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Attorney on Quicken’s Lawsuit; Fixing Appraisal System; Final Rules on AMCs

Many lenders are watching this battle of industry frustration from the sidelines: Quicken vs. the DOJ, and vice versa. Prior to the government suing Quicken, Matthew Schwartz, a former federal prosecutor who is now a partner at Boies, Schiller & Flexner in New York, wrote, "Quicken Loan's decision to sue the Government over what it has alleged is arbitrary and capricious conduct related to the investigation of Quicken's lending practices is unconventional, to say the least. The lawsuit itself is a legal long shot. The government generally has immunity and great discretion where it doesn't, over how it conducts its investigations or settles enforcement actions. But the lawsuit gives voice to an increasingly popular sentiment among financial institutions: that the government is, for political reasons, extracting hundreds of millions, if not billions, of dollars in settlements for what are at best technically and immaterially incorrect claims. While the government will probably win this lawsuit, if Quicken's allegations are correct, it may be forced to explain its conduct in a way that will undermine the law enforcement effect of this and other recent enforcement actions."

 

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HUD Changes Distressed Loan Sale Requirements

The Department of Housing and Urban Development (HUD) is tweaking its bulk loan sales program to give distressed borrowers a better shot at staying in their homes.  HUD announced today that investors who purchase delinquent mortgages through the Department's Distressed Asset Stabilization Program (DASP) will have to delay foreclosures for one year after purchase rather than the six month hiatus that had previously been required.

In addition loan servicers will have to evaluate all borrowers in the loan pool for eligibility for the Home Affordable Modification Program (HAMP) or a similar loss mitigation program.  In the past the assessment of borrowers for loan modifications was encouraged but not required.

 

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Mortgage Rates Continue Marginally Lower

Mortgage rates barely budged again today, which means they've been able to hold under an important ceiling as we head into next week's Fed Announcement.  Given the improvement in underlying market conditions, lenders are playing it safe with rate sheets.  This could allow them more flexibility in the event markets improve further at the start of next week.  3.75% remains the most prevalently-quoted conventional 30yr fixed rate for top tier scenarios, though several lenders are at 3.625%.  As always, keep in mind that a borrower being quoted one rate almost always has the option to pay more upfront in exchange for a lower rate.  Whether or not this makes sense is a matter of personal preference. 

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Lenders give Mixed Reviews to new GSE, FHA Initiatives, Homeowner Education

Lenders appear at least moderately encouraged by new efforts on the part of Fannie Mae and FHA to lower the costs and increase the availability of mortgage financing.  Fannie Mae's most recent quarterly Mortgage Lender Sentiment Survey, conducted in February found about 2/3s of lenders thought the initiatives would be beneficial.

Fannie Mae introduced a new 97 percent home mortgage late last year and a similar program was unveiled by Freddie Mac starting this month.  In January FHA reduced its annual mortgage insurance premiums (MIP) by 0.5 percent on new loans.  Fannie Mae's Economic & Strategic Research Group surveyed senior mortgage executives in February to examine lenders' views about the expected impact of these initiatives.

 

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Survey Says: Real Estate is The Best Long-Term Investment

Apparently all is forgiven and forgotten and Americans are again embracing real estate as more than just shelter.  For the second year in a row a Gallup telephone survey conducted in April found Americans think it is the best kind of long-term investment.

Investing in real estate outstripped stocks, gold, traditional savings instruments and bonds with 31 percent of survey respondents preferring it.  Stocks and mutual funds were second at 25 percent. "A return of Americans' confidence in real estate and stocks as solid long-term investments was first evident a year ago, paralleling real world improvements in these areas," Gallup said. "Their continued strength this year indicates that was no fluke."

 

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Mortgage Rates Hold Ground at Recent Highs

Mortgage rates didn't move much today.  While a few lenders were modestly improved, most were unchanged or offering slightly higher rates.  This stands in stark contrast to most of today's mortgage rate headlines that suggest rates moved lower.  Chalk that up to the widespread dissemination of the highly regarded Primary Mortgage Market Survey from Freddie Mac.  Indeed, Freddie's data is exceptionally accurate over time, but it also runs the risk of being a bit stale depending on market movement around the time of their survey period. 

Freddie collects data for the Survey from Monday through Wednesday, but most of the responses have been received by Tuesday.  This week, that meant that most of the respondents had not yet seen the steep losses on Wednesday.  Naturally then, Freddie's numbers suggest rates are lower than they actually are by the time people read about them on Thursday morning.

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Cash-outs Affecting Negative Equity Trends

A second company has now reported a recent increase in the number of underwater residential properties in the U.S.  Last month Corelogic said that approximately 172,000 homes slipped from positive to negative equity in the fourth quarter of 2014, a change the company called "seasonal."  Today RealtyTrac reported an increase in the first quarter of 2015 of 0.4 percent in the number of properties with negative equity, the first increase in nearly three years.   Both reports noted year-over-year declines in underwater properties for the respective quarters.

In its U.S. Home Equity & Underwater Report for the first quarter RealtyTrac estimated a total of 7,341,922 properties were seriously underwater, i.e. the combined loan amount secured by the property is at least 25 percent higher than the property's estimated market value - representing 13.2 percent of all properties with a mortgage.  The increase, while slight, was the first uptick since the second quarter of 2012.  The number of underwater homes was down 4 percentage points from the first quarter of 2014.

 

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New Home Sales didn’t Match February Pace

New home sales settled down a bit in March after a dramatic surge in the Northeast in February that drove national sales figures up nearly 8 percent.  The Census Bureau and U.S. Department of Housing and Urban Development reported today that sales of newly constructed single family homes in March were at a seasonally adjusted annual rate of 481,000 units.  This was down 11.4 percent from February's sales, originally reported at 539,000 but revised even higher to 543,000 with today's report.

Sales for the month were up 19.4 percent compared to the same period in 2014.  The rate at that time was estimated at 403,000 units.

On a non-adjusted basis there were 45,000 new homes sold in March, unchanged from February.  Thirty-nine thousand homes sold during the month of March in 2014.

 

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Freddie’s Multi Market Indicator Recovers from January Stumble

Freddie Mac's Multi-Indicator Market Index (MiMi) for February shows that the U.S. housing market continues to stabilize and has recovered from a slight stumble - what Freddie Mac had called "the winter doldrums" - in January.  The MiMi tracks the top 100 housing markets in the country and 60 percent are now showing an improving three-month trend.

The national MiMi increased 0.65 percent from January to February to 74.7, a three month gain of 0.30 percent, indicating a weak but improving housing market. On a year-over-year basis the national value has improved 3.53 percent.  The nation's all-time MiMi high of 121.7 was April 2006 and the national value has rebounded 31 percent since hitting its low of 57.4 in October 2010.

 

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Home Prices Overtaking Pre-Crash Peak

Home prices nationally are now within 3 percent of the peak they reached in March 2007.  The Federal Housing Finance Agency (FHFA) released its purchase only Home Price Index (HPI) for February showing that home prices increased 0.7 percent on a seasonally adjusted basis compared to January and were 5.4 percent higher than in February 2014.  The increase brought home prices back to January 2006 levels and within 2.7 percent of the pre-crash peak.

The numerical index number in February was 220.5 compared to 219.0 in January and 209.2 in February 2014.  The index is calculated using home sales price information from mortgages sold to or guaranteed by the government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac.  The basis for the index is January 1991=100.

 

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