MBA Significantly Increases Forecast for Home Purchase Lending

Purchase Originations Now Projected to Top $800 Billion in Both 2015 and 2016

WASHINGTON, D.C. (July 22, 2015) – The Mortgage Bankers Association (MBA) today released its updated mortgage finance and economic forecasts. The revision included a significant increase in the volume of purchase originations. MBA now projects that purchase originations will reach $801 billion in 2015 and $885 billion in 2016. That is an increase of $71 billion and $94 billion, respectively, over the association’s previous forecast.

Mike Fratantoni, MBA’s Chief Economist, along with senior MBA economists Lynn Fisher and Joel Kan, explained the drivers behind the increased forecast in MBA’s July Economic and Mortgage Finance Commentary, released today:

The housing market recovery has shifted to a higher gear. We have revised upwards our estimates and forecasts for home sales and home prices, and the cash share of purchases has declined.  All of these factors point to higher levels of purchase originations. Revisions to our purchase origination forecast in July result from changes in our expectations   about the rate at which purchase applications and housing sales translate into dollars of mortgage originations.

Overall, we believe that pull-through rates have increased, reflecting incremental but important changes in borrower behavior and lender underwriting practices, as well as changing average loan sizes and falling cash shares.  As a result of the changes outlined, purchase originations are now expected to increase to $801 billion in 2015, an upward revision from $730 billion in last month’s forecast, and from $638 billion in 2014. For 2016, we increased our forecast to $885 billion in purchase originations.

More sales are being financed, and more applications are being approved.  And we expect that this trend will continue into 2016 and beyond, as the broader economy and job market continue to improve.  The stronger job market and somewhat higher levels of inflation will lead the Fed to hike in September, and we expect that mortgage rates will hit 4.5 percent by the end of the year.  However, the positive of the stronger job market will outweigh any negative of somewhat higher mortgage rates.

The increase in rates will continue to nudge refinance volume down as expected.  Our forecast for refinance mortgage originations remains the same as last month. Refinances are expected to be $551 billion in 2015, compared to $484 billion in 2014. As a result, total originations are expected to be $1.35 trillion in 2015 and $1.26 trillion in 2016, compared to $1.12 trillion in 2014.

Click here to view a full copy of MBA’s July Economic and Mortgage Finance Commentary. Click here to view a full copy of MBA’s Mortgage Finance Forecast and click here to view a full copy of MBA’s Economist Forecast.

Caveat emptor!

Communities Digital News published an article about home and car buying on July 26th.  They make a number of valid points about both, including the following about title insurance:

 

Insurance protects you in two ways. First, “title” insurance protects your ownership of the property. Wouldn’t it be a bit troubling to learn three months after you have moved in that the seller did not own the property, and now, neither do you, because the real owner never sold it? Having a title search done through the local land records is vital to assure proper ownership and title to the property. The title search process can also alert you to any liens (claims against the property) and easements (rights others have to the property) of which you may not have been made aware. Title insurance protects you against all of these possible problems.

What to do – Make sure a title company searches the land records and is prepared to issue a title insurance policy.

 
Read more at http://www.commdiginews.com/business-2/buying-cars-and-homes-legal-and-financial-considerations-45586/#kb12lcIspgIArZoX.99

Good To Know: What Happens to a Reverse Mortgage When the Borrowers Die?

As more seniors turn to reverse mortgages, their adult children might well be puzzled or
concerned about what will happen to that debt when one or both of their parents eventually
dies. At that time, questions about how to pay off the loan will need to be resolved – and relatively quickly.
Nearly all reverse mortgages today are home equity conversion mortgages, or HECMs, which are insured by the Federal Housing Administration. HECMs are subject to certain rules that might not apply to non-HECMs.
The first thing adult children should know about HECMs is that these reverse mortgages
technically become due and payable when the borrower dies.
The word “technically” is important because it’s understood that a borrower’s heirs can’t possibly refinance or sell the home on the day of death to satisfy the debt, said Beth Paterson, a certified reverse mortgage professional at Reverse Mortgages SIDAC, a division of Greenleaf Financial in St. Paul, Minnesota.

Instead, what usually happens in practice is that the loan servicer sends out a letter that Paterson said might seem insensitive, but is intended to inform the heirs of the rules and ascertain their intentions for the loan and property.
“The servicing companies have had issues with people not notifying them and trying to stay in the home, so that’s why it needs to be harsh,” Paterson said. “My conversation to the consumer is that communication is vital.”

Servicers use a number of resources to find out that a borrower has died. These include the Social Security death index, proprietary databases and annual occupancy letters that typically are sent to reverse mortgage borrowers. “If they don’t get the letter of occupancy back or property taxes or insurance aren’t paid, they start doing the next steps: contacting an alternate contact, searching other records or sending someone out to inspect the property and see if someone is living in the house,” Paterson said.

The borrower’s heirs aren’t required to sell the home to pay off the reverse mortgage, said Cara Pierce, a housing and reverse mortgage counselor at ClearPoint Credit Counseling Solutions in Fresno, California. But if heirs want to keep the home, they’ll have to pay off the loan.
“If they want to get a loan in their own name and pay off the reverse mortgage, they can,” Pierce said. “But if they can’t and there are no other assets, like life insurance, other property or a 401(k),
that they could use to pay off the loan, they will have to sell the property.”
When heirs sell, they typically can choose their own real estate broker. The heirs manage the sale and keep any capital gain after the loan and closing costs have been paid. The borrower’s personal belongings and furnishings can be removed. Fixtures, as defined by state law, can’t.
A tenant living in the property might have certain rights and protections under state law.
Spousal rights If the borrower was married, the surviving spouse might be able to remain in the home even if he or she wasn’t a co-borrower, according to Sarah Mancini, an attorney at the National Consumer Law Center, a nonprofit advocacy organization in Washington, D.C.
That’s important, Mancini said, because some borrowers remove a younger spouse from their
home’s title to secure a larger reverse mortgage, leaving that younger spouse vulnerable to
eviction and foreclosure after the older spouse’s death.
The rules that affect surviving non-borrower spouses are complicated, and surviving spouses and heirs may need to consult an attorney to interpret their rights and options if the spouse wants to continue occupying the property.
“There are serious legal issues,” Mancini said, “and possible grounds for a legal challenge if the lender forecloses while there is still a surviving spouse.”
Upside-down HECMs The loan servicer usually will order an appraisal to determine how much the home is worth,
Paterson said. If the loan balance is higher than market value, the heirs can pay off a HECM at 95 percent of that value.
Another option for heirs is to sign a deed-in-lieu of foreclosure, giving the house to the lender, to resolve the situation more quickly.
HECMs are nonrecourse loans, so once the property is sold or given to the lender, the debt is considered satisfied and cannot be pursued further against the heirs or the borrower’s estate.
If the heirs don’t act, the lender can foreclose.
How long heirs have to act Time frames vary. According to the Department of Housing and Urban Development, or HUD, heirs can get an extension in some cases if a reasonable effort is being made to refinance or sell the home, and the lender and HUD agree to allow more time.
The bottom line, Paterson said, is that “if the servicer is not hearing from the family, they will start foreclosure proceedings.”

from The Houston Chronicle chron.com

Refinancing Your Mortgage? First, Clear A Path To Lower Rates

NEW YORK (MainStreet) — The housing market is heating up, and that goes double for homeowners looking to refinance and (hopefully) lock in a lower interest rate.

The scuttlebutt among mortgage rate insiders this spring indicated rates would be going up this summer, but as the U.S. inflation rate low (at a rock-bottom 0.0%), rates are still at reasonable levels.

Right now, the average 30-year mortgage rate in the U.S. stands at 4.27%, according to BankingMyWay’s weekly mortgage rate tracker. A caveat though. Rick Thorpe, a Doylestown, Pa.-based mortgage broker, says the lowest mortgage rates are only available to those consumers with good credit scores – think a 700 FICO score or better.)

Still, good deals are still out there for anyone with decent credit and for anyone with good credit who wants to cut his monthly mortgage payments.

Put it this way. A $200,000 fixed, 30-year mortgage at 5.5% would cost a homeowner $1,135 per month. But at a lower mortgage rate, say 4.3%, the homeowner would cut his monthly home payment to $978. You’d also save almost $20,000 over the life of the loan.

Surprisingly, financial experts say home loan borrowers may be unaware they can save money on their homes via refinancing. That sounds unreal in this, the information age, but it’s all too true, according to Steve Trumble, president of Newton, Mass.-based American Consumer Credit Counseling. “Too many homeowners are unaware of the opportunities to refinance and save money,” he says. “A lower interest rate can have a significant effect on monthly mortgage payments, potentially saving homeowners hundreds of dollars a year.”

Many homeowners may know refinancing can save them money, but they just don’t know the rules. For example, Zillow, the online real estate services site, says 47% of U.S. homeowners “incorrectly believe they must wait at least one year between refinancing.”

To cut the best deal, know that knowledge really is power when it comes to mortgage refinancing. “Make sure it makes sense,” says Yael Ishakis, vice president of First Meridian Mortgage located in Brooklyn, N.Y. “Figure out if the closing costs are worth the savings. And figure out if you’re just starting your mortgage over and adding years to payback and not just lowering the monthly payment.”

“Also, make sure you’re going down in the 1% range in interest rates before you refinance your mortgage,” Ishakis says.

Additionally, don’t make any major career or money moves as you are in the refinancing zone. “Prospective borrowers should do their best not to make any changes to their employment while looking to refinance,” advises Tali Raphaely, president of Armour Title Co., a real estate title firm. “Lenders look for stability – especially when it comes to one’s credit and career.”

Consumers should also be careful not to make any major purchases on credit while looking to refinance, because spikes in credit balances could affect credit score, Raphaely says. “One should not pay off any large credit balances while in the process of refinancing because that can also affect one’s credit score,” Raphaely says. “Remember, the rule of thumb is no big moves during a mortgage refinancing.”

So, if you’re in the market for a lower monthly mortgage payment, a good refinancing deal may be out there for you. There’s no guarantee rates will remain relatively low, so get out there while the getting is good.

CoreLogic Home Price Index (HPI) Up 6.8%

As a result of the 9% year-over-year growth in home sales, home prices have steadily risen, giving way to “important ramifications” for the overall economy, including positive equity that can increase homeowners’ wealth and place underwater homeowners “right-side up,” a recent CoreLogic report states.

In fact, the CoreLogic Home Price Index (HPI) for the U.S. was up 6.8% between April 2014 and April 2015, with further increases in HPI expected nationally through April 2016 at 5.3%.

And for some 4 million U.S. homeowners who owe the bank at least 20% more than their homes are worth, this is welcome news.

“We estimate that a 5% appreciation in home values across the U.S. will lift approximately 1 million additional homeowners out from being ‘underwater’ and place them right-side up once again,” CoreLogic writes.

Rising home values have also been a factor in reducing the foreclosure inventory across the U.S., according to the report.

“Homeowners with very little equity — and those who are underwater — have a greater default incidence,” CoreLogic writes. “Compared to homeowners with an 80% current loan-to-value ratio, owners who are underwater by 20% had a default rate that was about four times higher.”

In mid-2006, at the peak of the house-price bubble, less than 300,000 homes were in foreclosure proceedings. However, by mid-2011, more than 1.5 million homes were in the foreclosure pipeline, data shows.

Home value gains have, in part, worked to reduce the number of homes in these circumstances, with foreclosure inventory in April dropping 25% from a year ago, marking the fourth year of such declines.

And, as home values improve, homeowners with positive equity will “experience an increase in wealth, which can spur additional investments in their home (through home improvements) or in financial assets,” CoreLogic writes.