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Remodeling Market Stability a Positive Sign for Housing

Builders who engage in home remodeling continue to display confidence in their market the National Association of Home Builders (NAHB) said today.  NAHB's Remodeling Market Index (RMI) rose from 56 in the second quarter of 2014 to 57 in the third quarter.

NAHB described the current index reading as a "high water mark" and said it was the sixth consecutive quarter that the reading has been above the benchmark of 50.  This indicates that more remodelers report a higher level of activity compared to the previous quarter than those who see activity as down. 

The RMI averages responses about current activity with those about future expectations for work.  Both current and future responses are based on calls for bids, amount of work committed for the next three months, backlog of jobs, and appointments for proposals.

 

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Negative Equity Falling, but Still Exceeds $1 trillion

The percentage of American homeowners a mortgage that was seriously underwater fell to 15 percent in the third quarter of 2014 RealtyTrac said on Thursday.  There were 8.1 million properties with mortgages that met the company's definition of seriously underwater - where the combined loan amount of the homes mortgage(s) is at least 25 percent higher than the properties market value.  The combined market value of negative equity in these properties is an estimated $1.4 trillion.

In the second quarter of 2014 there were an estimated 9.1 million residential properties in a negative equity situation or 17 percent of all mortgaged homes.  The new third quarter figures were the lowest since RealtyTrac began following the issue in the first quarter of 2012.  Negative equity, which is a leading indicator of the possibility of foreclosure and seriously dampens a homeowner's ability to refinance or sell the property, peaked according to RealtyTrac's data in the second quarter of 2012 at 12.8 million properties or 29 percent.

 

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Mortgage Rates at a Standstill, but not for Long

Mortgage rates had their single flattest day since October 2nd today.  This is the polar opposite of last week's exceptional volatility.  The most interesting thing about it is that this is the way rates typically respond to that kind of rapid movement.  It goes something like this: one day, in particular, sticks out as utterly insane and the ensuing days get less and less insane until the insanity completely dries up.

Last Wednesday was ground zero for insanity, and today there's none to be found.

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Freddie Mac Economists Prescribe L.I.F.T. for Economy

Frank E. Nothaft and Leonard Kiefer, Freddie Mac's chief and deputy chief economists have come up with a formula for lifting the economy from its continuing low-growth status to a trajectory of robust sustainable growth.  And that's what they are calling it, L.I.F.T.  The acronym stands for Labor, Income, Fixed Investment, and Trust and in the current edition of the company's U.S. Economic and Housing Market Outlook they lay out the parameters for each.

Labor

The labor market must fully recover, providing solid employment gains, less long term unemployment, and broad-based income growth.  Unless the labor market recovery accelerates, any improvement in the housing market will also lag.  Last month the unemployment rate finally fell below 6 percent for the first time since the recovery began but that number does not tell the full story.

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Best Week of Year for Refis; MBA sees Purchase Loan gains Next Year

Falling interest rate precipitated a major refinancing rally during the week ended October 17 even though Columbus Day shortened the business weeks in some locations.  The Mortgage Bankers Association's (MBA's) Refinance Index jumped 23 percent compared to the previous week, the largest increase for the index this year, far surpassing an 11 percent gain in January and taking the index to its highest level since November 2013.  Applications for refinancing made up a 65 percent share of all applications compared to 59 percent the previous week and the average size of a loan for refinancing rose to $306,000 the highest level since MBA started its survey in 1990.

 

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Mortgage Rates Sideways to Slightly Higher

Mortgage rates continue to bide their time, holding just under 4 percent on average.  Some borrowers might see their quote move up .125% from yesterday, but others will be quoted the same rate with slightly higher closing costs.  A few lenders didn't move at all, but they're the exception.  Overall, rates were slightly weaker, resulting in a better balance between 3.875% and 4.0% as the two most prevalently quoted conforming 30yr fixed rates for top tier borrowers. 

Given the strong move higher in the stock market combined with the fact that rates have been taking a lot of guidance from stocks, today's marginal increase in rates is actually a strong showing.  The bond markets that underlie mortgage rate movement have done more to march to their own beat while broader markets make bigger moves.

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No Surprise: Final QRM Rule Closely Follows QM

Financial regulators on Tuesday finally released the final rule defining Qualified Residential Mortgages (QRM).  The definition is intended to determine which loans are exempt from the risk retention requirements of the Dodd Frank Wall Street Reform and Consumer Protection Act. 

As expected, the final QRM is aligned with the definition of Qualified Mortgages (QM) which defines how lenders determine if a borrower has the ability to repay the loan and sets out a safe harbor for lenders as they make that determination and underwrite the loan.

The regulatory agencies issuing the regulation (Treasury, Housing and Urban Development, the FDIC, Securities and Exchange Commission, Federal Housing Finance Agency, and the Federal Reserve) observed in the preamble to the proposals presenting the rule the securitization markets are an important part of the provision of credit to the nation's households and businesses.  "When properly structured, securitization provides economic benefits that can lower the cost of credit."

 

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Existing Homes Selling at Year’s Fastest Pace

Existing home sales, which ended four straight months of gains with a 1.8 percent decline in August, bounced back in September the National Association of Realtors® (NAR) said today. Sales increased 2.4 percent to a seasonally adjusted annual rate of 5.17 million homes, the highest pace of the year, from the August rate of 5.05 million.

Despite the recovery, sales in September are still 1.7 percent lower than in September 2013.  Existing homes were selling then at a rate of 5.26 million.  

Sales of single family homes rose 2.0 percent to an annual rate of 4.56 million from 4.47 million in August but were 1.9 percent below the annual rate of 4.65 million units a year earlier.  Existing condo and cooperative units sold at a 5.2 percent higher rate than in August, 610,000 units compared to 580,000, but were unchanged from September 2013.

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MBA’s Stevens: No Sense Pining for the way it used to be

David Stevens, President of the Mortgage Bankers Association (MBA), told an audience attending the association's s annual convention in Las Vegas that the rules for Qualified Residential Mortgages will be, as rumored, released on Wednesday. This rule, which was sent back to the drawing board two years ago after housing stakeholders complained it would shut down mortgage lending will, in this iteration, he said be aligned with the Qualified Mortgage Rule and will not have steep downpayment or strict debt-to-income requirements.  He credited the industry and consumer groups for advocating on the issue.  

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Watt Focuses on Reps/Warrants; 97% GSE Loan Mentioned Only in Passing

Federal Housing Finance Agency (FHFA) Director Melvin L. Watt focused his remarks to attendees at the Mortgage Bankers Association annual conference on the issue of representation and warranties.  He acknowledged that fears of being forced to repurchase large numbers of loans after they have been sold to one of the two government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac has created unease among lenders almost from the start of the mortgage crisis.

Watt said that the Representation and Warranty Framework in use by the GSE's provides them the necessary assurances they need to purchase loans in an efficient and responsible manner without checking each loan individually or attending every closing. They also provide the Enterprises remedies to address situations where a lender's obligations to meet the Enterprises' purchase guidelines have not been fully met.

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