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Mortgage Rates Unchanged Near 2014 Lows Ahead of 3-Day Weekend

Mortgage rates barely budged today.  A few lenders were a bit higher than yesterday.  A few more were a bit lower, but most hadn't moved enough to be considered anything more than unchanged.  Most borrowers would see the exact same quote today compared to yesterday.  4.125% remains the most prevalently quoted conforming 30yr fixed rate, but 4.0% is as close as it's been since May 28th.

The lack of material improvement in mortgage rates is notable today, considering the underlying markets that most directly affect rates would indicate some improvement.  This is one of the few instances where mortgage-backed-securities (MBS) will be in better shape without any noticeable effect on loan pricing.  This phenomenon actually isn't that uncommon on the day before a 3-day weekend, and especially when it happens to be the last business day of the month.

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New Credit Score Model Would be Great for Housing! Too Bad it Won’t be Used

FICO, the company that develops proprietary scoring models for credit bureaus and lenders, announced August 7 that a new model (FICO Score 9) would be released this fall.  FICO's press release caught buyers', Realtors', and lenders' attention, as the new model was touted as significantly more “borrower friendly”. Paid collections would no longer impact credit scores.  Medical debts (paid or not) would hurt scores less as well.  FICO predicted some consumers' scores could rise by 25 points, an amount that would significantly reduce their loan costs or interest rates.

The pending changes (which followed a CFPB study on the fairness of FICO's scoring models) ignited a frenzy of optimism from Steve Brown, president of the National Assn of Realtors who gushed they would “make a real difference in the lives of millions of American who have been shut out of the mortgage market or forced to pay higher mortgage interest rates because of flawed credit scores.”

 

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Housing Market Entering Dicey Transition Phase

RealtyTrac estimated that home sales in July were at an annualized rate of 4.63 million units, a decrease of 3 percent from June and down 12 percent from July 2013.  This would be the third consecutive month in which RealtyTrac has projected a decrease in sales volume and the report is sharp contrast to the Existing Home Sales report issued last week by the National Association of Realtors® (NAR).  That report showed existing home sales rose 2.4 percent from June to July, the fourth straight month-over-month increases, to an annualized total of 5.15 million sales and a rate down only 4.3 percent from the previous July.

 

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Mortgage Rates Fall For Sixth Straight Day

Mortgage rates fell modestly for an impressive sixth straight day today.  Yet again, we're seeing little attention paid to the events in the US that NORMALLY influence interest rates.  Case in point, stronger economic data typically pushes rates higher, and three out of three economic reports were stronger than expected today.  The dark horse market consideration continues to be Europe.  Specifically, expectations for further accommodation from the European Central Bank combined with real economic deterioration in the Eurozone are motivating record low rates in European bond markets and US markets are interconnected enough to get some of that benefit.

 

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Subservicer and New Jumbo Products; Flagstar and the CFPB; Theory of M&A

What's this? The borrower receives a cat when their mortgage closes? What would the CFPB say? Will fleas lead to a class action lawsuit a year down the road? Would the DOJ claim canine disparate treatment? Besides, for many people, not receiving a cat would be a better selling point.

There has been a huge rise in servicing by small and mid-sized lenders, and due to potential liability most turn to a subservicer. LoanCare, part of the Black Knight family of companies, is a leading national provider of full-service, interim, component and back-up subservicing as well as servicing performance solutions to the mortgage industry. With subservicing volumes exceeding 550,000 loans totaling over $110 billion in unpaid principal balance (UPB), "LoanCare has been the smart solution for subservicing since 1991. LoanCare offers award-winning technology to its lender/servicer clients featuring superior data access for full transparency and robust reporting capability. In addition, LoanCare deploys an intuitive borrower-facing website and powerful mobile platform for its customers, providing convenient 24/7 access through their smartphones or tablets, better enabling them to manage their mortgage loans. LoanCare will be at the ACUMA 2014 Annual Conference in Las Vegas the week of September 14-17 and the 20th Annual ABS East Conference in Miami Beach. If you are interested in meeting and speaking with the LoanCare team at the event, please contact Gene Ross.

 

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Pending Home Sales Highest in Nearly a Year

Favorable housing conditions were credited for leading pending home sales higher in July to their best level since August 2013.   Pending sales as measured by purchase contract signings rebounded from a slight dip in June that interrupted three straight months of steady gains. 

The Pending Home Sales Index (PHSI) compiled by the National Association of Realtors (NAR) rose 3.3 percent to 105.9 from 102.5 in June but is still 2.1 percent below the July 2013 level.  It is the third straight month the Index has been above 100, considered an average level of contract activity.  The gains were broad-based with only a slight decline in the Index in the Midwest.

 

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Mortgage Rates Closing in on 2014 Lows

Mortgage rates fell by an almost imperceptible amount today. Some lenders were actually unchanged or slightly higher.  The actual NOTE rates quoted today would be identical to yesterday, with the only differences being seen in the form of modestly lower closing costs.  This means that 4.125% stays intact as the most prevalently-quoted conforming 30yr fixed rate for top tier scenarios.  All that having been said, the slow trickle of improvement is gradually bringing rates closer to their best levels in 2014.  It would only take another few days of these improvements to get there.

The bond markets that underlie mortgage rates started strong today, once again benefiting from strength in European bond markets.  We talked about this phenomenon at length yesterday (Read More: How Long Will Low, Flat Mortgage Rates Last?).  Bond markets didn't move much during US trading hours, but this was more true of the Mortgage-Backed-Securities (MBS) that directly dictate rates as opposed to US Treasuries which continued improving into the afternoon.  In other words, Treasury rates are continuing their recent trend of moving lower, faster than mortgage rates (which are stuck in the mud by comparison).

 

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Housing Market Normalizing… Very Slowly

Freddie Mac said today that the housing recovery continues to be a primarily local phenomenon.  While markets with strong economies and favorable demographics are continuing to improve at a strong pace most markets are still generally weak and the housing market as a whole continues to plod along

The company released its most recent  Multi-Indicator Market Index (MiMi)on Wednesday, with a current value of 73.7.  This indicates a weak housing market overall, with only a slight improvement (0.04 percent) from May to June and a 3-month positive trend of 0.16 percent.  On a year-over-year basis the MiMi has risen by 7.67 percent.   

 

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Home Price Increases Lower than Inflation in Some Areas

Home prices have now increased on a quarterly basis 12 consecutive times.  The Federal Housing Finance Agency (FHFA) said yesterday that the 12th increase in its purchase-only seasonally adjusted House Price Index (HPI) was a 0.81 percent rise in the second quarter of 2014.  The seasonally adjusted monthly index for June was up 0.4 percent from May, its seventh consecutive monthly increase and the 23rd month it has gained out of the last 24.

A closer look at the quarterly numbers however confirms the data reported by Case-Shiller, Core-Logic, and others; those price increases are far from being as muscular as they once were.

 

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Black Knight Provide Sneak Peak at July Mortgage Data

Distressed housing measures continued on a somewhat jagged path toward normalcy in July according to preliminary numbers released by Black Knight Financial Services today.  The company's "Early Look" at some of the data from its monthly Mortgage Monitor report due out next week again shows a general downward trend in delinquencies and foreclosure activity.

Foreclosure starts rose again, the third consecutive month they have done so.  The number of properties entering foreclosure rose 2.72 percent from June to 90,700 but despite the increase starts are down 19.59 percent from July 2013.

The number of properties 30 or more days past due but not yet in foreclosure dropped by 34,000 in July to 2.85 million, 344,000 fewer delinquencies than in July 2013.

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