Purchase mortgage applications hit 19-year low

shutterstock_155808050-300x200Weakening housing activity image via Shutterstock

Purchase mortgage applications hit 19-year low

MBA: ‘We would expect a significant pickup in purchase activity, and we are not yet seeing it’

Teke Wiggin, Staff Writer

Feb 26, 2014

Applications for purchase mortgages hit a seasonally adjusted 19-year low last week, as demand from borrowers continued to lag despite the imminent onset of spring buying season, the Mortgage Bankers Association MBA reported.

Purchase loan applications fell a seasonally adjusted 4 percent for the week ending Feb. 21 to their lowest level since 1995, and were down 15 percent year over year, according to the latest Mortgage Bankers Association’s MBA Weekly Mortgage Applications survey.

“[T]his is the time of a year we would expect a significant pickup in purchase activity, and we are not yet seeing it,” said Mike Fratantoni, chief economist at MBA.

The survey’s results offer the latest indication that the housing recovery has lost some steam. Existing-home sales and pending home sales which predict future existing-home sales have both trended downwards in recent months.

Many real estate analysts say that increased mortgage rates and home prices are largely responsible. According to RealtyTrac, they’ve driven up the cost of owning a home by 21 percent in the last year.

In addition, housing experts cite unusually cold weather, tight credit potentially exacerbated by new mortgage rules and low inventory as headwinds.

But Jed Kolko, chief economist at Trulia, said there’s reason to believe that the demand from mortgage-financed buyers may recover soon.

“[R]ates remain low by historical standards, and the new mortgage rules could expand credit availability for loans that conform to the new standards, so part of the slowdown in purchase mortgage applications may be short-lived,” he said.

via Purchase mortgage applications hit 19-year low | Inman News.

Mortgage rates hold steady

Mortgage rates hold steady

BY KATHY ORTON

February 13 at 10:00 am

Mortgage rates held steady last week, according to the latest data released Thursday by Freddie Mac.

After falling for five weeks in a row, the 30-year fixed-rate average reversed course. It ticked up slightly, rising to 4.28 percent with an average 0.7 point. It was 4.23 percent a week ago and 3.53 percent a year ago. The 30-year fixed rate hasn’t moved above 4.5 percent since early January.

The 15-year fixed-rate average remained the same, holding at 3.33 percent with an average 0.7 point. It was 2.77 a year ago. The 15-year fixed rate has remained below 3.5 percent for five weeks.

Hybrid adjustable rate mortgages were mixed. The five-year ARM average fell to 3.05 percent with an average 0.5 point. It was 3.08 percent a week ago and 2.64 percent a year ago.

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Pam Tobey/The Washington Post

The one-year ARM average climbed to 2.55 percent with an average 0.4 point. It was 2.51 percent a week ago.

“Mortgage rates were little changed amid a week of light economic reports,” Frank E. Nothaft, Freddie Mac vice president and chief economist, said in a statement.

“Of the few releases, the economy added 113,000 jobs in January, which was below the market consensus forecast and followed a slight upward revision of 1,000 jobs in December. Meanwhile, the unemployment rate fell to 6.6 percent, which makes thirteen consecutive months without an increase.”

Mortgage applications were sluggish last week, according to the latest data from the Mortgage Bankers Association.

The Market Composite Index, a measure of total loan application volume, declined 2 percent. The Refinance index was nearly unchanged, slipping 0.2 percent. The Purchase Index dropped 5 percent.

The refinance share of mortgage activity was unchanged, accounting for 62 percent of all applications.

via Mortgage rates hold steady.

Expired tax breaks for homeowners could be restored — retroactive to Jan. 1 — by this summer

Capitol_shutterstock_113019124-300x198U.S. Capitol image via Shutterstock.

Expired tax breaks for homeowners could be restored — retroactive to Jan. 1 — by this summer
Why Obama’s appointment of Max Baucus to serve as ambassador to China is great news for real estate
Ken Harney, Contributor
Feb 11, 2014

Though it’s not attracting much attention, the impending arrival of Sen. Ron Wyden, D-Ore., as head of the Senate Finance Committee could be good news for housing and real estate in the weeks ahead.

That’s especially true if you care about mortgage forgiveness relief and other tax code provisions that help homeowners, buyers and sellers.

Things are looking up.

Wyden replaces Max Baucus, D-Mont., who is leaving to serve as the Obama administration’s new ambassador to China. Baucus spent much of the past two years developing comprehensive tax reform legislative proposals with severely negative impacts on real estate, including total elimination of tax-deferred exchanges and lower depreciation write-offs for investors. Now he’s gone.

Baucus’ reform efforts were paralleled in the House by Ways and Means Committee Chairman Dave Camp, R-Mich., who is sitting on a closely guarded tax bill that is potentially so explosive — it would reportedly kill or limit pretty much all popular deductions, such as those for mortgage interest and property taxes — that the House Republican leadership convinced him not to release details late last year.

Camp’s bill would use the revenue that would be generated by eliminating deductions to offset the cost of lowering the top marginal tax brackets for individuals, as well as corporations, to 25 percent.

 

Meanwhile, Baucus’ and Camp’s insistence on major tax reform had stalled efforts in the House and Senate to extend key expiring provisions in the code.

Max Baucus spent much of the past two years developing comprehensive tax reform legislative proposals with severely negative impacts on real estate. Now he’s gone.”

Among the most important for housing: reauthorization of the mortgage debt forgiveness law that allows financially stressed homeowners to escape federal taxation on the principal balances written off by lenders in connection with short sales, loan modifications and foreclosures; deductions for private and FHA mortgage insurance premiums; and write-offs for certain home energy-saving improvements.

Those three and about 50 other special interest provisions expired Dec. 31, and won’t be available for taxpayers this year unless Congress puts them back into the code retroactive to Jan 1.

But supporters of Baucus and Camp have argued that there shouldn’t be any extensions of special interest tax provisions until Congress takes up a full reform of the tax code. After all, they say, many of the so-called extenders won’t be retained in any major tax reform bill that passes both houses.

Now to the reasons why Wyden taking over as chairman of the Senate Finance Committee is a plus for real estate. No. 1: He is certain to call for a reassessment of Baucus’ reform proposals — a process that could take months.

That will delay consideration of fundamental tax reform in the Senate this year, and would provide fresh pressure to move an extenders bill sooner, not later.

In fact, Wyden has said he intends to take up the extenders issue before proceeding onto major tax reform. That’s welcome news for Wyden’s Democratic colleague from Michigan, Debbie Stabenow, who is sponsoring bipartisan legislation that would reauthorize mortgage debt relief through the end of 2014.

Even better: Wyden has his own ideas about comprehensive tax reform. And based on previous bills he has authored on the subject, they don’t require mangling or killing popular real estate deductions or tax-deferred exchanging a la Baucus.

Wyden’s “Bipartisan Tax Fairness and Simplification Act,” co-sponsored in 2011 with Sen. Dan Coats, R-Ind., would reduce the number of tax brackets for individuals to just three — 15 percent, 25 percent and 35 percent — and eliminate the widely despised Alternative Minimum Tax.

His bill also would seek to simplify the code by encouraging vastly larger numbers of taxpayers to opt for the standard deduction, which would be nearly tripled in size. Though that would encourage some homeowners to stop itemizing, and thus claiming mortgage interest and other real estate write-offs altogether. Wyden estimates that on average, individuals and couples with incomes up to $200,000 “will do as well or better” under his plan than they do today.

Meanwhile in the House, the departure of Baucus increases the pressure on Camp to abandon his plans for comprehensive tax reforms in 2014. With Wyden open to taking up an extenders bill sooner than later, Camp will eventually have to cave and go along.

Bottom line: Baucus heading to China is a great for real estate. Not only are Camp’s and Baucus’ bills essentially knocked off the track, but the popular extenders reauthorization is likely back on track.

Timing is uncertain, but veteran Capitol Hill tax experts say the now-expired housing benefits could be on the president’s desk — retroactive to Jan. 1 — by the summer recess, right before most members of Congress head home to campaign.

Ken Harney writes an award-winning, nationally syndicated column, “The Nation’s Housing,” and is the author of two books on real estate and mortgage finance.

via Expired tax breaks for homeowners could be restored — retroactive to Jan. 1 — by this summer | Inman News.

Mortgage Rates Hit Three-Month Low

mortgageBloomberg News

February 5, 2014, 11:46 AM

Mortgage Rates Hit Three-Month Low

By NICK TIMIRAOS

Average mortgage rates fell to the lowest level since mid-November last week as unease over economic growth in the U.S. and market turmoil abroad prompted investors to load up on government bonds, pushing down long-term interest rates.

The average rate on a 30-year fixed-rate mortgage was 4.47% last week, down from 4.52% the week before, the Mortgage Bankers Association said Wednesday. Mortgage rates are tied to yields on 10-year Treasury note, which closed at 2.64% on Tuesday amid market jitters.

But the modest decline in mortgage rates hasn’t yet been enough to trigger any meaningful gain in home-loan refinancing. Applications for refinances were up 3% from a week earlier but remain at extremely low levels.

Market strategists say that rates would need to ease to about 4% from their current levels in order to provide any lift to refinancing. Rates remain more than a percentage point above their lows of May 2013, when they fell to 3.6%.

“We are eyeing 4.0% on the primary mortgage rate to be a bellwether for increased originator supply,” said Walter Schmidt, an analyst at FTN Financial in Chicago, in a note on Wednesday morning. Refinances accounted for 62% of loan applications last week, which was unchanged from the prior week.

The Mortgage Bankers Association estimates that refinance volume will total about $440 billion this year, down from $1.1 trillion last year. That would be the lowest level of refinancing since 2000.

Mortgage rates jumped more than a percentage point last June as investors grew anxious over the Federal Reserve’s plans to unwind its unprecedented bond-buying campaign. The rise in rates ended an unusually long refinance wave that had generated huge profits for U.S. banks. It also led to a pullback in home sales during the fall.

Mortgage applications for home purchases fell 4% last week on a seasonally adjusted basis and stood 17% below their year earlier levels, a grim indicator of falling demand for homes. The small declines in rates in recent weeks could serve as a tailwind to the housing market as the spring buying season gets underway in the coming weeks.

Banks may be able to see refinancing drop by a smaller-than-expected margin if rates stay low and more borrowers find that rising home prices have restored equity, making it possible to refinance. Many borrowers have been shut out from refinancing because their homes have dropped in value, though a series of government programs have enabled more borrowers to refinance. But analysts don’t expect refinance volumes to come anywhere close to their levels of the past few years.

via Mortgage Rates Hit Three-Month Low – Developments – WSJ.

Massive credit-data breaches may pose problems for people trying to buy houses

photo-right-Capitollitup-against-med-blue-sky-copy-copyMassive credit-data breaches may pose problems for people trying to buy houses

By Kenneth R. Harney, Published: January 30 | Updated: Friday, January 31, 7:50 AM

The numbers of affected consumers are as yet impossible to predict, but mortgage credit experts warn that the recent massive data breaches at Target, Neiman Marcus and other retailers could have significant side impacts on some real estate transactions in the coming months, as damaged credit files depress scores and jeopardize loan applications and home sales.

The Target breach alone could touch as many as 70 million credit and debit card customers, according to the company. Neiman Marcus says that data on 1.1 million of its customers may be vulnerable to fraud. Data security researchers report that at least six other merchants have experienced data breaches from point-of-sale malware similar to what was used in the Target thefts.

Both Target and Neiman Marcus have sought to reach out to customers and have offered free credit-monitoring services. But credit experts say it’s likely that given the sheer size of the data thefts, large numbers of people either have not taken advantage of these offers or have, for varying reasons, not been aware that their data may have been compromised.

So what are the potential blowbacks on home sales and mortgage applications?

Start with the basics: Identity theft, if not corrected quickly, can make a mess of anyone’s credit bureau files. Though victims may not be liable for the unauthorized debts racked up, their credit reports — and, in turn, their credit scores — can be damaged for weeks or months.

Listen to Terry Clemans, executive director of the National Consumer Reporting Association, the primary trade group that represents independent credit-reporting companies serving the mortgage industry.

Clemans says that mass identity heists such as those at Target and Neiman Marcus have the potential to create “havoc on credit files for as long as it takes for the consumer to document [that] the accounts are due to identity theft and get them removed from the file. The impact on credit scores, although short-term, is devastating because they are current defaults and [trigger] a big hit to the score. With the sizes of the breaches, this could be painful for a long time.”

Sarah Davies, senior vice president for VantageScore Solutions, one of the two major providers of consumer score models used by banks and other creditors, confirmed that unauthorized debts on credit reports “can have quite a big impact” and could interfere with certain transactions you want to undertake, such as buying a home or applying for a mortgage.

Among the scenarios that could begin surfacing as the stolen information from retailers is sold and used in the coming months:

?Home sales could be knocked off track by the sudden appearance of new debts on buyers’ credit reports. Many lenders monitor national credit bureau files electronically from the date of loan approval to moments before closing.

Even if you explain that you were a victim of identity theft, your financing could be put on ice until you and the bureaus clean up your reports. That could cause you to miss contractual deadlines with the home seller and, worst case, cause you to lose the house.

?Undetected run-ups of balances on credit cards could seriously affect “utilization ratios” — how much of the available credit maximum a consumer has drawn down — and cause declines in scores. High rates of utilization, or “maxing out,” are penalized by the major scoring models. Lower credit scores, in turn, may disqualify you for a mortgage, at least until you are able to document to the credit bureaus’ satisfaction that the new debts were the result of identity theft.

?Undetected use of your information to create one or more new credit cards could be especially damaging and time-consuming to fix.

Clemans notes that although merchants and the bureaus may be eager to help resolve identity theft situations, they are also on guard against attempts by consumers to blame everything negative in their files on identity theft. They’ll want proof and documentation before expunging the bad information.

In the mortgage context, there’s another complication: Although independent credit reporting agencies, which resell and reformat the national credit bureaus’ data for lenders, can often help advise loan officers on ways to improve their applicants’ scores — a service known as “rapid rescoring” — they can’t help in identity theft repairs. That needs to be done by the consumers themselves, by contacting the bureaus, placing fraud alerts or freezes on their accounts, then working to clean out the bad stuff, line by line.

via Massive credit-data breaches may pose problems for people trying to buy houses – The Washington Post.

Mortgages have become harder to obtain, but consumers do have some alternatives

WFP_WhiteLogo_Reverse-PMS275BlueBackgroundMortgages have become harder to obtain, but consumers do have some alternatives

By Kenneth R. Harney, Published: January 23 | Updated: Friday, January 24, 7:50 AM

The verdict was nearly unanimous at a recent hearing on Capitol Hill: The new federal “ability to repay” and “qualified mortgage” regulations that took effect Jan. 10 will make obtaining credit tougher, not easier, this year, and potentially force large numbers of credit-worthy home buyers to defer or cancel their plans.

What nobody addressed at the hearing, though, was the elephant in the room: Okay, we’ve got a problem. But what, if anything, can buyers who find it difficult to meet the new standards do about it?

The testimony came from mortgage, banking and credit union leaders — even the head of a nonprofit Habitat for Humanity chapter. Though they didn’t dispute the good intentions of Congress or federal regulators in adopting the sweeping changes — banning or severely restricting most of the worst practices and loan features that facilitated the mortgage debacle of the last decade — they said the new rules amount to overkill.

By forcing creditors to offer mortgages within a tightly confined box of complex underwriting requirements and imposing crushing financial penalties for infractions, the new regulations are making lenders hyper-cautious about approving anybody, especially applicants who appear marginal or don’t quite fit the standard profile.

Bill Emerson, chief executive of Quicken Loans, one of the country’s highest-volume lenders, said the new rules could “impair credit access for many of the very consumers they are designed to protect.” These people are all over the country — young first-time buyers with student debts, middle-income minority buyers, self-employed individuals and those whose incomes are not received at regular intervals, plus just about anybody with household debt that exceeds 43 percent of income.

But are there ways for folks such as these to improve their chances to get a mortgage this year, rather than waiting the estimated 12 to 24 months it may take for regulators to assess the impact of their rules and loosen up? Yes. Here are a few practical strategies.

?Debt ratios. Though the baseline standard for a new “qualified mortgage” (QM) is that a borrower’s total debt-to-income ratio should not be greater than 43 percent, lenders say there is wiggle room if you search for it. For example, conventional loans being sold to giant investors Fannie Mae and Freddie Mac may exceed 43 percent by a little, provided your overall application makes it through the companies’ electronic underwriting systems, which take multiple factors into consideration beyond household debt burdens.

Dennis C. Smith, co-owner of Stratis Financial in Huntington Beach, Calif., says, “We’ve had some people with 44 percent to 45 percent” debt ratios get through the hoops. Smith uses another technique where appropriate: Getting a qualified co-borrower, typically a close relative, to join with the buyer and sending the application to Freddie Mac, which he says has a more generous rule on non-occupant co-borrowers than Fannie does. According to Smith, this allows a sharing or “blending” of household finances and can produce a lower overall debt-to-income ratio if the non-occupant co-borrower has a strong financial profile.

Another option: The Federal Housing Administration offers additional flexibility on debt-to-income ratios in its version of a qualified mortgage. Though FHA has raised its insurance premiums recently, it is still an important potential resource if your debt levels are high and you have only modest down-payment cash. FHA’s minimum down is still just 3.5 percent; Freddie and Fannie require at least 5 percent.

John Councilman, president of AMC Mortgage Corp. in Fort Myers, Fla., says that FHA’s current maximum acceptable debt-to-income ratio through its underwriting system appears to be around 50 percent. Applicants who have veterans status should check out VA loans for similar flexibility, and buyers in rural areas should look to the Department of Agriculture’s loan program.

?Down-payment assistance. Toughened federal rules are shedding new light on some alternatives that get relatively little public attention: hundreds of bond-funded, low-cost mortgage assistance programs run by state and local housing finance agencies. According to Downpaymentresource.com, an online service that helps connect buyers with houses and funding, there are nearly 1,600 such programs across the country. The site estimates that 70 percent of for-sale listings in any given market are eligible for at least one of these programs.

Bottom line: You may have options. Check them out with the help of an experienced loan officer who works with a variety of funding sources. Ask about that upfront.

via Mortgages have become harder to obtain, but consumers do have some alternatives – The Washington Post.

CFPB’s new ‘qualified mortgage’ rule now in effect

wfpCFPB’s new ‘qualified mortgage’ rule now in effect

BY ILYCE R. GLINK AND SAMUEL J. TAMKIN

January 22 at 5:30 am

Last week, the Consumer Financial Protection Bureau’s CFPB new qualified mortgage also known as the ability-to-repay rule went into effect.

The new rule is about helping borrowers understand the true costs of the mortgage they apply for. On the flip side, it is designed to keep lenders from lending money to borrowers who can’t afford to make those payments over time.

If it works out the way the CFPB has planned, the number of foreclosures should drop in the coming years, and, hopefully, some of the conditions that helped create one of the biggest real estate bubbles in U.S. history will be eliminated.

To be considered a qualified mortgage, a lender may not charge excessive upfront points and fees capped at 3 percent of the loan, and the loan cannot be longer than 30 years in length say goodbye to 40-year mortgages.

Also, interest-only loans also known as zero-down payment loans and negative amortization loans where the monthly payment doesn’t cover the true cost of the interest, so the total amount of the debt grows each month will not be considered qualified mortgages.

No-doc loans, also known as stated-income loans because the loan officer would just write down how much the applicant said he or she earned and not verify that information, have been eliminated. Starting this week, if you apply for a mortgage, you have to be able to prove that you can afford to repay it in full.

In addition, the loans must fall into one of three categories: The monthly loan payment plus the borrower’s other debt payments cannot exceed 43 percent of the borrower’s gross monthly income; the loan must qualify to be purchased or guaranteed by a government-sponsored enterprise such as Fannie Mae or Freddie Mac or to be insured or guaranteed by a federal housing agency; otherwise, the loan must be made by a smaller lender that keeps the loan in its portfolio and does not resell it.

As the CFPB Web site puts it: “The ability-to-repay rule is intended to prevent consumers from getting trapped in mortgages that they cannot afford, and to prevent lenders from making loans that consumers do not have the ability to repay. It’s that simple.”

So, of course, the nonprofit real estate and mortgage trade associations, which represent the housing industry’s interests in Washington, are up in arms. They claim that self-employed individuals, small business owners and many others will have a harder time qualifying for loans. They also say that loans will cost more.

Perhaps. But while lenders may offer other sorts of nonqualified mortgages provided they verify that the borrower can repay that loan, if a loan doesn’t fall into the qualified mortgage category, it will not receive the same sort of legal protections.

And after the billions spent to pay off the housing crisis, lenders may be inclined to primarily offer qualified mortgages.

Ilyce R. Glink’s latest book is “Buy, Close, Move In!” If you have questions, you can call her radio show toll-free 800-972-8255 any Sunday, from 11 a.m. to 1 p.m. EST. Contact Ilyce through her Web site, www.thinkglink.com.

via Real Estate Matters | CFPB’s new ‘qualified mortgage’ rule now in effect.