent of transactions during the second quarter, up from 24 percent in 2010 but down from 36 percent at the start of the year. At the same time, the firm said lenders appears to be speeding up short sales, which jumped 19 percent on a quarterly basis.
“Streamlined short sales also give lenders the opportunity to more preemptively purge non-performing loans from their portfolios and avoid the long, costly and increasingly messy process of foreclosure and the subsequent sale of an REO,” said James Saccacio, chief executive officer of RealtyTrac.
He added that properties which progress to foreclosure status may end up selling for a lower price than a short sale, in addition to adding more strain to mortgage lenders REO departments.
However, the continued influence of distressed property sales continues to skew overall home prices. According to data released by the Federal Housing Finance Agency Wednesday, prices in the second quarter were down 5.9 percent compared with a year earlier, even though they have risen for three straight months.
Mortgage lenders originating loans have changed their programs to accommodate the new landscape. Borrowers buying distressed properties may find it to their benefit to lock loans for longer than the traditional 30 days since those transactions rarely close quickly. Current record low mortgage rates have very little room to move lower, but a much higher probability of moving higher.
Aug
24
New Home Sales up Year-Over-Year
August 24, 2011 | Mortgage News | Leave a Comment
Government data shows new-home sales in July were significantly higher than their levels from July 2010 and showed only a marginal drop from June, despite uncertainty surrounding the economy as a whole.
According to the Commerce Department, the seasonally adjusted rate of new-home sales was 298,000 during the month of July, a 6.7 percent increase compared to last July. It also represented a 0.7 percent decline from June sales. Analysts said the new numbers were roughly in line with previous predictions.
“The sales pace of newly built, single-family homes in July was in line with what it has been over the last year, and this is in keeping with our forecast,” said National Association of Home Builders chief economist David Crowe.
The report added the inventory of 165,000 newly built homes available for sale represents a 6.6 month supply.
Low mortgage rates may provide some loan officers the opportunity to market new home financing to buyers for whom it may previously have been out of reach. According to a recent report by Freddie Mac, the average 30-year fixed-rate loan had a rate of just 4.15 percent – the lowest in more than 50 years.
Aug
23
New Advertising Rule for Mortgage Companies Takes Effect
August 23, 2011 | Government Regulation | 1 Comment
On July 22, 2011, the Federal Trade Commission (FTC) published final rules prohibiting unfair or deceptive acts and practices with regard to mortgage advertising. The new rule, known as the Mortgage Acts and Practices – Advertising Rule (MAP) is effective August 19, 2011.
MAP prohibits any material misrepresentation whether made expressly or by implication, in any advertisement, whether written or oral, regarding any term of any mortgage credit product. A representation, omission of information, or practice is material if it is likely to mislead consumers and is likely to affect their decision to purchase or use the product or service. In order to provide guidance and clarity, the FTC published 19 examples of deceptive misrepresentations that would violate the final rule. The examples were derived from FTC enforcement actions over the past several years and are not meant to be all inclusive. The list prohibits misrepresentations regarding:
- The interest charged for the mortgage, including the amount of interest owed each month included in the monthly payments, the loan amount, or the total amount due; or the amount of interest owed each month that is not included in the payments and therefore added to the total amount due (e.g. negative amortization).
- The APR, simple annual rate, periodic rate, payment rate, or any other rate.
- Mortgage loan costs or fees, including advertising that a loan is a no cost loan when fees are actually included in the loan amount. The fees charged include any fees collected over the life of the loan.
- Terms associated with additional products or features that may be sold in conjunction with a mortgage loan.
- Associated taxes or insurance, including whether the charges are included in the monthly payment or paid separately.
- Existence or amount of a pre-payment penalty.
- Variability of interest, payments, or other terms, such as using the word “fixed” when terms are variable or fixed for a limited amount of time.
- Comparisons between rates or payments, including comparisons involving savings, or savings rate claims if the borrower selects a particular mortgage loan.
- The type of mortgage loan being offered, including claims that the mortgage is fully amortizing when it is not.
- The amount of cash or credit the consumer could receive from the loan.
- The existence, number, amount, or timing of any payments required, including the statement that payments are not required for a reverse mortgage loan.
- The potential for default on the mortgage loan, including circumstances under which the consumer could default for nonpayment of taxes or insurance, failure to maintain the property, etc.
- Effectiveness of the mortgage loan in helping consumers resolve debt problems, including representations that the loan can reduce, eliminate, or restructure a debt or any other obligation.
- The association between a mortgage loan product or mortgage loan provider and any other person or program, including any affiliation with an organizational or governmental program, benefit, or entity. This includes the unauthorized use of logos, forms or symbols that resemble those used by other entities.
- The source of the mortgage loan, including claims that the advertisement is made by or on behalf of the consumer’s current mortgage lender or servicer.
- The consumer’s right to reside in the home, including claims about how long or under what conditions a consumer can stay in their home.
- The consumer’s ability to obtain any mortgage loan, including whether the consumer has been preapproved or guaranteed for any such loan.
- The consumer’s ability to refinance or modify any mortgage loan, including claims that the consumer has been pre-approved or guaranteed for any such loan.
- The ability, nature, or substance or counseling services or any other expert advice offered to the consumer regarding any mortgage loan, including misrepresentations about the qualifications of those offering services or advice.
The rule does not prohibit advertisements that incorporate any of the examples above as long as they are not used deceptively. You may add disclaimers to your advertisement for clarity; but the use of a disclaimer is not mandatory. If a disclaimer is used in the advertisement to provide clarity, it must be shown as clear and conspicuous as the claim itself.
As a reminder, solicitations on social media sites (e.g. Facebook, YouTube, etc.) are considered advertisements when used for soliciting business. All advertisements, including those made on Facebook and YouTube, must comply with other federal and state requirements.
Aug
10
Mortgage Loan Programs 2011
August 10, 2011 | Loan Programs | 1 Comment
While the news about housing continues to be disappointing, myths about home financing options continue to be promoted in the mainstream media. It is true mortgage lenders significantly tightened standards in the last three years, but some have now reversed those policies.
Despite more liberal lending programs being available today, the media continues to publish stories like these about borrowers not being able to get loans.
Though concerns about the American economy continue to exist, some lenders in strong financial positions are exercising “makes sense” types of programs for their clients. This article will discuss three mortgage loan programs currently available you may not know about.
The Federal Housing Authority is a government agency tasked with increasing home ownership in theUnited States. The way they achieve that goal is to insure loans originated by private lenders and buy pools of loans through Ginnie Mae. Until the housing crash, FHA didn’t require minimum credit scores from borrowers, provided other lending criteria were met. These criteria include a two year job history, a down payment of 3.5%, a debt to income ratio within guidelines, savings and a history of meeting monthly obligations on time.
When pressure was placed on FHA to impose credit standards, a minimum FICO of 500 was instituted with a corresponding 10% down payment for purchases. Despite the low threshold from FHA, and their insurance program, large lenders imposed overlays to their programs and required minimum FICO scores as high as 640. Since certain investors own so much of the secondary mortgage market, loan originators that sell their loans to that market were forced to raise their credit standards.
However, there are still lenders who originate and service their own loans and don’t have to rely on the secondary market to provide liquidity. Community banks immediately come to mind as examples as do larger mortgage lenders who originate a mix of in house and portfolio loans. These types of lenders adhere to FHA standards so their loans are insured without credit overlays that exclude many qualified home buyers. Borrowers with less than 580 FICOs are required by the guidelines to place 10% down on their purchase.
Another challenge the housing downturn has caused is a glut of foreclosed homes. Many of these bank owned homes are damaged to the point the home doesn’t qualify for a loan itself. Again, the FHA has a solution…the 203k rehabilitation loan. This loan program provides for repairs to be made during the loan process, allowing the buyer to move into a livable home and the lender to have an insured loan. It’s a win for everyone involved.
Though any FHA licensed lender can offer the 203k, both borrowers and originators will want to work with businesses familiar with the process as it can be time consuming and frustrating working with inexperienced lenders.
No part of the housing market has been more affected than the new home sector. Developers who purchased land at the edges of suburbia tried to nullify purchase agreements when it became very clear in 2007 demand had simply dried up. Those builders still in business are in an unenviable position of selling new homes for less than it cost to acquire land and build.
We will close this article mentioning a loan program that makes it very desirable to own a new home. One irresistible human tendency when buying a new home, is to fill it with new furniture and electronics. Some people manage to make the transition without that additional expense, but the vast majority wind up buying some portion of new furniture.
Since lenders have tightened up “cash at close” transactions and seller concessions, it’s more difficult than ever to finance furniture and “goodies” into the mortgage. Some lenders have come up with a work around; a mortgage with six months with only principle payments required. Interest for those six months is rolled into the end of the loan and effectively allows new home buyers to finance their moving expenses into the mortgage. Sounds like a nice program for builders.
Despite the bad economic and real estate news out there, it is still possible for regular Americans to buy homes, even if their credit score is a little low, the house is a little damaged or the home is new. You just have to know where to look!
Aug
4
Home Prices: Where are we Now?
August 4, 2011 | Mortgage News | Leave a Comment
Though recent reports by CoreLogic and Clear Capital show modest gains in home prices in 2011, property values remain well below year-ago and peak levels, which could continue to slightly depress mortgage volumes.
According to CoreLogic’s Home Price Index for June, residential values improved 0.7 percent month-to-month. However, on a year-to-year basis, prices fell markedly. Including foreclosure sales, prices slipped nearly 7 percent from the year before. Excluding distressed sales, prices still declined, dropping slightly more than 1 percent from a year earlier.
New York and Washington, D.C. experienced moderate increases in average home prices during the month, the report shows, with gains of 3.3 and 2.4 percent from a month earlier, respectively. However, a number of states saw property values slide considerably in June, with four markets experiencing double-digit decreases.
Additionally, 86 of the top 100 Core Based Statistical Areas, in terms of highest population, showed home price dips from June 2010.
“While there is a consistent and sustained seasonal improvement in prices over the last three months, prices are lower than a year ago due to the decline in prices after the expiration of the tax credit last year,” said CoreLogic chief economist Mark Fleming. “The difference between the overall HPI and our index excluding distressed sales indicates that the price declines are more concentrated in the distressed sales market.”
Clear Capital’s latest home price report showed substantial gains in residential values. However, similar to CoreLogic’s findings, the report shows prices declined from a year earlier.
For the most recent rolling quarter – April to June – home prices rose 4.1 percent, according to the report. In comparison to levels seen during the same period last year, though, prices are down nearly 8 percent.
Three out of four regions – the South, Northeast and Midwest experienced home price improvements of at least 4.2 percent from April to June, the report shows. Values increased 0.7 percent in the West.
In addition to solid housing markets, such as Washington, D.C. and Boston, seeing home prices rise in a quarter-over-quarter basis, the report indicates some modest- and lower-performing markets experienced price hikes, including St. Louis, Cleveland and Atlanta.
One market, though, continues to bear the brunt of the effects from the housing crisis. Home prices in Detroit plummeted further, dipping more than 7 percent from the previous rolling quarter and 24.3 percent from last year. More than half of the homes sold in the city during the quarter were real-estate owned.
“Building off last month’s minimal quarterly gains, prices continue to correct from winter’s extended declines,” Dr. Alex Villacorta, director of research and analytics for Clear Capital, said in the report. “Although this is encouraging, many markets are still near, or at record lows as REO saturation remains a significant proportion of all sales activity.”
These poor home values are likely one of the reasons the country’s homeownership rate fell to its lowest level in more than a decade this year. A report released by the Commerce Department shows the nation’s home ownership rate in the second quarter was 65.9 percent, 1 percentage point below the level seen from April to June last year.
“Tight underwriting standards and the lack of a down payment are keeping a big chunk of buyers out of the market and other people are being displaced by foreclosures,” Wayne Yamano, director of research at a real estate consulting firm in California, told Bloomberg.
Aug
2
Mortgage Insurance Company Opposes Qualified Residential Mortgage Rule
August 2, 2011 | Dodd-Frank | Leave a Comment
In comments filed in late July, Genworth Financial urged the six financial regulatory agencies in charge of defining the revamped qualified residential mortgage rules to alter their proposal for down payment requirements.
The company stated the proposed 20 percent down payment rule for borrowers would hurt private capital from the housing finance industry and force most low-payment lending to the Federal Housing Administration.
“The regulators’ QRM proposal ignores other factors to focus primarily on requiring a large down payment. Low down payment mortgages performed safely prior to and during the current housing market crisis and should not now be subjected, unnecessarily, to the higher costs associated with risk retention,” Kevin Schneider, president of Genworth’s U.S. Mortgage Insurance business, said in the letter.
Schneider added Genworth proposed an alternate down payment rule that would allow for affordable lending for consumers while also protecting lenders by making QRMs a safer risk for lenders.
The Coalition for Sensible Housing Policy also opposes the down payment rules. The group told Congress the regulation would require 25 million homeowners to meet the requirements, many of currently wouldn’t qualify.
Aug
1
Senate Banking Panel to Conduct CFPB Nominee Hearing
August 1, 2011 | Dodd-Frank | Leave a Comment
On August 4, the Senate Banking Committee will hold a hearing regarding the nomination of Richard Cordray as director of the Consumer Financial Protection Bureau.
However, House Republicans have stated they intend to block the appointment of Cordray to head the new agency unless structural changes are made to the CFPB.
“The CFPB opened its doors as an independent agency on July 21, and it is off to a strong start promoting an equitable and transparent consumer financial marketplace,” said Senate Banking Committee Chairman Tim Johnson. “However, until it has a Director, the CFPB will not be able to use its full powers to protect consumers and level the playing field for community banks and credit unions.”
One of the changes proposed by Republicans is to appoint a board instead of a single director to run the CFPB. Some Democrats are urging President Barack Obama, who nominated Cordray, to bypass a Senate vote and use a recess appointment to name him to the position.
Doing so, though, would only allow Cordray to serve an 18-month term. If voted in by Congress, Cordray would serve 5 years.
Jul
28
New Home Sales Contracts Increase in June
July 28, 2011 | Mortgage News | Leave a Comment
Mortgage availability appears to have been considerably higher in June, as pending home sales improved from the month before, according to the National Association of Realtors.
The association’s Pending Home Sales Index indicates a rise of 2.4 percent from May. By month’s end, the national PHSI was 90.9 – nearly 20 percent higher than the same month in 2010.
Lawrence Yun, chief economist for NAR, stated the numbers for June are solid, especially considering pending home sales increased in May as well. However, he added more can be done for home sales to jump and a housing recovery to get underway.
“The best way to ensure a more solid recovery in housing is to simply return to normal, sound credit standards so more creditworthy home buyers can get a mortgage,” Yun said.
Home loan affordability could continue to lessen as the year progresses, possibly hurting mortgage volume. Freddie Mac reports the average rate for a 30-year fixed-rate mortgage rose to end July.
Jul
27
Elizabeth Warren Returning to Harvard
July 27, 2011 | Dodd-Frank, Government Regulation | Leave a Comment
Elizabeth Warren, the White House special advisor who had become a lightning rod for controversy during her time as the head of the Consumer Financial Protection Bureau will be stepping down from that position at the start of August.
Warren will be replaced at the head of the new agency by Raj Date, who is already the Associate Director of Research, Markets, & Regulations at the CFPB. Date has served as a managing director at Deutsche Bank and a senior vice president at Capital One Financial.
Treasury Secretary Timothy Geithner praised Warren’s work setting up the agency.
“Her efforts to simplify mortgage and credit card disclosures, protect military families from abusive and deceptive financial practices, and bring aboard top talent like Richard Cordray and Raj Date have built a strong foundation for the Bureau’s future success,” said Geithner.
Warren will be returning to Harvard University, resuming her role as the Leo Gottlieb Professor of Law at Harvard Law School.
Date could be in charge of the agency for a significant period. While Richard Cordray, the former attorney general for Ohio, has officially been nominated its full-time director, he faces a difficult road to Congressional approval.
Jul
25
Consumer Protection Bureau Makes First Rule
July 25, 2011 | Dodd-Frank | Leave a Comment
On July 22, the Consumer Financial Protection Bureau published an interim final rule for public comment which implements amendments from the Dodd-Frank Act to the Alternative Mortgage Transaction Parity Act.
Under the ruling, state-licensed or chartered creditors can only conduct alternative mortgage transactions under the AMTPA if they comply with CFPB rules. The rule is the first major piece of regulation filed by the new agency.
“Without an interim final rule that takes immediate effect, state housing creditors would no longer be able to make variable rate mortgage loans and other alternative mortgage transactions pursuant to AMTPA in states that prohibit such transactions, thus denying consumers access to that form of credit,” the agency stated.
The CFPB added it approved the rule without a notice-and-comment period so not to disrupt the mortgage market, which it states could have hurt both creditors and consumers.
The rule will be in effect through July 22, 2012. The deadline for providing public comment on the rule is September 22.
Take a test drive!
