• In the past five years there has been a monumental shiftin mortgage loan servicing.  Bank servicing subsidiaries, which once dominated in the market, no longer even constitute a majority of companies servicing Ginnie Mae mortgage loans.  In an article in the CoreLogic Insights blog Faith Schwartz CoreLogic's senior vice president of Government Solutions, takes a look at how and why depository institutions have been releasing their servicing rights and what the implications may be for investors and consumers.

    Schwartz says that seven years after the collapse of the housing market and after many many changes to regulations affecting mortgage originations, the face of those originations have changed and this is also having an effect on loan servicing.   This trend of transferring servicing from banks to non-bank servicers, she says, can most likely to attributed to a combination of regulatory changes, reputational risks and basic economics.

     

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  • While a study released on Thursday by RealtyTrac shows a huge discrepancy between the growth in home prices and increasing wages, it appears that housing in most of the country remains affordable.  The California company looked at wage growth and home price appreciation over recent two year periods and found that the former is far from keeping up with the latter.

    In its analysis RealtyTrac used data on median home prices taken from deeds registered in 184 metropolitan statistical areas in the two years that ended in December 2014 and Bureau of Labor Statistics wage data from the second quarter of 2012, when home prices hit bottom and began to recover, and the second quarter of 2014.  It adopted the six month time lag between the beginning of the two two-year time periods based on the hypothesis that a change in average wages would take at least six months to impact home prices. 

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  • Freddie Mac said today that housing market stability "stumbled a bit"due to the cold winter weather and softening economic growth.  The company's Multi-Indicator Market Index (MiMi) declined slightly in January a decline described as broad-based rather than concentrated in just a few state or metropolitan markets.  Despite the lower MiMi index, Freddie Mac's economists said that "an improving labor market and attractive mortgage rates continue to promise a strong spring homebuying season."

    The national MiMi value declined a slight 0.20 percent from December to January to stand at 74.6, indicating a weak housing market overall.  In addition to the month-over-month negative change there was a 3-month decline of -0.37 percent.  On a year-over-year basis, the U.S. housing market has improved by 3.39.

     

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  • Stoked by the lowest interest rates in several weeks the volume of applications for mortgages to both purchase and refinance homes increased by the largest percentages during the week ended March 20 than at any time since early January. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of application volume, jumped 9.5 percent on a seasonally adjusted basis from the week ended March 13 and was up 9.0 percent on an unadjusted basis. 

    Applications for refinancing made up 61 percentof the total, up 2 percentage points from the previous week with much of the activity centered on refinancing; MBA's Refinance Index rose 12 percent compared to the previous week. The Purchase Index was 5 percent higher than the previous week on both a seasonally adjusted and an unadjusted basis, each reaching its highest level since January.  The unadjusted Purchase Index was 3 percent above its level during the same week in 2014.

     

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  • Three economists writing for the Federal Reserve Bank of San Francisco's Economic Letter, are theorizing that the explosion of lending, especially mortgage lending, has played a more important role in shaping the business cycle that previously thought.  If they are correct, they say, then economic policy must adaptto this reality.

    In their paper, "Mortgaging the Future?" the three, Oscar Jordà vice president in the Economic Research Department of the Bank, Moritz Schularick, professor of economics at the University of Bonn; and Alan M. Taylor professor of economics and finance at the University of California, Davis say that bank lending has quadrupled as a ratio to GDP in advanced economies since World War II.  This lending has been driven to a large extent by the growth in mortgage loanswhich has in turn allowed households to leverage up.  This "Great Mortgaging" as they call it has also fundamentally changed the nature of traditional banking and profoundly influenced the dynamics of business cycles.

     

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  • New home sales rose on a seasonally adjusted annual basis in February, partially because of a near triplingof sales in the Northeast.  Nationally sales of newly constructed single-family homes were up 7.8 percent from January to an annual rate of 539,000 units.  January sales were revised upward from 481,000 units to 500,000.  February sales were 24.8 percent higherthan a year earlier when they were estimated at 432,000.

    On a non-adjusted basis there were an estimated 44,000 new homes sold during the month compared to 37,000 in January and 35,000 in February 2014.  The homes sold were almost evenly divided across completed homes, homes under construction, and those for which construction had not yet begun.

     

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  • The number of pending foreclosures nationwide, the "foreclosure inventory," reached a milestone in February.  For the first time since December 2007 it has dipped slightly below 800,000.  The total, which still rounds up to 800,000, fell 15,000 from January and is 315,000 units lower than in February 2014.   

    Black Knight Financial Services released information on the inventory and other foreclosure data in its "first look" at the months mortgage performance data.  The company will provide more detail on this data in its Mortgage Monitordue to be published on April 6.

     

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  • Short supplies of existing home inventorycontinued to hold back sales in February the National Association of Realtors® (NAR) said today, but contributed to the fastest annual gain in home prices in a year.  Weather was also a factor, with lackluster sales in the snow-plagued Northeast offsetting gains in Sunbelt states.

    Nationwide sales of existing single-family homes, townhomes, condominiums, and co-ops rose 1.2 percent to a seasonally adjusted annual rate of 4.88 million in February from 4.82 million in January. Sales were 4.7 percent higher than in February 2014, the fifth consecutive month that year-over-year sales increased.

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  • The 114th Congress's first attempt at housing financial reform legislation hit the House hopper on Thursday. The bill, H.R. 1491 establishes an insurance program through Ginnie Mae and winds down Fannie Mae and Freddie Mac and allows them to be soldand recapitalized. 

    The legislation is sponsored by John K. Delaney (D-MD). John D. Carney (D-DE), and James A. Himes (D-CT), all members of the House Financial Services Committee and currently has 10 cosponsors.  Tagged as The Partnership to Strengthen Homeownership Act,text of the billis not yet available on the Thomas-Library of Congress website, but is apparently similar if not identicalto one introduced by the trio in the last Congress (H.R. 5055) which never made it out of committee.

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  • A few weeks ago there were a flurry of comments on MBS Live from members expressing concern about a sudden increase in appraisalsreflecting market values well belowwhat had been expected.  In some cases the low appraisals had merely required the restructuring of the loan, in others they killed the deal.  There were enough of these comments that we decided to see if there was a trend or if we could identify any cause for this apparent phenomena.

    We spoke to several of the loan officers and sales managers who had reported receiving multiple low appraisals, but we could discern no particular pattern.  At first it appeared that it was refinances that were being affected.  Matt Hodges, sales manager for Presidential Mortgage Group, said over 50 percent of his refinancing appraisals had come in low over the previous few weeks but none of those for purchases.  This made a certain amount of sense, he said, given that appraisal requests for refinancing cannot carry any guidance about value or the size of the intended loan.  Requests for purchase appraisals, on the other hand, are accompanied by the sales contract making appraisers at least aware of the approximate target.  

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  • February was the second month in a row that refinancing made up more than half of all mortgage originations.  Ellie Mae's latest Origination Insight Report said that the refinancing share of originations jumped 8 percent from the January level to comprise 59 percent of lenders' loan volume.  Refinancing had averaged a 38 percent share throughout 2014, never rising above 50 percent after reaching a high water market of 47 percent in January of that year.  Despite the spike in refinancing lenders took an average of 36 days to close those loans, the shortest timeframe since Ellie Mae began tracking that data in August 2011.

    "The drop in the average 30-year fixed rate in last few months has kept lenders busy with increased refinance business," said Jonathan Corr, president and CEO of Ellie Mae. "Considering the demand, the fact that lenders are taking fewer days to close the average refi loan is very good news."

     

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  • In its quarterly survey of lenders' sentiment Fannie Mae found increasing optimism about the mortgage business.  The survey conducted in the first quarter of 2015 revealed that, compared with the fourth quarter of 2014, lenders expect both mortgage demand and their profit margins to grow over the next three months.

    The number of lenders who expect near-term purchase mortgage demand to grow finally reversed a downward trend that lasted throughout 2014.  More lenders expect that, although there might be seasonal influences, the higher demand will extend to all types of loans and the increased optimism was present no matter whom the respondent represented; mortgage banks, depository institutions, or credit unions.  Seventy-one percent of lenders say they expect purchase mortgage demand to go up over the next three months compared with 59 percent reported during the same quarter last year.  For non-GSE eligible loans the increased demand was expected by 63 percent and for government loans by 65 percent.

     

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  • In 2013 Fannie Mae and Freddie Mac (the GSEs) both essentially bankrupt five years earlier, posted huge profits.  For Fannie Mae it was $84 billion and Freddie Mac $49 billion.  Both of course disclosed that much of the profit was the result of reclaiming tax assets written down during the crisis that led to their being put in government receivership in 2008.  Those one-time adjustments reaped $45 billion for Fannie Mae and $23 billion for Freddie Mac.  

    Still it was a spectacularyear for the GSEs, and in an brief written for the Urban Institute, Jim Parrott, a senior fellow at the Institute and owner of Falling Creek Advisors says talk around Washington "began to shift from winding them down to releasing them from conservatorship, taking much of the wind out of the sails of the already flagging push for overhauling the housing finance system.  All reform involves risk, after all," Parrott said, "and these numbers suggested that we were risking an increasingly healthy system."

     

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  • Even though the number of underwater homes increased seasonally in the fourth quarter of 2014, CoreLogic reports that 1.2 million borrowers regained equity in their homes during the year.  At year's end approximately 44.5 million homeowners or 89 percent of those with a mortgage had some equityin their homes compared to 6.6 million homes, or 13.4 percent, reported for Q4 2013.  The 1.2 million decrease in the numbers represents a change of -18.9 percent.  Borrower equity increased during the year by $656 billion.

    From Quarter 3 to Quarter 4 approximately 172,000 homes slipped from positive to negative equity bringing the total number of mortgaged homes that were underwater to 5.4 million or 10.8 percent of the total.  This was an increase of 3.3 percent from the 5.2 million homes or 10.8 percent of mortgaged property that lacked equity in the third quarter.

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  • It has been a tough winter and with spring less than a week away borrowers have apparently not yet emerged from hibernation.   Applications for bothhome purchases and refinancing were lower during the week ended March 13 in spite of falling interest rates.

    The Mortgage Bankers Association (MBA) said this morning that its Market Composite Index, a measure of application volume, decreased 3.9 percent on a seasonally adjusted basis from the week ended March 6.  The index has lost ground in six of the past eight weeks.  On an unadjusted basis, the Index fell 4 percent. 

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