Mortgage Rate News

Low inventories and increasing traffic have unleashed the confidence of new new home builders the National Association of Home Builders (NAHB) said today. Its Housing Market Index (HMI), issued in conjunction with Wells Fargo Bank, jumped eight points in June to a reading of 52. A score of 50 is significant to the Index as it indicates more builders view sales conditions as good than view it as poor. The eight-point jump in the index was the biggest one-month gain since August and September of 2002, when the HMI recorded a similar increase of eight points.

NAHB Chairman Rick Judson said "This is the first time the HMI has been above 50 since April 2006, and surpassing this important benchmark reflects the fact that builders are seeing better market conditions as demand for new homes increases. With the low inventory of existing homes, an increasing number of buyers are gravitating toward new homes."

Americans' confidence in U.S. banks has rebounded a bit from the low it hit in 2012. Gallop reports that 26 percent of recent survey respondents said they have a "great deal" or "quite a lot" of confidence in banks compared to 21 percent such responses last year. This is the highest level for these responses since June 2008 when confidence peaked at 41 percent before beginning to erode, ultimately by 20 percentage points.

Gallup said when it first asked about confidence in banks in 1979 60 percent of respondents expressed the highest degrees of confidence, second only to the numbers garnered by the church. This number hasn't been matched since and Gallup said that earlier showing probably resulted from the strong U.S. banking system established post-Great Depression and the related efforts of banks and their regulators to build confidence in the system.

The American Institute of Architects (AIA) is seeing an improving market reflected in the size and amenities Americans now expect in both new homes and when they remodel. The Institute also says that responses to its Home Design Trends Survey for the first quarter of 2013 indicate that member firms involved in residential work are seeing their strongest growth levels since the economic downturn began.

AIA Home Design Survey Index for Q1 2013 said that respondents reported that business conditions are strengthening with scores of 67 for billings and 74 for new projects where any score above 50 is positive. AIA Chief Economist Kermit Baker said, "With business conditions at residential architecture firms at the strongest growth level since 2005, this is a very encouraging sign for the housing sector and broader economy in general, especially when you look at the year-over-year improvement in the marketplace."

Increasing sizes in homes are reflected by an increase in the homes volume and square footage. Twenty-four percent of survey respondents reported seeing increasing trends in the former and 12 percent in the latter compared to 20 percent and 8 percent in 2012. While only 3 percent reported that preference for larger lot sizes had increased compared to 5 percent last year, customers appear focused on the features they put into that outdoor space and their environmental impact.

The California housing market heated up a little more in May with resales of houses and condominiums rising by 8.3 percent from resales in April. A total of 42,293 units sold during the month compared to 39,051 in April and 41,790 in May 2012, a 1.2 percent increase.

DataQuick said that the numbers were the strongest for any May since 2006 when 54,099 homes were sold. May sales have ranged from a high of 67,078 in 2005 to a low of 32,223 ten years earlier. Reaching back to 1988, sales for the month have averaged 46,471, 9.0 percent higher than the most recent figure.

Home prices are also increasing rapidly. May was the 15^th consecutive month that the state had seen an increase in median prices on an annual basis and last month's prices were up 25.9 percent from one year earlier, rising from $270,000 in May 2012 to $340,000. The median marked an increase of 4.9 percent from the April $324,000 price. The last time home prices were higher was in April 2008 when the median was $354,000.

Fannie Mae's Economic Outlook series continued its 2013 theme "Transition to 'Normal?'" in its June edition saying that four years into an expansion it appears the country may be well into a prolonged period of sub-par but sustainable growth.  Fannie Mae's economists say that they expect the annual growth rate between now and the end of the decade will average between 2.25 and 2.50 percent where the consensus of what would constitute normal will likely be around 2.75 percent.  Thus growth will probably be a bit slower than the potential of the economy and if that proves incorrect it will likely be housing and energy development that drive it higher.

The economists, Doug Duncan, Orawin T. Velz, and Brian Hughes-Cromwick, say their intermediate term view has changed little since the beginning of the year; modest growth for this year before accelerating moderately next year, and a durable recovery for housing with homebuilding and construction employment returning to normal around 1916.

The Federal Housing Finance Agency (FHFA) submitted its 2013 Report to Congress on Thursday.  The Report covers the Agency's regulation of the Federal Home Loan Banks (FHLBanks) and its activities as both conservator and regulator of the government sponsored enterprises (GSEs) Freddie Mac and Fannie Mae.

Most of the report is a collation of previous releases.  Some aspects--such as an explanation of the Strategic Plan for the GSEs, or the changes in the Senior Preferred Stock Purchase Agreements--have been covered repeatedly.  Rather than summarize the lengthy reprise of FHFA and GSE activities across the year we are summarizing instead the results of FHFA's evaluations of the two GSEs. 

In 2012 FHFA evaluated the GSEs' financial conditions, earnings, liquidity, and efforts taken to mitigate losses in its single and multifamily portfolios and assessed their responses to continued stress in the mortgages markets and its effect on their risk profile, performance, and condition.   FHFA uses three approaches in its evaluation; ongoing monitoring, targeted examinations, and risk assessments.

The Consumer Financial Protection Bureau (CFPB) has launched a new web page which consolidates all of the new mortgages rules issued this year and their related implementation materials.  The Regulatory Implementation Page (consumerfinance.gov/regulatory-implementation ) will be the central access point for collateral including:

• Mortgage rules at a glance 
• Small entity compliance guides 
• Videos 
• Quick reference charts 
• 2013 rural or underserved counties list 
• Other helpful materials 

 CFPB said it hopes the page will make rule content more accessible for its industry constituents, especially smaller businesses with limited legal and compliance staff.  The Bureau cautions that these materials are only designed to give an overview of the rules and are not substitutes for the rules themselves. 

RealtyTrac reported today that an increase in bank repossessions in May boosted foreclosure activity by 2 percent compared to April when foreclosure activity had reached a 75-month low. There were foreclosure filings - default notices, schedules auctions, and bank repossessions or REO - reported on 148,054 U.S. properties during the month which, while a higher number than April was down 28 percent from the May 2012 total of 205,990 filings. One in every 885 U.S. Housing units was the subject of a foreclosure filing in May compared to or one in every 639 a year earlier..

RealtyTrac, in its U.S. Foreclosure Report said the foreclosure problem continued to shift away from non-judicial states and toward judicial states which accounted for five of the top six foreclosure rates nationwide: Florida, Ohio, Maryland, South Carolina and Illinois. At No. 2, Nevada's foreclosure rate was the highest ranked among non-judicial states...

The House Financial Services Committee held a hearing today titled: "Beyond the GSEs: Examples of Successful Housing Finance Models without Explicit Government Guarantees." According to Jeb Hensarling (R-TX), committee chairman, "The hearing will examine the mortgage finance systems of other countries to determine whether a sustainable system of housing finance is possible that does not rely on government-sponsored enterprises or government subsidies."

Five witnesses were scheduled to appear before the committee. We have extracted a portion of the testimony of three.

Dr. Dwight M. Jaffee, Booth Professor of Banking, Finance, and Real Estate Haas School of Business University of California, Berkeley said that current discussion regarding GSE reform focuses on two alternatives. The first would allow the private markets to replace GSE functions and the second would create a government successor to continue guarantees against borrower defaults. His research, he said, leads him to a strong endorsement of the former for two reasons..

Nearly one-half million homeowners refinanced their mortgages in March according to the Refinance Report released by the Federal Housing Finance Agency (FHFA) today. Of the 461,652 refinances closed through Fannie Mae and Freddie Mac (the GSEs) in March, 98,982 or about 21 percent were completed through the Home Affordable Refinance Program (HARP) for a total of 2.46 million HARP transactions since the program began in April 2009.

In the first quarter of 2013 the GSEs refinanced about 1.4 million mortgages. About 22 percent or 300,000 of these were HARP loans, about the same percentage of HARP refinances in the fourth quarter of 2012.

Of the total 2.46 million HARP transactions, roughly half, or 1.37 million have taken place under the revised HARP guidelines put in place at the end of 2011. Those guidelines eliminated the prior 125 percent loan-to-value (LTV) cap on HARP mortgages and during the first quarter of 2013 22 percent of loans refinanced through the program had an LTV greater than 125. During the quarter 45 percent of the HARP loans had LTV ratios greater than 105 percent.

Over three-quarters of a million homeowners emerged from being underwater on their mortgages during the first quarter of 2013 and 39 million households now have positive equity in their homes. However, millions of those homeowners are only narrowly in that position. CoreLogic reported Wednesday that 850,000 more homes returned to a state of positive equity between January and March.

Negative equity, often referred to as "underwater" or "upside down," means that borrowers owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in value, an increase in mortgage debt or a combination of both.

At the end of the quarter 9.7 million households or 19.8 percent of all properties with a mortgage remained underwater compared to 10.5 million homes or 21.7 percent of mortgaged properties at the end of the fourth quarter of 2012. The aggregate value of underwater property decreased more than $50 billion to $580 billion quarter-to-quarter. CoreLogic said this decrease was largely driven by rising home prices.

The real story about racial discrimination in housing today, Shaun Donovan, Secretary of the Department of Housing and Urban Development (HUD) said, is the lack of any real differences across cities and regions. Donovan and and Margery Turner of the Urban Institute spoke to reporters on Tuesday in conjunction with the realease of the HUD/Urban Institute summary study Housing Discrimination Against Racial and Ethnic Minorities 2012.

There can be no question that the housing circumstances of whites and minorities differ substantially, the summary study says. Whites are more likely to own their homes, to occupy better quality homes and apartments, and to live in safer, more opportunity-rich neighborhoods. However, it is less obvious whether-or how much-these disparities result from current racial and ethnic discrimination in the housing market or because whites and minorities differ systematically in employment, income, assets, and debts.

After a string of dismal weeks during which refinancing activity dropped to its lowest level since November 2011, applications for both refinancing and purchasing picked up during the week ended June 7. The Mortgage Bankers Association said this morning that mortgage applications increased 5.0 percent on a seasonally adjusted basis.  On an unadjusted basis the Index was up 16 percent compared to the week ended May 31.

The increase in mortgage applications came despite higher contract and effective mortgage interest rates for all products tracked by the survey...

Contrary to the increasingly prevalent argument that the benefits of homeownership have been overemphasized, a new study by finds that it is still a good investment for low- and moderate-income households. But there is a caveat: The lending process must be done right, through responsible mortgage practices.

Michal Grinstein-Weiss and a team of researchers looked at a group of homeowners who got vanilla loans at a time where everyone else in similar circumstances were pushed into the subprime market. These vanilla borrowers subsequently reported higher net worth than a comparison group of participants who remained renters. Their findings are outlined in an article titled Is Homeownership Still a Sound Financial Move? published in the journal Housing and Policy Debate

The Federal Reserve Bank of New York has published a paper by one of its former visiting scholars that flies in the face of the stated policy of at least one federal regulatory agency and is bound to stir up Wall Street interests once again. Paying Paul and Robbing no One: An Eminent Domain Solution for Underwater Mortgage Debt by Robert Hockett, Professor of Financial and Monetary Law at Cornell Law School, advocates a program of loan restructuring by state and local government which has been specifically denounced by the Federal Housing Finance Agency and drawn substantial fire from the private sector.

Hockett says that, in the view of many analysists, the best way to assist underwater homeowners is to reduce the principal on their home loans but the hurdles to principal write downs make this form of modification used less than would be optimal. One is the "last-mover" advantage that accrues to the creditors of later loans when principal is reduced on earlier ones. Then the Federal Housing Finance Agency (FHFA), conservator of the government sponsored enterprises Freddie Mac and Fannie Mae, has flatly refused to allow them to participate in write downs.