Mortgage Rate News
The maximum conforming loan limit will remain at $417,000 for most of the U.S. in 2015. FHFA announced the limits, which define the size of loans eligible to be acquired by Fannie Mae or Freddie Mac, on Monday. The limits are established under the terms of the Housing and Economic Recovery Act of 2008 (HERA) and recalculated each year.
The limits were unchanged despite substantialincreases in most indexes that measure home priceson national and local levels. FHFA explained that HERA requires that while the baseline loan limit be adjusted each year to reflect changes in the national average home price, after a period of declining prices any prior declines must be fully offset before a loan limit increase can occur....(read more)
Is the party officially over?
S&P Dow Jones Indices said today that the increase in home prices, which has shown diminishing energy for months, experienced a broad-based slowdown in September. The company's Case-Shiller Home Price Indices continued to show gains over the levels of a year earlier, but the size of those gains continued to contract.
The Case-Shiller National Index rose 4.8 percent from September 2013 to September 2014 while the 10-City Composite posted a 4.8 percent increase compared to September 2013 and the 20-City was up 4.9 percent. The respective year-over-year gains for the two Composites in August were 5.5 and 5.6 percent. Charlotteand Dallaswere the only cities to see stronger annual gains in September than in August while Cleveland was unchanged....(read more)
The Federal Reserve has completed its latest round of Quantitative Easing, the government sponsored enterprises (GSEs) Freddie Mac and Fannie Mae are under orders to continue shrinking their investment portfolios and significant constraints exist to keep private investors from purchasing agency mortgage-backed securities (MBS). So who, the Mortgage Bankers Association (MBA) asks, is going to pick up the slack?
A white paper written by MBA's vice president and senior economist Michael Fratantoni, lays out the conundrum facing the MBS market. Fratantoni says both policy makers and the housing industry have a common interest in bringing private capital into the mortgage markets but the key question is how and in what form that private capital can best reenter the system. MBA has advocated for private capital to have a larger role in covering credit risk within the government guaranteed, conforming portion of the market but we need to consider how to draw it to the interest-rate risk of the conforming market and how to reengage it for lending outside of the government guaranteed system....(read more)
Growing numbers of severe weather events throughout the U.S. may be giving new meaning to "location, location, location" in the housing world. CoreLogic senior economist Kathryn Dobbyn writes in the company's blog "housing Pulse" that the $8 billion in property damage caused by severe weather in the U.S. in 2013 is causing the housing industry to think about the risk of any given location's exposure to natural disasters which are only expected to continue to increase in both frequency and intensity.
In some parts of the country, such as Florida's hurricane prone Atlantic coast or the Mid-West's "Tornado Alley" the risk of unexpected property damage is always there and the mortgage industry has relied on required insurance to mitigate its risks. But for a variety of reasons, costs, a lack of understanding of the risks, or the absence of a requirement to insure against most specific risks (floods being the exception), many homeowners don't maintain adequate coverage, especially for less common or widely known risks. Disasters like Hurricane Sandy have highlighted this but until recently very little could be done to quantify differences in the risk of a natural disaster from one property to the next.
Fannie Mae and Freddie Mac have nailed down the promised details the life-of-loan exclusions related to their representation and warranty framework. Under the direction of the Federal Housing Finance Agency (FHFA) the two government sponsored enterprises (GSEs) announced the changes on Thursday afternoon.
Press releases from the two mortgage companies said the enhancements to the framework are expected to help reduce lender concerns about when a GSE may demand a loan be repurchased. While the framework provided relief as explained below there remained so-called "life of loan" exclusions which permitted the GSEs to involve repurchase requests as long as there was an unpaid balance on the loan....(read more)
A report from the Federal Housing Finance Agency (FHFA) says that while the average fee charged by the government sponsored enterprises (GSEs) for providing a loan guarantee (g-fee) has more than doubledsince 2009, both pricing differences and fee equity have increased. The FHFA report is required for annual presentation to Congress.
Fannie Mae and Freddie Mac, the GSEs, acquire single-family loans from lenders, some of which they hold in their own portfolios but most of which are securitized in the form of mortgage-backed securities (MBS) and sold to investors. The GSEs guarantee timely payment of interest and principal from borrowers to investors in these securities and in return charge the lender (seller) a g-fee to cover three types of coststhey expect to incur. Costs include what they expect to lose on average through borrower default, the costs of holding economic capital against possible catastrophic losses from borrower default, and general and administrative expenses. Cost of capital is by far the most significant of these expenses, according to the FHFA.
The Consumer Financial Protection Bureau (CFPB) has proposed some new measures affecting the way servicers handle mortgages in various stages of default. The changes will require servicers to:
- Provide certain borrowers with foreclosure protections more than onceover the life of the loan. Currently a borrower is given certain protections such as the right to be evaluated under the CFPB's options to avoid foreclosure, only once during the life of the loan, even if they suffer separate financial hardships years apart. The proposal would require that servicers provide those protections for borrowers who have brought their loans current since the last loss mitigation application.
Melvin L. Watt, Director of the Federal Housing Finance Agency (FHFA) told the Senate Banking Committee today that Freddie Mac and Fannie Mae (the GSEs) will soon announce they will begin purchasing loans with downpayments of 3 or 5 percent, similar to those offered by FHA. Watt made the announcement in remarks prepared to update to the Committee on the GSEs and the Federal Home Loan Banks for which FHFA is regulator. The agency also serves as conservator of the two government sponsored enterprises.
Watt summarized the financial performance of the GSEs as significantly improved since the conservatorship began in 2008. While both entities have posted profits every quarter since the beginning of 2012 he said that some of the increased performance relates to one-time or transitory items, such as the reversal of each GSE's deferred tax asset valuation allowance, legal settlements, and the release of loss reserves associated with rising house prices. Other portions of the improvement are attributable to such factors as strengthened underwriting practices and increased guarantee fees.
If October sales of existing homes are an indication 2014 may come to a better conclusion than has been expected. The National Association of Realtors® (NAR) said today that sales of single-family homes, townhomes, condominiums, and co-ops in October were at their highest level since September 2013 and, for the first time in a year, exceeded sales a year earlier.
Existing home sales rose 1.5 percentin October to a seasonally adjusted annual rate of 5.26 million in October, the highest since the same figure was reached in September 2013, from an upwardly revised rate of 5.18 million in September, the second consecutive month-over-month increase. October's sales were also 2.5 percent higher than in October 2013.
October was a mixed month for new residential construction data. More permitswere issued than in September but housing starts and completions were both down. September numbers for permits and housing starts were upgraded slightly from original estimates while the completions number was revised down.
Permits for construction of privately owned housing units were issued at a seasonally adjusted annual rate of 1.080,000. This was an increase of 4.8 percent from the revised (from 1,018,000) September estimate of 1,031,000 permits and 1.2 percent higher than the October 2013 rate of 1,067,000....(read more)
The week ended November 14 was a lackluster one for mortgage activity. Mortgage applications during the week, as measured by the Mortgage Bankers Association's (MBA's) Market Composite Index increased 4.9percent on a seasonally adjusted basis but on an unadjustedbasis applications were down 7 percent. The higher number included an adjustment to account for the Veterans' Day holiday which occurred mid-week.
Applications for refinancing fell from 63 percent of all mortgage applications to a 61 percent share. The Refinance Index increased 1 percent from the week ended November 7.
New home builders regainedsome of the confidence in the market they had displayed in September after wavering significantlyin October. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), a measure of builder attitudes about the current and prospective market for newly built single-family homes, rose four points to 58 this month after falling five points from September to October.
The HMI is compiled from responses to a monthly survey NAHB conducts among its new home builder members. The survey asks for their perceptions about current single family home salesand their expectations for sales over the next six months as "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as "high to very high," "average" or "low to very low." Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.
Despite dire predictions from many quarters the Federal Housing Administration's (FHA's) Mutual Mortgage Insurance Fund (MMIF) has returned to solvency. And it did it a full three years ahead of the best estimates back in 2012. The Department of Housing and Urban Development (HUD) said on Monday that the Fund has gained nearly $6 billion in value over the last year and now stands at $4.8 billion with a capital ratio of .41 percent. One year ago that ratio was a negative .11 percent.
HUD made the financial announcement as it released its annual report to Congress. An independent actuarial report shows that the fund has gone from a negative value to a growth of $21 billion within the last two years.
In September 2013 FHA had to draw $1.7 billion against its borrowing authority from the Treasury Department, the first time in its 79 year history it had required such support. The draw came after the MMI failed to maintain its congressionally mandated capital-to-loan ratio of 2.0 percent for three consecutive years and an independent audit estimated it would not return to that ratio until 2017. It now appears that it will reach 2.0 percent sometime in FY 2016 after regaining an additional $15.1 billion in value over the remainder of this fiscal year. As late as December 2013 there were many who predicted the agency would have to return to Treasury to request more support.
HUD credited the improved financial picture to an aggressive set of policy actions. Delinquency rates in the agency's portfolio of guaranteed loans has dropped by 14 percent and recovery rates improved by 16 percent since last year. Since the housing crisis began FHA has made significant changes to underwriting standards, loss mitigation policies, and recovery strategies and has raised insurance premiums.
"This year's report shows that the fundamentals of the Fund are strong," said HUD Secretary Julian Castro. "Over the past five years, FHA has taken a number of prudent actions to restore the Fund's fiscal health. This is positive news for the economy and the millions of American families that count on FHA."
"Improving the performance of the Fund by $21 billion in two years is good news for the housing market," said Acting FHA Commissioner Biniam Gebre. "FHA will continue to focus on meeting its mission of creating responsible access, investing in our economy and preserving pathways to the middle class. We remain dedicated to giving more hard-working responsible families the chance to buy a home and not a returning to the days of reckless lending that caused so much pain for middle-class families and the economy."
David H. Stevens, President and CEO of the Mortgage Bankers Association (MBA), said following the release of the report that the continued improvement in the value of the MMI Fund was good news for taxpayers and the program, as almost all of the vital metrics, including delinquencies, foreclosures, and recoveries on property disposition, continue to improve.
"Maintaining this trend will require FHA to continue its ongoing work to improve transparency and certainty around its loan quality assessment methodology, as well as to re-examine mortgage insurance premiums, both the amount and the structure. Premiums are currently at an all time high, and FHA needs to find the right balance so it can meet its mission and further grow its reserves by sustainably increasing volumes without being adversely selected should only the highest risk borrowers be willing to pay the high premiums," Stevens said....(read more)
The prognosticators are already gearing up for the New Year and at least one foresees a strong economy in 2015. Freddie Mac's chief economist Frank E. Nothaft is forecasting 3.0 percent growth in the economy which would make 2015 only the second year in the last decade with growth at that pace or better.
His forecast, published in Freddie Mac's Executive Perspectives blog, is based on several factors; the governmental fiscal drag has turned into fiscal stimulus, lower energy costs will support both consumer spending and business investment, further easing of credit for business and real estate lending will support commerce and development, and more upbeat consumer and business confidence will stimulate growth. That growth, he says, will produce more and better paying jobs which will in turn support household formation and housing activity....(read more)
Although cash sales ticked up slightly in August, a pattern that has been maintained for 14 of the last 15 years, that share of all home sales continued to retreat on a long term basis. CoreLogic said today that cash sales had a 33.8 percentportion of the market in August, a less than one point uptick from July and was down from a 36.4 percent share in August 2013. The percentage of cash sales has been lower on a year-over-year basis every month since January 2013.
Prior to the housing crisis, the cash sales averaged approximately 25 percent of all sales. They peaked in January 2011 when cash transactions made up 46.3 percent of total home sales.