HUD Issues HECM Non-Borrowing Spouse Guidelines

Important news in the reverse mortgage world:  Mortgagee Letter 2014-07 was released by HUD this week, to become effective for FHA case numbers assigned on or after August 4, 2014.

The spouses of HECM borrowers who are not on the loan documents may remain in those homes after the death of their borrowing spouse for a newly defined “deferral period.”

The letter clarifies to whom the new guidelines will apply, the obligations of the non-borrowing spouse, and new at-closing certification requirements. 

The letter itself consists of 14 pages of definitions plus several attachments containing the new loan documents.  It can be read in full at the link above.

 

Home Values Up 5.7% Over Q1 2013

If you’re looking to sell a house in 2014, the latest word on home value prices should strike you as good news. Zillow ^[1]’s Q1 Real Estate Market Report ^[2], released Tuesday, shows that home values across the United States are up 5.7 percent (to a national median of $169,800) compared to Q1 2013. This marks the 21st consecutive month that prices, compared year-over-year, have gone up.

Even more encouraging is that home values in 527 U.S. cities that saw declines of 10 percent or more during the recession are either at their peak or soon will be. Zillow also expects that home values in 1,000 metro areas will finish the year higher than ever.

Though not connected, the Zillow report was released the day before the Federal Housing Finance Agency ^[3] released its February House Price Index ^[4] report, which corroborates the 21-month uptick Zillow reported and also finds that housing prices nationally were up 6.9 percent that month.

But though market prices are up and climbing, national home values remain 13.5 percent below their 2007 peak. Still, barely 30 months after home values nationally plummeted nearly 23 percent, the recession’s grip has eased on about one-fifth of U.S. cities that Zillow monitors. “This is a remarkable milestone coming only two and a half years after the end of the worst housing recession since the Great Depression,  said Stan Humphries, Zillow’s chief economist. “This is a testament to just how robust this housing recovery has been.”

The largest increases, according to Zillow, occurred in Riverside, Calif., and Las Vegas, where home values rose more than 22 percent compared to Q1 2013. Though neither market is expected to finish the year at peak, Zillow expects home values in Riverside to increase another 12 percent this year, in the report’s most optimistic projection. Las Vegas is expected to increase a further 6 percent.

Texas, however, leads the field in having reached market peak already. According to Zillow, home values in Houston, Dallas-Fort Worth, and Austin have returned to their 2007 glory and are expected to climb roughly 4 percent throughout this year.

But while this news is encouraging for sellers, the steady climb in home values comes with its share of baggage for buyers. In a fairly clear market yin-yang, the increase in home values has accompanied a stead drop in availability. Zillow reported that inventory fell in March for the first time in six months and is down 0.5 percent year-over-year. This, at a time when mortgage interest rates are rising with home prices, could create affordability problems for buyers.

In most metros, Zillow reported, housing affordability is and will remain strong even as prices continue to rise. But homes in a handful of metros—particularly in the major California markets—are already unaffordable, as residents are contributing a larger share than ever of their salaries to pay down mortgages.

Though mortgage rates remain quite low, Humphries said, they won’t stay that way forever. He also points out that rents nationally are on the rise (though not at the same pace as home prices), and some markets could become unaffordable to those looking to live or stay in desirable metro areas, such as Bay Area, California.

“As affordability worsens, more residents will be forced to search for affordable housing farther from urban job centers,” Humphries said. And if that happens? “Home values in some areas may have to come down.”

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Freddie Mac: Mortgage Rates Fall to 4.27 Percent

From DSNews  April 17, 2014

Average fixed mortgage rates declined for the second straight week, bringing them to a six-week low—and easing affordability conditions slightly as the homebuying season gets under way.

Per Freddie Mac’s ^[1] Primary Mortgage Market Survey ^[2], the 30-year fixed rate mortgage (FRM) this week averaged a rate of 4.27 percent (0.7 point), down from 4.34 percent last week. A year ago, the 30-year FRM sat at 3.41 percent.

At the same time, the 15-year FRM averaged 3.33 percent (0.6 point), down from an average 3.38 percent.

Frank Nothaft, VP and chief economist for Freddie Mac, said the latest decline fits with a disappointing—though not dismal—construction report ^[3] showing homebuilding rising at a rate of 2.8 percent in March.

“Also, permits fell 2.4 percent in March to a seasonally adjusted annual rate of 990,000, which followed a slight downward revision of 4,000 permits in February,” Nothaft said.

Numbers were mixed in adjustable rates. According to Freddie Mac, the 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.03 percent (0.5 point), down from 3.09 percent in the prior week, while the 1-year ARM averaged 2.44 percent, up a few basis points.

Bankrate.com ^[4] also saw a drop in its weekly national survey ^[5], recording the 30-year fixed at 4.43 percent and the 15-year fixed at 3.48 percent.

“Mortgage rates dropped for the second week in a row amid mixed economic news abroad and in the United States,” said Polyana da Costa, senior mortgage analyst for the finance site. “Despite some recent economic news, the United States is still perceived by investors as one of the safest places to park their money.”

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Happy Spring!

Happy Easter and Happy Passover to all of our friends!

NY to start licensing title insurance agents

Associated Press April 12, 2014ALBANY, N.Y. — New York’s new budget gives state financial regulators authority to issue licenses to title insurance agents for the first time.

Sponsors say the measure is intended to protect consumers and lower costs for New York homeowners.

The Department of Financial Services is expected to require title insurance agents to meet qualification standards and undergo regular training.

The department already licenses other insurance agents and brokers.

It will also have authority to monitor complaints and abuse, revoke licenses and investigate conflicts of interest that drive up homeowner costs.

The department plans to issue regulations.

The Cuomo administration says reforms should result in a 20 percent reduction in title insurance premiums and closing costs for buying new homes and a cut refinancing transaction costs by more than 60 percent.

No Reduction of FHA Mortgage Insurance

from National Mortgage News Tuesday, April 15, 2014

 FHA’s Galante Offers Alternatives to Rolling Back MI Premiums

The Department of Housing and Urban Development is pushing back against industry groups calling for the Federal Housing Administration to reduce or rebalance its mortgage insurance premiums.

“Now is not the right time to do a wholesale rollback of mortgage insurance premiums,” FHA Commissioner Carol Galante told a group of mortgage bankers on Wednesday. “We have a long to go to meet our statutorily required 2% capital reserve ratio.”

Three industry groups have urged FHA to rebalance its 1.35% annual MI premium and its 1.75% upfront MI premium to make FHA loans more affordable. But such a change would reduce FHA revenue.

The commissioner stressed that it’s important to strengthen the FHA single-family mortgage insurance fund and find other ways to increase access to credit. “We must do both,” she told attendees at the Mortgage Bankers Association’s Washington Policy Conference.

HUD is moving ahead with a housing counseling program called HAWK (Homeowners Armed with Knowledge) that will reward FHA borrowers that receive counseling. “That means lower upfront MI premiums at closing and a permanent reduction in the annual premiums after several years or both,” Galante said. She indicated that the details of the HAWK program will be announced very soon.

“Housing counsel in our mind is very important. We know the borrowers who receive counseling are up to 30% less likely to default on their mortgage than buyers who don’t,” she said.

The FHA is also working on creating a new performance measure that might reward lenders for extending credit to lower-score borrowers.

Lenders have been complaining for some time that a compare ratio FHA currently uses to measure lender performance leads to conservative underwriting in an environment where credit is already tight.

“We have heard loud and clear from lenders,” the FHA commissioner said, that the compare ratio has resulted in a “race to the top” in terms of credit quality.

“FHA is coming up with another performance metric that is maybe more sensitive to bucketing by credit scores for example,” she said. “We will be ready to speak about the specifics of this fairly soon.”

Dodd-Frank Regulations Pose a ‘Serious Challenge’

From DSNews April 8, 2014

The latest version of the Dodd-Frank mortgage regulations has bankers worried about lending, and their fear has already affected who can qualify for mortgage loans.

On Monday, the American Bankers Association ^[1] (ABA) released the results of its latest annual Real Estate Lending Survey ^[2], which clearly show signs of caution among loan officers. According to the ABA, more than 80 percent of bankers surveyed believe that tightened Dodd-Frank rules will restrict credit, thereby narrowing the pool of candidates able to secure mortgages.

In January, the Consumer Finance Protection Bureau implemented Regulation Z ^[3], which prohibits lenders from making a higher-priced mortgage loan without regard to the consumer’s ability to pay it back. This change swiftly led lenders to alter who they saw as viable mortgage loan candidates as they figure out how to do business within the confines of tighter controls.

“The new mortgage rules are a serious challenge, especially in the near term, for mortgage lending,” said Robert Davis, EVP of the American Bankers Association. “The problem will last at least as long as bankers calibrate their compliance systems, and perhaps much longer.”

According to the ABA, more than a third of bankers surveyed said they would only offer qualified mortgages. Another third said they would offer non-qualified mortgages, but only to targeted customers. A full 95 percent of those who say they will offer non-QMs plan to hold the loan as a portfolio investment. Five percent say they would sell the loan to secondary market investors.

More than anything, bankers are concerned with the increasing burden of ever-tightening regulation and with meeting the cost of compliance, which has yet to be assessed. It should be noted, however, that three-quarters of the organizations surveyed were financial institutions with less than $1 billion in assets.

Still, not all news is bad. Despite the worries, the ABA survey shows an uptick in the percentage of single-family mortgage loans made to first-time home buyers, from 11 to 13, last year. This is the highest percentage since 2007. Also, 30-year fixed-rate mortgages made up half of all mortgages in 2013, and the purchase market increased from 39 to 44 percent of mortgage originations.

Also, despite concerns, only 11 percent of institutions surveyed say they are contemplating selling servicing rights due to new regulatory requirements or capital treatment of mortgage servicing rights.

 

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March 2014 Scorecard on Administration’s Comprehensive Housing Initiative

The March 2014 housing scorecard includes key indicators of market
health and results of the Administration’s comprehensive response:
• House prices remain stable. As of January 2014, the Federal Housing
Finance Agency (FHFA) purchase-only house price index rose 7.4 percent
from last year and ticked up 0.5 percent (seasonally adjusted) from December.
The FHFA seasonally adjusted purchase-only index for the U.S. shows that
home values are on par with prices in mid-2005. The S&P/Case-Shiller
20-City Home Price Index for January posted returns of 13.2 percent over
the past 12 months but was down 0.1 percent (not seasonally adjusted) from
December. Prices, however, are typically weaker at this time of the year. The
Case-Shiller index shows that home values are back to their mid-2004 levels.
(The Case-Shiller and FHFA price indices are released with a 2-month lag.)
• Foreclosure starts are at their lowest level since the end of
2005. Newly initiated foreclosures, at 51,842 U.S. properties, were down
9 percent from January and 27 percent from one year ago–reaching their
lowest level since December 2005. A total of 30,307 U.S. properties were
repossessed by lenders (Real Estate Owned, or REO) in February, virtually the
same as January and down 33 percent from a year ago. (Source: Realty Trac)
• Homeowners’ equity continues to rise. According to the Federal
Reserve, homeowners’ equity is up over $400 billion ($412 billion) in the
fourth quarter of 2013, reaching more than $10 trillion ($10.026 trillion),
for the first time since 2007. Homeowners’ equity has risen sharply since
the beginning of 2012, with equity up 60 percent, or more than $3.7
trillion, as of the fourth quarter of 2013. The change in equity since April
1, 2009 now stands at more than $3.9 trillion.
• Purchases of new homes were down. Purchases of new homes were
down 3.3 percent to a seasonally adjusted annual rate (SAAR) of 440,000
in February. New home sales were down 1.1 percent from a year earlier–
the second consecutive annual decline. (Source: HUD and Census Bureau).
• Sales of previously owned homes dropped. February was the
fourth consecutive month that sales of previously owned (existing) homes
were below year-ago levels. The National Association of Realtors® (NAR)
reported that existing homes—including single-family homes, townhomes,
condominiums, and cooperatives—sold at a seasonally adjusted annual rate
(SAAR) of 4.60 million in February, down 0.4 percent from January and 7.1
percent from a year earlier, reaching their lowest level since July 2012. The
weakness reflects low inventory, strict bank lending standards, less favorable
housing affordability, and unusually harsh weather in much of the country.
• The Administration’s foreclosure mitigation programs continue
to provide relief for millions of homeowners. The Administration’s
foreclosure mitigation programs continue to provide relief for millions of
homeowners as the recovery from the housing crisis continues. Nearly 2.0
million homeowner assistance actions have taken place through the Making
Home Affordable Program, including more than 1.3 million permanent
modifications through the Home Affordable Modification Program (HAMP),
while the Federal Housing Administration (FHA) has offered more than 2.2
million loss mitigation and early delinquency interventions through February.
The Administration’s programs continue to encourage improved standards
and processes in the industry, with HOPE Now lenders offering families
and individuals more than 4.0 million proprietary modifications through
January (data are reported with a 2-month lag). In all, more than 8.2 million
mortgage modification and other forms of mortgage assistance arrangements
were completed between April 2009 and the end of February 2014.

Vacation Home Sales Rise in 2013; Investment Purchases Fall

April 2, 2014 – DSNews.com – http://dsnews.com –

Vacation home sales rose in 2013, while investment purchases fell below the higher levels seen in previous years, according to the National Association of Realtors (NAR). NAR’s 2014 Investment and Vacation Home Buyers Survey found vacation-home sales jumped 29.7 percent to an estimated 717,000.

Investment-home sales fell 8.5 percent to an estimated 1.1 million in 2013, down from 1.21 million in 2012.

NAR Chief Economist Lawrence Yun expected an improvement in the vacation home market. “Growth in the equity markets has greatly benefited high net-worth households, thereby providing the wherewithal and confidence to purchase recreational property,” he said. “However, vacation-home sales are still about one-third below the peak activity seen in 2006.”

Vacation-home sales accounted for 13 percent of all transactions last year, their highest share of sales since 2006. Investment sales fell 20 percent in 2013 from 24 percent in 2012.

Yun said the retreat in investment activity is understandable. “Investment buyers slowed their purchasing in 2013 because prices were rising quickly along with a declining availability of discounted foreclosures over the course of the year,” he said.

Yun commented that home prices had sharply over corrected in 2011 and 2012, leading many investors to purchase homes cheaply to turn into rental properties. As market conditions return to normal, investors must now evaluate their purchases more carefully—and judiciously.

The report by NAR found, “The median investment-home price was $130,000 in 2013, up 13.0 percent from $115,000 in 2012, while the median vacation-home price was $168,700, up 12.5 percent from $150,000 in 2012.”

All-cash purchases remained sizable in the investment- and vacation-home market: 46 percent of investment buyers paid cash in 2013, as well as 38 percent of vacation-home buyers.

Foreclosures also served as a verdant market for investors. 47 percent of investment homes purchased in 2013 were distressed homes. 42 percent of vacation homes were distressed homes.

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