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Rising Inventories Tempering Prices, Existing Home Sales Resume Slide

Existing home sales finished up the year on a decidedly sour note.  After putting together consecutive increase in October and November and ending a six-month losing streak, the National Association of Realtors® reports sales plummeted 6.4 percent in December. Sales of previously owned single-family houses, townhouses, condos and cooperative apartments were at a seasonally adjusted annual rate of 4.99 million compared to 5.32 million in November.  Existing home sales, which were already at a 7-1/2 year low in November and down 7.0 percent from a year earlier are now 10.3 percent lower than from the 5.56 percent pace last December.

 

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Fannie/Freddie Changes Run the Gamut, Including Shutdown Underwriting Shift

“Some people are so poor, all they have is money.” How about “26 of the World’s Richest Own the Same Wealth as Poorest Half” in the world!? To the best of my knowledge the PUGS (partial U.S. government shutdown) is not helping anyone’s wealth and is impacting U.S. citizens. Freddie and Fannie released policy and procedure updates caused by the shutdown – more below... Will Joseph Otting, Acting Director of the FHFA, which oversees Freddie and Fannie, soon announce a plan to take the GSEs out of conservatorship? We’ve never expected Congress to spring into action, with the U.S. Government receiving billions of dollars of their profits every year.

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Mortgage Rates Nominally Higher Despite Bond Market Warning

Mortgage rates rose gently today.  Most mortgage borrowers (and many mortgage professionals, for that matter) wouldn't be aware of slightly more alarming risks lurking underneath the surface.  Those risks involve the broader bond market from which mortgage-related bonds take their directional cues. 

More simply put, if US Treasuries are improving, mortgage-backed bonds tend to improve as well.  The level of correlation varies though.  For nearly all of 2018, mortgages weren't improving as quickly as the most widely-used rate benchmark: 10yr Treasury yields.  That began to change recently--especially when 10yr yields began moving higher 3 weeks ago.  During that time, we've seen moderate moves higher in 10yr yields met with modest moves higher in mortgage rates.  Today was another one of those days.

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Has RESPA’s Servicer Rule Reduced Foreclosures?

In accordance with requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Consumer Financial Protection Bureau (CFPB) recently conducted five-year assessments of two rules it promulgated under the act.  We summarized their assessment of the Ability-to-Repay/Qualified Mortgage rule last week.  What follows is a brief summary of the assessment of the Real Estate Settlement Procedures Act's (RESPA's) servicing rule. Many provisions of the rule relate to servicer obligations to review delinquent borrowers for foreclosure avoidance options such as loss mitigation. 

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New Home Sales Pull Back Amid Global Uncertainty

Applications for new home purchases dropped in December, falling 6.8 percent behind those a year earlier. The deficit from November was even larger, a decline of 13 percent.  The Mortgage Bankers Association (MBA) estimates that those numbers, which do not include any adjustment for seasonal patterns, translates into new home sales during the month at an annual rate of 552,000 units, a 12 percent decrease from the estimated November pace of 627,000 units. On an unadjusted basis, MBA says there were 37,000 new homes sold during the month, down 17.8 percent from the 45,000 new home sales in November.

 

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Mortgage Rates Holding Ground But Volatility Could Increase

Mortgage rates were technically steady today.  In fact, as of this writing, most lenders are offering slightly better terms compared to yesterday, but only by barely-detectable amounts.  The afternoon brought volatility in financial markets owing to trade-related headline.   That volatility isn't moving in a good direction for mortgage rates at the moment.  The takeaway is that, all other things being equal, lenders will be offering slightly weaker terms tomorrow morning, assuming they don't see quite enough weakness to adjust today's offerings with only a few hours left in the day.

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Will New FHFA Head Follow his Instincts or Bow to Reality?

"The most important question in housing policy heading into the new year has nothing to do with interest rates, housing supply, or home sales," Urban Institute (UI) non-resident fellow Jim Parrott says.  "It's what kind of director of the Federal Housing Finance Agency (FHFA) Mark Calabria will be." Calabria has been named to replace Melvin Watt as director of the agency that regulates the Federal home Loan Banks and the GSEs Fannie Mae and Freddie Mac.  FHFA has also been conservator of the GSEs since 2008.  Parrott says the agency has "an enormous hand in who in this country can get a mortgage and on what terms."  

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Mortgage Rates Up Slightly, But Still in Great Shape

Mortgage rates rose modestly today after spending the past 2 days moving sideways.  It was really yesterday's market weakness that caused today's move.  Mortgage rates are most directly affected by the trading of mortgage-backed securities (MBS).  When MBS are weaker, rates rise.  MBS were weaker throughout the day yesterday, but not by quite enough for lenders to go to the trouble of revising their rate sheets for the worse.  Instead, lenders simply waited until this morning to make the changes implied by the market.  This delayed reaction is common when the market movement on any given day isn't quite enough to justify lender reprices.

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Builder Confidence Buoyed by Lower Rates

After falling an aggregate of 12 points in November and December the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) appears to have stabilized.  The HMI, a measure of home builders' confidence in the market for newly constructed homes, gained 2 points in January, rising to 58.  This one 1-point higher than analysts polled by Econoday had predicted. "The gradual decline in mortgage rates in recent weeks helped to sustain builder sentiment," said NAHB Chairman Randy Noel.  "Low unemployment, solid job growth and favorable demographics should support housing demand in the coming months."

 

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Millionaires Cash-Out Too; Big Refis for Big Homes

Somewhere in this country there are 230 homes with mortgage balances between $10 and $20 million dollars.  According to a post written by Arthur Jobe in the CoreLogic Insights blog, 75 percent of them were originated since 2013, and 180 represent refinances. Those refinances were largely originated since 2013 as well. These homes are unlikely to be in your neighborhood (or ours) although you would have the best shot if you live in California, home to 55 percent of the super jumbo refinances. Seventeen percent are located in Florida, and smaller percentages (4 to 6 percent) in Massachusetts, Connecticut, New York, and Texas.

 

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