News Flash

Last year was profitable for independent mortgage banks and the mortgage subsidiaries of chartered banks, according to new data from the Mortgage Bankers Association (MBA)

Home prices are showing no signs of falling, according to the latest data from the S&P/Case-Shiller Home Price Indices.

The S&P/Case-Shiller U.S. National Home Price Index recorded a 5.2 percent annual gain in March, down from 5.3 percent the previous month, while the 10-City Composite and 20-City Composites’ year-over-year gains were unchanged at 4.7 percent and 5.4 percent, respectively, from the prior month.

Before a seasonal adjustment, the National Index posted a month-over-month gain of 0.7 percent in March, while the 10-City Composite recorded a 0.8% month-over-month increase and the 20-City Composite posted a 0.9 percent increase in March. After seasonal adjustment, the National Index recorded a 0.1 percent month-over-month increase, the 10-City Composite posted a 0.8 percent increase, and the 20-City Composite reported a 0.9 percent month-over-month increase.

The cities with the year-over-year gains in annual price increases were Portland (12.3 percent), Seattle (10.8 percent) and Denver (10 percent).

“Home prices are continuing to rise at a five percent annual rate, a pace that has held since the start of 2015,” says David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices. “The economy is supporting the price increases with improving labor markets, falling unemployment rates and extremely low mortgage rates. Another factor behind rising home prices is the limited supply of homes on the market. The number of homes currently on the market is less than two percent of the number of households in the U.S., the lowest percentage seen since the mid-1980s.”

Yin-Yang

The latest industry data offered a classic case of yin-yang, with good news and bad news in an equal balance.

 

The latest Weekly Mortgage Applications Survey issued by the Mortgage Bankers Association found mixed results in housing market for the week ending March 4. The Market Composite Index increased by a scant 0.2 percent on a seasonally adjusted basis and one percent on an unadjusted basis from the previous week. The seasonally adjusted Purchase Index increased four percent its highest level since January 2016, while the unadjusted Purchase Index increased six percent compared with the previous week and was 30 percent higher than the same week one year ago. The Refinance Index, however, decreased two percent from the previous week while the refinance share of mortgage activity decreased to 56.7 percent of total applications from 58.6 percent one week earlier.

 

Among the government loan programs, the FHA share of total applications remained unchanged at 12 percent from the week prior, while the VA share of total applications increased to 12.6 percent from 12.1 percent and the USDA share of total applications increased to 0.8 percent from 0.7 percent.

 

Another good news/bad news data report came via Zillow’s Negative Equity Report, which noted that while the negative equity rate fell to 13.1 percent during the fourth quarter of 2015, six million homeowners were still in negative equity during this period while more than 820,000 underwater homeowners owed over twice as much on their mortgages as their homes are worth.

 

"Even though the number of underwater homeowners has fallen significantly since the peak of the housing crisis, negative equity persists in many markets as it fell at its slowest pace in a year," said Zillow Chief Economist Svenja Gudell. "Things are moving in the right direction, but some owners are still deeply underwater. As we move into the home shopping season, inventory is already low, and negative equity is keeping potential additional stock from becoming available."

 

Among the major metro areas, Las Vegas had the highest rate of fourth-quarter negative equity at 20.9 percent, followed by Chicago with 20.5 percent, while San Jose only had 2.8 percent of mortgaged homeowners that were underwater.

 

Still, homeowners with negative equity still have a roof over their head—and fewer people facing the prospect of foreclosure. CoreLogic’s latest National Foreclosure Report found the U.S. foreclosure inventory declined by 21.7 percent and completed foreclosures declined by 16.2 percent on a year-over-year basis, while the volume of completed foreclosures nationwide decreased year over year from 46,000 in January 2015 to 38,000 in January 2016.

 

As of January, the national foreclosure inventory included approximately 456,000, or 1.2 percent, of all homes with a mortgage—its lowest level since November 2007. In January 2015, the national foreclosure inventory covered 583,000 homes, or 1.5 percent of all mortgaged residences. The five states with the highest number of completed foreclosures for the 12 months ending in January—Florida (74,000), Michigan (49,000), Texas (29,000), California (25,000) and Ohio (24,000)—accounted for almost half of all completed foreclosures nationally.

 

"In January, the national foreclosure rate was 1.2 percent, down to one-third the peak from exactly five years earlier in January 2011, a remarkable improvement," said Frank Nothaft, chief economist for CoreLogic. "The months' supply of foreclosure fell to 12 months, which is modestly above the nine-month rate seen 10 years earlier and indicates the market's ability to clear the stock of foreclosures is close to normal."

 

Separately, Equifax’s latest National Consumer Credit Trends Report found the total balance of outstanding first mortgages in January was more than $8.3 trillion, an increase of 2.1 percent from same time a year ago. The severe delinquency rate for first mortgages in February was 1.75 percent, down from 2.50 percent same time a year ago.

 

But home equity installment activity fell 5.1 percent (from $138.5 billion to $131.4 billion) on a year-over-year basis while home equity lines of credit (HELOC) activity took a 3.7 percent (from $514.2 billion to $495 billion) year-over-year dive. Amy Crews Cutts, chief economist at Equifax, was encouraged by this data seesaw.

 

"Home purchase activity accelerated in 2016 as economic conditions boosted consumer confidence," she said. "When first-time homebuyers move into homeownership or existing homeowners upgrade to a larger, more expensive home, new debt is created. This trend is finally dominating the accelerated amortization from borrowers paying a little extra each month or paying their mortgages in full, and foreclosure activity is also greatly diminished. With many HELOCs hitting their recast into amortization, we are seeing increased payoffs, reducing the debt and numbers of HELOCs outstanding. About 20 to 25 percent of HELOCs active a year prior to their recast anniversary will payoff and close within the year after date. Originations of new loans are not keeping pace with the payoffs."

 

But another debt study suggested that the Americans are still struggling with their finances. CardHub’s 2015 Credit Card Debt Study found U.S. consumers tallied up $52.4 billion in credit card debt during the fourth quarter of 2015—which is extremely close to $57.4 billion total of credit card debt for the entire year of 2014. The fourth quarter debt numbers resulted in a $71 billion net increase in credit card debt for 2015.

 

“As a result, the average household with credit card debt now owes $7,879 and we’ve far surpassed $900 billion in credit card debt—a mark last breached in 2007 during the ramp up to the financial system’s 2008 collapse,” said Diana Popa, communications manager at CardHub. “If we don’t get a record-setting debt pay-down during the first quarter of the year (when consumers typically get tax refunds and annual salary bonuses) and we continue to add debt at this rate, it won’t be long before default rates begin to rise and credit availability tightens.”

 

Neel Kashkari

In his first speech as the new president of the Minneapolis Federal Reserve, Neel Kashkari took on a strikingly political edge by complaining about the limits in enforcing the Too Big to Fail (TBTF) aspect of a Dodd-Frank Act. Speaking this morning at the Brookings Institution in Washington, D.C., Kashkari noted that his regional Fed bank was taking aim at the issue and then challenged Capitol Hill to do the same.

“I believe the biggest banks are still too big to fail and continue to pose a significant, ongoing risk to our economy,” said Kahskari. “Enough time has passed that we better understand the causes of the crisis, and yet it is still fresh in our memories. Now is the right time for Congress to consider going further than Dodd-Frank with bold, transformational solutions to solve this problem once and for all. The Federal Reserve Bank of Minneapolis is launching a major initiative to develop an actionable plan to end TBTF, and we will deliver our plan to the public by the end of the year.  Ultimately Congress must decide whether such a transformational restructuring of our financial system is justified in order to mitigate the ongoing risks posed by large banks.”

Using language that sounded closer in spirit to Bernie Sanders than Janet Yellen—or, for that matter, either Ben Bernanke or Alan Greenspan—Kashkari offered several alternatives that would ensure the TBTF banks would not keep their current status.

“I believe we must begin this work now and give serious consideration to a range of options, including the following: Breaking up large banks into smaller, less connected, less important entities; turning large banks into public utilities by forcing them to hold so much capital that they virtually can’t fail, with regulation akin to that of a nuclear power plant; [and] taxing leverage throughout the financial system to reduce systemic risks wherever they lie.”

Kashkari also pointed to the financial services industry and its lobbyists for working to preserve the current environment regarding the TBTF banks. But he insisted their arguments were “unpersuasive” and that a flawed effort to break up these banks was better than no effort.

“If we are serious about solving TBTF, we cannot let them paralyze us,” he said. “Any plan that we come up with will be imperfect. Those potential shortcomings must be weighed against the actual risks and costs that we know exist today. Perfect cannot be the standard that we must meet before we act. Better and safer are reasons enough to act. Otherwise we will be left on the default path of incrementalism and the risk that we will someday face another financial crisis without having done all that we could to protect the economy and the American people.”

Fannie Mae has launched the Healthy Housing Rewards initiative
Fannie Mae has launched the Healthy Housing Rewards initiative, a financial incentive for borrowers who incorporate healthy design features for new or rehabilitated affordable multifamily rental properties.
 
The initiative, which is part of Fannie Mae’s Sustainable Communities Partnerships and Innovation endeavor, offers a pricing break for borrowers whose properties include design features that improve air quality, encourage physical activity, and incorporate common space, community gardens and playgrounds. Qualified borrowers’ properties must meet or exceed the minimum achievement score of 90 points under the Center for Active Design’s Healthy Housing Index and other affordability requirements defined by Fannie Mae. Properties where at least 60 percent of the units are serving tenants at 60 percent of average median income or less are eligible for participation.
 
“Incorporating healthy design features in affordable multifamily properties can have a big impact on residents—from increasing physical activity and social interaction to reducing environmental triggers for asthma,” said Jeffery Hayward, executive vice president of multifamily at Fannie Mae. “When we strengthen the connection between affordable housing and the long-term health and stability of the people and families who live there, we help create more sustainable communities across the country. This new initiative will provide a financial incentive to borrowers who invest in the health and stability of the people who live in their affordable housing properties.”

 
Half of the 10 fastest-growing cities in the U.S. can be found in Texas, according to a recent report from the U.S. Census Bureau
Half of the 10 fastest-growing cities in the U.S. can be found in Texas, according to a recent report from the U.S. Census Bureau.
 
In an analysis of the populations of cities with at least 50,000 residents between July 1, 2015, and July 1, 2016, the Houston suburb of Conroe, Texas, was crowned the nation’s fastest-growing city, with a 7.8 percent growth spurt. In comparison, the national average for population growth during that 12-month period was a mere 0.7 percent. Other Texas cities experiencing rapid growth are second-place Frisco (6.2 percent), third-place McKinney (5.9 percent), fifth-place Georgetown (5.5 percent) and ninth-place New Braunfels (4.7 percent).
 
The remainder of the top 10 list were either in the South or the West: fourth-place Greenville, S.C. (5.5 percent), fifth-place Bend, Ore. (4.9 percent), sixth-place Buckeye, Ariz. (4.8 percent), seventh-place Bonita Springs, Fla. (4.8 percent) and tenth-place Murfreesboro, Tenn. (4.7 percent).

 
For the first time in nearly six years, the Multifamily Production Index (MPI) released by the National Association of Home Builders (NAHB) fell below the 50-mark
For the first time in nearly six years, the Multifamily Production Index (MPI) released by the National Association of Home Builders (NAHB) fell below the 50-mark.
 
In the first quarter, the MPI took a seven-point fall to 48. The last time the MPI went below 50 was in the fourth quarter of 2011. The Multifamily Vacancy Index was also in decline, dropping one point to 41 for the first quarter.
 
Nonetheless, the NAHB did not view these numbers with dread.
 
“Volatility in the tax credit market is already having a detrimental effect on the production of affordable rental properties, most of which need to be financed with tax credits,” said Dan Markson, senior vice president of The NRP Group in San Antonio, Texas, and chairman of NAHB’s Multifamily Council. “However, developers of market rate properties in many parts of the country remain reasonably optimistic.”
 
“The drop in the MPI in the first quarter is consistent with NAHB’s forecast of a general leveling off of multifamily production activity,” said NAHB Chief Economist Robert Dietz. “Going forward, we expect some modest declines, but multifamily production volume will still remain solid.”

 
The banking and credit union industries may not agree on many things, but they are in agreement that the Consumer Financial Protection Bureau (CFPB) needs to rethink the changes to the Home Mortgage Disclosure Act (HMDA) that is due to take effect on Jan. 1, 2018.
 
The Independent Community Bankers of America (ICBA) sent a letter to the CFPB warning that increased level of data-collection and -reporting related to the HMDA changes would force many community banks out of the residential mortgage market.
 
“These changes are just the latest in an unprecedented number of new and amended consumer regulatory requirements put into effect over the past several years,” ICBA Assistant Vice President and Regulatory Counsel Joe Gormley wrote. “ICBA understands that some of this change was required by statute, but we strongly urge the CFPB to mitigate the impact of the new HMDA requirements on community banks.”
 
Separately, the National Association of Federally-Insured Credit Unions (NAFCU) Regulatory Affairs Counsel Andrew Morris wrote a letter to the CFPB urging for a one-year delay in the HMDA changes to help compliance preparation efforts. He echoed the ICBA’s concerns about smaller lenders being damaged by these changes.
 
“As financial cooperatives directed by volunteer boards, credit unions exist for the primary purpose of serving their membership,” he wrote. “Under current reporting thresholds, the collection of a vastly expanded HMDA dataset from credit unions that do not originate a significant number home mortgage loans would be counterproductive and ultimately harm access to credit. Accordingly, NAFCU urges the Bureau to consider amendments that would raise the reporting threshold for close-end mortgage loans in Section 1003.2(g) of the Final Rule. NAFCU believes that by raising the reporting threshold, smaller credit unions will be spared unreasonable compliance costs that would otherwise impact their capacity to originate affordable mortgages.”
The median home value in the U.S. reached $198,000 in April, which is one percent higher than peak value hit in 2007 during the height of the housing bubble, according to new data from Zillow.
 
Home values in April rose 7.3 percent on a year-over-year basis, the strongest rate of appreciation in more than 10 years. Among the 32 largest metro markets, 10 markets saw their median home value exceed prior bubble peaks more than a year ago, while 17 have yet to regain peak value.
 
Also on the rise was median rent, up 0.7 percent since last April, to a median payment of $1,412 per month.
 
"Now that the typical U.S. home is worth more than ever, people may be tempted to ask if we're in another national housing bubble," said Zillow Chief Economist Svenja Gudell. "We aren't in a bubble, and won't be entering one anytime soon. There are big differences between the market then and the market now: Then, loose credit, speculation and overbuilding were ingredients in a recipe for disaster. Now, healthy home buyer demand is being driven largely by a stable economy and demographic tailwinds, which is exactly what we would expect in a healthy market.”
Total existing-home sales took a 2.3 percent drop last month to a seasonally adjusted annual rate of 5.57 million from the downwardly revised 5.70 million in March
Total existing-home sales took a 2.3 percent drop last month to a seasonally adjusted annual rate of 5.57 million from the downwardly revised 5.70 million in March, according to new data from the National Association of Realtors (NAR). On a year-over-year-basis, sales were up by 1.6 percent.
 
The median existing-home price for all housing types in April was $244,800, which is six percent above the April 2016 level of $230,900. April's price increase is the 62nd consecutive month of year-over-year gains.
 
The total housing inventory at the end of April climbed 7.2 percent to 1.93 million existing homes available for sale, but was nine percent lower than a year ago, marking the 23rd consecutive month of year-over-year declines. Unsold inventory is at a 4.2-month supply at the current sales pace, which is down from 4.6 months a year ago.  
 
“Last month's dip in closings was somewhat expected given that there was such a strong sales increase in March at 4.2 percent, and new and existing inventory is not keeping up with the fast pace homes are coming off the market,” said NAR Chief Economist Lawrence Yun. "Demand is easily outstripping supply in most of the country and it's stymieing many prospective buyers from finding a home to purchase."
Existing-Home Sales Fall 2.3 Percent

 
There appears to be a significant lack of unison when it comes to Republican efforts to consider the future of the Consumer Financial Protection Bureau (CFPB)
There appears to be a significant lack of unison when it comes to Republican efforts to consider the future of the Consumer Financial Protection Bureau (CFPB), with the White House assuming the agency’s structure will face changes while House and Senate GOP leaders offer conflicting views on the matter.
 
In the 2018 budget issued yesterday by the White House, the second-to-last page of the 159-page document included a page titled “Restructure the Consumer Financial Protection Bureau,” which outlined a proposal to chop the CFPB’s budget by $145 million in 2018 and to continue making cuts to the agency’s budget to more than $700 million by 2021.
 
“Restructuring the CFPB to refocus its efforts on enforcing enacted consumer protection laws is a necessary first step to scale back harmful regulatory impositions and prevent future regulatory hurdles that stunt economic growth and ultimately hurt the consumers that CFPB was originally created to protect,” the budget documented stated. “Furthermore, subjecting the reformed Agency to the appropriations process would provide the oversight necessary to impose financial discipline and prevent future overreach of the Agency into consumer advocacy and activism.”
 
The only problem with this proposal is that the Executive Branch does not have the authority to unilaterally restructure the CFPB. Under the Dodd-Frank Act, the CFPB receives its funding from the Federal Reserve and not through Congress, and it would take a new act of Congress to make that change.
 
There are several bills before Congress seeking to change how the CFPB is financed, with the most recent coming from Rep. Andy Barr (R-KY) with his reintroduction of the Taking Account of Bureaucrats’ Spending (TABS) Act.
 
“I am reintroducing the TABS Act because the Bureau deserves the same scrutiny and the same checks and balances as any other federal agency,” said Rep. Barr. “Congressional oversight and accountability will ensure that the Bureau stays true to its mission of consumer protection, and avoids politically motivated overreaches, wasteful spending, and unnecessary regulations.”
However, Senate Majority Leader Mitch McConnell (R-KY) does not appear to be giving a full-throttle push for Dodd-Frank and CFPB reform. Last week, he told Bloomberg that the bipartisan support needed to make any changes was non-existent.
 
“So far, my impression is the Democrats on the Banking Committee believe that Dodd-Frank is something akin to the Ten Commandments,” Sen. McConnell said.