U.S. 30-Year Mortgage Rates Increase for a Second Week – Bloomberg

Mortgage rates for 30-year U.S. loans climbed for a second week, cutting into affordability as the housing recovery shows signs of cooling.

The average rate for a 30-year fixed mortgage was 4.33 percent this week, up from 4.28 percent, Freddie Mac said today. The average 15-year rate rose to 3.35 percent from 3.33 percent, the McLean, Virginia-based mortgage-finance company said.

While the job market is improving, higher prices and borrowing costs are making it more expensive to own a home. Monthly payments on a median-priced three-bedroom home — including mortgage, insurance, taxes and maintenance — rose an average of 21 percent in the fourth quarter from a year earlier, according to an analysis of 325 U.S. counties by RealtyTrac released today. Mortgage rates jumped to a two-year high in August from near-record lows in May, Freddie Mac data show.

“The cost of financed homeownership is becoming dangerously disconnected with still-stagnant median incomes,” Daren Blomquist, vice president at Irvine, California-based RealtyTrac, said in the report.

Starts for single-family houses slumped in January, in part because of unusually harsh weather in much of the U.S. Builders began work on 573,000 homes at an annualized rate last month, down 15.9 percent from December and the fewest since August 2012, Commerce Department data issued yesterday show.

Confidence among homebuilders dropped in February by the most on record as snowstorms on the East Coast limited prospective buyer traffic, according to the National Association of Home Builders/Wells Fargo sentiment gauge released this week.

To contact the reporter on this story: Prashant Gopal in Boston at pgopal2@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net

Refinances Seen Falling to 38 Percent Market Share in 2014

Feb 4 2014, 1:16PM

Homeowners who refinanced through Freddie Mac in 2013 continued to display fiscal restraint, choosing fixed rate mortgages, keeping essentially the same mortgage balance, and in many cases opting for shorter-term loans to build equity more rapidly.  In doing so homebuyers who refinanced during the year will save approximately $21 billion on net over the first 12 months of their new loans.

The results of Freddie Mac’s fourth quarter refinance analysis showed borrowers are continuing to take advantage of low rates, with the refinancing shaving an average of about 1.5 percentage points off of their old rate; or an average reduction of 25 percent.  On a $200,000 loan this translates into $3,000 in interest over 12 months.  Homeowners who refinanced through the Home Affordable Refinance Program (HARP) benefited from an average rate reduction of 1.7 percentage points and will save an average of $3,300 in interest during the first 12 months.

Thirty-nine percent of those who refinanced during the fourth quarter of 2013 shortened the term of their loan compared to 37 percent in the third quarter.  This was the highest percentage since 1992.  Homeowners who refinanced through HARP continued to take advantage of incentives offered by the program to shorten loan terms with 42 percent choosing to do so compared to 35 percent of those financing outside of HARP.  Only 5 percent of borrowers picked longer loan terms for their new loans.

Only $6.5 billion in net home equity was cashed out through refinancing in the fourth quarter compared to $7.1 billion in the third quarter.  . The peak in cash-out refinance volume was $84 billion during the second quarter of 2006. Another $6.1 billion was used to consolidate home equity loan balances into the first mortgage at the closing table.  About 83 percent of those who refinanced their first-lien home mortgage maintained about the same loan amount or lowered their principal balance by paying in additional money at the closing table. That’s just shy of the 88 percent peak during the second quarter of 2012.

During the entire year the total cash-out from refinancing was $32.1 billion compared to $320.5 billion during the 2006 peak.  Adjusted for inflation, annual cash-out volumes during 2010 through 2013 have been the smallest since 1997.

More than 95 percent of refinancing borrowers chose a fixed-rate loan. Fixed-rate loans were preferred regardless of what the original loan product had been. For example, 94 percent of borrowers who had a hybrid ARM refinanced into a fixed-rate loan during the fourth quarter. In contrast, only 3 percent of borrowers who had a fixed-rate loan chose an ARM.

The median age of a mortgage that was refinanced during the quarter increased to 7.0 years, the oldest median since Freddie Mac began its analysis.  The company said this reflected the duration of prevailing low interest rates; that is few homeowners who took out their mortgages within the last four year have much incentive to refinance.

Frank Nothaft, Freddie Mac vice president and chief economist said, “Our latest refinance report shows the refinance boom continued to wind down as the pool of potential borrowers declined and as mortgage rates increased during the second half of 2013. We are projecting the refinance share will be just 38 percent of all originations in 2014 as refinance falls off further and the emerging purchase market consumes a bigger piece of the pie.”

Freddie Mac’s refinance analysis is based on a sample of properties on which Freddie Mac has funded two successive conventional, first-mortgage loans with the latest being for refinance rather than for purchase. During the fourth quarter of 2014, the refinance share of applications averaged 56 percent in Freddie Mac’s monthly refinance survey, and the ARM share of applications was 10 percent in Freddie Mac’s monthly ARM survey, which includes purchase-money as well as refinance applications.

Higher Rates Should Lead to ARM Resurgence Freddie Mac Says

Jan 28 2014, 12:08PM

Adjustable rate mortgages remain at historic lows Freddie Mac said today as the company released results of its 30th Annual Adjustable-Rate Mortgage (ARM) Survey of prime loan offerings.  The 1-year ARM has remained essentially unchanged since last year’s survey while initial period rates on hybrid loan products rose. This, Freddie Mac said, largely reflects term structure movements in the rest of the capital markets and the Federal Reserve’s monetary policy, which has kept the federal funds rate and other short-term interest rates exceptionally low while allowing a rise in medium- and longer-term interest rates from last year.

Hybrid ARMs have a fixed rate for an initial period ranging from three to 10 years and then adjust annual thereafter.  Nearly all of the ARM lenders participating in the survey offered a hybrid with the 5/1 far and away the most common of the products both in terms of availability and use, followed by the 3/1, the 7/1 and the 10/1.  Less common are ARMs with longer repricing periods such as a 5/5 which features rate adjustments every five years for the life of the loan.

The survey, which was conducted January 6 to January 10, showed that the largest rate increases were for hybrids with longer initial fixed-rate periods.  The 7/1 ARM rose by 0.71 basis points  from last year and the 10/1 was up 0.76 basis points.

The savings in early January 2014 for a borrower taking a 30-year 5/1 hybrid ARM instead of a 30-year fixed rate mortgage (FRM) was about 1.36 percentage points.  This would result in a monthly principal and interest payment during the first five years that is about $194 less than for the fixed rate for a $250,000 loan.

Frank Nothaft, Freddie Mac vice president and chief economist said, “Homebuyers have preferred fixed-rate mortgages the past few years because of the low interest rates and the certainty of the monthly principal and interest payment. As longer-term rates rise, ARMs with their lower initial interest rates will become more appealing to loan applicants. Hybrid ARMs are particularly attractive because they have an initial extended fixed-rate period of 3 to 10 years.”

Freddie Mac surveyed 106 ARM lenders and found that 84 offered ARMS indexed to Treasury bills and 22 offered London Interbank Offered Rate (LIBOR)-indexed ARMs.  The company said that generally large national lenders offered LIBOR based loans while community and regional lenders were more likely to offer those based on Treasury indices.  Thus, even though offered by fewer lenders, the LIBOR-based product accounted for more than one-half of ARM originations. LIBOR-indexed ARMs generally had a lower margin (about 0.5 percentage points lower) than Treasury-indexed ARMs, a similar initial interest rate, but a higher index rate (about 0.5 percentage points higher).

Worst rental affordability crisis that this country has known – Yahoo Homes

 

CNBC

 

Since the housing crisis began in 2008, approximately 4.6 million homes were lost to foreclosure, according to CoreLogic. The vast majority of those homeowners became renters. Even as housing recovered, credit tightened, pushing even more potential buyers out of homeownership and into rentals, both apartments and single-family rental homes.

There are now 43 million renter households, or 35 percent of all U.S. households, the highest rate in over a decade for all age groups, according to Harvard’s Joint Center for Housing Studies; 4 million more renters today than there were in 2007. For those aged 25 to 54, rental rates are the highest since the center began record keeping in the early 1970s.

As a result, rental vacancies have fallen dramatically, and rents have skyrocketed.

“We are in the midst of the worst rental affordability crisis that this country has known,” said Shaun Donovan, U.S. Secretary of Housing and Urban Development.

Half of all U.S. renters today pay more than 30 percent of their incomes on rent. That’s up from 18 percent a decade ago, according to the Harvard center. For those in the lowest income brackets, the jump is even worse.

“Over four years, a 43 percent increase in the number of Americans with worst-case housing needs,” said Donovan. “Let’s be clear what that means, they’re paying more than half of every dollar they earn for housing.”

The numbers are not lost on Annie Eccles, who is in her late 20s. She has been renting for over two years, and the rent on her Bethesda, Md., apartment has increased by the maximum the county allows every year.

“It’s frustrating because we pay for rent, we also pay for parking, and just knowing that every June it’s going to increase significantly, it’s frustrating,” said Eccles.

And Eccles pays almost as much each month on student loan debt as she does in rent. Put together, it makes it very hard for her and her husband to save up enough to buy a home of their own.

“It would be hard buying in this area, just because it’s so expensive,” she added.

Most younger Americans, like Eccles, want to be homeowners someday. While so-called millennials favor mobility and city living, they still see homeownership as a goal.

“Nineteen out of 20 people that are surveyed say that they intend to buy a home at some point in the future, if they’re under the age of 30,” said Eric Belsky, director of Harvard’s Joint Center for Housing Studies. “There is no question that the will toward homeownership remains there, it’s the way.”

Home prices are rising faster than expected, due to heavy investor demand, ironically in single-family rental housing. While more than 3 million owner-occupied homes are now investor-owned rentals, there is still a lack of supply in the market. New rental stock is coming soon, but demand is not easing. Renters may want to be buyers, but many still can’t, due to rising home prices and mortgage rates.

“You add in other things, like higher student debt for many people, you add in the fact that incomes for low- and moderate-income people have not been going up as fast as inflation, and you have a situation where it’s going to be very difficult to buy homes,” said Belsky.

How QM Harms Homeowners -House Committee Hearing

Jan 14 2014, 4:14PM

The House Financial Services Committee heard testimony from five persons, almost all representing mortgage lenders, at a hearing today entitled How Prospective and Current Homeowners Will Be Harmed by the CFPB’s Qualified Mortgage Rule.  Given the title of the hearing it is not surprising that four of the five spoke out against the regulations.

Jack Hartings, President and CEO of The Peoples Bank Company and Vice Chairman of the Independent Community Bankers of America told the committee that reform of QM is a key plank of ICBA’s Regulatory Relief Agenda.

Mortgage lending by community banks represents approximately 20 percent of the national mortgage market and is often the only source of mortgage lending in the small communities they serve, he said.  The 20 percent actually understates the significance of their mortgage lending as they make a larger share of their home purchase loans to low-or moderate-income borrowers or borrowers in low- or moderate-income neighborhoods and make a larger share of home purchase loans than loans for other purposes such as refinancing or home improvement.

Hartings said there is question that the QM rule will adversely affect his own bank’s mortgage lending even though it qualifies as a small creditor making fewer than 500 mortgage loans annually and having less than $2 billion in assets.  “Even though my asset size is well below the $2 billion, in 2012 I made 493 mortgage loans.  We believe this threshold is far too low and is not consistent with the asset threshold.”   He later pointed out that such low thresholds could prevent his bank from expanding its lending as the economy recovers.

Non-QM loans will be subject to significant legal risk under the Ability to Repay (ATR) rule and the liability for violations is draconian, he said.   Non-compliance with ATR could also serve as a defense to foreclosure if the loan is deemed not to be a QM loan and small community banks do not have the legal resources to manage this degree of risk. Thus these banks, he said, will not continue to make some of the loans they have made in the past such as low dollar amount loans, balloon payment mortgages, and higher priced mortgage loans.

The full impact of ATR goes beyond QM compliance as banks must still analyze each loan for ATR compliance, a costly and time consumer procedure.  It is necessary to expect that regulators will want to see documentation of the eight ATR underwriting factors and if they are not sufficient the asset could be downgraded and subject to high capital requirements.

Without “small creditor” status, he said, his loans will be subject to a 43 percent debt-to-income limitation, a lower price trigger for “high cost” QM status which carries higher liability risk, and restrictions on balloon loans.  ICBA is urging Congress to raise the loan volume threshold. The problem could be easily addressed by disregarding loans sold into the secondary market in applying the threshold,” Hartings said.

Daniel Weickenand CEO, Orion Federal Credit Union testifying on behalf of The National Association of Federal Credit Unions said that credit unions have always been some of the most highly regulated of all financial institutions, facing restrictions on who they can serve and their ability to raise capital and the Federal Credit Union Act has strict consumer protection rules.  Despite the fact that they were not the cause of the financial crisis, they are still firmly within the regulatory reach of rules promulgated by CFPB.

The impact of this growing compliance burden is evident as the number of credit unions continues to decline, he said, dropping by more than 900 institutions since 2009.  One cause of this decline is the increasing cost and complexity of complying with the ever-increasing onslaught of regulations.  “We remain concerned about the QM standard and that this rule will potentially reduce access to credit and hamper the ability of credit unions to continue to meet their member’s needs,” he said.

A number of mortgage products sought by credit union members and offered by credit unions are non-QM loans and may disappear from the market.  He said a forty-year mortgage loan, a product sought by credit union members in high costs areas, exceeds the maximum loan term for QMs, and because of a problematic definition, a number of credit unions make mortgage loans with points and fees greater than 3% because they can leverage relationships with affiliates to get the best deal for their members.

Because a credit union will not receive any presumption of compliance with the ability-to-repay requirements for a non-QM loan, the least risk to credit unions would be to originate only QM loans.  His own credit union, Weickenand said, has decided to go that route and a recent NAFCU survey revealed that a majority of credit unions will cease or greatly reduce their offerings of non-QMs.

Weickenand said that NAFCU strongly supports bipartisan pieces of legislation in the House (H.R. 1077/ H.R. 3211) to alter the definition of “points and fees” prescribed by the QM standard and an exemption from the QM cap on points and fees: (1) affiliated title charges, (2) double counting of loan officer compensation, (3) escrow charges for taxes and insurance, (4) lender-paid compensation to a correspondent bank, credit union or mortgage brokerage firm, and (5) loan level price adjustments which is an upfront fee that the Enterprises charge to offset loan-specific risk factors such as a borrower’s credit score and the loan-to-value ratio.

Like Hartings, he supports an increase in the exemption’s asset size and 500 mortgage thresholds.  He said many credit unions are approaching one or both thresholds which will render the small lender exemption moot for them.

The Association also believes that all mortgages held in portfolio should be exempt from the QM rule not just small credit unions and would like to be able to continue to offer mortgages of 40 years or less duration as QMs.  NAFCU also supports Congress directing the CFPB to revise aspects of the ‘ability-to-repay’ rule that dictates a consumer have a total debt-to-income (DTI) ratio of 43 percent or less which will prevent otherwise healthy borrowers from obtaining mortgage loans and will have a particularly serious  impact in rural and underserved  areas where consumers  have  a limited number of options.

Bill Emerson, CEO of Quicken Loans and Vice Chairman of the Mortgage Bankers Association spoke on behalf of the trade group, starting his testimony by saying, “I can tell you categorically that Quicken Loans, like the overwhelming majority of lenders, will not lend outside the boundaries of QM. In fact, even if we wanted to, we wouldn’t be able to make non-QM loans because there is no discernible secondary market for them. The only place these loans can be kept is on a bank’s balance sheet.”

“Beyond that, the liability for originating non-QM is simply too great. Claimants can sue for actual and statutory damages, as well as a refund of their finance charges and attorney’s fees, and there is no statute of limitations in foreclosure claims. By MBA’s calculations, protracted litigation for an average loan can exceed the cost of the loan itself.

Given this uncertainty, at least for the foreseeable future he said non-QM lending is likely to be limited to three categories; loans where there are unintended mistakes, higher balance and non-traditional loans to wealthier borrowers, and loans made by a few lenders to riskier borrowers, but at significantly higher rates. He said the rate sheets he had seen suggest borrowers could pay an interest rate of 9-10 percent for non-QM loans.

Emerson said it remains very important to make adjustments to the QM rule. “The CFPB (Consumer Financial Protection Bureau) deserves enormous credit for working with all stakeholders, lenders and consumer groups alike, and fashioning a rule we think is a substantial improvement over Dodd-Frank. We are also grateful the Bureau is open to making additional revisions in the near future.”

There is a major problem with the 3 percent cap on points and fees for QM eligibility.  Because so many origination costs are fixed, a lot of smaller loans, particularly in the $100,000 to $150,000 range, will trip the 3 percent cap and fall outside the QM definition, pricing consumers, especially first-time homebuyers and families living in rural and underserved areas, out of the market.

“Additionally, the final rule picks winners and losers between affiliated and unaffiliated settlement service providers, even though their fees are subject to identical regulation. At Quicken Loans, we have chosen to affiliate with title and other service providers to ensure our customers have the best loan experience and that there are no surprises at the closing table.”  His company, he said, has won awards because its affiliated arrangements have led to a smooth closing process.

Emerson said the MBA urges the House to promptly pass H.R. 3211, the Mortgage Choice Act.

Michael D. Calhoun, President of the Center for Responsible Lending was the only one of the five presenting testimony in favor of the CFPB’s rules.  Calhoun said those rules strike the right balance of providing borrower protections while also ensuring access to credit.

The QM rule covers 95 percent of current originations according to Moody Analytics he said that this broad coverage is because CFPB established four different pathways for a mortgage to gain QM status. The first uses a 43 percent back-end debt-to-income ratio. A second is based on eligibility for purchase by Fannie Mae and Freddie Mac and a third is specifically crafted for small creditors holding loans in portfolio. Lastly, there is a pathway for balloon loans as well. This multi-faceted approach will maintain access to affordable credit for borrowers.

“This broad definition is key for borrowers, including borrowers of color who represent 70% of the net household growth through 2023.  The broad definition means that borrowers will not be boxed out of getting a home loan and will also benefit from the protections that come with a Qualified Mortgage.  In addition, several lenders have said they will originate mortgages that do not meet QM requirements, holding them in their own portfolios.  Calhoun said he expects this will only grow over time.

As a whole, these rules continue the CFPB’s approach of expanding access to credit while ensuring that loans are sustainable for the borrower, the lender and the overall economy, Calhoun said.

Also testifying was Frank Spencer, President and CEP of Habitat for Humanity’s Charlotte, North Carolina Chapter.  Spencer was primarily asking for relief from QM and ATR requirements for his organization which currently services approximately 780 mortgages.  Spencer said that despite the fact that the mortgages are non-interest bearing and that most of the chapters that originate them fall far below the thresholds of QM, some of the charity’s operations trigger the requirements and present significant liability for its officers and community partners.

Common Short Sale Myths Dispelled

Jan 13 2014, 12:59PM

Thanks to key changes in the program, completing a short sale through Freddie Mac is taking less time than ever before.  The company’s Senior Vice President Tracy Mooney, writing in Freddie Mac’s Executive Perspectives Blog, said that despite the improvements and that short sales are an important tool for helping distressed homeowners avoid foreclosure and eliminate their mortgage debt, they remain a mystery to many who might benefit from them.  In her occasional column “Dispelling the Myths” Mooney lays out eight misconceptions about short sales and the facts she says every distressed homeowner should know.

The first myth is that the homeowner will be responsible for the entire amount owed on the mortgage.  Under the company’s Standard Short Sale program, borrowers who complete a short sale in good faith and in compliance with all laws and Freddie Mac policies will not be pursued for the after-sale mortgage balance.  However, if a borrower has the financial ability he/she may be asked to make a one-time payment or sign a promissory note for a portion of that balance.

Many homeowners think a short sale is not possible for an investment property or second home.  Mooney said the important factor is whether the borrower meets the program’s eligibility requirements, not the status of the property itself.

The third myth is that a homeowner must be delinquent on the mortgage to be eligible for a short sale.  A homeowner who is current must meet the general eligibility requirements for the program and have a debt-to-income ratio greater than 55 percent.  In addition, in this case the property must be the homeowner’s primary residence.

Homeowners sometimes presume they won’t qualify because of their servicer’s strict guidelines about short sales.  But Mooney says that Freddie Mac has increased the authority of its servicers to approve short sales for qualifying financial hardships for homeowners who are past due or current on their mortgage.  Servicers also now have independent authority to approve short sales without a separate and potentially time-consuming review by the mortgage insurance company.

Myth #5 is that a short sale will affect a homeowner’s future eligibility for a mortgage.  If the financial difficulties arose from circumstances outside the borrower’s control such as job loss or a health emergency he/she may be eligible for a new Freddie Mac mortgage with a minimum of 24 months acceptable credit after the short sale.  If the short sale was necessitated by personal financial mismanagement the buyer might need 48 months of acceptable credit to obtain a new Freddie Mac loan.  Mooney advises all homeowners to begin discussions with a lender two years after the short sale closes to find out about specific requirements in their individual case.

Many people think that short sales can take a long time but Mooney reiterates that under the new guidelines timelines are shorter than ever.  Servicers now have 30 days to make and communicate a decision once they receive a completed application and, once approved, the sale should take less than 60 days to close.  She says that working with an experienced real estate agent might further speed the process

It is also a mistaken belief that having a second mortgage will make a short sale impossible.  If other eligibility requirements are met a second mortgage is not necessarily a barrier because Freddie’s short sale program can offer second lien holders up to $6,000 to release their lien and extinguish the underlying debt

The final myth is that a short sale will ruin a homeowner’s credit. While only the credit reporting agencies can determine how a credit score will be computed it is possible that a short sale could be less damaging than a foreclosure.  Even if this isn’t the case a short sale can give a homeowner time to arrange other housing and exit homeownership gracefully.

Mooney says a homeowner should consider a short sale if

  • He/she does not qualify for any options to keep the home;
  • Needs to move in order to keep or obtain employment.
  • Doesn’t think the home will sell at a price that will cover the outstanding mortgage amount.

The first step in the process is to determine if Freddie Mac owns the mortgage by using its  Loan Look-up Tool.   If it does the next step is to contact the mortgage servicers.  Contact information, Mooney says, should be listed on the monthly mortgage statement or in the coupon book.

Housing Scorecard: Nearly 6 Million Fewer Underwater as Prices Hit 2005 Levels

Jan 13 2014, 10:49AM

Rising home prices are continuing to drive down the number of homeowners who are underwater according to the December Housing Scorecard published by the Departments of Treasury and Housing and Urban Development (HUD).  HUD Associate Deputy Assistant Secretary for Economic Affairs Edward J. Szymanoski said, “Since the beginning of 2012, the number of homeowners underwater has declined by 5.7 million and homeowners’ equity has risen by 55 percent to $9.7 trillion.”  Homeowners’ equity jumped $418 billion, or 4.5 percent, to $9.669 trillion in the third quarter of 2013, returning to a level slightly higher than at the end of 2003.

As of October 2013, the Federal Housing Finance Agency (FHFA) purchase-only index rose 8.2 percent from last year and ticked up 0.5 percent (seasonally adjusted) from September, showing that home values are now on par with prices in early 2005. The S&P/Case-Shiller 20-City Home Price Index for October posted returns of 13.6 percent over the past 12 months and was up 0.2 percent (not seasonally adjusted) over September, indicating that home values are at the same level as in mid-2004.

The Scorecard notes there is much good news to report but the overall recovery remains fragile.  Szymanoski said there remains more work to do to address the 6.4 million homeowners who remain underwater; “Nevertheless, these are encouraging signs that the housing market recovery is providing millions of American homeowners with more economic security.”

The Scorecard is a monthly recap of housing data from sources such as FHFA and S&P Case-Shiller as well as RealtyTrac, the National Associations of Home Builders and Realtors®, and the Census Bureau, most of which has been previously reported by MND.  It also contains by reference the monthly record of the Making Home Affordable (MHA) Program and nearly half dozen initiatives operating under that umbrella.

The MHA report this month contains data through November 2013 and this month spotlights the Second Lien Modification Program (2MP).  That program was expanded in September and now, when a borrower’s first lien is modified under the GSE Standard Modification requirements (which applies to loans owned or guaranteed by Fannie Mae or Freddie Mac) and the first lien satisfies the Home Affordable Modification Program (HAMP) eligibility criteria, the 2MP servicer must offer to modify or extinguish the borrower’s second lien under 2MP.

The report says that more than 123,000 second lien modifications have now been completed through 2MP and homeowners with an active permanent 2MP modification save a median of $153 per month on their second mortgage and a median total of  $784 on first and second mortgages, 41 percent of the pre-modification payment.  Homeowners who receive a full extinguishment of their second lien receive a median total first and second lien monthly payment reduction of $1,047, or 53 percent of their before-modification payment.

MHA says the various programs it operates, HAMP, 2MP, Home Affordable Foreclosure Alternatives (HAFA) and the UP Forbearance Program, have assisted 1.9 million homeowners since they were initiated in 2009 and later.  Of these, 1.3 million were modifications done through HAMP.  Since the last HAMP report there have been 22,814 permanent first lien modifications initiated and a total of 35,869 assisted through all MHA programs except its . Principle Reduction Activity (PRA).   That program has eliminated $10,124,838,950 in outstanding principal and another $2.5 billion in principle has been reduced outside of PRA.  GSE loans are not eligible for principle reduction.

Mortgage Rates Tumble to 1-Month lows After Jobs Report

Jan 10 2014, 3:25PM

Mortgage rates fell abruptly today, following a significantly weaker than expected Employment Situation report.  The data hit markets before most lenders had rates available for the day, but most of them still held back on the first round of rate sheets.  As trading levels in the secondary mortgage market only improved into the afternoon, lenders released new rate sheets reflecting more of the day’s movement.  Ultimately, it’s been enough to bring 4.5% back into view as a best-execution rate, though 4.625% remains at least as prevalent.

Today’s movement ends up being fairly uncomplicated.  Heading into late December, rates leveled-off into an extremely flat pattern.  This carried into the new year and it became increasingly clear that it would be up to today’s big jobs report to cast a vote for the next move to be higher or lower.

All major economic reports have a published consensus level, readily available from the likes of Reuters and Bloomberg.  These are median values based on surveys of economists and other forecasters which essentially amount to the market’s expectations.  The farther away from those expectations a given piece of data falls, the more of an impact it can have on markets.  The more important the report, the more magnified the effect.

With that in mind, today’s Employment Situation report is THE most important piece of recurring economic data and the margin by which it missed expectations is among the largest ever.  Weaker employment data tends to push rates lower and today was obviously no exception.

While that’s great news in the short term, the conclusion is less obvious in the longer term.  The Fed has already begun tapering and it will probably take more than one jobs report (no matter how far off the mark it is) to even get markets considering a potential change in course.  As of right now, this report amounts to a very welcome push back against the broader uptrend in rates though the uptrend remains intact.  The question simply concerns how long the push back will last.  The longer it does and/or the bigger it gets, the riskier it is to float.
Loan Originator Perspectives

“Todays employment data comes just in time to save us from taking another significant move higher in rates. I would say wisdom will lean towards locking in these gains as they probably will be short lived, but there may be more to this recent move in the immediate near future. The SAFE BET -If closing within 30 days you should should be locking your loan as a defensive move on a bullish day, longer than 30 may consider the same as we are in a very volatile and unfriendly environment for rates. ” –Constantine Floropoulos, Quontic Bank

“All eyes were on highly anticipated Jobs Report that was released this morning, and report was considered a major miss with only 74k new jobs created in December with initial estimates closer to 200k. 10 year Treasury has continued to hover around 3.00%, and the impact of this report has moved the 10 year below levels seen last before the FOMC tapering announcement. Today’s report has shifted the momentum towards lower interest rates, and Retail Sales next week can further confirm this momentum swing. Cautiously floating is your best bet. ” –Justin Dudek, Senior Loan Officer, Supreme Lending

“Remarkably poor NFP report today as job growth was the smallest since January 2011. Mortgage rates predictably improved, but it’s common for secondary departments to initially hold back a portion of large one day gains. With that in mind, it’s possible that Monday’s pricing may be better than today’s. Not ready to concede that rates will plummet in the days to come, but today’s data sure indicates the economy still faces challenges.” –Ted Rood, Senior Mortgage Planner, Wintrust Mortgage

“A pleasant surprise today with a horrible jobs number printing. Rates have actually improved noticeably in price. The talking heads on various financial news networks are saying this is an outlier on the recent data trends for jobs and that revisions next month will show the Dec # to be wrong, but we’ll take it for the short term. Locking was still the safe bet yesterday and if the downward trend continues, renegotiations on locks will take place. For now the market might be spooked into a rate retreat and next month we’ll know for sure. Locking in gains and hoping for more is recommended in my opinion. ” –Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc. NMLS # 107434

 
Today’s Best-Execution Rates

  • 30YR FIXED – 4.5 – 4.625%
  • FHA/VA – 4.25%
  • 15 YEAR FIXED –  3.5%
  • 5 YEAR ARMS –  3.0-3.50% depending on the lender

Ongoing Lock/Float Considerations

  • The prospect of the Fed reducing its asset purchases weighed heavy on interest rates for the 2nd half of 2013, causing volatility and generally pervasive upward movement.
  • Tapering ultimately happened on December 18th, 2013.  Markets had done so much to come to terms with it ahead of time that it essentially just confirmed the the 6 month move higher in rates, but didn’t make for another immediate spike higher.
  • That said, we should assume that we’re still in a rising rate environment on average with scattered pockets of recovery providing clear opportunities to lock.
  • (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).

 

1 in 5 Homeowners Drowning

 

9.3 million U.S. residential properties are underwater

 

 

underwater homeowner

 

RealtyTrac released its U.S. Home Equity & Underwater Report for December 2013, which shows that 9.3 million U.S. residential properties were deeply underwater, or about 1 in 5 of every property with a mortgage.

“Deeply underwater” is defined as worth at least 25% less than the combined loans secured by the property.

That was down from 10.7 million residential properties deeply underwater in September 2013, representing 23% of all properties with a mortgage, and down from 10.9 million properties deeply underwater in January 2013, representing 26% of all properties with a mortgage.

The high watermark for being deeply underwater came in May 2012, when 12.8 million U.S. residential properties were deeply underwater, representing 29% of all properties with a mortgage.

“During the housing downturn we saw a downward spiral of falling home prices resulting in rising negative equity, which in turn put millions of homeowners at higher risk for foreclosure when they encountered a trigger event such as job loss,” said Daren Blomquist, vice president at RealtyTrac. “Now we are seeing the reverse trend: rising home prices resulting in falling negative equity, which in turn is giving millions of homeowners a lifeline to avoid foreclosure when they encounter a trigger event. On the other end of the spectrum, the percentage of equity-rich homeowners is nearing a tipping point that should result in a larger inventory of homes listed for sale and give the overall economy a nice shot in the arm in 2014.”

“However, there are still millions of homeowners who are in such a deep equity hole that it will take years for them to regain their equity,” Blomquist added. “The longer these homeowners remain in a negative equity position without relief in the form of a principal loan balance reduction, the more likely that foreclosure will become the path of least resistance for them.”

The universe of equity-rich properties — with at least 50% equity — grew during the fourth quarter as well, from 7.4 million representing 16% of all residential properties with a mortgage in September, to 9.1 million representing 18% of all residential properties with a mortgage in December.

“With available home inventory and interest rates at all-time lows, we experienced an increased rate of appreciation throughout the Ohio housing market during the fourth quarter of 2013,” said Michael Mahon, executive vice president/broker at HER Realtors, covering the Cincinnati, Columbus and Dayton markets in Ohio.

RealtyTrac’s report also found the following:

  • States with the highest percentage of residential properties deeply underwater in December were Nevada (38%) Florida (34%) Illinois (32%) Michigan (31%) Missouri (28%) and Ohio (28%).
  • Major metropolitan statistical areas with the highest percentage of residential properties deeply underwater in December were Las Vegas (41%) Orlando, Fla., (36%) Detroit (35%) Tampa, Fla., (35%) Miami (33%) and Chicago (33%).
  • States with the highest percentage of equity-rich residential properties were Hawaii (36%) New York (33%) California (26%) Montana (24%) and Maine (24%. The District of Columbia also posted an equity-rich rate of 24%.
  • Major metropolitan statistical areas with the highest percentage of equity-rich residential properties were San Jose, Calif., (37%) San Francisco (33%) Pittsburgh (30%) Buffalo, N.Y. (30%) and Los Angeles (29%).
  • States with the highest percentage of deeply underwater residential properties in the foreclosure process included Nevada (65%) Florida (61%) Illinois (61%) Michigan (55%) and Ohio (48%).
  • Major metro areas with the highest percentage of deeply underwater residential properties in the foreclosure process were Las Vegas (66%) Tampa, Fla. (63%) Chicago (62%) Orlando (61%) and Detroit (61%).
  • States with the highest percentage of foreclosure properties with some equity included Oklahoma (62%) Colorado (54%) New York (52%) Texas (51% and North Carolina (45%).

History of Mortgage Rates Infographic

Date:January 6, 2014 | Category:Market Trends | Author:Erin Lantz

Since 1971, when mortgage rates first started being tracked, they have ranged from a high of 18.63 percent in the early 80′s to a low of 3.20 percent in late 2013. Currently, rates are still relatively low and for many prospective home buyers, low rates can greatly affect the affordability of a home and the monthly mortgage payment. But, what will the future hold?

“After dropping to all-time lows at the end of 2012, rates have steadily rebounded throughout 2013. Now that the Federal Reserve has announced plans to begin winding down its stimulus program, which has helped keep rates low while the economy was still fragile, we expect rates will rise above 5 percent in 2014 as the economic recovery gains steam. Although those who missed out on mortgages in the 3 percent range may be disappointed that they missed that historic window, rates are still extraordinarily low by historic standards,” says Erin Lantz, director of Zillow Mortgage Marketplace.

http://cdn2.blog-media.zillowstatic.com/1/HistoryofMortRates_Infographic_g_03-dae9d2.png