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HUD Comment Period: “Required Use” Affiliated Business Arrangements
August 26, 2010 by Spencer Anglin · Leave a Comment
<<< Call To Action >>>
Please take some time to comment to HUD during the comment period on “Required Use”. I would also recommend reading this extremely informative blog from Bob Willett of Sacramento, CA: http://sacrelender.com/?cat=41
From National Association of Independent Housing Professionals (NAIHP):
Affiliated Business Arrangements:
“As many of you know, RESPA Reform originally contained a provision prohibiting the “required use” of specific settlement service providers, where discounts and/or incentives were offered. HUD was forced to withdraw that provision last year, after the National Association of Home Builders filed suit in objection.
HUD is again exploring language to clarify “required use” and is asking for your comments.
To be perfectly clear, NAIHP is NOT opposed to Affiliated Business Arrangements. Our concerns pertain to consumers forced to use certain settlement service providers, as a condition of receiving discounts and/or incentives. Research has shown these discounts and incentives are frequently made up elsewhere in the transaction, often by higher interest rates and closing costs.
Please click on the link below and give HUD your comments. If you have personally witnessed harm to consumers, please give them this information. You can upload supporting document attachments.
We support consumer incentives and discounts, PROVIDED consumers are NOT required to use specific mortgage companies, title companies, or any other settlement service providers to obtain them. One stop shops often eliminate competition and provide no benefit to consumers.”
You can comment by clicking here to comment: CLICK HERE
Here is what I wrote to HUD if you are looking for talking points:
“Required Use” Clarification -
My concerns pertain to consumers forced to use certain settlement service providers, as a condition of receiving discounts and/or incentives. Research has shown these discounts and incentives are frequently made up elsewhere in the transaction, often by higher interest rates and closing costs. Furthermore, this hinders competition which, in turn, leads to a reduction in consumer choice which ultimately leads to increased costs for the consumer. One only needs to see the increased costs of appraisals due to the implementation of the Home Valuation Code of Conduct (HVCC) to see how lack of consumer choice increases costs and provides no benefit to the consumer.
In addition, if a home builder has “required use” for a lender that is a bank (IE: Wells Fargo, BofA, etc) then they are under even less scrutiny to provide transparency because the lending institution is not required to disclose the service release premium (SRP) to the consumer. SRP is exactly the same thing as yield spread premium (YSP) which is credited to the consumer on broker transactions. This is even more detrimental in providing accurate information and choices to the consumer.
Basically, if “Joe Schmo” seller trying to sell his home in the resale market cannot do it, why should a builder, bank (REO homes) or any other seller be allowed to dictate through “required use” incentives where any buyer receives their services?
This leveling of the playing field needs to happen on the services and lending side in order for consumers to get a truly fair deal from lenders and other service providers. Providing consumer choice is the only way to truly protect the consumer.
Price Reduction? Maybe…
July 12, 2010 by Spencer Anglin · Leave a Comment
This blog is brought to you in part by: www.AZRealtorAdvantage.com
This particular blog post is directed at real estate agents but I’m sure that anyone, including sellers, can see the logic! And…I think we can all agree that 90% of marketing a piece of real estate in today’s housing market is coming on the market with a good, competitive price. Therefore is it crucial for real estate agents to have a plan, up front, for making price reductions with their sellers.
With that in mind…
Have a “pricing reduction” system in place and explain it to your sellers up front. Many sellers want to “test” the market and not start out so low with their home’s price and that’s fine but most likely that is not the price that will get the home sold. So have a system in place. IE: If you have 10-15 showings in a 3 month period and no offers, it’s probably over-priced. Figure out your own system and implement it with your clients. Be sure to even bring your listing modification form with you on your first appointment letting the seller know, up front, that you expect that there will be a price reduction in this housing market.
Set up clients with an email search of their neighborhood. Knowledge is power. Agents, keep your sellers educated with detailed information from their neighborhood or subdivision. Sellers will typically be able to understand the realities of their own market. It’s easy! Just use MLS!
Show them Internet traffic! If you are not posting your listings online with at least 3 or more real estate search engines like Trulia, Zillow, or Realtor.com then you are missing a large audience of technically savvy buyers. 90 percent of all home searches now begin online. Provide clients with weekly reports to let them know that their home is being “seen” even when they’re not being seen. In addition to using property search engines, use social networking sites to your advantage! Post your listing to Craigslist, Facebook, Twitter, etc.
Keep your sellers motivated by keeping them on the buy side. Sellers are going to be buyers, most likely, and a smart agent will already have set up an email drip of MLS listings that match the sellers buying criteria for their next home. When sellers find something they like they can become much more motivated to sell their own home sooner.
Give ‘em what they want! Most clients truly appreciate open houses, they really do. They will know that you’re working for them that day. Sellers will be much more willing to adjust their prices when they know you are working hard for them.
Once you had made sure that you are the local real estate expert for the neighborhoods you market in, let the seller ask for the price reduction. Use a “passive aggressive” approach to sales. Agents, you want your clients asking you to reduce the price. Act as an adviser. Provide them the raw data like the MLS neighborhood/subdivision information, the online traffic is good but the showings are low, feedback from those who have seen the home (feedback forms). Most sellers will see the writing on the wall and realize that a price reduction might be the key to receiving an offer!
One of the best ways to incorporate online marketing into your overall marketing strategy is have a single property website. Since 90% of new buyers are looking online, they want to see LOTS of information and pictures before stepping foot into a hot car to drive out and see a home. A smart single property website can automatically feed property info to the major search engines, provide for unlimited media options like being able to show hundreds of pictures, virtual tour, a actual walk through video tour of the home, a panoramic tour and show city demographics & local schools as well as aerial views of the neighborhood. Buyers want to know these things. Pictures are worth thousands of words. Make it easy for potential buyers to have the information all in one place! This is the kind of stuff that might make price less of a driving factor for buyers.
Drive traffic to your single property website using print ads with the URL and text code or hanging a sign rider with that same info. Include that URL info in your blogs and on your websites. When anyone sees a new product on the market (or in this case a home’s website address or URL) they want to learn more about it before they invest any time to go and see it in person. Give them that information through a dedicated website that only features one property. Load the website up with as many pictures, videos and documents (positive inspection reports, completed appraisal supporting the homes listing price, etc) and when prospective buyers land on your listing’s website and sees ALL of that info, they are much more likely to find a picture, document or statistic about the home that makes them want to come out and see it. We live in a Google age. You can either embrace that and be successful or wither away…trust me on this. Then you should post the property’s website URL into your Facebook, Twitter, MySpace, any social networking site and get some real traffic into the home! If you still aren’t seeing offers after doing this much work marketing, then a price reduction is probably in order.
Post your own thoughts about pricing on your own blog or website and share that info. Sellers will read it and they could easily turn into your clients!
I hope some of these tips work for you as well as they have worked for countless agents I work with that seem to get fantastic results from implementing these concepts.
Want more information about single property websites at no charge?
Check out www.AZRealtorAdvantage.com and watch the video.
Regards,
Spencer Anglin
New Listing Presentation For Agents
June 25, 2010 by Spencer Anglin · Leave a Comment
Be sure to check out the latest in online property marketing technology! Then comment below and tell me what you think.
Watch the presentation at:
www.AZRealtorAdvantage.com
Brought to you by Spencer Anglin, NMLS# 226533
Is YOUR loan originator licensed?
Find out here: License Lookup
www.SpencerAnglin.com 602-705-6293
Mortgage Industry Update: Rates, News & More
June 6, 2010 by Burt Carlson · Leave a Comment
***Weekly Mortgage & Business Update June 4, 2010***
How I see it $: Since so much of what happens in the U.S. is influenced by the rest of the world I thought I’d provide a few headlines from the week. The French Budget Minister said last weekend that maintaining France’s AAA rating is a “tough objective”. Monday the ECB said the potential loan losses for its banks could be as much as $240 billion in the next 18 months. Tuesday the Chinese Central bank said its housing problems are more severe than the U.S. faced before the financial crisis because the housing bubble is combined with “social discontent”. Thursday Hungary warned that its deficit could be higher than the 3.8% of GDP target set by the EU. The government blamed “fiscal skeletons” left by the previous Socialist administration. The deficit could go as high as 7.5%. Today the U.S. jobs report drove markets lower as market volatility continues to worry investors.
In the U.S. the state of New York continues to struggle with its budget as it delayed paying $2.5 billion in bills as a short term way to stay solvent but the state’s budget director warned it could get worse in August and September if things don’t change. If you have any comments or thoughts please e-mail me at burt@gosfm.com.
Interest Rates
Retail rates remained below 5% for yet another week and it does not look like we will see upward movement any time soon. The bad news is that applications to purchase homes are down sharply even with great rates and beaten down home prices. Makes one wonder what it is going to take to get buyers back in the market.
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Note that actual market rates vary geographically and by lender, credit score and Loan to Value. Source: Federal Reserve Statistical H.15. http://www.federalreserve.gov/releases/h15/data.htm
Mortgage Industry
· Bank of America announced its “Principal Reduction Enhancement” program this week. The plan is an earned principal forgiveness loan for borrowers who are at least 20% underwater. The bank said its plan will be a first step toward reaching the federal loan modification target of housing expense being no more than 31% of income. The stated reason for the program is to combat strategic defaults. A bank executive said “There is a huge incentive for customers to walk away”. Ya think!
· The Federal Home Loan Board (FHLB) of San Francisco may have losses on its $20 billion MBS portfolio of nearly $5 billion which would wipe out its $1.5 billion in equity. The FHLB system has 12 institutions across the country and if the San Francisco banks equity is wiped out it would only be the second time in the 77 year history of the system that a bank “failed” (Pluris Valuation Advisors/American Banker).
Good News
· Pending home sales increased 6% in April the third consecutive monthly increase (NAR).
· Construction spending increased by 2.2% in April from March. This was biggest monthly increase since August 2008 (Commerce Department).
· U.S. service sector index of 55.4 in May indicated expansion for the fifth consecutive month (ISM).
Statistics of Interest/Concern
· U.S. manufacturing index slipped to 59.7 in May from 60.4 in April (ISM).
· Non-farm productivity rose at 2.8% for first quarter 2010 down from the previously announced 3.6% (Labor Department).
· The U.S. budget deficit for FY 2010 will be 10.6% of our economy the largest since 1945 (White House).
Foreclosure Headlines
· Fannie Mae delinquency of 90 days or more declined to 5.47% in March from 5.59& in February the first decline since early 2006 (Financial News Network).
· The average borrower in foreclosure has been delinquent 438 days before eviction is final this is up from 251 days in January 2008 (LPS Applied Analytics).
Jobs Update
· The May jobs report showed an increase of 431,000 jobs but only 20,000 were in the private sector with most of the jobs created by adding census employees. The jobless rate declined to 9.7% and the under employed rate also declined to 16.6% from 17.1% in April (Labor Department).
· Initial weekly jobless claims declined by 10,000 to 453,000 (Labor Department).
· Continuing jobless claims rose 31,000 to 4.67 million (Labor Department).
· Four week moving average for jobless claims increased slightly to 459,000 (Labor Department).
· The pace of job losses edged slightly higher in May as employers announced plans to cut 38,810 jobs just slightly higher than April (Challenger, Christmas & Gray).
Key Indicators
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Source: www.cnbc.com/markets/commodities
Mortgage Industry Update: Rates, News & More
May 31, 2010 by Burt Carlson · Leave a Comment
***Weekly Mortgage & Business Update May 28, 2010***
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How I see it $: The crisis in Europe continues over fears that one or more Euro-zone countries could have to restructure its debt or even default. One country in the spotlight this week is Spain and especially the stability of its banking industry. On Friday Spain’s credit rating was downgraded from AAA to AA+ by Fitch Ratings Service. Meanwhile Italy announced $30 Billion in budget cuts to show investors that Euro nations can trim budget deficits. The reductions included a three year wage freeze for civil servants and a crackdown on tax evasion.
Another related issue is the increasing LIBOR rate. This is the rate that European banks charge each other to borrow money on a short term basis. While the rate itself is very low it has increased for eleven straight days (as of Monday). Given all of the borrowing going on in the Euro Zone if as rates move higher the cost of repayment increases which among other things could cause banks there to tighten lending.
Finally, in honor of all of those who have given so much for our freedom please take a moment to remember them this weekend. Happy Memorial Day!
If you have any comments or thoughts please e-mail me at burt@gosfm.com. Finally, if you would like to view any of the articles I have written click on the link http://www.examiner.com/x-39888-Phoenix-Real-Estate-Financing-Examiner.
Interest Rates
Retail mortgage rates remained near the mid 4% range for the week and the average rate for a 30 year fixed rate mortgage of 4.78% (see chart below) approached the record of 4.71% set in early December 2009. In its annual report the Federal Reserve said it will not sell its MBS or mortgage financed agency debt until “the economy is clearly in a substantial recovery”. Some observers had suggested the Fed might start selling these assets sooner but apparently they will wait. What this means is that the concerns back in March that mortgage rates would increase are on the back burner for now.
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When |
Rate |
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This Week |
4.78% |
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Month Ago |
5.06% |
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Year Ago |
4.91% |
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2 Years ago |
6.08% |
Note that actual market rates vary geographically and by lender, credit score and Loan to Value. Source: Federal Reserve Statistical H.15. http://www.federalreserve.gov/releases/h15/data.htm
Mortgage Industry
· In the first quarter of 2010 FHA insured $52.5 Billion in loans compared to the total loans by Fannie Mae and Freddie Mac of $46.5 Billion. When asked about the huge increase in FHA market share the head of the FHA said “This is a market purely on life support, sustained by the government”. FHA market share is typically 4% and before the current crisis had never been above 14%. According to the Mortgage Banker Association 12% of all FHA loans are at least one month behind on their payment (CNBC).
· FHA loan modification update: FHA did 171 loan mods in April which includes trial and permanent/fully approved modifications. There are about 6 million FHA borrowers and one million of them are delinquent (HUD Neighborhood Watch).
· A possible partial solution to Fannie Mae and Freddie Mac could be the covered bond. This is a debt security that is backed by the cash flow of a loan such as a mortgage. The loan is covered (secured) by a pool of assets that investors can claim rights to if the issuer (or originator like a bank) becomes insolvent. While not common in this country they are very common in Europe. For example, Bank of America and Chase have issues them and companies like Blackrock and Pimco have invested in them. Currently the Covered Bond Act is being discussed in Congress and may become part of the financial reform package soon to be passed into law (CNBC).
· In 2009 Arizona Mortgage Fraud Index (MFI) was 158 placing it fourth in the country for mortgage fraud with Florida number one at 292. Nationwide the MFI increased by 7% in 2009 from 2008 (Mortgage Asset Research Institute).
Good News
· Existing home sales increased 7.6% in April and the median home price increased 4% to 173,100 (NAR).
· New home sales increased 14.8% in April to the highest level since May 2008 (Commerce Department).
· Consumer confidence increased to 63.3 in May from 57.7 in April the April number was the highest since March 2008 (Conference Board).
· U.S. consumer spending was flat in April but for the first quarter 2010 was up 3.5% twice fourth quarter 2009 number. Consumer spending is about two thirds of GDP (Commerce Department).
· A key index of current business conditions in New York for May was 89.9 up from 62.2 in April. This was the fifth highest number since the index was created in 1993 (ISM).
Statistics of Interest/Concern
· First quarter GDP was 3.0% compared to the 3.2% initial reading reported last month. State and local governments reduced spending at the steepest rate since 1981 (Commerce Department).
· The U.S. economy is forecast to grow at 3.2% this year and next (NABE).
· Home prices fell in March by .5% from February but have increased 3% since April 2009. In the first quarter 2010 prices declined by 3.2% compared to fourth quarter 2009 but are up 2% year over year (S&P Case-Shiller).
· Durable goods orders decreased by 1% in April after increasing 4.8% in March (Commerce Department).
Foreclosure Headlines
· Bank of America has implemented a new automated system for handling short sale applications which has reduced the average number of days to approve a short sale from 90 to 50. The bank approved 18,000 short sale applications in April but received more than 50,000 (AZ Central).
· Lenders nationwide have repossessed 350,376 homes thru April 30, 2010 (RealtyTrac).
Jobs Update
· Initial weekly initial jobless claims declined 14,000 to 455,000 (Labor Department).
· Four week moving average for weekly jobless claims was up slightly to 465,500 (Labor Department).
· Continuing jobless claims were down 49,000 to 4.61 million (Labor Department).
Key Indicators
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Indicator |
5/21/10 |
5/28/10 |
Change |
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Dow |
10,193 |
10,137 |
-56 |
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10 year yield |
3.23% |
3.30% |
-.07% |
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Crude oil |
70.24 |
74.09 |
+3.85 |
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Dollar (vs Euro) |
1.2579 |
1.2268 |
-.0101 |
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Gold |
1176.9 |
1213.7 |
+36.8 |
Source: www.cnbc.com/markets/commodities
Mortgage Industry Update: Rates, News & More
May 22, 2010 by brianculhane · Leave a Comment
***Weekly Mortgage & Business Update May 21, 2010***
How I see it $: I don’t want to sound like an alarmist but what is happening in Europe scares the heck out of me. While there was some short term relief after the IMF and EU committed to a bailout package the enormous European debt load has been increased. Earlier this week the Euro against the dollar sank to a level not seen since before Lehman Bros. collapsed and it is quite evident that the bailout package did not relieve investor concerns. The head of the ECB (similar to Ben Bernanke as head of our Federal Reserve) has warned Europe is facing “severe tensions” and markets are fragile. Those sentiments played out this week as markets in Europe and the U.S. saw sharp declines over concerns about the EU and economy in general albeit with some improvement Friday. Finally, the German parliament approved its portion of the EU/Greek bailout package on Friday.
In a related story the IBD (International Institute for Business Development) reported that government debt will be a major problem for Japan until 2084 and Italy until 2060. It went on to say that the U.S. debt as percentage of GDP will be 60% by 2033 assuming we are deficit free by 2015. The IBD report also said that Germany, Great Britain and France would be at the U.S. level by 2028, 2028 and 2029 respectively. If you have any comments or thoughts please e-mail me at burt@gosfm.com. Finally, if you would like to view any of the articles I have written click on the link http://www.examiner.com/x-39888-Phoenix-Real-Estate-Financing-Examiner.
Interest Rates
The average 30 year fixed rate for a conforming loan was 4.75% at mid week based on a survey of a dozen wholesale lenders in the valley. By the end of the week rates had moved down to around 4.5%. Note that the 10 year Treasury yield declined by almost one quarter point this week which pushed mortgages rates down. For now all of the uncertainty in the world is really helping mortgage rates.
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When |
Rate |
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This Week |
4.84% |
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Month Ago |
5.07% |
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Year Ago |
4.82% |
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2 Years ago |
5.98% |
Note that actual market rates vary geographically and by lender, credit score and Loan to Value. Source: Federal Reserve Statistical H.15. http://www.federalreserve.gov/releases/h15/data.htm
Mortgage Industry
· The Treasury Department released its April HAMP (loan modification) report this week. For the month of April 68,000 homeowners were converted to a permanent loan mod bringing the program total to 295,348. This brings the total permanent modifications to 24.6% of the eligible borrowers up from 19.8% in March. Still there were 122,000 trial modifications cancelled in April bring the program total of cancellations to 277,640. Note that there are two new initiatives coming later this year. One encourages servicers to reduce loan balances to 115% of the home’s value and the other will allow qualified borrowers who are current on their mortgage to refinance to 97.75% of the home’s value with a new FHA loan.
Good News
· Housing starts were up 5.8% in April to the highest level in 18 months (Commerce Department).
· CPI (aka core inflation rate) was down .1% in April the first monthly decline in a year. Also, compared to April last year core inflation rose only .9% the smallest year over increase since January 1966.
· U.S. homebuilder confidence in May increased to 22 the highest level since August 2007 (NAHB/Wells Fargo Housing Market Index).
· The Producer Price Index (PPI) declined by .1% in April after an increase of .7% in March (Labor Department).
· Bank of America said that its delinquency on credit cards fell in April to the lowest level since November 2008 to 6.73%. Other large credit card issuers saw their rates decline as well (Bloomberg).
Statistics of Interest/Concern
· The delinquency on U.S. Commercial Mortgage Backed Securities (CMBS) increased to 7.02% in April and was the second biggest increase on record (Moody’s Investor Services-DQT). The value of CMBS loans in need of special servicing increased to $81.7 Billion in first quarter 2010 a new record from $74 Billion in fourth quarter 2009 (Fitch Ratings).
· Housing permits for April were down 11.5% from March (Commerce Department).
· The leading economic indicators index was down .1% in April the first decline since March 2009 (Conference Board).
· Problem banks in the U.S. increased by 10% in the first quarter of 2010 over fourth quarter 2009 and the number of banks insured fell below 8,000 for the first time in 76 years (FDIC).
· The Empire State Index fell from 31.86 in April to 19.1 in May. However, employment grew for the fifth consecutive month to the highest level since 2004 (NY Federal Reserve).
· Household debt was 69% of GDP in 1998 but had increased to 97% of GDP by the end of 2009 (Commerce Department/Federal Reserve).
Foreclosure Headlines
· There are 2.5 million homes in foreclosure today and the number of homes at least one month behind is 5.4 million. Half of the 5.4 million are 90 days behind that is on the verge of foreclosure (Capital Economics).
· Loans in foreclosure or at least 30 days delinquent declined to 14.01% in the first quarter of 2010 compared to 15.02% in fourth quarter 2009. Homes in foreclosure in the first quarter were a record 4.63% up from 3.85% a year earlier.
Jobs Update
· Initial weekly jobless claims increased 25,000 to 471,000 (Labor Department).
· The four week moving average for weekly jobless claims increased by 3,000 to 453,500 (Labor Department).
· Continuing jobless claims fell 40,000 to 4.63 million (Labor Department).
· In April 34 states had a decrease in their unemployment rates a modest improvement from March. Nevada saw its rate hit an all-time high at 13.7%. Michigan had the highest rate at 14.0% down slightly from March (Labor Department).
Key Indicators
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Indicator |
5/14/10 |
5/21/10 |
Change |
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Dow |
10,620 |
10,193 |
-427 |
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10 year yield |
3.46% |
3.23% |
.23% |
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Crude oil |
71.90 |
70.24 |
-1.66 |
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Dollar (vs Euro) |
1.2361 |
1.2579 |
+.0218 |
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Gold |
1232.3 |
1176.9 |
-55.4 |
Source: www.cnbc.com/markets/commodities
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Mortgage Industry Update: Rates, News & More
May 9, 2010 by Burt Carlson · Leave a Comment
***Weekly Mortgage & Business Update May 7, 2010***
How I see it $: This week there were several important events that impact all of us and I feel like some extended commentary is appropriate. To see how dramatic the week was you may want to check out Key Indicators below.
With all the talk about sovereign debt you may want to check out Statistics of Interest/Concern below. The tease is that as a percentage of GDP (the total of ALL the goods and services an economy produces) the U.S. is at only 96.5%. Can you guess which nation has the highest? Well, the U.K. is second at 425.9% and Ireland is first with a staggering 1312% of debt to GDP! This enormous debt caused at least in part a massive sell off on Wall Street Thursday where the Dow recorded the biggest intra-day decline in history of almost 1,000 points! Today it looks like the balance of the loss was due to some sort of “electronic trading” glitch.
Can the Greek or any nation’s debt crisis be solved with more debt? Are we witnessing the collapse of the “Socialized Democracy” form of government? The Greek bailout plan was agreed to last weekend by the EU and IMF but by Tuesday markets became concerned that fixing a debt crisis with more debt might not be a great idea. Thursday as the Greek Parliament officially approved the bailout plan the Geeks, I mean Greeks, took to the streets in protest. Of course, they did not appear to offer any solutions to the crisis which surprised no one. This is what happens when too many people are relying on the government for their pay, holidays, health care, etc and there is an economic decline. Pay attention to what the German Bundesrat (upper house) does late Friday and over the weekend. Hopefully they will approve their portion of the Greek bailout package. If not, Monday will be a wild day! All of this Greece business brings to mind my concerns about some of the policy decisions coming out of D.C. Lastly, some of our biggest banks have major European loan exposure.
As most of you know state budgets are taking some big hits and in FY 2011 and 2012 none will be bigger than the loss of “Stimulus” funding. As of mid April states had received about $109 Billion since the American Recovery & Investment Act of 2009 was passed in February according to the GAO. These funds helped state’s bridge the 30-40% budget shortfall they were facing due to declining tax receipts over the last two years. In the 2011 FY only about 20% of the gap will be filled and by FY 2012 there will be almost no funding. The impact of this loss of funding includes reduction in Medicaid funding, employee layoffs and possibly more. In addition, school districts alone are estimating a loss of 275,000 jobs wiping out the estimated 300,000 jobs saved by the stimulus money. My question is was the stimulus money spent wisely or could it have been put to better use? It would appear the data leads to the obvious answer.
If you have any comments or thoughts please e-mail me at burt@gosfm.com. Finally, if you would like to view any of the articles I have written click on the link http://www.examiner.com/x-39888-Phoenix-Real-Estate-Financing-Examiner.
Interest Rates
With all of the volatility in the market this week there was the anticipated “flight to safety” which drove 10 year yields down and long term mortgage rates as well. The week ended with retail rates just below 5%. Some believe the Fed will soon start unloading some of the $1.25 Trillion in MBS they hold which will move rates higher. The question continues to be timing.
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When |
Rate |
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This Week |
5.00% |
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Month Ago |
5.21% |
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Year Ago |
4.84% |
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2 Years ago |
6.05% |
Note that actual market rates vary geographically and by lender, credit score and Loan to Value. Source: Federal Reserve Statistical H.15. http://www.federalreserve.gov/releases/h15/data.htm
Mortgage Industry
· Five percent down conventional loans are now available in Arizona but the minimum credit score is 720 and other strict qualifying criteria apply. Note that lenders may also have price adjustments for this loan product (MGIC/Radian).
· Fannie Mae has announced tighter requirements for interest only loans. The new requirements are effective august 31, 2010 and include a minimum 30% down, minimum 720 credit score and 24 months reserves (CNN).
· Government related entities backed 96.5% of all loans in the first quarter of 2010 and 90% of all loans in 2010 (Inside Mortgage Finance).
· Freddie Mac asked Congress for $10.6 billion after reporting its third consecutive quarterly loss of $6.7 billion for the first quarter 2010. In January the Congressional Budget Office (CBO) estimated that Freddie Mac and Fannie Mae could need up to $319 billion by 2019 (Newsweek).
· Countrywide has agreed to pay $624 Million to settle a lawsuit accusing it of misleading investors about its lending practices. A judge in Los Angeles has to approve the settlement.
Good News
· Consumer spending rose .6% in March the biggest monthly increase in five months (Commerce Department).
· Pending home sales rose 5.3% in March which was higher than forecast and follows an 8.3% increase in February (NAR).
· Manufacturing index rose to 60.4 in April up from 59.6 in March (ISM).
· New factory orders increased 1.3% in March following an upwardly revised 1.3% in February (Commerce Department).
· Non manufacturing index (Service sector) for April was unchanged from March at 55.4 (ISM).
Statistics of Interest/Concern
· Sovereign debt as percent of GDP looks like this: U.S. 96.5%, Australia 124.3%, Greece 170.5%, Germany 182.5%, Spain 186.1%, France 248%, The U.K. 425.9% and number one is Ireland at 1312% (CNBC)!
· Non-farm production rose 3.6% in the first quarter of 2010 this following a brisk 6.3% increase in the fourth quarter 2009 (Labor Department).
· Mortgage delinquency declined for the second month in a row in March but excluding foreclosures delinquency was up 15.7% from the previous March while foreclosures were up 32.9% for the same period.
Foreclosure Headlines
· The housing market is set for a modest rebound in the next two years depending on where you live according to a new report from PMI Group. The complete report can be viewed at http://www.pmi-us.com/PDF/q2_10_pmi_eret.html.
· Strategic defaults accounted for 31% of foreclosures in the first quarter of 2010 which is much higher than the Goldman Sachs number of 12% in February (Chicago Booth/Kellog School Financial Trust Index).
· The average time from date of last mortgage payment until foreclosure and owner vacates the property is 14 months (Financial Times/Lender Processing services).
Jobs Update
· The April job’s report showed the fastest rate of job additions in four years at 290,000 and both February and March data were revised upward by 120,000. However, the unemployment rate increased from 9.7% to 9.9%.
· Initial weekly jobless claims were down 7,000 to 444,000 (Labor Department).
· The four week moving average for weekly jobless claims was 458,500 down 4750 (Labor Department).
· Continuing jobless claims were down 59,000 to 4.59 million. Those getting extended benefit increased 153,000 to 5.56 million (Labor Department).
· Planned job cuts fell to 38,326 in April down 43% from March (Challenger, Gray & Christmas).
Key Indicators
|
Indicator |
4/30/10 |
5/7/10 |
Change |
|
Dow |
11,009 |
10,378 |
-631 |
|
10 year yield |
3.66% |
3.43% |
-.23% |
|
Crude oil |
86.18 |
75.28 |
-10.90 |
|
Dollar (vs Euro) |
1.3296 |
1.2731 |
-.0565 |
|
Gold |
1179.4 |
1208.4 |
+29.0 |
Source: www.cnbc.com/markets/commodities
Mortgage Industry Update: Rates, News & More
May 1, 2010 by Burt Carlson · Leave a Comment
***Weekly Mortgage & Business Update April 30, 2010***
How I see it $: Another more contemporary Greek tragedy has played out this week and with any luck may be resolved by Monday. Early in the week the Greek financial rating was downgraded to below investment grade. The downgrade set off a series of events that will lead to severe austerity measures for Greek unions and the people at large. A bailout package of about $130 billion has been proposed which will keep Greece from defaulting on its debt. While this move will “save” Greece the unions are not too happy and promise to fight pay reductions and other elements being proposed. Further, in a Greek poll taken late this week two thirds of those responding said it was likely there would be civil unrest. You may want to keep an eye on further developments in Greece. Finally, how about those wacky guys from Goldman Sachs in their appearance before our beloved elected officials? While I cannot place all of the blame for our recent financial crisis entirely on them they certainly played a role and for them too not acknowledge it is amazing. Wonder if their tune will change when they get in front of a court and respond to the SEC charges? If you have any comments or thoughts please e-mail me at burt@gosfm.com. Finally, if you would like to view any of the articles I have written please go to http://www.examiner.com/x-39888-Phoenix-Real-Estate-Financing-Examiner.
Interest Rates
A month after the Fed stops buying MBS most observers expected rates to show some signs of moving up. Guess what? So far there has been little impact on rates as they have continued around the 5.00% range. How long this will last is anyone’s guess.
|
When |
Rate |
|
This Week |
5.06 |
|
Month Ago |
5.08 |
|
Year Ago |
4.78 |
|
2 Years ago |
6.06 |
Note that actual market rates vary geographically and by lender, credit score and Loan to Value. Source: Federal Reserve Statistical H.15. http://www.federalreserve.gov/releases/h15/data.htm
Mortgage Industry
· Fannie Mae announced Tuesday the extension of its incentive program to purchase its existing inventory through the Home Path program. The program will now expire on June 30, 2010. See http://www.homepath.com for program details.
· FHA loans that are 90 days or more delinquent dropped to 8.8% in March down from 9.2% in February. FHA now holds over six million mortgages with loan balances exceeding $800 Billion (FHA).
· If you have a 30 day late on your credit report your score can go down between 10 and 110 points, a 90 day late 70 to 135, a foreclosure, short sale or deed-in-lieu 130-240 and bankruptcy 130-240. These are of course educated guesses and each consumer’s situation may cause the reduction in score to be different (TBWS).
· An Arizona law professor argues that in Arizona (like most non-recourse states) lenders are charging all Arizona borrowers an additional $800 per $100,000 borrowed for the option to default on a purchase money loan without any recourse. There is no discussion on how the $800 was determined (Brent T. White, Law Professor, University of Arizona published in Arizona Republic on April 25, 2010).
Good News
· First quarter 2010 GDP grew at 3.2% less than fourth quarter 2009 which was 5.6% forecast was for 3.4% increase but still a solid number (Commerce Department).
· Consumer spending which accounts for about 70% of GDP grew 3.6% in the first quarter of 2010 compared to 1.6% in fourth quarter 2009 (Commerce Department).
· Consumer confidence increased in April to 57.9 up from 52.3 in March the highest level since September 2008 when Lehman Brothers collapsed (Conference Board).
· Home prices increased by .3% in February from the same month in 2009 the first increase in more than three years. However, it is expected that for February 2010 thru February 2011prices will decline by 3.4% (First American CoreLogic).
Statistics of Interest/Concern
· Consumer sentiment fell to 72.2 in April from 73.6 in March (Reuters Thomson/University of Michigan).
· U.S. home prices fell in February by .9% from previous month BUT were up year over year by .6% the first increase in more than three years (S& P Case-Shiller).
· Phoenix had the seventh most foreclosures in the first quarter of 2010 with one for every 38 homes. Las Vegas was first at one out of 28 homes (Realty Trac).
Foreclosure Headlines
· The Las Vegas metro area has the worst foreclosure rate in the nation at one in 28 homes while Phoenix metro is seventh at one in 38 (Realty Trac).
· Strategic defaults on home loans were at 12% in February up from an estimated 4% in mid 2007. The Treasury Department is expected to announce changes to HAMP (Loan mod program) by September to help homeowners who owe more than 115% of the home’s value reduce principal (Bloomberg).
· There could be another 1.6 million distressed sales in 2010 or about 30% of total sales and the same numbers are expected for 2011. The shadow inventory (homes at 90 days or more delinquent) is estimated at 4.6 million homes some of which will modify or work out the loan with their lender and some will be strategic defaults (Barclays Bank).
· Apparently the State of Arizona has decided how it is going to spend the $125 million from Washington. $90 million will be used to reduce loan balances on 3,000 “deeply underwater” mortgage’s, $12 million will subsidize unemployed borrowers mortgages, $7.5 million will buyout second mortgages and $10 million will be for counseling (WSJ). Some of you math wizards out there may have noticed the total is not $125 but $119.5 million. More government accounting?
Jobs Update
· Initial weekly jobless claims were down 11,000 to 456,000 (Department of Labor).
· Four week moving average for weekly jobless claims increased 1500 to 462,500 (Department of Labor).
· Continuing jobless claims declined 18,000 to 4.65 million (Department of Labor).
· Since December 2007 Congress has extended the length of unemployment benefits three times. Apparently neither party has any interest in extending them further thus the maximum length to receive benefits will remain at 99 weeks. In the coming months about one million people will see their benefits end. This fiscal year we will spend $200 Billion for unemployment benefits or about six times what it was before the recession began (Bloomberg).
· 44% of jobless people have been unemployed at least six months or more (Bureau of Labor statistics).
· At least 3.4 million people have been out of work at least one year (Pew Fiscal Analysis Initiative).
Key Indicators
|
Indicator |
4/23/10 |
4/30/10 |
Change |
|
Dow |
11,204 |
11,009 |
-195 |
|
10 year yield |
3.82% |
3.66% |
-.16% |
|
Crude oil |
85.11 |
86.18 |
+1.07 |
|
Dollar (vs Euro) |
1.3369 |
1.3296 |
-.0073 |
|
Gold |
1156.0 |
1179.4 |
+23.4 |
Source: www.cnbc.com/markets/commodities
Mortgage Industry Update: Rates, News & More
April 25, 2010 by Burt Carlson · Leave a Comment
***Weekly Mortgage & Business Update April 23, 2010***
|
|
How I see it $: I am wondering if the incentives offered by the government are enough to entice lenders/servicers to do a loan mod or a short sale versus foreclosure. The HAMP program pays $1,000 for each loan mod plus, if the borrower stays current, an additional $1,000 per year for three years. Wow, $4,000 to do a loan mod! Under HAFA the new short sale program the servicers get $1500 for each short sale. Double wow! Is that kind of money motivation enough to offset what might be gained from a foreclosure? Hey, I am just asking the question. With 4.6 million mortgages 90 days or more late on their payments and some estimates for as many as 7 million foreclosures in the next three years somebody better think of something and fast.That is the way I see it if you have any comments or thoughts please e-mail me at mailto:burt@gosfm.com. If you would like to view any of the articles I have written please go to http://www.examiner.com/x-39888-Phoenix-Real-Estate-Financing-Examiner.
Interest Rates
Retail mortgage rates remained flat for the week even as some Federal Reserve members are talking about the Fed selling some of its MBS. This of course would put upward pressure on mortgage rates.
|
When |
Rate |
|
This Week |
5.07 |
|
Month Ago |
4.99 |
|
Year Ago |
4.80 |
|
2 Years ago |
6.03 |
Note that actual market rates vary geographically and by lender, credit score and Loan to Value. Source: Federal Reserve Statistical H.15. http://www.federalreserve.gov/releases/h15/data.htm
Mortgage Industry
· Fannie Mae announced a revised policy on the waiting periods following a foreclosure or short sale. Generally the new policy says a borrower must wait 2 years and put at least 20% down, or 4 years and put at least 10% down or 5-7 years requires borrower meet requirements of an “eligibility matrix”. The borrower also must meet other conditions reflected in Fannie Mae’s Automated Underwriting System (AUS). HUD guidelines for FHA/VA and other government loans are 3 years.
· As of March there have been 227,922 permanent loan modifications and 108,212 approved but not accepted by the borrower. 780,951 Trial modifications are active and includes the approved but not accepted by borrowers total. Of the permanent loan modifications only 2879 have defaulted so far. The top performing major lenders as a percentage of “eligible” borrowers are; GMAC 48%, Citi 47%, Wells Fargo 38%, Chase 37% and U.S Bank and Bank of America at 26%. Eligible borrowers are at least 60 days delinquent on their first mortgage. Also, 6 million homeowners have missed at least two payments (Treasury Department).
Good News
· New home sales in March rose 27% the biggest increase in 47 years and follows February’s record low number. The median sales price was $214,000 up 4% from a year ago (Commerce Department).
· Existing home sales rose 6.8% in March with the median home price slightly higher than a year ago at $170,700 (NAR).
· 20% of sellers reduced prices in April by 10% on average compared to 27% a year ago (Trulia.com).
· U.S. growth forecast for 2010 is 3.1% up from 2.7% in January (IMF).
· U.S. leading economic indicators rose 1.4% in March the 12th consecutive monthly increase (Conference Board).
Statistics of Interest/Concern
· U.S. commercial real estate prices declined 2.6% in February the first monthly decline in four months (Moody’s/REAL Commercial Property Price Index).
· The default rate on commercial loans will continue to rise in 2010 and is estimated to reach 11% by the end of the year. A big concern is the default of large loans (over $50 million). In 2008 there were five defaults but that number increased to 56 in 2009 (Fitch Ratings).
· March Producer Price Index (PPI) rose .7% making the year over year increase a stout 6%. The main culprit was the 2.5% increase in wholesale food prices the largest increase in 26 years (Department of Labor).
· Durable goods (excluding aviation) increased 2.8% in March the biggest increase since December 2007 (Commerce Department).
Foreclosure Headlines
· The Arizona Department of Housing received $2 million from NeighborWorks America to support community revitalization and counseling families facing foreclosure. According to NeighborWorks 937,000 families have received assistance since January 2008 including loan modification assistance.
· California mortgage defaults fell 4% in the first quarter of 2010. However, defaults in the $500,000 plus range increased 1.5%. First quarter 2009 defaults were 135,431 but declined to 81,054 in same quarter 2010 (Data Quick).
· In March about 50% of home sales were distressed sales (Campbell Surveys).
Jobs Update
· Initial weekly jobless claims were down 24,000 from previous week to 456,000 (Department of Labor).
· Four week moving average for initial weekly jobless claims increased slightly to 460,250 (Department of Labor).
· Continuing jobless claims were down 40,000 to 4.65 million (Department of Labor).
· Twenty four states had an increase in their unemployment rates in March. Michigan at 14.1% led the nation with Nevada second at 13.4%. Arizona was stable at just under 10%.
Key Indicators
|
Indicator |
4/16/10 |
4/23/10 |
Change |
|
Dow |
11,019 |
11,204 |
+185 |
|
10 year yield |
3.77% |
3.82% |
+.05% |
|
Crude oil |
82.83 |
85.11 |
+2.23 |
|
Dollar (vs Euro) |
1.3500 |
1.3369 |
-.01310 |
|
Gold |
1136.9 |
1156.0 |
+19.1 |
Source: www.cnbc.com/markets/commodities
Mortgage Industry Update: Rates, News & More
March 28, 2010 by Burt Carlson · Leave a Comment
***Smart Financial Weekly Mortgage & Business Update March 26, 2010***
HEADLINE: New foreclosure prevention plan announced by the government today details can be found at www.makinghomeaffordable.com or contact me for information.
Interest Rates
Retail rates moved up toward the end of the week to just over 5%. Expectations for much better jobs numbers and a weak Treasury auction pushed the stock market and Treasury yields higher at mid week. There is growing sentiment that the Fed will have to sell the Mortgage backed securities (MBS) it owns which will put upward pressure on mortgage rates. Remember the Fed purchased $1.25 Trillion of these MBS and hold them on its balance sheet.
|
When |
Rate |
|
This week |
4.99 |
|
1 Month Ago |
5.05 |
|
1 Year Ago |
5.07 |
|
2 Years Ago |
6.24 |
Note that actual market rates vary geographically and by lender, credit score and Loan to Value.
Source: Federal Reserve Statistical H.15.
Mortgage Industry Update
· Effective April 5, 2010 up front mortgage insurance on FHA loans increases from 1.75% to 2.25%.
· The USDA or Rural loan program is close to running out of funding and only Congress can authorize additional funding.
· Details are now starting to emerge on the $1.5 Billion program to help underwater homeowners in AZ, CA, NV, MI and FL. It looks like Arizona will get $125 million for the Arizona Housing Department to hand out. According to the Department’s Director he will take the approach known as “earned forgiveness”. This is where the state and banks promise to forgive debt later but only if the homeowner/borrower who stays in their home, makes payments and still has a job. The Director is not inclined to help out those who overspent on their homes or took out equity lines during the boom.
· Chase Bank has finally agreed to sign up for HAMP2 the government’s second mortgage modification program. Chase joins Wells Fargo and Bank of America as program participants. Citi also announced it would participate in the program. Together the four big banks hold about $442 billion in second mortgages.
· Fannie Mae revised its first quarter funding estimate downward from plus 2.8% to minus 17.2%. In addition it downgraded its funding estimate for the entire year from $1.97 Trillion to $1.31 Trillion a reduction of over 30%.
Good News
· Commercial real estate prices improved 1% in January according to Moody’s/REAL Commercial Property Price Index. This was the third consecutive monthly increase in prices.
· The Commerce Department reported that durable goods were up .5% in February the third consecutive monthly increase.
· Consumer sentiment for March was 73.6 unchanged from February according to the Thomson Reuters/University of Michigan survey.
Statistics of Interest/Concern
· Mortgage delinquency was nearly 14% at the end of 2009 according to the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS). The increase was due mainly to a 21% increase in 90 day plus delinquency.
· Existing home sales declined .6% in February the third consecutive monthly decline.
· New home sales declined 2.2% in February for the fourth consecutive monthly decline and yet another low for annualized sales according to the Commerce Department.
· Chase Bank said Monday that its losses from the Wamu mortgages it acquired could be as much as $40 Billion plus another $3-4 Billion in the quarter from the Wamu credit card portfolio.
· The New York Federal Reserve says that as much as 40% of FHA mortgages are upside down.
Foreclosure Headlines
· According to Zillow the number of cities experiencing a “double dip” in home prices increased from 5 in December to 12 in January. They also identified 10 other markets that “seemed poised for a double dip”. These cities included Boston and Denver. No Arizona cities were mentioned by Zillow.
· The Financial Times says the average cost of foreclosure to a lender is about 50% of the outstanding loan balance.
· Strategic Defaults are on the rise according to Amherst Mortgage Insight. In their report issued this week they show these defaults increasing along all types of loan classes and accelerating as negative equity increases. The report observed that if the various loan modification schemes incent borrowers to default in order to qualify look for a further increase in Strategic Defaults.
Job Market Headlines
· The jobless rates in four states (FLA, NV, GA & NC) hit record levels in February. Also, 27 states saw unemployment rates higher in February than in January according to the Department of Labor.
· Initial weekly jobless claims were down 14,000 to 442,000.
· The four week moving average for weekly claims was down 11,000 to 453,750 the lowest since September 2008.
· Continuing claims fell 54,000 to 4.65 million the lowest since December 2008.
· Congress went on its two week spring vacation without extending unemployment benefits again. Up to 750,000 could lose their benefits by the end of April if Congress does not act. Republicans argued the $9.2 billion cost should come from the Stimulus funds but Democrats said that would hurt the job creation effort. The Stimulus bill was for $787 billion.
Comments/Observations
The government has controlled the housing market for the last 18 months or so thru the GSE’s (Fannie Mae and Freddie Mac) and FHA. Collectively they own or control more than 50% of all mortgages and by some estimates 70% of mortgages done in 2009. There is increasing conversation about doing something for our national housing market the question is what and when. Do we privatize or nationalize? Do we find some sort of middle ground solution? How do we make the transition from what we have today to whatever solution is agreed upon? These are difficult decisions and ones that will impact our lives and our economy for years to come.
One of the elements of this housing reform will be the mechanism by which capital is raised. What will that process look like in the future? Clearly some portion of the funding will come from overseas investors. Perhaps the recent statements by David Stevens the FHA Commissioner will shed some light on the challenges associated with relying on foreign bankers and investors. In a recent speech Mr. Stevens said when referring to some conversations he had with international bankers about how these bankers/investors saw triple A rated securities turn to junk “We are at the point right now where no one trusts the American housing finance system”. If what he says is true one can only observe how far we have fallen in such a relatively short amount of time.
If you have have any mortgage or related questions I can be reached at (602) 803-9660 or by e-mail at burt@gosfm.com.