Nationwide Housing Continues to Improve; Jumbo Originations Increasing; Lender Updates
to a water shortage in California, Sacramento swimming pools have
announced they are closing lanes 7 and 8." Speaking of swimming pools,
the most any of us see of swimming events is at the Olympics every four
years, and the winter Olympics just finished up. What happens to
previous Olympic venues? Needless to say, the pomp, circumstance, glory,
and fresh paint fades, and we are left with some pretty surprising
sites, and sights. (Page down once or twice to quickly go through the slides.)
can't figure out if this is a story about the rebounding real estate
market, or about the gap between the "haves and the have-nots" widening -
or both. Bloomberg's Oshrat Carmiel writes how "Miami
Luxury Condos Revived With Buyer Cash Deposits." Regarding one 132 unit
luxury project where prices range from $4.5 million to $32.5 million,
"While the oceanfront tower's foundation is still being poured, 113 of
its 132 units have sold. All buyers placed deposits of 30 percent in
cash...We wanted to reconfigure and go after a buyer that is not as
financially sensitive." Builders are funding projects with cash commitments from buyers of as much as 60 percent of the purchase price.
One reason existing home sales are so anemic is because few homeowners can afford to sell.
There are roughly 75 million owner-occupied households, of which 10
million are underwater and 10 million have insufficient equity in their
homes to afford a down payment on a new home. So 27% of all
owner-occupied homes are effectively off limits under standard loan programs.
As such, the 5 million expected home sales this year, 10% of the
available stock, is good, per economist Dr. Elliot Eisenberg. That being
said, a Zillow survey finds nearly 4 million homeowners saw their home
prices rise enough to push them back above water (owe less than their
house is worth). So-called negative equity is now below 20% nationwide according to Zillow.
into that a little, if inflation is the cruelest tax of all, negative
home equity has to be the most repressive. According to the fourth
quarter Zillow Negative Equity Report,
the national negative equity rate dipped below 20 percent to 19.4
percent for the first time in years; negative equity reached its
national apex in the first quarter of 2012 with 31.4% of all home owners
underwater. As home values have risen, negative equity has diminished,
which is certainly good for the homeowner, as well as the nation.
However, not is all perfect as more than 9.8 million homeowners with a
mortgage still remain underwater. Zillow is a driver of interesting
housing numbers; none more interesting than their effective negative equity rate (homeowners not technically underwater, but having an LTV > 80%)....this number, unfortunately, is a persistent 37.6%.
There is a lot of press about Freddie and Fannie - what about jumbo originations? Non-agency residential mortgage lending rose 21% y/y in 2013 to $272 billion
and home-equity lending increased 33% to $59 billion, while GSE
originations fell 18% as refinancing slowed, according to Inside
Mortgage Finance. Total non-agency lending accounted for 18% of total
mortgage originations in 2013. As a reminder, the MBA expects about $1.1
trillion in mortgage loan originations in 2014, down 37% year over
year. Given that so much of this non-agency production (read: jumbo,
and now non-QM) stays on the books of portfolio lenders, there sure are a
lot of venture capital and money managers chasing a small percentage of
the origination market.
a non-descript strip mall somewhere in America, there are three store
fronts: an AutoZone parts place, a Subway sandwich shop, and a Check 'n
Go payday lender. Since it was after lunch, and my Prius never breaks
down, I opened door #3. While it is hard for me to imagine a mortgage
originator currently being OUT of compliance with Dodd-Frank (and the
CFPB) it's even harder for me to imagine places like these, in their
current business model, ever being IN compliance. In a speech given
recently by CFPB Director Cordray, addressing state's Attorney Generals,
Mr. Cordray said that issues
relating to payday and title loans and other small-dollar lending
products will be "very much on the [CFPB's] plate" in 2014. Director
Cordray is also reported to have said that scrutiny of such products
"could easily be expanded to things like pawn brokering and overdrafts."
For all your payday lending informational needs, visit Ballard Spahr's CFPB Monitor.
definitely influences housing & lending, and vice versa. On the
Eastern Seaboard Marc Savitt is running for office, and now out in California Dr. Lesli Gooch is running for Congress to succeed Congressman Gary Miller. "Lesli has been an intricate (sic) part of Congressman Miller's success in promoting housing and the mortgage industry.
When elected, Lesli will be the voice for the homeowner; fighting to
preserve and expand homeownership, while working with the housing
industry to increase opportunity." "Lesli has spent the past 15 years on
Capitol Hill fighting for San Bernardino County families," said
Congressman Miller. If you're in Northern California, come by Il' Fornaio in Burlingame Saturday March 15th between 3-5PM PST to meet Dr. Lesli Gooch.
Freddie Mac has
updated its reserve requirements to base calculations on the subject
property's full monthly payment amount rather than only principal,
interest, taxes, and insurance. Borrowers
no longer need to have an additional six months of reserves when
converting a -4 unit primary residence to an investment property and
using the resultant rental income, e.g. income from units they have not
previously occupied, to qualify. Additionally,
FHLMC mas removed the requirement that the appraisal be dated 60 days
or fewer prior to the note date when used to document the value of a
primary residence pending sale or being converted to a second
home/investment property with the intention of establishing the minimum
required reserves. This goes into effect for all loans with settlement dates on or after June 1st.
has clarified its appraisal policy for its 203(k) Refinance program to
state that, in cases where an As-Is appraisal is obtained in addition to
the as-completed appraisal, the LTV calculation should be based on the
lesser of the after-improved value or the as-is value of the property
plus the total rehabilitation. If
a separate appraisal is not obtained, this calculation should be
determined using the lesser of the UPB plus total rehabilitation cost or
the after-improved appraisal value. When
the subject property is owned free and clear, M&T requires the use
of an As-Is appraisal if the loan amount is greater than the renovation
costs, while an As-Is appraisal is "highly recommended" if the borrower
has enough equity accrued that the existing UPB is considerably lower
than the anticipated as-is value, as this allows the lower LTV to be
used when calculating monthly MIP. M&T
has also clarified that, for all 203(k) transactions, inspection and
title fees necessary for draw administration, HUD consultant fees,
permit fees, and structural engineer or architect fees are all excluded
from the 3% Points and Fees test.
Cornerstone Home Lending has launched a 15-day mandatory lock option for all of its Conforming Fixed products. At present, no changes may be made to the lock, and overnight locking is not available. Cornerstone
has also rolled out its new R Jumbo and F Jumbo products, which offer
Premium Pricing and a full array of Fixed and ARM options.
We actually saw a bit of a rally/improvement Wednesday in the bond market.
Attribute it to whatever you'd like (flight to quality due to the
Ukraine/Russia issue is as good a reason as any), the 10-yr price rose
by almost .375 and closed at 2.73%, and agency MBS prices improved about
.250. The Fed continues to be the big buyer, and the New York Federal
Reserve Board announced
that over the mid-March to mid-April period it expected to purchase $16
billion in MBS from paydowns received in its Agency MBS and debenture
portfolios in February. Thomson Reuters points out, "Combined with
outright purchases, buying is projected to average $2.3 billion per day
over the last half of March compared to $2.1 billion in the first half
of this month. Assuming the Fed announces another $5 billion taper in
MBS at its upcoming meeting, buying is anticipated to decline to just
over $2 billion per day over the first two weeks of April."
a new day has begun. We've had Retail Sales for February. (Expected at
+.2%, it was +.3%, same ex-auto). We've also had Initial Jobless Claims
(expected +7k to 330k, it was 315k down 9k from a revised 324k), and
Import Prices were +.9% - double expectations. At 11AM MST we'll have a
$13 billion 30-year bond auction. For numbers, the 10-yr. closed
Wednesday at 2.73% and this morning we were at 2.73% before the numbers;
soon after we're at 2.74% and agency MBS prices are worse a tad.