Do legal settlements between the government and lenders really do anything to expand credit to deserving home buyers needing to borrow money? I don’t think so…
Yesterday the commentary looked at trends in New Home Sales. I think it is important to look at trends rather than individual numbers - to keep things in context and step back to gain some sense of the direction. Today let's look at another number that came out this week: the S&P/Case-Shiller index, made up of specific indices which measure prices in several different geographic areas.
"Their purpose is to measure the average change in home prices in a particular geographic market. They are calculated monthly and cover 20 major metropolitan areas (Metropolitan Statistical Areas or MSAs), which are also aggregated to form two composites - one comprising 10 of the metro areas, the other comprising all 20. The S&P/Case-Shiller U.S. National Home Price Index ('the U.S. national index') tracks the value of single-family housing within the United States. The index is a composite of single-family home price indices for the nine U.S. Census divisions and is calculated monthly. The indices measure changes in housing market prices given a constant level of quality. Changes in the types and sizes of houses or changes in the physical characteristics of houses are specifically excluded from the calculations to avoid incorrectly affecting the index value."
The number this week, for February, showed that the S&P/Case-Shiller index of home prices rose .66% on a MOM basis and is up 5.38% YOY. Their take on the housing market: "Mortgage defaults are an important measure of the health of the housing market. Memories of the financial crisis are dominated by rising defaults as much as by falling home prices (see first chart). Today as well, the mortgage default rate continues to mirror the path of home prices. Currently, the default rate on first mortgages is about three-quarters of one percent, a touch lower than in 2004. Moreover, the figure has drifted down in the last two years. While financing is not an issue for home buyers, rising prices are a concern in many parts of the country. The visible supply of homes on the market is low at 4.8 months in the last report. Homeowners looking to sell their house and trade up to a larger house or a more desirable location are concerned with finding that new house. Additionally, the pace of new single family home construction and sales has not completely recovered from the recession."
Looking at it over time, however, shows a nice trend. The July numbers were reported in September. The S&P Case-Shiller index of home prices rose 0.37% month-over-month and is up about 4.7% year-over-year.
One month later housing prices in the U.S. grew more than expected in August, with the Case-Shiller 20-City Index rising 5.1% y/y and 0.4% m/m. Yes, the S&P/Case-Shiller Home Price Index rose 0.11% in August and is up 5.1% year-over-year. They made this point about home price appreciation: "A notable part of today's economy is the continuing low inflation rate; in the year to September, consumer prices were unchanged. Even excluding food and energy, the core inflation was 1.9%. One result is that a 5% price increase in the value of a house means more today than it did in 2005-2006, the peak of the housing boom when the inflation rate was higher. The rebound from the recent lows was faster than the 1997-2005 housing boom, and also much less driven by inflation."
Skipping ahead somewhat the Case Shiller Home Price Growth Picks Up in November. The S&P/Case-Shiller Home Price Index, covering the entire nation, rose 5.3% in the 12 months ended in November, greater than a 5.1% increase in October. The 10-city index gained 5.3% from a year earlier, compared with a 5% increase in October. The 20-city index gained 5.8% year-over-year from 5.5% a month earlier. "Home prices extended their gains, supported by continued low mortgage rates, tight supplies and an improving labor market," said David Blitzer, managing director at S&P Dow Jones Indices.
Franklin American Mortgage Company announced the expansion of what has been a limited program. Effective immediately, all lenders delegated to underwrite conventional loans now have access to sell Texas cash-out (A6) loans to FAMC.
NYCB has multiple low down payment loan options. Conforming Fixed - 95.01 -97% LTV is available for purchase, owner occupied, 1 unit transactions and at least one borrower must be a first time homebuyer1, as indicated on the 1003 in Section VIII. HomeReady Mortgage - 95.01 - 97% LTV is available for conforming fixed, purchase, owner occupied, 1 unit transactions. A minimum 3% contribution may be entirely funded by flexible sources such as gifts of grants and features lower mortgage insurance requirements. Qualifying income from non-occupant borrowers is eligible. FHA - 96.5% LTV is available for conforming fixed, purchase, owner occupied, 1-2 unit transactions with no minimum borrower contributions.
Citi Correspondent Lending will soon be introducing a new tool on the Correspondent web site which will provide CRA loan eligibility and premium results within minutes of your submission of just a few key loan data points. Look for additional updates regarding process details and availability in future communications.
Mortgage Solutions Financial recently made changes to its guidelines. click here for posted updates.
Citi Correspondent Lending introduced a new tool now available on the Correspondent web site which provides CRA loan eligibility and premium results within minutes of your submission of a few key loan data points. A job aid addressing this quick and easy process from data submission to viewing your results is available here.
M&T Bank has expanded LTVs for High Balance loan limits and a 5/1 ARM option. Fannie Mae has combined the high balance and conforming loan limits into 2 grids, Fixed and ARM. As a result of the combining of LTV's, the minimum FICO on Fixed and ARMS is 620.
Caliber Home Loans has enhanced its Fresh Start Loan. Part of our Portfolio Lending suite, Fresh Start now features several new, borrower-friendly features: a lower down payment requirement - 85% LTV with no Mortgage Insurance (MI), No seasoning requirement for derogatory events, including Chapter 7, 11 and 13 bankruptcies; foreclosure, deed-in-lieu, short sale and pre-foreclosure, Multiple significant derogatory events allowed and No mortgage/rental payment history required. Visit its website for details.
Turning our attention to the bond markets, remember when rates actually moved around from one day to the next? Lately all we've seen is some movement between coupons and securities, but nothing major. As ThomsonReuters put it: "MBS ended higher and mixed, mostly wider versus treasuries and unchanged to modestly tighter versus swaps, as treasury prices finally flipped higher, in curve flattening fashion, with the rallying extending following the FOMC statement."
Wassup with today in the market? The Bank of Japan decision, overnight, is expected to deliver more accommodation with disparate views on what levers they decide to pull via increased QQE purchases, lowering of the IOER or others rates, or ECB-styled lending mechanism for banks. But the group over there decided to do nothing, "stunning" investors. David Zervos with Jefferies sagely observed, "Over the last 26 years, since the bubble popped in Japan, investors have consistently been beaten down whenever betting on an economic recovery. There have of course been a few glimmers of hope...optimism has always been trumped by inept policy responses. And this morning we saw yet another epic BoJ policy failure on what is no doubt a continuation of a long term path to economic destruction in the land of the setting sun."
Besides the Bank of Japan news overseas today in this country we've had the advanced look at Gross Domestic Product (GDP: +.5%, less than expected) for Q1 and Initial Jobless Claims for the week ending April 23 (257k, up 9k from the revised number). We have some other 2nd and 3rd tier news, but then we'll see the U.S. Treasury auction off $15 billion new 2-year notes at 9:30AM CDT followed by $28 billion 7-year notes at 11AM CDT. We closed Wednesday with the 10-year at 1.86% and this morning it is at 1.86% with agency MBS prices roughly unchanged.
Jobs and Announcements
In more constructive thoughts, Jordan Capital Finance is hiring a VP or SVP, Wholesale/Correspondent. "The focus is generating business from mortgage bankers and brokers. JCF provides private money financing for investors who buy, renovate, sell, and rent residential real estate. We offer lines of credit up to $7.5M in 40 states but do not lend to home owners. JCF is extremely well funded by Garrison Partners, a $5 billion New York private equity firm, and is on an aggressive growth path. We are a top 5lender in our industry: our management has closed $150 billion in mortgage volume. The SVP must have extensive experience and exceptional sales success with wholesale/correspondent, have a degree from a top 4-year college, and a very strong work ethic (including travel). The VP/SVP will receive a competitive salary, but a very substantial portion of compensation is performance based. Candidates must live in Chicago, East Coast or Texas, and will report to the CEO. Contact Magdalena Pyclik with questions or to submit a resume.
In a combination of construction financing & warehouse lending did you know that First Tennessee Bank offers construction loan warehousing to its mortgage warehouse customers? The program is designed to provide warehouse support for mortgage lenders offering owner-occupied construction-to-permanent mortgage loans. Lenders must have or obtain an active warehouse line with First Tennessee to be eligible. For more information about First Tennessee's mortgage warehouse lending and construction loan warehousing, please contact Scott Walker (901-759-7770).
And in the wholesale arena Fannie & Freddie seller/servicer American Capital Corp (ACC) is gearing up to increase business in its Wholesale channel. The name has changed from ACBN to ACC Wholesale. ACC has been in business for over 22 years and is looking for Account Executives for the following areas: Seattle, Texas, San Diego, Pasadena/Santa Barbara. AEs have the ability to bring on Retail and Wholesale clients as well as originate themselves if they are licensed. They have over 20 Correspondent Investors. Please email ACC@amcap. mortgage if you would like to be considered.
ShareDiligence is a revolutionary, collaborative approach to vendor management. Developed by Strategic Compliance Partners (SCP) in conjunction with the Offit Kurman law firm, ShareDiligence allows Lenders to share the results and costs of due diligence through an online community. SCP has a special introductory offer for lenders to try ShareDiligence for free for 90 days. The firm had a demonstration yesterday, and has another onWednesday, May 4 at 12 pm EDT. For more information contact Leslie Benjamin. To repeat, free 90 days of vendor management - supply vendor name and emails only.