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.”


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.”


A nonprofit research group has issued a report stating that New York City can alleviate its housing shortage by introducing a program to enable the conversion of approximately 38,000 basements in local single-family residences into new housing units.


According to a report on the 6SqFt blog, the study by Citizens Housing and Planning Council (CHPC) concluded that “a basement conversion program in New York City would be an ecient and exciting way to add residential density and expand housing choices in our expensive and highly constrained urban market.” The majority of the basements targeted for conversion are located in the eastern section of the Bronx, southeast Brooklyn, and throughout Queens and Staten Island.


Nonetheless, the CHPC study noted there were a few potential problems, including the need for homeowners to provide parking spaces for new basement-dwelling tenants and the possibility that these new underground apartments would be rented at New York’s pricey market rates rather than an affordable rental level. New York’s Department of Buildings and City Planning and the New York Fire Department have expressed concerned on the safety aspects of basement apartments, and Mayor Bill De Blasio has not embraced similar proposals that were floated earlier in his administration.

The Mortgage Bankers Association (MBA) has looked into the future, and they are not complaining
The Mortgage Bankers Association (MBA) has looked into the future, and they are not complaining.
"We're expecting steady, modest growth in the U.S. economy," said MBA Vice President of Research & Economics Lynn Fisher yesterday at the MBA National Mortgage Servicing Conference & Expo. "We're seeing real economic growth in a number of indicators."
Fisher noted that as federal unemployment rates decline, employers may find difficulty in attracting workers to meet specific skill-sets. "This in turn is going to drive up wages," she said. "Over the next two years, unemployment will fall to around 4.5 percent, suggesting further tightening on the labor front."
Fisher also observed that the Federal Reserve is expected to raise the federal funds rate at least two more times this year, with the first increase mostly likely coming by June. The MBA also predicts the 30-year fixed rate will reach 4.7 percent by the fourth quarter while home prices increase by 4.28 percent and new home sales rise by 10.1 percent.
Fisher added that the Millennials and minority communities will be fueling new housing demand in the near future. "If you fast-forward to 2019-2020, this cohort is going to be ready for homeownership," she said. "We're going to build into this—it's a big group—but it's going to take some time." 
The Consumer Financial Protection Bureau (CFPB) scored another victory in court, this time in a case regarding its authority to issue a subpoena in a housing finance investigation.
According to a New York Times report, Judge Nancy G. Edmunds of Federal District Court in Detroit ruled that Harbour Portfolio Advisors of Dallas must comply with a CFPB administrative subpoena for documents and related information. The CFPB has been investigating whether the company violated federal laws through its sale of foreclosed homes to low-income buyers through installment payment plans known as contracts for deeds, but Harbor Portfolio claimed that the CFPB had no authority to demand this information.
“There are plausible grounds to believe that respondents may have information related to a violation,” the judge stated in her ruling, referring to such laws as the Truth in Lending Act, the Consumer Financial Protection Act and the Equal Credit Opportunity Act. Neither the CFPB nor Harbour Financial offered an immediate comment on the ruling. 
Affordable housing continues to be an elusive commodity, according to the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index
Affordable housing continues to be an elusive commodity, according to the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index, which has declined to its lowest point since the third quarter of 2008.
The NAHB reported that 59.9 percent of new and existing homes sold in the fourth quarter of 2016 were affordable to families earning the median income of $65,700, a decline from the 61.4 percent level in the third quarter. This occurred as the national median home price increased from $247,000 in the third quarter to $250,000 in the fourth quarter and average mortgage rates edged higher from 3.76 percent to 3.84 percent in the same period.
The Youngstown-Warren-Boardman metro straddling Ohio and Pennsylvania was rated by the NAHB as the nation’s most affordable major housing market, where 90.4 percent of all new and existing homes sold in the fourth quarter were affordable to families earning the area’s median income of $53,900. Among the smaller metro areas, Fairbanks, Alaska, was pegged as the most affordable with 95.1 percent of homes sold in the fourth quarter being affordable to families earning the median income of $93,800. And for the 17th consecutive quarter, California’s San Francisco-Redwood City-South San Francisco was the nation’s least affordable major housing market, with 7.8 percent of homes affordable to families earning the area’s median income of $104,700.
Affordability remains positive nationwide even as demand is outstripping supply in many markets,” said NAHB Chief Economist Robert Dietz. “Though mortgage rates are rising, incomes should rise faster as well, helping to keep home prices affordable. Meanwhile, policymakers at all levels of government must address regulatory burdens that are raising housing costs while officials at the state and local level need to take steps to put more lots in the pipeline to help offset future price growth.”
This year started off with a bang, at least in terms of housing activity. According to the latest RE/MAX National Housing Report, last month “topped all other Januarys in the report’s nine-year history with the most sales, highest sales price and fewest days on market.”
Total sales were up 4.5 percent year-over-year, and over two-thirds of the 53 metro areas tracked by RE/MAX saw an increase in sales year-over-year, with 12 experiencing double-digit increases. The median sales price of $208,500 was up 4.3 percent and marked the 10th consecutive month of year-over-year price increases; only five metro areas saw year-over-year decreases or remained unchanged, while 10 experienced increases in double-digit percentages.
A new January low of 66 days on the market was set last month, and the number of homes for sale in January was down 4.3 percent from December 2016 and down 16.9 percent from January 2016. RE/MAX added that housing inventory rates declined year-over-year for 99 consecutive months dating back to October 2008.
“January may have set the tone for the coming home-buying season with homes selling faster and at higher prices,” said Dave Liniger, RE/MAX CEO and chairman. “Homebuyer demand is strong, and not enough sellers are listing to keep up with the demand, despite rising prices. At any rate, the beginning of 2017 continued the strong pace of 2016.”
eValuation ZONE Inc., a business specializing in real estate appraisal management services, has announced its national certification as a Women’s Business Enterprise by the Women's Business Development Center-Chicago
eValuation ZONE Inc., a business specializing in real estate appraisal management services, has announced its national certification as a Women’s Business Enterprise by the Women's Business Development Center-Chicago, a regional certifying partner of the Women’s Business Enterprise National Council (WBENC).
“We are thrilled to receive WBE Certification and honored to be a part of this wonderful community of women-owned business. The Certification brings many great opportunities for our company, opening doors to compete in both public and private sector projects,” said Inesa Tomaszewski, president of eValuation ZONE. “We are very excited to offer our Real Estate Appraisal Management Services to clients where supplier diversity is a priority.”
WBENC’s national standard of certification implemented by the Women's Business Development Center-Chicago is a meticulous process including an in-depth review of the business and site inspection. The certification process is designed to confirm the business is at least 51 percent owned, operated and controlled by a woman or women.
By including women-owned businesses among their suppliers, corporations and government agencies demonstrate their commitment to fostering diversity and the continued development of their supplier diversity programs.
The U.S. Court of Appeals for the District of Columbia Circuit has agreed to rehear the case that challenged the constitutionality of the Consumer Financial Protection Bureau’s (CFPB) leadership structure.
According to a Bloomberg report, the full 12-just court will hear the case on May 24. Last October, a three-judge panel heard the case in which resulted in the erasure of $109 million in penalties enacted by the CFPB against mortgage lender. A two-judge majority on that panel went one step further in declaring the single-director CFPB leadership system created a position with too much authority and little accountability.
The October ruling took greater prominence after Donald Trump’s election, with many Capitol Hill Republicans demanding that the new president fire Cordray. However, to date the White House has given the CFPB director’s fate a low priority and has declined to state what its plans were for the bureau.