According
to
a recent survey by the National Association of Realtors (NAR), the typical U.S. homebuyer
spent less and borrowed less in 2011. NAR's annual Profile
of Home Buyers and Sellers, which due to methodology tends to
under-represent investors versus owner-occupied properties,
reported that “first time buyers, who made up 37% of the market,
down from an historic 40% share, had a median age of 31 and
income of $62,400, up from $59,900 in the 2010 study. This
buyer typically bought a 1,570 square foot home for $155,000,
taking on a median monthly mortgage principal and interest
payment of $794. The typical repeat buyer was 53 years old,
earned $96,600 (up from $87,000 reported last year) and
purchased a 2,100 square foot home for $219,500 with a median
payment of $1,006.” Most purchased a SFR (77%), 9% a condo, 8% a
town or row house and 6% some other kind of housing. The median
down payment for all buyers was 11%, however for first-time
buyers it was 5% and for repeat buyers 15%. In both cases the
median was a full percentage point higher than in 2010.
Fifty-four percent of first-time buyers financed with a low-down
payment FHA mortgage, and 6% used the VA loan program which
requires no down payment.”
S&P,
who
brought us the downgrade of the United States earlier this year
(which certainly didn't move Treasury rates any higher) but who,
along with the other major rating agencies at that time somehow
miss-rated billions of dollars of mortgage debt, has now downgraded
several banks around the world. These include the six
largest U.S. banks: http://www.bloomberg.com/news/2011-11-29/s-p-cuts-bank-of-america-citigroup-goldman-ratings-in-industry-revision.html.
And folks wonder why banks
are holding on to capital, and continue high documentation and
strict residential mortgage underwriting guidelines?
Speaking of bank problems, under the category of "Why should
BofA be all alone in dealing with problems created by previous
acquisitions?” the
National Credit Union Administration is suing Wells Fargo over
$200 million in soured MBS’s. NCUA reached a settlement
over soured mortgage investments earlier this month, but it
alleges that Wachovia's two capital markets businesses sold
faulty mortgage-backed securities to U.S. Central Federal Credit
Union and Western Corporate Federal Credit Union, both of which
were liquidated in 2009.
In
a comment about life in the secondary markets, an exec from the
West Coast wrote, “"Rob, what am I supposed to do with my loans?
Does Wells Fargo have any competition? Citi, Chase, and GMAC all
have one foot on a banana peel and my staff in Secondary is
always waiting for another shoe to drop. SunTrust, Flagstar, US
Bank, Franklin American, PHH, BB&T, Affiliated, and so on
wouldn't know an AOT or a bulk mandatory if it came up and
slapped them on the "rump" and called them Shirley. It costs a
large amount of capital to sell loans to Fannie or Freddie. This
is my nightmare scenario – wake me up when it is over." (Hey,
not my quote!)
Well, as it turns out, lots
of originators out there have applications in with Fannie
& Freddie, both of whom are busy dealing with HARP
questions. And of course it is necessary for borrowers,
and/or their LO’s, to figure out if Freddie or Fannie actually
own or guarantee their mortgage if they have any hope for HARP.
The sites & phone numbers are, for Fannie, http://www.fanniemae.com/loanlookup/
or 800-372-6643, and for Freddie, https://ww3.freddiemac.com/corporate/
or 800-373-3343. And remember that not only do primary
residences qualify, but also investment properties and second
homes do as well.
Turning to another government agency, “they” say a series of
rule revisions by the FHA has caused thousands of condo
projects to become ineligible for FHA mortgages. This, in
turn, has abruptly shut off loan money for would-be condo buyers
and refinancers, forcing them to pursue conventional bank loans
requiring much higher down payments (20% versus 3.5%): http://therealdeal.com/newyork/articles/new-fha-rules-ittle-publicized-switch-in-federal-mortgage-policy-cause-condo-headaches-says-ken-harney.
Regarding
the news out of Washington, I received this note from Idaho:
"Replacing Barney Frank with Maxine Waters? Be careful what you
wish for! Maxine has shown little or no empathy for banks or
financial institutions, and, in fact, according to people I know
who have met her, is openly disdainful of 'bankers.' And Barney
is not to blame for everything that happened: http://www.washingtonpost.com/blogs/ezra-klein/post/barney-frank-didnt-cause-the-housing-crisis/2011/11/28/gIQANqLH5N_blog.html.”
The
MBA offers all kinds of
classes for originators, whether it is increasing one's
production or using social media. There usually is a cost, less
for members of the MBA than for non-members, but heck, if it
helps an LO close an extra loan it's more than worth it. Start
at: http://www.campusmba.org/PublicCalendar.htm.
Turning
to lender/investor news, HSOA
spread the word to brokers that “USDA Purchase transactions may
close; refinances remain on hold…While the appropriations budget
was passed on 11/18 and signed by the president for FY 2012, the
next step is for the Budget office to allocate the program funds
to the USDA. This usually takes a few weeks. In the interim,
USDA has unused funding authorizations available for purchase
transactions, but not for refinances.”
PHH
came out with a first round of HARP updates.
It is fairly extensive, but some changes roll into place
tomorrow. Both the FNMA DU REFI PLUS program and FHLMC RELIEF
REFI programs have been extended until December 31, 2013. It “expanded the list of
acceptable borrower benefits to include a reduction to the
monthly P&I payment liabilities – The overlay for the
maximum number of mortgage delinquencies has been removed for
new registrations. LP will assess mortgage payment history to
determine eligibility for the FHLMC Relief Refinance…”
“Systems
will
not be updated to support the use of the mortgage proceeds
guidelines until a future release. In the interim, loans will
need to be manually conditioned to reflect the correct terms
based on the LTV.”
Where
do the experts think home values are heading?
“Nobody should be surprised by further home value losses in the
remaining balance of this year and into next year,” said Zillow Chief
Economist Stan Humphries. “Despite record high affordability of
real estate, the psychology of home buyers is still being
weighted down by economic uncertainty, keeping them on the fence
when it comes to buying homes. Moreover, we do expect
foreclosure liquidation rates to increase in the coming months
as banks try to unload their backlog of foreclosures accumulated
in the post robo-signing period. This will also put downward
pressure on home values. The good news is that we expect these
remaining home value losses to be relatively minor in comparison
to the declines from the market peak to current levels.”
This
was supported by, or was said to support, the
S&P/Case-Shiller index of property values that came out
yesterday showing that values in 20 cities dropped 3.6% in
September from the same month in 2010 after decreasing 3.8% in
the year ended August. On the flip side, the FHFA's House Price
Index increased 0.2% in Q3 from Q2; year over year prices were
off 3.7%. For the month of September, however, prices increased
0.9% from August from a downwardly revised -0.2% that was
previously reported at -0.1%. Consumer Confidence jumped to “56”
from a revised 40.9 reading in October, the biggest monthly gain
in eight years as people grew more upbeat about employment and
income prospects. And headlines blared, “Treasuries Fall on
Speculation ECB, IMF Will Move to Support Italian Debt” which
pushed the 10-year T-note yield higher for a third straight day
– it closed at 1.99% Tuesday. But MBS prices closed higher
(improved) on the strong demand.
Today
we have already had a large amount of news, scheduled and
unscheduled. The MBA reported that last week’s applications
dropped for the third week in a row. Apps dropped nearly 12% -
but don’t forget that it was a holiday week. Refinancing
applications dropped 15%, the biggest decrease in more than a
month per the MBA, and purchases were down about 1%. And the refinance share of
total mortgage activity eased to about 74%, down from 76% the
prior week.
The
final Q3 reading for Productivity and Unit Labor Costs was
reported (+2.3% and -2.5% respectively) and the ADP private
employment numbers came in much stronger than expected, +206k
with job gains across most sectors. Today we also have the
Chicago PMI (Nov), which is projected unchanged at 58.4, the
Pending Home Sales Index (Oct), and the Fed release of its Beige
Book with economic anecdotes from the 12 Districts in
preparation for the December 13 FOMC meeting. But what is really
pushing the markets today is the news that the Fed and world
banks announcing measures to boost liquidity in order to “ease”
situation in Europe. The
10-yr is up to 2.07% and MBS prices are worse by roughly .250.
Who was the first person to look at a cow and say, 'I think I'll
squeeze these dangly things and drink whatever comes out'?
If Jimmy cracks corn and no one cares, why is there a song about
him?
Why does your OB-GYN leave the room while you get undressed as
if they are not going to look up there anyway?
If quizzes are quizzical, what are tests?
If corn oil is made from corn, and vegetable oil is made from
vegetables, then what is baby oil made from?
Do illiterate people get the full effect of Alphabet Soup?
Does pushing the elevator button more than once make it arrive
faster?
Why doesn't glue stick to the inside of the bottle?
Do you ever wonder why you gave me your email address?
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