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Mortgage Rates Edge Slightly Lower After Jobs Data

Mortgage rates made an anti-climactic move lower today after the big jobs report proved slightly disappointing to markets.  Stocks and bond yields both fell after the Bureau of Labor Statistics said only 223k jobs were created in June compared to a negatively revised 254k in May.  Perhaps even more of an issue was the drop to 0.0 percent wage growth versus forecasts of 0.2 percent.  The Fed has recently expressed interest in wage growth as one of the signs that economy is ready for a rate hike.  After the data came out, options trading suggested the median Fed rate hike time frame moved into 2016.  It had been September 2015 until today.

 

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Homeowner Shift to Condos won’t affect Prices -S&P

In the S&P/Case-Shiller home price indices report for April David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices notes that, "Sales of new and existing homes are rising in recent reports and construction of new homes enjoyed strong gains in May. At the same time, the proportion of new construction that is apartments rather than single family homes remains high."  Over the last year, he says, 34 percent of housing starts were apartments compared to an average of 22 percent over the years since 1975.  He points out that one aspect of this could be an increase in condominium construction and that in all five of the cities in which Case-Shiller tracks condos, their prices are rising faster than single family homes. 

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CoreLogic Ties Fraud Risk to Interest Rates, Purchases

A new analysis by CoreLogic shows an increased risk of mortgage application fraud associated with purchase loans while loans made for refinancing are showing decreased risk.  Thus, as rates rise and refinancing diminishes, fraud can be expected to rise as well.

The company, which has tracked fraud since 2010, said that application fraud has increased in Florida, New Jersey and New York by more than 20 percent since 2012 and to a lesser extent in Nevada, Illinois and California.  According to its Mortgage Application Fraud Index, Fraud has decreased in most of the rest of the country, notably in Arizona and Georgia (down 36 percent and 26 percent respectively.  Nationwide, however, fraud is increasing and is becoming more prevalent in larger metropolitan areas, especially in the Northeast and Southeast.

 

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Investors, Cash Sales Returning to More Normal Levels

The National Association of Realtors® reported last week that first time buyers had increased their share of existing home sales in May by two percentage points and in a market where sales were up 9.2 percent in a year had increase their share of those sales by 5 points.  On Thursday we got, as a famous newscaster used to say, "The rest of the story." 

RealtyTrac reported, in its May 2015 U.S. Home & Foreclosure Sales Report that both cash sales and institutional sales have shrunk again during the month, and in the case of cash sales are nearly back to historical norms.  These sales had been cited as providing competition to traditional buyers both because they could close a transaction quickly and often bought without mortgage and perhaps even inspection contingencies.

 

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Mortgage Rates Rise Ahead of Big Jobs Report

Mortgage rates gave up recently-enjoyed gains today.  This brings them to the week's highest levels (and the 3rd highest in 2015) a day before the all-important Employment Situation Report.  Also referred to as "the jobs report" or simply "nonfarm payrolls," this is the most important piece of economic data released each month in terms of potential to move interest rates.  If job growth is stronger than expected, rates usually rise.  The farther away the actual number is from forecasts, the more markets usually move.  Tomorrow is no exception despite several other important considerations ahead.

 

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Construction Spending maintains new $1 trillion Plus Pace

Construction spending in the public and private sectors increased slightly in May to a seasonally adjusted annual rate of $1,035.8 billion.  The figure was up 0.8 percent from the April number which was, however substantially revised from $1,006.1 billion to $1,027.0 billion.

The Census Bureau estimate of May spending, which includes construction put in place in residential and 16 other categories such as lodging, education, and health care, was 8.2 percent higher than expenditures of $957.6 billion in May 2014.  During the first five months of 2015 spending has totaled $382.1 billion, a 5.9 percent increase over the year-to-date figure a year earlier.

 

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Several Significant Income-Related Underwriting Changes from Fannie

Highlights from the most recent update to Fannie's Selling Guide:

Conversion of Principal Residence Requirements

At the height of the financial crisis Fannie Mae required lenders to make a manual application to convert a principal residence to a secondary or vacation property in order to ensure that borrowers had adequate capacity and financial reserves to manage multiple properties.  Effective immediately Fannie Mae is eliminating requirements specifically associated with such a conversions because of other policies now in place that adequately address credit history, rental income and financial reserves and lenders may use these in the future. 

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New Suit “Injects Vigor” into GSE Conservatorship Challenges

An unsigned article in the National Law Review takes another look at the Federal Housing Finance Agency (FHFA)/Treasury Department handling of the conservatorship of Fannie Mae and Freddie Mac (the GSEs) and the law suits that have challenged that handling.  The article is prompted by a new suit filed by what appears to be a family of investors from Iowa which takes a different tack from suits filed earlier which, while they have not failed, have hit rough sledding in federal courts.

To revisit history, in 2008 the GSEs, hit by the collapse of the housing market, falling home prices, increasing defaults, and the unwillingness of investors to purchase their mortgage-backed securities, were placed in conservatorship authority of the Housing and Economic Recovery Act (HERA).  The newly created FHFA was appointed conservator and the GSEs were provided with a line of credit by the Treasury Department in return for preferred, dividend generating senior stock in both companies. Over the course of the next few years a total of approximately $117 billion in Treasury funds was used to shore up Fannie, and $70.5 billion for Freddie.  The preferred stock was the equivalent of 79.9% of the companies' common shares with the rest remaining in private hands.

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G-Fees Up to 58bps in 2014; Small Lenders Benefit

In a report prepared for submission to Congress the Federal Housing Finance Agency analyzes the guarantee fees charged by Freddie Mac and Fannie Mae (the GSEs) in 2014 by product type, risk class, and the volume of a lender’s business.  It also analyzes the costs of providing the guarantee

G-fees are charged for guaranteeing investors timely payment of principal and interest on loans held in mortgage-backed securities (MBS) and are designed to cover three types of costs that can be incurred in providing the guarantee. These are the average costs the GSEs expect to bear as borrowers fail make their payments; the costs of holding economic capital to protect against potentially much larger, and unexpected such losses; and general and administrative expenses.

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Same Old Story – Rates up, Applications down

Mortgage applications declined yet again during the week ended June 26.  The Mortgage Bankers Association (MBA) said its Market Composite Index, a gauge of mortgage volume, was down 4.7 percent on a seasonally adjusted basis during the week ended June 26 when compared to the week before.  On a non-seasonally adjusted basis the index was down 5.0 percent.  Both seasonally adjusted and unadjusted the Composite Index have lost ground for ten of the last 12 weeks.

The Refinance Index decreased 5 percent from the previous week to its lowest level since December 2014 and the refinance share of mortgage activity ticked down 0.1 percent to 48.9 percent. The Purchase Index decreased 4 percent from one week earlier when seasonally adjusted and 5 percent unadjusted.  Despite weeks of declining activity the unadjusted Purchase Index remained 14 percent higher than during the same week in 2014.

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