Mortgage Rates Still Waiting for Bigger News

BY: MATTHEW GRAHAM
Mortgage Rates Still Waiting for Bigger News
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Mortgage rates were almost flat again today. Most lenders were just a hair higher in costs vs yesterday. The most prevalent conventional 30yr fixed quote remains 4.0% for top tier scenarios, but 3.875% is still available. In general, the bond markets that drive mortgage rates are remaining nimble until they have a better sense of what the Fed will do in the policy meeting 2 weeks from now.

As we frequently discuss, the Fed Funds Rate doesn’t dictate 30yr mortgage rates, but the two tend to correlate over time. Moreover, the initial lift-off from record low rates will be a big deal for financial markets in general. It would be hard for mortgage rates not to get caught up in the volatility–most likely in a bad way.

In other words, the sooner the Fed officially hikes OR the sooner the economic data makes investors think the Fed is going to hike, the worse it probably is for mortgage rates in the short term. Of course markets have already been doing their best to get ready for such an occasion, and that’s one of the reasons interest rates pushed higher in the first half of 2015.

With all this in mind, the Fed Vice Chair, Stanley Fischer made some important comments last week. He said there was a strong case for a September hike and that there was “a little over two weeks before we make the decision.” That was enough to let markets know that September is an imminent possibility for a hike. Fischer went on to say “we’ve got time to wait and see the incoming data.” With that, we know that these 2 weeks of data may be helping determine whether or not the Fed hikes in September. That makes Friday’s job report (this week’s biggest piece of data) especially important.

Loan Originator Perspective

“Rates hovered in recent ranges again today as Friday’s Employment Situation Report (aka NFP) for August looms. Some tepid economic news that might have boosted bonds (ISM, ADP jobs projection) were apparently disregarded, and as of mid PM, MBS are down slightly from the open, but not enough to incite lender reprices. For better or worse, it’s all about NFP for now, we’ll see if that’s still the case Friday. Happy with your pricing? Sure could do worse than locking.” -Ted Rood, Senior Originator

“Bonds are waiting for Friday’s jobs report to make their next move. It is always risky to float into this report, so only those that can afford to be wrong should consider to do so. I think you are safe to float overnight, but regardless of trading lenders will be reluctant to pass along improvements with the jobs report coming out on Friday. Recent data has shown economy weakening some, so I think Friday’s report will be good for rates…but this is just a guess. ” -Victor Burek, Churchill Mortgage

Today’s Best-Execution Rates

30YR FIXED – 4.0
FHA/VA – 3.75%
15 YEAR FIXED – 3.25%
5 YEAR ARMS – 2.75 – 3.25% depending on the lender

Ongoing Lock/Float Considerations

2015 began with a strong move to the lowest rates seen since May 2013. The catalyst was Europe and the introduction of European quantitative easing. Investors bet heavily the move lower in European rates and domestic rates benefited as well. But with those bets finally drying up in April and with the Fed seemingly intent on hiking rates in the US, May and June saw a sharp move back toward higher rates. The implicit fear is that global interest rates set a long term low in April, and have now begun a major move higher.

July said “not so fast” to that potential “big bounce.” Some of the data began to suggest the Fed is still a bit too early in talking about raising rates in 2015–particularly, a lack of wage growth or any promising signs of inflation. But Fed proponents maintain that low inflation is a byproduct of temporary trends in the value of the dollar and the price of oil, and that once these factors level-off, inflation will ultimately return. That side of the argument suggests that inflation could increase too quickly if the Fed hasn’t already begun normalizing interest rates.
With all of the above in mind, locking made far more sense for the entirety of May and June, and we were not shy about saying so. The second half of July saw that conversation shift toward one where multiple outcomes could once again be entertained. In other words, we went from “duck and cover!” to “let’s see where this is going…”

Bottom line, locking is always the safest bet and it was the only bet from late April through early July. Since then, there’s been room for other points of view. We should know a lot more about how valid those points of view are as August and September progress.

As always, please keep in mind that the rates discussed generally refer to what we’ve termed ‘best-execution’ (that is, the most frequently quoted, conforming, conventional 30yr fixed rate for top tier borrowers, based not only on the outright price, but also ‘bang-for-the-buck.’ Generally speaking, our best-execution rate tends to connote no origination or discount points–though this can vary–and tends to predict Freddie Mac’s weekly survey with high accuracy. It’s safe to assume that our best-ex rate is the more timely and accurate of the two due to Freddie’s once-a-week polling method).
About the Author

Matthew Graham
Chief Operating Officer, Mortgage News Daily / MBS Live
A former originator, Matthew began writing for Mortgage News Daily in 2007, covering a wide range of topics. Seeing a need in the marketplace, his focus increasingly shifted toward relating MBS and broader financial markets for loan originators. … more

 

Default Mode: How Ocwen Skirts California’s Mortgage Laws

Capital and Main  | by  David Dayen
Posted: Updated:

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The following story was reported by Capital and Main and published here in collaboration with The Huffington Post.

Lost documents. Incomplete and confusing information. Mysterious fees. Payments received but not applied. Homeowners waiting for a loan modification and suddenly placed in foreclosure. A nightmare of uncertainty, frustration and fear.

These incidents, described to me by numerous homeowners, mortgage counselors and defense lawyers, were supposed to be a thing of the past in California. After revelations of fraud and abuse throughout the mortgage business, including tens of billions of dollars in corporate penalties, state Attorney General Kamala Harris pushed through the 2012 California Homeowner Bill of Rights (HBOR), designed to standardize conduct by mortgage servicers – those companies that manage day-to-day operations on mortgages by collecting monthly payments and making decisions when homeowners go into default and seek help.

Yet one company allegedly committed all these HBOR violations: Ocwen, the nation’s fourth-largest mortgage servicer. According to the complaints, Ocwen (“New Co.” spelled backwards) either skirts around the edges of California law or simply ignores it, causing headaches for homeowners – and potentially illegal foreclosures. (Ocwen did not respond to a request for comment for this article, but in the past, it has pointed to its track record of assisting homeowners to avoid foreclosure.)

“Ocwen is one of the worst servicers in the state,” says Kevin Stein, Associate Director of the California Reinvestment Coalition, a nonprofit advocate for low-income communities.

Ocwen may not even be aware of the rules of the road. One lawyer, who requested anonymity because his client is currently negotiating with Ocwen on a mortgage, described a conversation with one of the company’s specialized home retention consultants. The lawyer asked the Ocwen representative about the servicer’s HBOR compliance efforts and the representative replied that she had never heard of the statute, had no training for it and knew of no process established to conform to it.

“Ocwen doesn’t give a hoot about the Homeowner Bill of Rights,” the lawyer told me. “They ignore the statute. It’s cheaper for them to ignore than to implement.”

Ocwen’s suspected flaunting of the law could be traced to its aggressive growth strategy. Until the past few years, the largest mortgage servicers were divisions of major banks, such as Bank of America, JPMorgan Chase and Wells Fargo. After being sanctioned for their own misconduct, these banks were forced to adhere to new servicing standards that increased their costs, as well as new, higher capital requirements associated with servicing that came from the Dodd-Frank financial reform law. As a result, banks commenced a fire sale, selling off trillions of dollars in servicing rights to non-bank firms like Ocwen. These non-bank servicers don’t own the loans, only the rights to service them, in exchange for a percentage of the monthly payments.

Ocwen calls itself a “specialty servicer,” with a particular focus on subprime mortgages, loans that often come to them already in trouble. Managing delinquent loans is a “high-touch” business, demanding lots of personnel to work with homeowners to negotiate affordable payments or foreclosure proceedings. Yet Ocwen has claimed to its investors that it can service these loans at 70 percent lower costs than the rest of the industry, raising red flags from regulators.

“I don’t think you can handle subprime mortgages by being efficient, with better computers,” says Benjamin Lawsky, head of New York’s Department of Financial Services. “You’re going to have a lot of people looking for help, and they’re not just a number, they’re real people with real problems who need help in real time, right now.”

What Ocwen calls efficiency has already led to significant misconduct. The Consumer Financial Protection Bureau (CFPB) and 49 states, including California, fined Ocwen $2.1 billion last December for “violating consumer financial laws at every stage of the mortgage servicing process.” Many of the stories from California homeowners mirror the charges in the CFPB settlement – overcharging homeowners, misplacing documents, illegal denials of loan modifications and more. And Ocwen also violates HBOR, the controlling state law for mortgage servicing.

Janice Spraggins of NID Housing Counseling Agency says that Ocwen failed to honor prior agreements that her clients secured with their old mortgage servicers. This is consistent with a recent report from CFPB citing numerous problems with mortgage servicing transfers, including lost documents, unapplied payments and homeowners who, having already started down the road to fixing their problems, have had to start all over again.

“The homeowner goes to the back of the line,” Spraggins says. “For whatever reason they’re not on the same page [as Ocwen].”

Other homeowners complain about how Ocwen satisfies the state requirement for a “single point of contact” — the one individual who is aware of their unique situation and who they can consult for timely updates on the status of their loan. Ocwen designates a “relationship manager” to handle these cases.

But homeowners say they get no specific email or phone number for their relationship manager; they must call the main customer service line, schedule an appointment and wait to hear back. The relationship manager, Ocwen clients allege, doesn’t always call at the designated appointment time, meaning the homeowner must go through the process all over again, dealing with customer service reps who frequently give out contradictory or misleading information.

“It doesn’t appear to be in compliance,” says Lauren Carden of Legal Services of Northern California, when describing Ocwen’s procedures. “They give you a single point of contact, but if you can never reach them, effectively you don’t have one.” Carden cited one client who tried for four months to reach their relationship manager, and only got the person on the phone once.

Saleta Darnell, a Los Angeles County child-support officer who lives in South Los Angeles, criticized Ocwen for adding charges to her loan, which the company took over from GMAC.

“I had a $1,389 monthly payment. When it got to Ocwen, the payment went up to $1,469,” Darnell says, adding that Ocwen had increased the total loan balance by $60,000 without explanation. Darnell immediately requested a loan modification. After several weeks of waiting, Ocwen notified Darnell by mail that she didn’t qualify for anything but an “in-house” modification. The in-house mod lowered the balance to the original amount, but with a significantly higher monthly payment of $2,316, more than half Darnell’s take-home pay.

LaRue Carnes, a Sacramento homemaker, needed a loan modification after her husband lost his job nearly two years ago. OneWest Bank transferred her loan to Ocwen last August. She had trouble getting her relationship manager on the phone, and had to deal with customer service representatives, often located overseas with limited English proficiency, who, Carnes says, never told her the same information twice.

“Dealing with the people answering the Ocwen line has been some of the most frustrating conversations of my life,” Carnes says.

Carnes says Ocwen lost the financial documents she submitted for her loan modification application on four separate occasions, which would violate state HBOR prescriptions for timely responses. Meanwhile, in the months of waiting, the family’s arrears ballooned from $11,000 to $54,000. And Ocwen would not post the payments Carnes did send in on time until as late as the 18th of the month, triggering additional hits to the couple’s credit report.

“How can you not process a check within your own system?” Carnes wondered. “I don’t understand how a company can do business like that.”

One reason is that Ocwen has a captive audience. Homeowners have no say in who services their loan. They get passed around from one company to the next, with the servicer having enormous power to tack on fees, deny loan modifications or pursue foreclosure. Homeowners experiencing difficulties must still work with Ocwen to keep their homes, creating pressure against speaking out. One lawyer had an Ocwen representative respond to a threat of a lawsuit for HBOR violations by asking, “Does your client want a modification or not?”

The homeowner who requested anonymity because of an ongoing negotiation submitted a completed loan modification application to Ocwen, only to find a notice of default taped to his front door. A completed loan application is supposed to freeze the foreclosure process while the servicer decides on eligibility, preventing a practice called “dual tracking,” perhaps the most serious HBOR violation. The homeowner, in this case, said he never received a letter required by California law, confirming receipt of the initial application, and was not assigned a single point of contact for months. In December, while waiting for an answer on a second application, the homeowner received notice of the pending sale of his property at auction. This led to the phone call, where an Ocwen representative claimed to never have heard of HBOR.

Attorney General Harris has urged homeowners to file any HBOR complaints with her office. That information goes to the Mortgage Fraud Strike Force and a state-appointed monitor for foreclosure-related matters, who spots trends and works with servicers on compliance. This can help at the margins but homeowner advocates are seeking stronger measures.

“There have been good reports about the monitor resolving problems on individual cases,” says Kevin Stein of the California Reinvestment Coalition. “But we would love to see the Attorney General more involved.”

In addition, under HBOR homeowners have a “private right of action” to hire legal counsel and sue Ocwen over violations. However, a California State Bar ruling stipulates that lawyers cannot collect fees for their services in loan modification-related cases prior to their completion. While this protects homeowners from foreclosure rescue scams, where lawyers would take money up front and skip town, it has significantly damaged HBOR enforcement. Though the HBOR statute includes provisions for attorney fees, the Bar ruled that HBOR suits are related to loan modifications, meaning that lawyers must for a period of time litigate for free against legal teams working for deep-pocketed servicers.

“I’m aware of many lawyers who have said, I can’t do this,” says one lawyer. “What appears to have been a good idea is now about as dangerous [for Ocwen] as wading into a pond and getting bitten by a guppy.”

The CFPB continues to investigate violations of its federal mortgage servicing laws. And Lawsky, the New York banking regulator, stopped a deal to transfer $39 billion in mortgages from Wells Fargo to Ocwen, citing concerns about Ocwen’s capacity and its relationships with subsidiaries that profit off Ocwen foreclosures, raising the possibility of conflicts of interest. Ocwen executive chairman William Erbey said on an earnings call that this has frozen all servicing transfer deals, stunting the company’s growth. Erbey runs four separate subsidiary corporations, including Altisource, which buys foreclosed properties to turn them into rentals. Critics argue that this gives Ocwen incentive to push homes into foreclosure, so Altisource can profit from them. But without new mortgage servicing rights to purchase, Erbey’s grand scheme will falter. In fact, Ocwen’s first-quarter earnings fell below expectations and the stock has sunk as regulatory scrutiny has increased.

But this doesn’t comfort those homeowners stuck with Ocwen, who have labored for years to get clarity on whether they can keep their homes. Some of these homeowners may yet get the modification they need – one Ocwen client I’ve spoken to is about to start a trial payment plan and another is negotiating terms. Still, the struggle exacts a real toll, both in financial terms with late fees and increased arrears, but also on an emotional level. Waking up day after day without knowing if you’ll have to pack up all your possessions and leave your home creates feelings of humiliation and shame that can’t be measured in dollars.

“We need to start repairing our credit, our good name,” says LaRue Carnes.

Meanwhile, homeowner advocates grumble that Ocwen executives, and their counterparts at other servicers, do not share such worries, because violating the law makes more financial sense to them than following it.

“All the power resides in the servicer,” says the anonymous lawyer. “Plainly they don’t care.”

(David Dayen is a contributing writer to Salon who also writes for The New Republic, The American Prospect, Politico, The Guardian and other publications. He lives in Los Angeles.)

Mortgage Applications Lowest Since 2000

 

Apr 30 2014, 7:55AM

 

The week ended April 25 was one of the slowest for mortgage application activity the industry has seen in years.  The Mortgage Bankers Association (MBA) said applications for both purchase mortgages and refinancing decreased and its Market Composite Index, a measure of overall mortgage applications volume, fell to its lowest level in almost 15 years.

 

The Composite decreased 5.9 percent on a seasonally adjusted basis from the week ended April 18 and was down 5 percent on a non-seasonally adjusted basis.  Refinancing activity fell 7 percent and purchase applications were off 4 percent from a week earlier on both a seasonally adjusted and an unadjusted basis and was 21 percent lower than during the same week in 2013.

 

Refinancing fell to exactly half of all mortgage applications from 51 percent the previous week.  This is the lowest share for refinancing since July 2009 and it is 13 percentage points below the level at the beginning of 2014.

 

Refinance Index vs 30 Yr Fixed

 

Purchase Index vs 30 Yr Fixed

 

“Both purchase and refinance application activity fell last week, and the market composite index is at its lowest level since December 2000,” said Mike Fratantoni, MBA’s Chief Economist. “Purchase applications decreased 4 percent over the week, and were 21 percent lower than a year ago. Refinance activity also continued to slide despite a 30-year fixed rate that was unchanged from the previous week. The refinance index dropped 7 percent to the lowest level since 2008, continuing the declining trend that we have seen since May 2013.”

 

Contract interest rates for fixed rate mortgages were lower or unchanged from the previous week while effective rates all decreased.  Interest rates for 5/1 adjustable rate mortgages did increase during the week with the average contract rate rising 10 basis points to 3.26 percent.  Points decreased to 0.35 from 0.36 and the effective rate decreased from the previous week.  Approximately 8 percent of mortgage applications were for the various adjustable rate products, essentially unchanged from the previous week.

 

The average contract interest rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances of $417,000 or less was unchanged at 4.49 percent, with points decreasing to 0.38 from 0.50.  The average contract interest rate for jumbo 30-year fixed-rate mortgages with balances greater than $417,000 decreased to 4.37 percent from 4.41 percent, with points dropping to 0.14 from 0.34.

 

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 4.17 percent from 4.20 percent with points decreasing to 0.10 from 0.41 and the rate for 15-year fixed-rate mortgages decreased to 3.53 percent from 3.55 percent.  Points for the 15-year decreased to 0.31 from 0.33.

 

MBA’s data is derived from its Weekly Mortgage Applications Survey which it has conducted since 1990 and which covers over 75 percent of all U.S. retail residential mortgage applications.  Survey respondents include mortgage bankers, commercial banks and thrifts.  Interest rate information is 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.

 

Fannie Mae and Freddie Mac must not Die: Bove

by:

Mar 25 2014, 9:46AM

The current plan to wind down Fannie Mae and Freddie Mac would result in lower housing prices for everyone. It would harm the United States economy by lowering growth. It would increase unemployment.

Despite this probability, the president and Congress seem to be intent on killing these companies – and the media and public do not seem to care. The prevalent belief is that these are failed companies with failed structures that exacerbated the American housing crisis that flared up in 2008 and therefore they must be expunged from the system.

In fact, the opposite is true. For eight decades, the system that they represent was successful in allowing tens of millions of Americans to own their own homes. The system was abused by politicians, regulators, and bankers beginning in the mid-1990s and this led to the downfall of these two giant companies. It was not structure but political and financial interference with proper underwriting that created their difficulties. The reaction to these misdeeds is to eliminate these companies without considering what this will do to housing and beyond housing, the economy.

Consider the current proposals, in Washington D.C.:

  • One set of ideas would result in the elimination of the 20- and 30-year self-amortizing mortgage.
  • Another concept would result in increasing the federal debt ceiling by more than $5.3 trillion and maintaining pressure to keep raising it going forward.
  • Another option would wipe away $350 billion of tax payer equity.
  • Other ideas would result in the complete nationalization of the housing finance industry.

What is certain is that under every one of the proposals, the concept of every American owing his or her own home is now gone. The result will be to create neighborhoods of rental units – or in my view, instant slums. Given the risks implied by the current proposals, one would think that Americans would want to know more about what is happening to home finance or, more specifically, the price of their homes. To date they are not interested – and neither is the media.

It is probable that the housing industry in the United States is the nation’s most subsidized sector. The problem, of course is how do we get from the most heavily subsidized system of home finance in the western world to a system that is not subsidized at all? Clearly if the transition is not handled properly, major dislocations will emerge and these dislocations will be very painful to all Americans.

If the current plan from the U.S. Treasury clears Congress and the courts, two things will happen: Fannie Mae and Freddie Mac will stop functioning on January 1, 2018; they will then enter a liquidation phase that may take at least 10 years.

This will not be good for anyone in this country. If there is no Fannie Mae and Freddie Mac, no bank will be willing to make 20- or 30-year self-amortizing mortgages. I have spoken to at least a dozen banks who feel very strongly about this issue – they just don’t view mortgage lending as the profit center it once was in the past. It’s more of a loss-leader to attract customers and cross-sell them other products.

Banks will simply be unwilling to put 30-year self-amortizing mortgages on their balance sheets, particularly at today’s interest rates. They will be willing to make 10- and 15-year adjustable-rate loans. The math here is frightening. The median income of American households is approximately $51,000. Under the new qualified mortgage rules, if you want to buy a home:

  • You must make a down payment equal to 20 percent of the value of the home to be purchased.
  • You are not allowed to pay more than 40 percent of your household income to meet principal and interest payments.

So, if the homeowner obtains a 30-year mortgage at a 4.25-percent fixed rate, then he/she/they can afford a home worth approximately $435,000. Conversely, if all they could get was a 10-year adjustable-rate mortgage at 6.25 percent (the average over the past 20 years), they could only afford a house worth $345,000 – a drop of $90,000.

You can play with the numbers any way you want but the bottom line is always the same: Affordability drops. Housing prices must come down. Moreover, if the American banks adopt the mortgage systems widely used in Canada, the 3-5-year balloon mortgage will be back.

Of course, no one believes that this will ever happen. However, they need to think again. The program to eliminate Fannie Mae and Freddie Mac is already in place. Unless Congress acts or the courts throw out the U.S. Treasury’s plan, the price of every home in the United States is about to fall. After the fact, people will care and the media will awaken from its somnolent state.

What should be done

To me it is very clear that the following should be done to minimize the impact of the government’s withdrawal from the home finance industry.

  • The conservatorship controlling Fannie Mae and Freddie Mac should be eliminated.
  • The companies should be returned to private sector ownership.
  • The government should exercise its warrants and sell the stock in the open market.
  • The dividend on the Series A preferreds should be returned to 10 percent.
  • The two companies should have as their mission:
    1) The elimination of their owned portfolios
    2) The expansion of their insurance roles without the full faith and credit of the nation behind this insurance
    3) The requirement that they give preference to insuring long duration fixed rate mortgages
  • The Senior Preferred Stock should be placed in a new trust dedicated to funding low-income housing.

None of this requires congressional or court actions. The president is able to do it by fiat. There is no massive government takeover of the housing finance industry and more importantly no massive bureaucracy created. It is simple, low cost, and would avoid disrupting the American public by forcing the prices of their homes lower.

– By Richard X. Bove

Richard X. Bove is an equity research analyst at Rafferty Capital Markets and the author of “Guardians of Prosperity: Why America Needs Big Banks,” which is due out on Dec. 26.

Ocwen stock brushes off more headline risk

Pile of Money

Easily survives spate of negative news

March 19, 2014

Ocwen Financial Corp. (OCN) is set to pay $268 million to California residents as part of $2.1 billion settlement of a Consumer Financial Protection Bureau investigation into its servicing practices.

According to the San Francisco Business Times, the California Department of Business Oversight recently made the announcement.

Despite this, and other recent negative headlines, Ocwen stock is holding steady.

“Deceptions and shortcuts in mortgage servicing will not be tolerated,” said CFPB Director Richard Cordray when the settlement was initially announced in December. “Ocwen took advantage of borrowers at every stage of the process. Today’s action sends a clear message that we will be vigilant about making sure that consumers are treated with the respect, dignity, and fairness they deserve.”

Ocwen’s stock was slightly down for the day, closing at 40.59. That price is down 0.10 points from Tuesday’s closing price of 40.69.

Ocwen is part of the HW 30, HousingWire’s proprietary index of 30 key housing finance-focused stocks. The HW 30 was down 0.86 points (-.08%) after rising by nearly 3.5 points (0.32%) earlier in the day’s trading.

Most of the HW 30 was down as were all the major market indices upon news of the Federal Reserve Bank’s announcement to continue the taper.

Two of the companies on the HW 30 didn’t take the day’s news too hard.

Zillow, Inc. (Z) was the highest gainer amongst the HW 30, rising 2.3% over the previous day’s closing price. Trulia, Inc. (TRLA) was also up by 2.0%.

Lennar Corp. (LEN) was also up for the day by 1.82%.

Fallout From Refinancing – NYTimes.com

 

 

Credit The New York Times

 

 

Homeowners who refinanced when fixed mortgage rates dropped below 4 percent will be less inclined to put their homes on the market as interest rates climb. And as a result, the limited property supply already impeding sales in many markets may not ease anytime soon.

A recent survey by Redfin, a national real estate brokerage based in Seattle, suggests that even those beneficiaries of low-refinance rates who do decide to move may want to make money renting out their homes while waiting for prices to rise, rather than sell right away.

Redfin questioned 1,900 people nationwide who said they planned to buy a home within a year; 42 percent said they already owned one, and of those, 39 percent said they planned to rent it out after they moved. The survey also asked buyers about their frustrations with the process, and “low inventory” topped the list.

 

 

Market dynamics are encouraging owners to keep their homes off the market for now, said Anthony Hsieh, the chief executive of loanDepot, a mortgage lender. “The rental market is very, very healthy today because a lot of Americans are locked out of the mortgage market,” he said. “And there is the promise that real estate is going to appreciate, because we’re just coming out of a deep recession.”

Of course, most borrowers can’t afford to buy another home without using equity from their first for a down payment. But Mr. Hsieh says that those who were able to take advantage of low refinance rates tend to be “premium consumers,” with very good credit and stable, above-average incomes.

“These are the folks that will think twice before they pay off that mortgage that is such cheap money,” he said. “They’re going to explore all types of options before they do that.”

They may want to consider a few other factors before taking on tenants, said Jed Kolko, the chief economist of Trulia, an online marketplace for residential real estate. First is the effort involved in managing a rental property. Second is the greater financial risk of owning two homes in the same market should home prices take a dive. And third is the changing nature of what’s driving rents.

“Over the past several years,” Mr. Kolko said, “the strong demand for renting single-family homes has been driven by people who lost homes to foreclosure but still wanted to stay in the same area. But now it is more driven by young people, and they are more urban focused.”

Patric H. Hendershott, a senior research fellow at the Institute for Housing Studies at DePaul University in Chicago, says he has witnessed the current allure of being a landlord firsthand. He lives in a housing community for older people, and he has recently noticed that residents who are moving to larger units are choosing to rent out their smaller ones.

But he views another scenario as more likely for low-rate holders: Those who can’t afford to move on without selling will essentially be “locked into” their homes. As interest rates rise, even buying another home at the same price will result in a higher mortgage payment.

In a recent analysis of the effect of lock-ins, Mr. Hendershott predicted that if rates continue to rise, the result will be substantial declines in housing turnover in strong housing markets, in which large numbers of households refinanced at low rates.

“We had a big episode of this in the 1980s,” he said, recalling when soaring interest rates locked in large numbers of homeowners.

Research cited in his analysis found that during that period, household mobility declined by 15 percent for every 2 percent increase in rates.

 

California Congressman on REO-to-rental warpath

 

Takano pushing four federal bodies to investigate

 

 

Congress

 

Longtime critic of REO-to-rental U.S. Rep. Mark Takano, D-Calif., is on the warpath Thursday, firing off letters to four federal entities asking for a detailed investigation into the growth of REO operations and REO-to-rental as an investment — and what they are doing to effectively regulate the emerging asset class.

Takano sent letters Thursday morning to the Consumer Financial Protection Bureau, the U.S. Department of Housing and Urban Development, the U.S. Securities and Exchange Commission, and Treasury Office of Financial Research.

Takano is concerned that rental prices are going up, and a surplus of investors in rentals — along with new rental-backed securities deals — could have the effect of artificially raising rental prices, making housing even more costly in parts of California and elsewhere.

Takano cites a Federal Reserve report, which claims if unchecked, investor activity in local housing markets may lower the quality of neighborhoods, while pushing up prices.

Investor purchasers have been an outsized figure in recent years in housing. Normally, about 85% of home sales are individuals purchasing with a mortgage, about 10% are all-cash sales, and about 3-5% are distressed sales. In 2013, something like 40% of home sales were individuals using a mortgage, 40% were all-cash, more than about 15% were distressed sales and 5% were flips.

Takano’s office wants a number of detailed questions investigated by the federal entities, including clarification on how single-family rental bonds are structured, what their metrics are, how their performance criteria could affect operations, and what is the risk that when bonds mature, the borrower would be unable to refinance the bonds and be forced to sell properties to repay bondholders.

From the SEC, Takano wants to know details about the investors who are purchasing the bonds, how the riskier tranches are sold and whether they are being re-packaged into collateralized debt obligations and resold with higher ratings.

He wants the CFPB to provide a list of local housing markets with high concentrations of rental properties linked to rental-backed securities, and analysis of common trends within these communities, so that they can examine the impact of REO-to-rentals and rental-backed securities on mortgage credit availability, rental prices, and housing prices in highly impacted communities.

Further, he wants the CFPB to perform a comparison between the rehabilitation, ongoing maintenance, and management costs that large investors spend on REO-to-rental properties with other actors, and how that impacts local neighborhoods.

From HUD and the Federal Housing Administration, Takano is asking for detailed information about the impact of large investor purchasers on first-time homebuyers’ ability to enter the market, and an evaluation of trends in FHA-approved mortgages in impacted communities.

To date only two REO-to-rental deals have been securitized.

Blackstone Group (BX) spent the past two years building an expansive portfolio of single-family rental homes via subsidiary Invitation Homes, spending $7.5 billion to acquire 40,000 houses. Blackstone then packaged rental income from single-family homes into a pass-through security, which is functionally not unlike a mortgaged-backed security.

Goldman Sachs (GS) started coverage on American Homes 4 Rent at a neutral rating and a price target of $18, reports say. American Homes 4 Rent has spent some $3.5 billion to acquire more than 21,000 rental homes.

“If vacancy rates rise or renters are unable to pay their rent, Blackstone and others may be forced to sell off vast amounts of property to make their investors whole,” Takano explained. “Selling a large amount of properties quickly would not only deprive renters of their home, but destabilize the market for homebuyers and send housing prices into a freefall.”

Jed Kolko, chief economist with Trulia, told HousingWire that the outsized and growing number of single-family rentals’ affect on rental rates in general is negligible.

Using American Community Survey data from 2005 and 2012, Kolko looked at the change in metro housing units that were single-family rentals.

Most metros had a large increase in the share of their housing stock that was single-family rentals. Among the 100 largest metros, Kolko looked at the top 10 with the biggest increases in institutional investments (from one to ten) – Las Vegas, Nev.; Phoenix, Ariz.; Cape Coral-Fort Myers, Fla.; Memphis, Tenn.; Riverside-San Bernadino, Calif.; Tuscon, Ariz.; El Paso, Texas; Lakeland-Winter Haven, Fla.; Fresno, Calif., and Sarasota, Fla.

 

Full Work Week and Rate Rally Boost Mortgage Apps

 

Mar 5 2014, 8:45AM

The volume of mortgage applications increased during the week ended February 28 for the first time since late January.  This good news was muted slightly by the fact that the previous week had been a holiday for many with government offices and schools closed.

The Mortgage Bankers Association said its Market Composite Index increased 9.4 percent on a seasonally adjusted basis from the week ended February 21 and 11 percent on an unadjusted basis.  The seasonally adjusted Purchase Index was 9 percent higher than the previous week but MBA noted that week was not adjusted to account for the President’s Day holiday.  The seasonally adjusted Purchase Index during the most recent week was 6 percent above the level during the last non-holiday week which ended February 14.  The unadjusted Purchase Index was 19 percent lower than during the same week in 2013.

Purchase Index vs 30 Yr Fixed

The Refinance Index was up 10 percent from the holiday week but was 3 percent lower than two weeks earlier.  Refinancing had a market share of 57.7 percent compared to 58 percent the previous week, the lowest since last September.

Refinance Index vs 30 Yr Fixed

Both average contract and effective rates decreased last week for all mortgage products.  The average contract interest rate for a 30-year fixed-rate mortgage (FRM) with a conforming loan balance of $417,000 or less decreased to 4.47 percent with 0.28 point.  The previous week the rate was 4.53 percent with 0.31 point.

Jumbo 30-year FRM (loan balances in excess of $417,000) had an average rate of 4.37 percent, 10 basis points below the average rate the previous week.  Points increased to 0.20 from 0.13.

Thirty-year FRM carrying FHA guarantees had an average rate of 4.13 percent with 0.13 point.  The previous week the average rate was 4.17 percent with 0.20 point.

The rate for 15-year FRM was 3.52 percent, down 4 basis points from the previous week.  Points decreased to 0.18 from 0.28.

Adjustable rate mortgages (ARM) held at an 8 percent share of mortgage applications for the fifth straight week.  The contract rate for the most widely offered ARM, the 5/1 hybrid, was 3.09 percent with 0.38 point.  The rate the previous week was 3.17 percent with 0.31 point.

MBA’s Weekly Mortgage Application Survey has been conducted since 1990.  It surveys mortgage bankers, commercial banks, and thrifts and covers over 75 percent of U.S. retail residential mortgage applications.  Base period and value for all indexes is March 16, 1990.  Interest rates are quoted for 80 percent loan-to-value ratio loans and points include the origination fee.


Mortgage Rates Continue Higher as Weather Blocks Progress

February 21, 2014
Market Summary

Mortgage rates continued higher this week as weather-related effects on financial markets deprived interest rates of one of their primary sources of support.  This is the second straight week of increases and the 3rd week with no improvement.  Before that, rates had fallen for 5 straight weeks.

In terms of the most prevalently quoted conforming 30yr fixed rate for ideal scenarios (best-execution), both 4.375% and 4.5% were in play this week with 4.5% taking over by Thursday.

Unfortunately, there’s no perfect way to separate weather-related distortions from reality, and this is currently serving to keep the range of movement relatively narrow for mortgage rates and US Treasuries.  Also unfortunate is the fact this weather dynamic creates something of a no-win situation for interest rates because only the negative data (which would help rates) is suspect due to weather, while positive data (which would hurt rates) would be seen as strong enough to overcome any weather-related drag.

That’s not to say rates can’t improve, but gains are limited, and more of a serendipitous by-product of market considerations that are not dependent on economic data.  Strong data, on the other hand, could have a noticeable negative effect.

Matthew Graham, Chief Operating Officer, Mortgage News Daily

Complaints Surging, Modifications Decreasing As Loan Servicers Snap Up Mortgages From Banks – Consumerist

 

(RAWRS)

(RAWRS)

It’s been a rough few years for homeowners. Since the collapse of a housing bubble in 2008, mortgage-holders have been yanked around every which way by the banks that own their loans. Mega-banks like Wells Fargo and Bank of America have earned their reputations for being impenetrable, hostile bureaucracies to their customers. The industry has done everything from issuing loans that borrowers had no chance of repaying, to “losing” paperwork that distressed borrowers endlessly resend, to foreclosing on borrowers who have actually paid, and even discriminating based on race and gender.

But it’s not just the banks making life harder for homeowners anymore. Loan servicers are buying up more mortgages every day, and borrowers are plagued with just as many problems from these third-party companies as they have been from the big banks.

 

As the New York Times reports, loan servicing companies now own about 17% of the mortgages in the country. While that may not sound like a huge number, these servicing companies held only 3% of mortgages in 2010. That’s an enormous change in a very few years.

 

It’s also a change that’s proving difficult for consumers that need help. It’s hard enough for a borrower to request and receive a loan modification from a big bank; getting one from a servicer, when your loan keeps being handed off among them, can be even harder. By the time you finally have someone agreeing you’ve sent the right paperwork, you might have to do it all over again with yet another company.

 

Borrowers with two huge servicing companies, Ocwen and Nationstar, have particularly low chances of seeing a modification approved for their mortgages. While Bank of America has approved roughly 44% of modifications since 2009, the NYT says, Ocwen has approved just 23% and Nationstar, 22%.

 

Meanwhile, complaints against the servicing companies have been increasing. One couple who won a modification from BoA told the Times that it vanished into thin air when Nationstar took over managing their mortgage a few months later. Another homeowner described to the NYT her experience being bounced among three servicers in less than two years: “I either get conflicting answers or no answer at all.”

 

In January, the Consumer Financial Protection Bureau announced new rules requiring mortgage servicers to provide actual service to customers in need. The deputy director of the CFPB, Steve Antonakes, said at a conference on Wednesday that he was “deeply disappointed by the lack of progress the mortgage servicing industry has made” in helping consumers.

 

“There will be no more shell games where the first servicer says the transfer ended all of its responsibility to consumers and the second servicer says it got a data dump missing critical documents,” Antonakes added, saying that situations where servicers refused to honor loan modifications “would not be tolerated,” and that loan handoffs should be “seamless” for consumers.

 

Rep. Maxine Waters (D-CA), the top Democrat on the House Financial Services Committee, has also urged regulators to extend greater oversight over mortgage servicers.

 

Loan Complaints By Homeowners Rise Once More [New York Times]
Official ‘Deeply Disappointed’ by Mortgage Servicing Problems [Wall Street Journal]

 

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