CFPB Launches Education Campaign Ahead of New Mortgage Rules

With new mortgage regulations due to be implemented in less than a month, the Consumer Financial Protection Bureau (CFPB) has released a set of materials designed to educate both homebuyers and homeowners about the new regulations and how they can be used to protect homeowners and ease the home buying process.  CFPB also released a manual summarizing the new regulations and designed to be used by housing counselors.

The materials, all available on the Bureau's website, explain what a Qualified Mortgage is, why the category was designed, what it does for consumers, and how to find one in the mortgage market.  Consumer rights under new rules effecting mortgage servicers are also explained, as are ways to gather information about an existing loan and to get help if the rules are violated.

The materials are in several formats:

Factsheets: There is a two-page factsheet with an overview of all of the new consumer protections in the Bureau's mortgage rules.  It explains what a WM mortgage is and why it protects the borrower including an explanation of its protections against steering and high fees.  It also lays out the consumer protections afforded borrowers under new servicing rules and explains how to file a complaint with CFPB for any violations of the rules.  A second factsheet is a summary of the new procedures to facilitate borrower's access to foreclosure avoidance options.

Tips:  There are separate tip sheets homebuyers looking for a mortgage, for homeowners on how to get the most out of their mortgage, and one for troubled homeowners facing foreclosure. 

Tools:  CFPB also has added questions and answers about the regulations to its interactive AskCFPB website tool and reminds consumers that its website also offers tools to find local housing counseling agencies to answer their questions or address their concerns. Consumers that have an issue with consumer financial products or services, such as a mortgage, can also submit a complaint on the site.
"Taking on a mortgage may be the largest financial obligation of a consumer's lifetime," said CFPB Director Richard Cordray. "We want to make sure that potential homebuyers have the information they need to make responsible decisions and that current borrowers know about their new protections."

 The Bureau says it is working with industry, housing counselors, and consumer groups to promote a smooth implementation of the new rules.  Most of the rules, including the new Qualified Mortgage regulation, go into effect on January 14. 

Foreclosure Inventory Falls to 5 year Low

Lender Processing Services (LPS) said today that the national foreclosure pre-sale inventory is at its lowest level since 2008.  The inventory, the number of loans that are in some stage of foreclosure, now represents 2.54 percent of mortgaged homes.  The rate dropped 3.23 percent from September to October and is nearly 30 percent below its level in October 2012.  There are now 1.276 million homes in the inventory.
The information was included in LPS' regular preview of its monthly Mortgage Monitor.  The Monitor presents loan-level information from the LPS database representing approximately 70 percent of the mortgage market.  The full report will be published by December 9.

LPS said in October there were 3.152 million mortgage loans that were 30 or more days past due but not yet in foreclosure, a delinquency rate of 6.28 percent.  This is a decrease of 2.80 percent since September and 10.69 percent year-over-year.   Of these delinquent loans, 1.283 million are seriously delinquent, that is 90 or more days past due but not yet in foreclosure. 


Including delinquent loans and loans in the foreclosure inventory there were 4.43 million distressed mortgages throughout the U.S. in October.  Mississippi has moved into first position among states with the highest percentage of non-current loans.  It is followed by Florida, New Jersey, New York and Louisiana. 

More People Will Buy Homes if Prices go Up - nice theory by Fed senior economists

According to the Mortgage News Daily, sale inventories have been slow to rebound from the Great Recession even though home prices have increased steadily since 2012. Two Federal Reserve Bank of San Francisco senior economists, William Hedberg and John Krainer theorize that prices are still not high enough to entice many sellers.  For some this is because the value of their home is still below the outstanding balance on their mortgage (also known as a negative amortization in mortgage parlance), meaning that sellers would have to bring cash to the closing.  For others it may be that their equity is not back to a level that motivates them to sell.

Economic theory suggests that all homes are for sale if the price is right, but at any point in time, the price may not be right. Sellers have their own ideas about what is "right" and must also consider that selling a house can be costly because of brokerage fees, and necessary or cosmetic changes to the house.  For these reasons and others the active listing a home is viewed by economists as a strong signal of an intent to sell and they measure the short-run supply of homes for sale, the inventory, by the listing numbers.

Good times or bad, there is always some level of inventory in the housing market.  Some owners sell to move up, others to downsize, other move for employment reasons, or to free up cash.  These are life-cycles motives not necessarily tied to the business cycle and produce a general level of churning in the market.  Nevertheless the authors say there is a distinct cyclical pattern to inventories which rise in good times and fall in bad times. 

Credit conditions, which are also cyclical, can account for some of this.  Risk premiums charged by lenders and their willingness to lend, tend to ease during good economic times, allowing more potential buyers to enter the market. But it is the level of house prices which is by far the variable that most influences the inventory of homes for sale.

Even though not all listed homes are vacant Census Bureau data on the numbers and price level of vacant homes have a long history of indicating the relationship between inflation-adjusted house prices and for-sale inventory.  As Figure 1 shows, inventories generally move with prices and changes in house prices have a causal effect on inventories.  The two series are tied together in a long-run relationship and the authors say this makes sense as rising house prices should encourage home owners to sell and thus inventories to rise.

Vacancies for sale over the years

Inventories do not instantly react to house price changes and other economics can disrupt the price/inventory relationship as is evident in the most recent time period in the figure above.  House prices have been recovering broadly since 2012 but inventories have been declining.  Only recently have they begun to rise.

The relationship between inventory and prices may have broken down for an extended period as the market rebounded in 2012 because of fallout from the housing boom and bust.   The boom saw an unprecedented rise in homeownership rates with younger households more willing to buy and eased lending allowing in less qualified borrows.  When those trends reversed the inventory shifted from homes for sale to homes for rent with the later rising steadily during the recession and the for-sale inventory dropping and only recently stabilizing.

The authors say the data does not go back far enough to show if this is a typical reaction but some Census Bureau data suggest it is unprecedented since the 1960s.  The phenomenon is widespread and cannot be accounted for solely by the surge in foreclosures.  The inventory of homes in foreclosure has recently been falling in most markets but the ratio of owner occupied and renter occupied units has remained down. Thus, either preference for home ownership has shifted or, more likely, credit constraints have affected household home purchase decisions.

The changes in for-sale and for-rent inventories are seen most dramatically in markets like Las Vegas, Phoenix and Miami where foreclosures were high and investors have been buying large numbers of the foreclosed properties.  In these market the total inventory of homes for rent is approaching that of homes for sale, a remarkable shift that has continued throughout the recovery.  But, in addition to the investor-effect the decline in homes for sale is very closely linked with the large downward shift in the home ownership rate in these markets. It is impossible to say though whether declining sales are pushing down home ownership rates or falling home ownership is pushing down sales, or both are interacting with each other in a complicated feedback process.

Tight credit conditions may be affecting both the ownership decisions of young buyers and the supply side of the market.  In theory, falling house prices alone may keep some home owners from selling. It may seem logical that decisions to sell should be based only on information about current and future market conditions and the authors point to research that shows home owners take more time to sell if home prices have fallen since the original purchase. That is, two similar home owners experiencing similar housing market conditions will behave differently if one of those home owners has an unrealized loss on his or her house.

Falling prices may hold down home sales for several reasons. An underwater home owner may be unwilling or unable to make up the difference between sale proceeds and mortgage balance and chose to delay selling.  Even if there is equity, it may be reduced enough that no cash is available for the down payment on another home.

Since early 2008, homes for sale and homes underwater have been negatively correlated.  Counties with a high share of underwater mortgages have tended to have smaller for-sale inventories.  The authors say that while this relationship is significant, its strength diminished as the recovery got under way. Underwater borrowers may have been locked into their houses in a way that impaired the normal functioning of the housing market. But that effect seems to be waning.

Another explanation for this breakdown is that home owners may be taking a longer view of the market.  In the housing cycle price changes are persistent, that is both price rises and price drops are likely to be followed by more of the same.  Home owners who can be flexible on timing a sale can take advantage of this persistence, waiting and gambling that increases will continue and they can sell at a higher price.

Figure 4 confirms on a county level the negative relationship between prices and inventories shown at the aggregate level in Figure 1. Where counties experienced relatively large price increases they also saw for-sale inventories decline.

The authors say it turns out that that variables such as recent house price appreciation and changes in employment are the most robust predictors of recent changes in housing inventory. Once these are accounted for other variables, such as changes in the for-rent inventory, the underwater share, or local price-rent ratios, do little to explain the inventory of houses for sale. "Thus, current home owners may be making a rational choice to postpone selling in the hope that prices will rise further. However, this behaviour tends to be short run. In the longer run, the link between the level of house prices and for-sale inventories is strong. If prices continue to rise, inventories for sale should eventually rise too."

Conclusion of the article:

History shows a long-run relationship between house prices and the number of houses available for sale. Thus, current inventories of homes for sale are low given more than a year of house price appreciation. County-level data suggest that many home owners are waiting for prices to rise further in their markets. Markets that have seen the strongest house price appreciation and job growth are the ones where for-sale inventories have declined the most.

CFPB and the new mortgage rules.

New mortgage rules recently released by the Consumer Financial Protection Bureau (CFPB) will change many of the mortgage lending rules as of January 1, 2014, and affect both banks and other mortgage lenders.

The most significant new rule is the Ability-to-Pay rule. In brief, creditors must determine a borrower’s ability to repay a mortgage, at a minimum evaluating eight underwriting factors:

• Current or reasonably expected income or assets
• Current employment status
• Monthly mortgage payment
• Monthly payments on other loans
• Current debt obligations, alimony and child support
• Monthly payment for mortgage-related obligations
• Monthly debt-to-income ratio or residual income
• Credit history
• No dual compensation for loan originators
• No prohibition on consumer payment of upfront fees and points
• Individual loan officers, mortgage brokers, and creditors must be "qualified" and, when applicable, registered or licensed under state and federal law
• Mandatory arbitration clauses are not allowed
• Record-keeping requirements for loan originators and mortgage brokers are now three years
• Subprime mortgage loans can only be made if the creditor obtains a written appraisal; the appraisal is performed by a certified or licensed appraiser; and the appraiser conducts a physical property visit of the interior of the property

Lenders must use reasonably reliable third-party records to verify the information. In addition, lenders are encouraged to refinance "non-standard mortgages," such as those with balloon payments, into "standard mortgages" with fixed rates for at least five years that reduce consumers’ monthly payments.

The other significant new regulations affect mortgage servicing and certain fees, including:

These new rules aim to curb mortgage delinquencies, foreclosures, real estate "flipping," and costly surprises.

- See more at: http://www.bakertilly.com/CFPB-and-the-new-mortgage-rules#sthash.cPTct00y.pdf

CFPG creates incentives for consumers to pay brokers fees.

According to National Mortgage News, the compensation paid by the creditor to a mortgage brokerage firm should be included in the 3% cap under the qualified mortgage rule. In addition, any origination fee paid by the consumer to the creditor must be accounted towards the 3% cap. The CFPB said that this CAP ensures that lenders offering qualified mortgages do not charge excessive points and fees.

However the CFPB said that creditor may reduce the cost it needs to recover from origination by having the consumer pay the mortgage brokers directly. This rule comes into effect by Jan 10th, 2014. The final rule is that if the origination fees are included in the finance charge then, the origination fees paid by the consumers to the brokerage firm can be excluded. To read more click here.

PrivoCorp is a licensed mortgage processor in several states in the US.

Home Equity Buoyed by Rising Home Prices - Nice graphic by RealtyTrac

Mortgage News daily reported that the steady rise in home prices last year has pulled up an estimated 600,000 properties from the category of "deeply underwater" just since May.

Daren Blomquist, Vice President of Realty Trac said that the steadily rising home prices are lifting all boats in this housing market and should spill over into more inventory of home for sale in the coming months. " Home owners who already have ample equity are quickly building on that equity, while the 8.3 million homeowners on the fence with little or no equity are on track to regain enough equity to sell before 2015 if home prices continue to increase at the rate of 1.33 percent per month that they have since bottoming out in March 2012."

Blomquist said that homeowners in foreclosure with some equity have a better chance to avoid foreclosure without resorting to a short sale assuming they don't miss the opportunity to leverage that equity.  "Even homeowners deeply underwater have reason for hope, with about 150,000 each month rising past the 25 percent negative equity milestone - although it will certainly take years rather than months before most of those homeowners have enough equity to sell other than via short sale."

States with the highest percentage of homes with LTVs of 125 percent or higher included Nevada (46 percent), Illinois (40 percent), Florida (40 percent), Michigan (38 percent), Rhode Island (34 percent), and Ohio (31 percent).

Privocorp is a licensed mortgage processor in several states in the US.

Mortgage Rates Push Further Into 6-Week Lows

According to industry sources mortgage rates continued lower today, bringing rates in line with the lowest levels seen during the past 4 months (officially, 6-week lows as several days have been slightly better during that time). Some lenders are now down to 4.375% for their most efficient combination of closing costs and rate (best-execution) while a majority remain at 4.5%.

Last week's big news regarding the Fed abstaining from any significant policy changes continues to benefit rates.  Several speakers from the Federal Reserve shared their opinions on the topic today and the overall tone reiterated that the economy was not yet likely to make the desired progress without full-fledged stimulus.  Apart from that, news was limited and market conditions were fairly quiet.  This is less likely to be the case as the week progresses and the tone of the economic data should have more of an impact as well.

"Economic Data" refers to various scheduled reports that are released on a set schedule, such as Thursday's GDP and weekly Jobless Claims numbers at 8:30am Eastern.  That combination makes for a relatively potent morning in that if both the pieces of data show the economy in stronger-than-expected territory, rates would likely move higher that day.  Conversely, weaker-than-expected data can help rates move or stay lower.

Today's Best-Execution Rates

• 30YR FIXED - 4.5%
• FHA/VA - 4.25
• 15 YEAR FIXED -  3.5%
• 5 YEAR ARMS -  3.0-3.50% depending on the lender

Mortgage rates up

The average mortgage rates in the US edged up in the latest week amid signs of a stronger economic recovery and recent positive housing and manufacturing data.

Bankrates, weekly national survey shows that the 30 year fixed mortgage rate which was at 4.62 last week is now at 4.72%. The average 15 year fixed mortgage increased from 3.66 to 3.74 %. Seven year adjustable rate mortgages increased from 4% to 4.04%.

Meanwhile the popular five year adjustable rate jumped from last week's 3.61% to 3.65%. To read more click here.

PrivoCorp is a contract mortgage processor licensed in several states in the US.

Improvements in the economy ... the bad times will pave way for the good ...

The housing sector continues to improve despite the recent rise in home loan rates, as housing starts rose 5.9 percent from June to July to 896,000 on an annualized basis. This was in line with estimates. Building permits, a sign of future construction, were up 2.7 percent, coming in above expectations. In addition, the National Association of Home Builders Housing Market Index rose to 59 in August from the 57 recorded in July. This is the best level in nearly eight years.

Retails Sales for July were also positive, rising for the fourth straight month.  When stripping out autos, sales surged by 0.5 percent, the fastest pace this year. And there was good news for the labor market, as Weekly Initial Jobless Claims fell to 320,000, a level not seen since October 2007. There were no apparent seasonal distortions in the numbers. In the manufacturing sector, Empire State Manufacturing came in above expectations, while the Philadelphia Fed Index came in just below expectations.

What does this mean for home loan rates? Remember that the Fed has been buying $85 billion of bonds a month to help stimulate the economy and housing market. This includes mortgage bonds, to which home loan rates are tied, and these purchases have helped home loan rates remain attractive. 

The Fed has said the rate of its purchases will continue to depend on economic data and could be increased or decreased accordingly. The data that continues to come in will be a key factor in whether the Fed begins tapering these purchases as early as its meeting in mid-September, or if it waits until later in the year or even 2014.

One thing that is also important to note is that inflation at both the wholesale and consumer levels remains moderate, as evidenced by the Producer and Consumer Price Indexes for July. This gives the Fed cover to continue its bond purchases if economic data takes a turn for the worse.

Now remains a great time to consider a home purchase or refinance, as home loan rates remain attractive compared to historical levels.

And there’s good news for borrowers, About 47.72 percent of mortgages from June 2013 had an average FICO score under 700, compared to only 28.53 percent from June 2012. As credit requirements ease and home buying picks up pace, lenders will be competing for attention and loyalty from Realtors. This changes the competitive landscape, placing new requirements on mortgage professionals.

Mortgage Rates Sharply Higher; More Volatility to Come

Mortgage rates rose abruptly today, moving  highest levels since July 9th as financial markets prepare for tomorrow's important Employment Situation Report.  These preparations refer to several underlying factors including the reaction to this morning's stronger-than-expected economic data as well as concern that similarly stronger data tomorrow could lead rates even higher.  Today's move took 30yr Fixed best-execution to the upper edge of 4.5% with 4.625% very close.  Tomorrow is an extraordinarily important day with the highest prospects for volatility since the last employment report caused the biggest one-day rise in rates of the past 10 years.  It can go either way, depending on the data (which will be released well before any lenders release rate sheets for the day).

To be clear, if the data is weak enough, it would likely result in lower rates, but the range of possibilities is wide, and it's "easier for markets to play defense" against rising rates than it is to try to guess when, and by how much the longer-term trend higher will stop.  It's similar to the popular phrase "no one wants to catch the falling knife."  Traders aren't eager to trade rates aggressively lower in a rising rate environment.  Our only big moves lower in rate since early May have been in response to even bigger moves higher.  There continues to be no organic drive toward lower rates, and that continues to be very scary to anyone hoping to see lower rates any time soon.

Today's Best-Execution Rates

• 30YR FIXED - 4.5% - 4.625%
• FHA/VA - 4.25%
• 15 YEAR FIXED -  3.625%-3.75%
• 5 YEAR ARMS -  3.0-3.25% depending on the lender

FHA insured mortgages could come under the review for the foreclosure processes

According to the Housing Wire, Patton Boggs of the Washington Advisory said that the Mortgage Review Board of the Department of Housing and Urban Development could review the FHA insured mortgages due to the foreclosure furor. This came in the wake of many banks in the U.S. suspending their foreclosure process after allegations of improper documentation and illegal affidavit signing were disclosed. Attorneys general in all 50 states have initiated their own reviews of the foreclosure procedures of mortgage servicers.

The Mortgage Review Board can sanction, suspend or even terminate lenders and servicers that are found to have erred during a foreclosure on a FHA-insured mortgage. Patton Boggs said the board also has the authority to assess and collect penalties from the perpetrators for violations of HUD regulations and guidance.

Just another indication that originators need to be careful about what kind of loans they are working on. Gordon Gecko did say "Greed is good" - but I am sure he would have qualified it had we asked him to talk about it in the context of the FHA mortgages.

Mortgage Rates End Week at Lows, after Bernanke

Mortgage Rates End Week at Lows

Mortgage rates didn't manage the same sort of surge lower as that seen yesterday.  In fact, some lenders were unchanged, but on average, rates fell to their lowest levels of the week.  Most of the positivity came courtesy of overnight movement in Europe and Asia.  This started the day for rates off on a strong foot and although mid-day weakness prompted many lenders to hike rates a bit, the worst of the adjusted rate sheets were still at least as good as yesterday's.  That means the 30yr fixed best-execution rate remains at 4.625%.  Most of the improvements were seen in the form of lower borrowing costs.  At this point, we're closer to moving down to 4.5% than up to 4.75%.

After topping out briefly at 4.875% last Friday, getting back within striking distance of 4.50% is no small relief for those hoping to see moderation in the extended move higher of the past two months.  Although it was preceded by the worst week in recent memory, this week has been the best of the year in terms of outright gains.  It's a good thing too, because if rates hadn't fallen at least this much, there would be less of a case to be made for a consolidation in the week's ahead.

Unfortunately, a return of sub-4.0% rates would require a significant change in economic conditions--enough to change the course of Fed policy.  As long as economic metrics continue in roughly the same vein, the best rate-watchers can hope for is a broader consolidation between 4.375% and 4.875%.  We stand a chance to be crossing into the lower half of that range now and next week's data and events will likely be the deciding factor.  Until we break lower through that range (or until it looks highly likely that we will), it makes most sense to look for advantageous opportunities to lock the closer we are to the lower bound.

Keep in mind that "advantageous" isn't necessarily limited to prospects for movement in rates, but also lock time frames.  For instance, a borrower who is 29 days away from closing has more reason lock than one who is 31 days away, all things being equal.  This has to do with the lower costs involved with shorter term locks.  Lenders can offer better pricing for a 30 day lock than for the next  most common increment of 45 days (some lenders do 40, but you get the idea).  Even then, it's important to keep an eye on what's coming up that could cause volatility.  If a jobs report or Fed Announcement is scheduled for the next day, the lock time frame becomes inconsequential by comparison.  In reality, any time you wait for the following day's rates, you're taking a risk that they'll be worse than today's--especially in this market.

Today's Best-Execution Rates

• 30YR FIXED - 4.625%
• FHA/VA - 4.25%  -4.75% (depending on lender buy-down structure)
• 15 YEAR FIXED -  3.75%
• 5 YEAR ARMS -  3.0-3.375% depending on the lender

Ongoing Lock/Float Considerations

• After rising consistently from all-time lows in September and October 2012, rates challenged the long term trend higher, but failed to sustain a breakout
• Uncertainty over the Fed's bond-buying plans is causing immense volatility in rates markets and generally leading rates quickly higher
• Fears about the Fed's bond-buying intentions were proven well-founded on May 22nd when rates rose to 1yr highs after the Fed indicated their intention to taper bond buying programs sooner vs later
• The June 19th FOMC Statement and Press Conference confirmed the suspicions.  Although tapering wasn't announced, the Fed made no move to counter the notion that they will decrease bond buying soon if the economic trajectory continues
• Rates Markets "broke down" following that, as traders realized just how much buy-in there was to the ongoing presence of QE.  These convulsions led to one of the fastest moves higher in the history of mortgage rates and market participants have not been eager to be the among the first explorers to head back into lower rate territory until they're sure they'll have some company.
• (As always, please keep in mind that our Best-Execution rate always pertains to a completely ideal scenario.  There are many reasons a quoted rate may differ from our average rates, and in those cases, assuming you're following along on a day to day basis, simply use the Best-Ex levels we quote as a baseline to track potential movement in your quoted rate).

Builder Confidence Soars. Sharpest Rise Since 2002

Another article from the Mortgage news Daily that points to overall improvements in the mortgage industry. Low inventories and increasing traffic have unleashed the confidence of new new home builders the National Association of Home Builders (NAHB) said today. Its Housing Market Index (HMI), issued in conjunction with Wells Fargo Bank, jumped eight points in June to a reading of 52. A score of 50 is significant to the Index as it indicates more builders view sales conditions as good than view it as poor. The eight-point jump in the index was the biggest one-month gain since August and September of 2002, when the HMI recorded a similar increase of eight points.

NAHB Chairman Rick Judson said "This is the first time the HMI has been above 50 since April 2006, and surpassing this important benchmark reflects the fact that builders are seeing better market conditions as demand for new homes increases. With the low inventory of existing homes, an increasing number of buyers are gravitating toward new homes." 

The HMI is derived from a monthly survey of its builder members that NAHB has conducted for 25 years. Builders are asked to gauge the current market and the market as they expect it will look for the next six months as "good," "fair," or "poor." They are also asked to rate current buyer traffic as "high to very high," "average" or "low to very low." Responses are used to construct three measures of confidence and the composite index.

The index measuring current sales conditions also increased eight points to 56 and the index gauging future expectations was up even more - nine points to 61 - its highest point since March 2006. The index for buyer traffic, while still lagging at 40 was up seven points from May.

"Builders are experiencing some relief in the headwinds that are holding back a more robust recovery," said NAHB Chief Economist David Crowe. "Today's report is consistent with our forecast for a 29 percent increase in total housing starts this year, which would mark the first time since 2007 that starts have topped the 1 million mark."

The HMI three-month moving average was up in three of the four regions, with the Northeast and Midwest posting a one-point and three-point gain to 37 and 47, respectively. The South registered a four point gain to 46 while the West fell one point to 48.

More good housing news: Existing home sales at highest level since 2009

Here is an interesting article from mortgagenews.com.  The implications of existing home sales increasing are positive to all the stakeholders - including buyers, sellers and financiers of these homes.

Existing-home sales improved in May and remain solidly above a year ago, while the median price continued to rise by double-digit rates from a year earlier, according to the National Association of Realtor.

Total existing-home sales, which are completed transactions that include single-family homes, town homes, condominiums and co-ops, rose 4.2 percent to a seasonally adjusted annual rate of 5.18 million in May from 4.97 million in April, and is 12.9 percent above the 4.59 million-unit pace in May 2012.

Lawrence Yun, NAR chief economist, said the recovery is strengthening and to expect limited housing supplies for the balance of the year in much of the country.  “The housing numbers are overwhelmingly positive.  However, the number of available homes is unlikely to grow, despite a nice gain in May, unless new home construction ramps up quickly by an additional 50 percent,” he said.  “The home price growth is too fast, and only additional supply from new home building can moderate future price growth.”

Existing-home sales are at the highest level since November 2009 when the market jumped to 5.44 million as buyers took advantage of tax stimulus.  Sales have stayed above year-ago levels for 23 months, while the national median price shows 15 consecutive months of year-over-year increases.

Total housing inventory at the end of May rose 3.3 percent to 2.22 million existing homes available for sale, which represents a 5.1-month supply at the current sales pace, down from 5.2 months in April.  Listed inventory is 10.1 percent below a year ago, when there was a 6.5-month supply.

The national median existing-home price for all housing types was $208,000 in May, up 15.4 percent from May 2012.  This marks six straight months of double-digit increases and is the strongest price gain since October 2005, which jumped a record 16.6 percent from a year earlier.  The last time there were 15 consecutive months of year-over-year price increases was from March 2005 to May 2006.

Distressed homes⁴ – foreclosures and short sales – accounted for 18 percent of May sales, unchanged from April, but matching the lowest share since monthly tracking began in October 2008; they were 25 percent in May 2012.  Fewer distressed homes, which generally sell at a discount, account for some of the price gain.

Eleven percent of May sales were foreclosures, and 7 percent were short sales.  Foreclosures sold for an average discount of 15 percent below market value in May, while short sales were discounted 12 percent.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 3.54 percent in May from 3.45 percent in April; it was 3.80 percent in May 2012.

NAR President Gary Thomas, broker-owner of Evergreen Realty in Villa Park, Calif., said market conditions today are vastly different than during the housing boom.  “The boom period was marked by easy credit and overbuilding, but today we have tight mortgage credit and widespread shortages of homes for sale,” he said.“The issue now is pent-up demand and strong growth in the number of households, with buyer traffic 29 percent above a year ago, coinciding with several years of inadequate housing construction.  These conditions are contributing to sustainable price growth,” Thomas said.The median time on market for all homes was 41 days in May, down from 46 days in April, and is 43 percent faster than the 72 days on market in May 2012.  Short sales were on the market for a median of 79 days, while foreclosures typically sold in 43 days and non-distressed homes took 39 days.

Forty-five percent of all homes sold in May were on the market for less than a month.  The median time on the market is the shortest since monthly tracking began in May 2011; on an annual basis, a separate NAR survey of home buyers and sellers shows the shortest selling time was 4 weeks in both 2004 and 2005.

First-time buyers accounted for 28 percent of purchases in May, compared with 29 percent in April and 34 percent in May 2012.

All-cash sales were at 33 percent of transactions in May, up from 32 percent in April and 28 percent in May 2012.  Individual investors, who account for many cash sales, purchased 18 percent of homes in May; they were 19 percent in April and 17 percent in May 2012.

Single-family home sales rose 5.0 percent to a seasonally adjusted annual rate of 4.60 million in May from 4.38 million in April, and are 12.7 percent higher than the 4.08 million-unit pace in May 2012.  The median existing single-family home price was $208,700 in May, up 15.8 percent above a year ago, the strongest increase since October 2005 when it jumped 16.9 percent from a year earlier.

Existing condominium and co-op sales slipped 1.7 percent to an annualized rate of 580,000 units in May from 590,000 in April, but are 13.7 percent above the 510,000-unit level a year ago.  The median existing condo price was $202,100 in May, which is 11.8 percent above May 2012.

Regionally, existing-home sales in the Northeast rose 1.6 percent to an annual rate of 650,000 in May and are 8.3 percent above May 2012.  The median price in the Northeast was $269,600, up 12.3 percent from a year ago.

Existing-home sales in the Midwest jumped 8.0 percent in May to a pace of 1.21 million, and are 16.3 percent higher than a year ago.  The median price in the Midwest was $159,800, up 8.2 percent from May 2012.

In the South, existing-home sales rose 4.0 percent to an annual level of 2.09 million in May and are 16.1 percent above May 2012.  The median price in the South was $183,300, which is 15.0 percent above a year ago.Existing-home sales in the West increased 2.5 percent to a pace of 1.23 million in May and are 7.0 percent above a year ago.  With the tightest regional supply, the median price in the West was $276,400, up 19.9 percent from May 2012.The National Association of Realtors, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.  For additional commentary and consumer information.

Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings from Multiple Listing Services.  Changes in sales trends outside of MLSs are not captured in the monthly series.  NAR re benchmarks home sales periodically using other sources to assess overall home sales trends, including sales not reported by MLSs.

Existing-home sales, based on closings, differ from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit.  Because of these differences, it is not uncommon for each series to move in different directions in the same month.  In addition, existing-home sales, which account for more than 90 percent of total home sales, are based on a much larger data sample – about 40 percent of multiple listing service data each month – and typically are not subject to large prior-month revisions.

The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months.  Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity.  For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns.  However, seasonal factors cannot compensate for abnormal weather patterns.

Single-family data collection began monthly in 1968, while condo data collection began quarterly in 1981; the series were combined in 1999 when monthly collection of condo data began.  Prior to this period, single-family homes accounted for more than nine out of 10 purchases.  Historic comparisons for total home sales prior to 1999 are based on monthly single-family sales, combined with the corresponding quarterly sales rate for condos.

Total inventory and month’s supply data are available back through 1999, while single-family inventory and month’s supply are available back to 1982 (prior to 1999, single-family sales accounted for more than 90 percent of transactions and condos were measured only on a quarterly basis).

The median price is where half sold for more and half sold for less; medians are more typical of market conditions than average prices, which are skewed higher by a relatively small share of upper-end transactions. The only valid comparisons for median prices are with the same period a year earlier due to a seasonality in buying patterns.  Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns.  Changes in the composition of sales can distort median price data.  Year-ago median and mean prices sometimes are revised in an automated process if additional data is received.

Immigration Reform Suggests $500 Billion Housing Boom

Immigration reform is on everyone lips in the recent past. We are sure that no one doubts that something needs to be done about the immigration situation in the country. What, how, and when are questions that needs a lot of discussion and debate.  Only then will a meaningful conclusion be able to be reached. Whether back taxes need to be collected, what happens if immigrants are able to sneak in to the US in the future, all these are questions that will have to be answered in time, but fact of the matter is that these "legalized" citizens will be bold enough to make some purchasing decisions without fear of the law of the land. This undoubtedly is positive for the entire real estate and mortgage industry

As per Mortgage News daily, the immigration reform bill will finally get it's debut on the floor of the Senate tomorrow with potentially big implications for the Housing and Mortgage markets.  Though not specifically related to immigration reform, the CAP recently argued that the future mortgage market will benefit from providing more credit access to socioeconomic groups that have had less access in the past.

Before that, the National Association of Hispanic Real Estate Professionals (NAHREP) was out with a slightly different take on the same core concept: more participants in the housing/mortgage means more business.  The Association estimates that some 6 million undocumented immigrants would pursue legalization--about half of those with the desire and the economic resources to buy a home.

The estimates suggest a new pool of roughly 3 million new prospective homeowners, capable of purchasing a home at the median price of $173,000.  NAHREP based its projections on updated data and the approach it used for its 2004 study "The Potential for Home ownership Among Undocumented Workers." Using information from that study it estimates that those 3 million prospective homeowners would pump about $500 billion into the housing market.

But that would be just the beginning, NAHREP said. The chain reaction triggered by those home purchases would bring an additional $233 billion in spending for origination fees, real estate commissions, and consumer spending associated with home ownership. These expenditures are factored in over a five year period.

"Foreign-born householders have a high value and strong desire for home ownership," said Juan Martinez, NAHREP president. "They have been here in our midst for years, working and participating in our economy. Legitimizing them through immigration reforms would finally give them the access and the confidence to buy homes."

The press released said that other housing and corporate leaders that work closely with the underserved market agree that legalization will spark swift interest in homeownership among these Latinos because they are already established in communities here in the U.S.

Economist Believes Refinance Applications Will Remain Strong

If the latest Mortgage Bankers Association application survey results are any indicator, the refinance business has not started to dissipate, and one observer believes it will stay strong for some time to come. For the second consecutive week, refis are driving the increase in application volume, this time up 4.8% on a seasonally adjusted basis for the week ended April 12.
However, purchase applications also had a strong week as well.
The unadjusted Refinance Index increased 5% and is at its highest level since mid-January. The seasonally adjusted Purchase Index increased 4% from one week earlier and it is at its highest level since May 2010. The MBA noted that conventional application volume increased 3% to its highest level since October 2009. On an unadjusted basis, purchase applications are up 20% when compared with the same week in 2012.
Quicken Loans chief economist Bob Walters commented, “Projections of declining refinance activity seem to be premature as rates dipped amid the Bank of Japan moving into quantitative easing, causing a rally in the bond market. Look for refinance volume to stay strong driven by historically low rates and aided by the millions of HARP-eligible underwater homeowners who still could benefit from refinancing.”
Don’t expect rates to rise anytime soon. Zillow said on Tuesday afternoon that on a real-time basis it found the average 30-year fixed rate being offered through Zillow Mortgage Marketplace fell one basis point from last week to 3.34%.
The 30-year FRM hovered between 3.41% and 3.32% for the majority of the week.
"Rates fell slightly this past week after lower-than-expected retail sales numbers raised concerns about softening consumer confidence," said Erin Lantz, director of Zillow Mortgage Marketplace. "We expect mortgage rates will remain depressed this week due to apprehension related to the Boston Marathon bombing and threats from North Korea."
The MBA said the share of refi applications remained at 75%.
The average contract rate for the 30-year conforming FRM (MBA defines this as a loan with a balance of $417,500 or under) for the survey period decreased one basis point to 3.67%. Federal Housing Administration-insured loans had an average contract rate for the week of 3.37%, a drop of six basis points from the previous week.
Jumbo 30-year FRMs saw its average contract rate decrease two basis points to 3.77%. The MBA said the rate for the 15-year FRM fell by one basis point to 2.91%.
The share of adjustable-rate mortgages remains at 5% of the week’s loan applications; the average contract rate for the 5/1 ARM decreased by one basis point to 2.57%.

U.S. mortgage rates hold steady

Long- and short-term mortgage rates saw little change this week, but they remain below year-ago levels.

A 30-year fixed-rate averages 4.88 percent this week, up from 4.87 percent last week. A year ago, 30-year mortgages averaged 4.95 percent.

The average rate on a 15-year fixed-rate mortgage is 4.15 percent, unchanged from last week.

A one-year adjustable rate fell to 3.21 percent from 3.23 percent.

Mortgage applications jumped nearly 16 percent last week, according to the Mortgage Bankers Association, as potential buyers and existing homeowners continue to try to lock in rates before they rise. Applications to refinance rose 17.2 percent while purchase applications rose 12.5 percent, to the highest level of the year.

“An improving job market is beginning to pave the way for an improving housing market,” said MBA vice president of research Michael Fratantoni.

Low mortgage rates have continued to help nudge housing sales higher nationwide. However, home sales in Dayton have continued to lag and dropped 5 percent in 2010.

Read more: http://www.bizjournals.com/dayton/news/2011/03/10/mortgage-rates-hold-steady.html?ed=2011-03-10&s=article_du&ana=e_du_pub

Foreign buyers picking up US Homes at record rate

This is an interesting read - particularly if one is in the processing business, and trying to figure out the implications on our own business impact ... NAR report shows that these foreigners are snapping up great deals, and they are doing so for a number of purposes. Some are wealthy investors who are reacting positively to the slow signs of economic recovery in the U.S., and who are bullish on the real estate market. Others are looking for vacation homes in tourist destinations such as Miami and Orlando. There are some new immigrants in the mix as well; foreigners who have filed for extended visas and are applying for residency status for academic, business and lifestyle reasons.

Real Estate Agents Welcome Foreign Buyers

The strong demand for single-family residences and apartments has prompted the NAR to make changes to its website to make it more attractive to foreigners. More than 4 million listings across the U.S. can now be browsed from several countries in different languages.

Foreign home buyers are welcomed by real estate agents and even some mortgage brokers. Real estate financing has become difficult for many Americans, and for foreigners it is even more restrictive. As a result, many of the housing acquisitions by foreigners are closed in cash. The sunnier regions of the country are thus far favored by foreign home shoppers, and not just because of the warmer climates. Arizona, California, Florida, and Texas are also attractive due to the large inventory of unsold and distressed homes available.

What the Future Holds

Those who are concerned that foreigners will one day rule the American real estate market underestimate the huge inventory of the domestic market, valued at over one trillion dollars. At this moment, foreign real estate investors are doing their part to shore up the ailing housing market.

Real estate agents are naturally welcoming foreign buyers with open arms, and some lawmakers have proposed bills that would allow foreigners to obtain U.S. visas if they specifically make a significant investment in American housing. While there are a number of visa programs in place for foreigners who wish to buy a home in the U.S., this bill aims to attract investors willing to purchase homes valued at more than $500,000.

Anyone with half a million - will they require a mortgage? And if so who will finance these homes? And on what basis? Would be interesting to see ...

Great news for everyone ! - More Homeowners Returning to Positive Equity

Thousands of homeowners are seeing improvements in their home equity as the housing market continues its recovery, however, they represent a dent in the surface of total underwater mortgage holders. Approximately 200,000 residential properties returned to a state of positive equity during the fourth quarter of 2012, according to data from CoreLogic.

This brings the total number of properties that moved from negative to positive equity in 2012 to 1.7 million, bringing the total of mortgaged residential properties with equity to 38.1 million.

Despite steady gains in home prices, the number of homeowners who have moved into positive territory is overshadowed by a vast number of those still underwater. Negative equity, often referred to as “underwater” or “upside down,” can occur because of a decline in value, an increase in mortgage debt or a combination of both.

Data show that 10.4 million, or 21.5% of all residential properties with a mortgage were still in negative equity at the end of the fourth quarter of 2012, down from 10.6 million (22%) in the third quarter.

Also of note is that out of the 38.1 million properties with positive equity, 11.3 million have less than 20% equity.

Underwriting constraints may make it more difficult for these borrowers to obtain new financing for their homes, according to CoreLogic. Even more disadvantaged are the 2.3 million properties that had less than 5% equity by the end of the fourth quarter 2012. These “near-negative equity” borrowers are at risk should home prices drop, writes CoreLogic. Under-equited mortgages accounted for 23.3% of all residential properties with a mortgage nationwide in the fourth quarter of 2012, the average amount of equity for all properties with a mortgage being 31%. “The scourge of negative equity continues to recede across the country. There is certainly more to do but with fewer borrowers underwater, the fundamentals underpinning the housing market will continue to strengthen,” said Anand Nallathambi, president and CEO of CoreLogic. “The trend toward more homeowners moving back into positive equity territory should continue in 2013.”

Of the 38.1 million residential properties with positive equity, 11.3 million have less than 20 percent equity. Borrowers with less than 20 percent equity, referred to as "under-equitied," may have a more difficult time obtaining new financing for their homes due to underwriting constraints. At the end of the fourth quarter, 2.3 million residential properties had less than 5 percent equity, referred to as near-negative equity. Properties that are near negative equity are at risk should home prices fall. Under-equitied mortgages accounted for 23.2 percent of all residential properties with a mortgage nationwide in the fourth quarter of 2012. The average amount of equity for all properties with a mortgage is 31 percent.

Mortgage bill faces tough road in Congress

As per USA Today ,A sharply divided Congress isn't likely to jump at President Barack Obama's challenge for quick passage of a mortgage refinancing bill that supporters say could help millions of homeowners save big each year and boost the economy.
Obama praised the legislation in his State of the Union speech last week, saying the proposal would help more homeowners with mortgages backed by Fannie Mae and Freddie Mac take advantage of low interest rates and refinance their loans.

Even with mortgage rates near a 50-year low, Obama said, too many families that have never missed a payment and want to refinance are being turned down.
"That's holding our entire economy back, and we need to fix it," the president said. "Right now, there's a bill in this Congress that would give every responsible homeowner in America the chance to save $3,000 a year by refinancing at today's rates. Democrats and Republicans have supported it before."


HOUSING: States' foreclosure pace affects home Prices

The economy's slow recovery from the recession gives the idea urgency, Obama said. "Send me that bill," he told members of Congress listening to his speech in the House chamber.
The proposal is part of a push by Democrats and the White House to help homeowners take advantage of low interest rates as a way to help the housing market recover and to give the economy a shot in the arm.
While the bill could gain traction in the Democratic-controlled Senate, it faces a rough road in the GOP-run House, where many Republicans favor scaling back the government's role in the housing market as a way of aiding the economy. Similar versions of the measure died in the House and Senate's lame duck sessions last year.
"At the moment, it's an uphill battle," said Rep. Peter Welch, D-Vt., who plans to file the House version of the bill.


JOBS: Housing holds key to full job growth rebound

Welch said he will reach out to Republicans this year in hopes of building more support, but the bill's association with the government-controlled Fannie Mae and Freddie Mac, the federal housing agencies partly blamed for the collapse of the housing market, hurts its support base among GOP lawmakers.
"The American taxpayers have already sunk $190 billion dollars into the operations of Fannie and Freddie," said Rep. Randy Neugebauer, R-Tex., a member of the House Financial Services Committee. "It's time that we wind their operations down instead of using them as a piggy bank for failed programs that further delay the housing recovery.

 "In the Senate, Democrats Bob Menendez of New Jersey and Barbara Boxer of California have legislation to aid borrowers who are current on their loans backed by Fannie Mae and Freddie Mac, but who are not able to refinance because their home values have declined too much.

Nearly 12 million homeowners have Fannie Mae and Freddie Mac loans and stand to benefit refinancing, the two senators said. Many can't refinance at a lower rate because of red tape and high fees. The red tape has reduced competition among banks, so borrowers pay higher interest rates than they would if they were able to shop around more, according to the senators.

The bill also would reduce up-front fees that borrowers pay on refinances and eliminate appraisal costs for all borrowers. The measure seeks to expand the Obama administration's Home Affordable Refinancing Program, which saves an average homeowner about $2,500 per year, they said.

"Homeowners will have more money in their pockets, Fannie and Freddie will see fewer foreclosures, and the housing market and economy will continue building momentum," Boxer said.

Among the bill's supporters are the Mortgage Bankers Association, the National Association of Realtors and the National Association of Home Builders.

"It is another tool that can be out there to help stabilize the housing market and kick start the economy if consumers can, in fact, put another $100 bucks in their pockets every month," said John Hudson, government affairs chairman of the Association of Mortgage Professionals.

Similar proposals by Boxer and Menendez last year got bogged down in the Senate Banking, Housing and Urban Affairs Committee. Republican attempts to add amendments on other housing issues beyond refinancing led to a stalemate.

Twenty Senate Democrats are co-sponsors of this year's bill, but no Republicans have signed on."I support finding ways to smartly streamline the refinance process, but I'm not sure that eliminating all documentation requirements makes sense," said GOP Sen. Bob Corker of Tennessee, a committee member. "I also think we need to quickly move beyond short-term stimulus and start focusing on the structural issues in our housing finance system."Sen. Mike Crapo, the committee's top Republican, declined through a spokeswoman to comment on the bill.Welch's House bill also died during the last Congress. Welch accused Republicans of not wanting to give Obama an election-year boost by passing the mortgage refinance measure.

"Last year was even tougher because it was an election year," said Welch. "The Republican leadership wanted Obama to fail."

Mortgage Applications Recover from Holiday Doldrums

As per Mortgage news daily ..Applications for mortgages increased substantially during the week ended January 11 as purchase applications soared to their highest levels in nearly two years.  The Mortgage Bankers Association's (MBA)  Market Composite Index for the first full working week of the New Year increased 15.2 percent on a seasonally adjusted basis and 45 percent on an unadjusted basis compared to the holiday shortened week ended January 4.
The seasonally adjusted Purchase Index was up 13 percent on a seasonally adjusted basis from the previous week to the highest level since April 2011.  The unadjusted index was 47 percent higher than the previous week and 5 percent above that of one year earlier.  The Refinance Index increased 15 percent from the previous week and the refinance share of mortgage activity remained unchanged at 82 percent of total applications.

Interest rates for the week were mixed. The average contract rate for 30-year fixed-rate mortgages (FRM) with conforming balances of $417,500 or less remained unchanged at 3.61 percent with points decreasing to 0.38 from 0.41.  The effective loan rate decreased from the previous week.
Jumbo 30-year FRM - loans with balances over $417,500 - rose 10 basis points to 3.88 percent with points unchanged at 0.38.  The effective rate increased.

The average contract rate for 30-year FRM backed by FHA increased to 3.39 percent with 0.58 point from 3.35 percent with 0.69 point and the effective rate increased.  

The average contract interest rate for 15-year fixed-rate mortgages remained unchanged at 2.88 percent, with points decreasing to 0.27 from 0.39 and the effective rate decreased. .

The average contract interest rate for 5/1 adjustable rate mortgages (ARMs) increased to 2.66 percent from 2.64 percent, with points decreasing to 0.34 from 0.37. The effective rate increased from last week.   The ARM share of activity increased to 3 percent of total applications.

MBA's Weekly Application Survey covers over 75 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990.  Respondents include mortgage bankers, commercial banks and thrifts.  Rates are based on loans with an 80 percent loan-to-value ratio and points include the origination fee.  Base period and value for all indexes is March 16, 1990=100.