NRMLA News Summary of Recent NY Conference

Tradition was there! -Here is the NRMLA News report from today:

Large New York Conference Gathering Looks at New and Improved HECM

Almost 300 NRMLA members, non-members and interested investors gathered at the Intercontinental Times Square Hotel in New York last week for an energetic and forward looking Eastern Regional Meeting & Finance and Investor Forum entitled “New HECM, New York.” The focus throughout the two-day event—the largest attended NRMLA regional meeting in recent years—was utilizing recent changes to the HECM program to expand the base of potential borrowers and to be able to present them with a better product and more secure future.

Despite the fact that a final Mortgagee Letter on Financial Assessment is yet to be issued by HUD, the potential impact of this imminent program change ran through many of the sessions, including a panel moderated by NRMLA Executive Vice President Steve Irwin that featured Paul Fiore of AAG, Tracy Milligan of One Reverse Mortgage and Diane Coats of Generation Mortgage Company that dug into the requirements as described in the Handbook first issued by HUD last September with emphasis on understanding the use of residual income, including benefits as a qualifying mechanism.

Many of the sessions, including a look at Industry Trending that featured HUD’s Karin Hill, Reza Jahangiri of AAG representing industry executives, Anthony Lopes of Cambridge Credit Counseling representing counselors and NRMLA President and CEO Peter Bell, highlighted the broadening spectrum of interested consumers as regulations and research sway reverse mortgages toward those assembling a comprehensive retirement plan. This theme culminated in a presentation by financial advisors Alan Kleinberg and Carl Friedrich of the FCE Group, who presented scenarios of seniors with a variety of assets, including the quite wealthy, who could all utilize reverse mortgages to fulfill their financial goals.

The Finance and Investor Forum, an afternoon devoted to developments in the HMBS program, featured a review of the state of the program by John Getchis, Senior Vice President in the Office of Capital Markets at Ginnie Mae, a look at Myths and Misperceptions of reverse mortgages to better educate attendees from outside the industry, as well as panels on expectations for the improved HECM following recent changes by representatives of a dozen companies from the investment community. Overall, the forum presented an HMBS program geared up for considerable growth and diversity.

HSH Mortgage Survey Shows Rates Up

Rates for two popular mortgage types nudged slightly upward in recent days to an eight-week high, but future activity continues to hinge upon actions taken by the Federal Reserve this year.

In the last week, the average rate for conforming 30-year fixed-rate mortgages rose by five basis points to 4.46%, while conforming 5/1 hybrid adjustable rate mortgages rose seven basis points to 3.18%, according to the latest weekly mortgage survey data from HSH.com.

Though not a large rate spike, the slight increase brings rates back to levels not seen since January, according to Keith Gumbinger, vice president of HSH.com.

“While not a spike like we saw last spring, the small bump in rates was sufficient to put us back to levels seen in late January,” Gumbinger said in a statement. “However, we are still at very favorable levels as we begin the traditional spring homebuying season, even if the Fed and an expected warming in the economy may conspire to nudge them higher in the weeks ahead.”

Fitch Finalizes U.S. RMBS Qualified and Non-Qualified Mortgage Criteria

Posted on March 19, 2014 @ 11:02 am in Daily Dose

Fitch Ratings announced it has finalized its criteria for analyzing loans securing U.S.residential mortgage-backed securities (RMBS) under the new qualified mortgage (QM) and Ability-to-Repay rule (the Rule) recently adopted by the Consumer Financial Protection Bureau (CFPB).

Fitch developed assumptions with respect to the probability of challenges to the Rule or a mortgages QM status, as well as the potential costs or damages.

“We expect some defaulted borrowers will likely challenge the Rule, but a lack of legal precedent could make the first few cases high profile and prone to significant legal costs,” said senior director Suzanne Mistretta.

The announcement commented, “Fitch will make upward adjustments to its credit enhancement calculations if the originator designates the loan as higher priced QM (HPQM) or non-QM. Loans identified by the lender and confirmed by third party due diligence as safe harbor QM (SHQM) will not receive an adjustment.”

Fitch makes a few assumptions regarding how to handle new loans. First, Fitch will consider the lifetime probability of default (PD) derived from Fitch’s mortgage loan loss model. Additionally, the population is narrowed further to indicate only those borrowers who are likely to default within five years of origination. Finally, a states foreclosure process, either judicial or non-judicial, plays a factor.

Mistretta noted, “Lower credit quality pools will see a larger effect on credit enhancement relative to higher credit quality pools primarily due to their higher probability of default and smaller loan balances.”

Fitch will make mark a key difference between structures—those that provide for expenses to be paid from available funds, and those that deduct expenses from the mortgage pool’s net weighted average coupon (Net WAC).

The announcement clarified, “Where expenses are absorbed by the pool’s Net WAC and the note rate is capped at the Net WAC, Fitch will not adjust its loss expectation for the pool. Although expenses are borne by both senior and subordinated investors, this provision does not affect the trust’s ability to pay contractual amounts due.”

“The loan designation and determination of potential challenges and legal costs and damages will be highly dependent on the results of Fitch’s review of the originator’s/aggregator’s underwriting guidelines and origination processes,” the release added.

URL to article: http://dsnews.com/fitch-finalizes-u-s-rmbs-qualified-non-qualified-mortgage-criteria/

4 million homeowners climb out of negative equity

 from latimes.org 3/16/14

WASHINGTON — The economy may be growing at a frustratingly slow pace, but one piece of it is booming: American homeowners’ equity holdings — the market value of their houses minus their mortgage debts — soared by nearly $2.1 trillion last year to $10 trillion.

Big numbers, you say, and hard to grasp. But look at it this way: Thanks to rising prices and equity levels, about 4 million owners around the country last year were able to climb out of the financial tar pit of the housing bust — negative equity.

Negative equity gums up people’s lives and the real estate marketplace as a whole. It makes it difficult or impossible for many owners to refinance out of a higher-cost mortgage into a more affordable one. It makes it painful to sell — you’ve got to bring cash to the table to pay off what you still owe to the bank. Plus almost no one wants to lend you money, at least not at reasonable interest rates secured by your real estate, when you’re deeply underwater. So you’re likely to spend less and invest less, and you’re probably not going to buy another house. Nor will potential new buyers be able to purchase yours.

So when 4 million owners manage to transition out of negative equity into positive territory, that’s significant news not just for them personally, but for the economy overall.

Two statistical studies released this month offered a glimpse of where the country is in terms of homeowner equity, seven years after real estate began to tumble and crash. The first was the Federal Reserve’s quarterly “flow of funds” report. Among many other segments of the economy it toted up, the Fed found that homeowner equity has rebounded to its highest level in eight years — though it’s still not quite back to the $12 trillion it was during the hyperinflationary high point of the housing boom in 2005.

The second study, from real estate analytics firm CoreLogic, focused on the flip side — the impressive shrinkage of negative equity. According to researchers, nearly 43 million owners with mortgage debt have positive equity. Roughly 6.5 million owners are still in negative equity positions, however, down from more than 10 million a year ago and 12 million in 2009.

Who are they and where are they? Not surprisingly, they are heavily concentrated in areas that saw the wildest price run-ups, the heaviest use of toxic loan products and the steepest plunges during the crash. In Nevada, 30.4% of all owners with mortgages are underwater. In Florida, the percentage is 28.1%, and in Arizona, it’s 21.5%. Still, all three areas have improved sharply over the last two years.

Although non-costal California markets suffered some of the most dramatic declines in property values during the bust, researchers found that the state as a whole is nowhere near the top of the latest negative equity list. With 12.6% of mortgaged homes underwater, California has a lower overall negative rate than the national average (13.3%), and has relatively fewer underwater homes than Maryland (ranked 10th worst in the country with a negative equity rate of 16.2%), Ohio (19%), Illinois (18.7%), Rhode Island (18.3%) and Michigan (18%).

Among the best markets if you’re measuring for positive equity: Texas, where just 3.9% of owners are in negative positions, Alaska (4.2%), New York (6.3%), Oklahoma (6.4%) and the District of Columbia (6.5%.) Higher-priced houses generally have lower rates of negative equity compared with houses in lower-priced areas, many of which saw construction booms for entry-level, low- and moderate-cost homes in the suburbs of major cities during the boom years. Just 8% of mortgaged homes worth more than $200,000 have negative equity, compared with 19% of homes under $200,000.

Having positive equity is one thing, but do you have adequate equity? Or are you, as CoreLogic refers to the phenomenon, “under-equitied”? Researchers define under-equity as mortgage debt that is in excess of 80% of your home’s resale value.

This is important in practical terms, they say, because having less than 20% equity makes it more difficult for you to pursue potentially helpful financial options, such as refinancing your primary home loan or obtaining an equity credit line. About 21% of all mortgaged homes nationwide are currently in this situation, and 1.6 million owners have less than 5% equity.

kenharney@earthlink.net

Distributed by Washington Post Writers Group

Copyright © 2014, Los Angeles Times

Happy St. Patty’s Day from Tradition Title

This month, we have donated to St. Jude’s Children’s Hospital in the hope of passing on a little luck of the Irish to children in need.

CFPB Director Calls for Increased Financial Literacy

CFPB Director Calls for Increased Financial Literacy.

For Richard Cordray, the equation is simple: In the Land of the Free and the home of the free market, American citizens should be as informed about and capable of self-governance in their personal finances as they are in the democratic process, especially when it comes to borrowing for a mortgage.

In a speech Tuesday before the federal Financial Literacy and Education Commission, Cordray, the director of the U.S. Consumer Financial Protection Bureau (CFPB), urged the need for American businesses to teach employees the importance of saving and making more sound financial decisions when it comes to major investments, such as buying a home.

Cordray called upon business owners and managers to leverage such milestone moments in their employees’ lives to teach specific skills they will need in order to make good decisions for their future.

Cordray’s speech is the latest effort in a growing trend to help American citizens better understand what it means to borrow money to buy a home. Cordray said the lack of good consumer education was a key factor in the wave of foreclosures since the Great Recession started squeezing American throats five years ago.

He added that the CFPB fields daily calls from distressed homeowners watching their version of the American dream erode due to the poor decisions they’ve come to regret making.

Cordray’s challenge to American businesses builds on a January 27 report he made to the House Committee on Financial Services. In that speech, Cordray compared what he called “troubling similarities” between the student loan crisis plaguing young people and “the broken mortgage market before the crisis.”

The troubling similarities include borrowers who took out loans with much worse rates than they could have qualified for and the disastrous consequences of not knowing what kinds of questions to ask in order to secure more favorable loans.

Not all news from the CFPB camp is grim, however. Cordray said last month that the bureau’s efforts to educate Americans about the risks and consequences of their financial endeavors has yielded much fruit in the past two years. As more citizens become aware of the bureau’s education programs and consumer tools, he said, the more they have righted their troubled ships.

Still, Cordray says, there is much uneasy water to traverse. He called upon U.S. employers Tuesday to help employees understand and diversify their personal savings and to increase information about major financial decisions as well as increase access to information regarding employee retirement and benefits programs.

Only when the finances of American workers are in order, he said, are homebuyers in a true position to understand what getting a mortgage is all about.

Buying A Home Is Now 38% Cheaper Than Renting

That’s nationwide – in the NY-Metro area it’s 22%.  Here is what Forbes Online had to say:

Is renting or buying a better financial bet? Every six months, Trulia’s chief economist Jed Kolko runs the numbers to answer that question and help you stay on top of the trends.  So what does Trulia’s Winter 2014 Rent vs. Buy Report tell us? Although the gap between renting and buying is narrowing across the U.S., homeownership is still 38% cheaper than renting.

Homeownership remains cheaper than renting nationally and in all of the 100 largest metro areas according to Trulia’s latest Winter Rent vs. Buy report. Rising mortgage rates and home prices have narrowed the gap over the past year, though rates have recently dropped and price gains are slowing. Now, at a 30-year fixed rate of 4.5%, buying is 38% cheaper than renting nationally, versus being 44% cheaper one year ago.

The rent versus buy math is different in each local market. Buying ranges from being just 5% cheaper than renting in Honolulu to being 66% cheaper than renting in Detroit. But even for a specific market, the cost of buying versus renting depends on how much home prices rise (or fall) after you buy. Our model assumes conservative home price appreciation, but – as we all know after the last decade – home prices can unexpectedly rocket or plummet.

Buying Beats Renting Until Mortgage Rates Hit 10.6%

Even though prices increased sharply in many markets over the past year, low mortgage rates have kept homeownership from becoming more expensive than renting. Also, in some markets, like San Francisco and Seattle, rents have risen sharply; rising rents hurt affordability relative to incomes, but rising rents make buying look cheaper in comparison.

Will renting become cheaper than buying soon? Some markets might tip in favor of renting this year as prices continue to rise faster than rents and if – as most economists expect – mortgage rates rise, due both to the strengthening economy and Fed tapering. For each metro, we identified the mortgage rate “tipping point” at which renting becomes cheaper than buying, given current prices and rents. If rates rise, Honolulu would become the first metro to tip, at a mortgage rate of 5.0%. San Jose and San Francisco would also tip before rates reach 6%. But those are the extreme markets. Nationally, rates would have to rise to 10.6% for renting to be cheaper than buying – and rates haven’t been that high since 1989.

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This article is available online at:
http://www.forbes.com/sites/trulia/2014/03/05/buying-a-home-is-now-38-cheaper-than-renting/

Fannie Mae Confident of Continued Growth in 2014

February 28, 2014 In Daily Dose,Government,Headlines,News

The housing market’s cooler-than-expected first quarter should just be a temporary blip in a year of modest overall growth, according to Doug Duncan, chief economist at Fannie Mae.

Fannie Mae released Wednesday its latest economic forecast, which acknowledged that atypically harsh winter weather in much of the United States has slowed new home construction and sales in Q1 2014. But the report also reaffirms Fannie Mae’s position that the economy and housing markets will improve on 2013 growth by the end of Q4.

In an accompanying podcast to the February forecast, Duncan presented a mixed bag of growth and sluggishness in the housing market. A rise in mortgage rates, which Duncan expects to top out somewhere between 4.75 and 5 percent by year’s end, will slow existing-homes sales to about 1 percent growth this year, and maybe even less in Q1, he said.

Pending home sales plunged by 8.7 percent in December and were flat in January, leading to a rather guarded optimism that existing-home sales will show even tiny signs of improvement.

However, Fannie Mae is openly optimistic that sales of newly constructed homes should increase sharply this year, continuing last year’s trend toward more building and sales.

The caveat, Duncan said, is that the rise in new home sales is coming from a very low base. A healthy market, he said, would be about 1.7 million units built in a year. Fannie Mae predicts about 1.15 million units will be built in 2014, up from an overall 923,000 units built in 2013 (which itself was an 18.3 percent jump from 2012).

This is good news for the job market, as new construction means new jobs for builders and crews. Residential construction employment jumped by 17,000 jobs in January and should continue growing modestly in 2014, even if the numbers do not reach their pre-recession plateau of 2.5 million jobs, the report stated.

Overall mortgage volume, however, will likely be down this year, Duncan said. Higher mortgage rates are curtailing refinancing activity, even though an expected rise in mortgages for new home purchases should offset the drop a little, he said. Interest in mortgages peaked in May of 2013 and then fell by 20 percent, where it has stayed, according to the Fannie Mae forecast.

Despite a few broken bones in housing, however, Fannie Mae expects fairer weather to usher in gentle growth for the economy for the remainder of the year. The agency expects the economy overall to increase from 2.7 percent to 2.9 percent this year.

Non-Borrowing Spouse Lawsuits Against HUD

Reverse Mortgage Daily has been reporting on these lawsuits:

“Four surviving spouses of reverse mortgage borrowers filed a lawsuit this week against Department of Housing and Urban Development Secretary Shaun Donovan claiming they faced undue harm due to reverse mortgage statute.

The lawsuit comes several months following a previous suit filed by AARP on behalf of non-borrowing spouses of reverse mortgage borrowers, in which a court ruled against HUD and granted relief to the plaintiffs, to be determined by the agency. HUD appealed the ruling, but the appeal was later thrown out.

The new suit seeks relief for a class of borrowers who faced situations similar to those detailed in the earlier lawsuit; namely those who faced foreclosure of their homes because they had been removed from the home title or were not named on the title prior to the closing of the reverse mortgage and had survived their borrower-spouses.”

Every reverse mortgage application contains disclosures warning against removing a homeowner from title.  Some of these non-borrowing homeowners claim that this was not made clear, or they were encouraged to change the title to “get more money”.

With HECMs, there is an additional wrinkle, where the Statute and the Regulation differ slightly:

The Statute:

The Secretary may not insure a home equity conversion mortgage under this section unless such mortgage provides that the homeowner’s obligation to satisfy the loan obligation is deferred until the homeowner’s death, the sale of the home, or the occurrence of other events specified in regulations of the Secretary.  For purposes of this subsection, the term “homeowner” includes the spouse of the homeowner. (12 U.S.C. § 1715z-20(j) (emphasis added))

The Regulation:

The mortgage shall state that the mortgage balance will be due and payable in full if a mortgagor dies and the property is not the principal residence of at least one surviving mortgagor.  (24 C.F.R. § 206.27)

Because of this, lenders are adding additional documentation requirements for a non-borrowing spouse:

•Valid ID for NBS

•Letter of Explanation signed by borrower and NBS

•Counseling

•Non-Borrower Certification

•Attorney Letter stating that upon a trigger event, the loan must be satisfied or the lender may foreclose on the property

•Credit authorization

•In community property states:  signed deeds and right to cancel, credit report