Archive for January 2013

Homeownership Rate Slips in Q4

January 31, 2013

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The number of households owning homes rose to 75,209,000 in the fourth quarter, up from 75,076,000 in the third, but down from 75,315,000 a year ago, theCensus Bureau reported Tuesday.

At the same time, the nation’s homeownership rate (seasonally adjusted) dipped to 65.4 percent in the fourth quarter from 65.5 percent in the third quarter.

At 65.4 percent—the same level as the first quarter—the homeownership rate is at its lowest level since the first quarter of 1997 when the rate was also 65.4 percent. The homeownership rate peaked at 69.2 percent in Q2 2004. The rate measures the proportion of households owning their primary residence, computed by dividing the number of household that are occupied by owners by the total number of occupied homes.

The Census Bureau also reported the homeowner vacancy rate remained at 1.9 percent in the fourth quarter, the lowest level since Q3 2005. The homeowner vacancy rate is the proportion of the homeowner inventory that is vacant for sale.

The rental vacancy rate in the fourth quarter ticked up to 8.7 percent from 8.6 percent in Q3, but fell from 9.4 percent in Q4 2011.

The number of housing units for sale in the fourth quarter, Census reported, was 1,498,000, down from 1,783,000 in Q4 2011, confirming assertions by the National Association of Realtors of weak inventories.

The number of housing units held off the market in the fourth quarter was 7,299,000, up from 7,190,000 in third quarter and from 7,122,000 a year ago.

The stagnant homeownership rate combined with a decline in the number of units held off the market suggests opportunities for home sales. At the same time, the profile of homeowners, by age, is changing.

The homeownership rate for older Americans—65 and over—dipped in the fourth quarter to 80.7 percent from 81.4 percent in the second, the lowest rate in three years. The homeownership rate for those under 35 rose to 37.1 percent in the fourth quarter, the highest level in a year after falling for three straight quarters. The homeownership rate for those under 35 was as high as 43 percent in Q3 2006.

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Rate Slips

Report: Remodeling Projects that Yield the Greatest ROI

January 31, 2013

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A lot of homes can use a facelift, especially properties in distress, but some projects may not be worth the sweat and dollars when considering the return on investment (ROI).

Based on results from the 2013 Remodeling Cost vs. Value Report, the National Association of Realtors (NAR) revealed exterior projects will typically yield the highest ROI.

“Projects such as siding, window and door replacements can recoup more than 70 percent of their cost at resale. Realtors know what home features are important to buyers in your area and can provide helpful insights when considering remodeling projects,” said NAR president Gary Thomas, broker-owner of Evergreen Realty in Villa Park, California.

The report found replacing a door with a steel entry door anticipates the most return, with an estimated 85.6 percent of costs recovered upon resale. On average, the report found a steel entry door replacement is costs about 1,137 on average.

However, an article from House Logic, NAR’s consumer website, warned the lifespan of a steel door is generally shorter than fiberglass or wood doors.

The project that would reap the next highest return is a wooden deck addition. The project is estimated to recoup 77.3 percent of costs upon sale, but project expenses should average $9,327.

Replacing a garage door ranked third, with 75.7 percent of costs expected to be recouped and a lower average cost of $1,496. While most of the high-ranked projects were exterior, a minor kitchen remodel is expected to yield the fourth highest return of 75.4 percent. The average cost for this project is $18,527.

Wood replacement windows were No. 5, with 73.3 percent of expenses expected to be recouped, along with an average cost of $10,708.

Other projects expected to yield at least a 70 percent return were attic bedroom (72.9 percent), vinyl siding replacement (72.9 percent), vinyl window replacement (71.2 percent), and basement remodel (70.3 percent).

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Remodeling Projects

I Just Got This From HUD In An Email – FHA TAKES ADDITIONAL STEPS TO BOLSTER CAPITAL RESERVES

January 30, 2013

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HUD No. 13-010                                                                                             FOR RELEASE

Lemar Wooley                                                                                                 Wednesday

(202) 708 – 0685                                                                                             January 30, 2013

http://www.hud.gov/news/index.cfm

 

Continuing effort to help strengthen FHA’s Mutual Mortgage Insurance Fund

WASHINGTON – As part of a broad effort to strengthen the Federal Housing Administration’s (FHA) Mutual Mortgage Insurance Fund (MMI Fund), FHA Commissioner Carol Galante announced a series of changes to be issued this week that will allow the agency to better manage risk and further strengthen the health of the MMI Fund.

“These are essential and appropriate measures to manage and protect FHA’s single-family insurance programs” said Galante.  “In addition to protecting the MMI Fund, these changes will encourage the return of private capital to the housing market, and make sure FHA remains a vital source of affordable and sustainable mortgage financing for future generations of American homebuyers.”

Home Equity Conversion Mortgage Consolidation

As discussed in its Annual Report to Congress, FHA will consolidate its Standard Fixed-Rate Home Equity Conversion Mortgage (HECM) and Saver Fixed Rate HECM pricing options. This change will be effective for FHA case numbers assigned on or after April 1, 2013.   The Fixed Rate Standard HECM pricing option currently represents a large majority of the loans insured through FHA’s HECM program and is responsible for placing significant stress on the MMI Fund.  To help sustain the program as a viable financial resource for aging homeowners, the HECM Fixed Rate Saver will be the only pricing option available to borrowers who seek a fixed interest rate mortgage.  Using the HECM Fixed Rate Saver for fixed rate mortgages will significantly lower the borrower’s upfront closing costs while permitting a smaller pay out than the HECM Fixed Rate Standard product, thereby reducing risks to the Mutual Mortgage Insurance Fund.  Read FHA’s new HECM Mortgagee Letter.

In addition to the HECM consolidation announced today, FHA will announce the following changes in the coming days:

Changes to Mortgage Insurance Premiums

FHA will increase its annual mortgage insurance premium (MIP) for most new mortgages by 10 basis points or by 0.10 percent.  FHA will increase premiums on jumbo mortgages ($625,500 or larger) by 5 basis points or 0.05 percent, to the maximum authorized annual mortgage insurance premium.  These premium increases exclude certain streamline refinance transactions.

FHA will also require most FHA borrowers to continue paying annual premiums for the life of their mortgage loan.  Commencing in 2001, FHA cancelled required MIP on loans when the outstanding principal balance reached 78 percent of the original principal balance.  However,  FHA remains responsible for insuring 100 percent of the outstanding loan balance throughout the entire life of the loan, a term which often extends far beyond the cessation of these MIP payments.  FHA’s Office of Risk Management and Regulatory Affairs estimates that the MMI Fund has foregone billions of dollars in premium revenue on mortgages endorsed from 2010 through 2012 because of this automatic cancellation policy.  Therefore, FHA will once again collect premiums based upon the unpaid principal balance for the entire period for which FHA is entitled.  This will permit FHA to retain significant revenue that is currently being forfeited prematurely.

Requiring Manual Underwriting on Loans with Decision Credit Scores below 620 & DTI Ratios over 43 Percent

FHA will require lenders to manually underwrite loans for which borrowers have a decision credit score below 620 and a total debt-to-income (DTI) ratio greater than 43 percent.  Lenders will be required to document compensating factors that support the underwriting decision to approve loans where these parameters are exceeded, using FHA manual underwriting and compensating factor guidelines.

Raising Down Payment on Loans above $625,500

Through a Federal Register Notice to be published in the next several days, FHA will announce a proposed increased down payment requirement for mortgages with original principal balances above $625,500.  The minimum down payment for these mortgages will increase from 3.5 to 5 percent.  This change, coupled with the statutory maximum premiums charged for these loans, will help protect FHA and further facilitate its efforts to encourage higher levels of private market participation in the housing finance market.

Access to FHA after Foreclosure

FHA will step up its enforcement efforts for FHA-approved lenders with regard to aggressive marketing to borrowers with previous foreclosures and remind lenders of their duty to fully underwrite loan applications.  New loans must meet all FHA guidelines.

Borrowers are currently able to access FHA-insured financing no sooner than three years after they have experienced a foreclosure, but only if they have re-established good credit and qualify for an FHA loan in accordance with FHA’s fully documented underwriting requirements. It has come to FHA’s attention that a few lenders are inappropriately advertising and soliciting borrowers with the false pretense that they can somehow “automatically” qualify for an FHA-insured mortgage three years after their foreclosure.  This is simply not true and such misleading advertising will not be tolerated.

Moreover, FHA will work with other federal agencies to address such false advertising by non-FHA-approved entities.  Finally, as discussed in its Annual Report to Congress, FHA is also committed to structuring a new housing counseling initiative that would apply to a number of borrower classifications, including borrowers with previous foreclosures.

Continuing Effort to Improve Risk Management

The changes announced this week will further contribute to the efforts made throughout the Obama Administration’s tenure to improve risk management at FHA and protect the Mutual Mortgage Insurance Fund.  Because of these commitments, the changes made at FHA over the past four years have already added more than $20 billion in value to the MMI Fund.

NAR: Pending Home Sales Index Records Sharp Drop as Inventory Falls

January 30, 2013

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The Pending Home Sales Index (PHSI) fell 4.3 percent to 101.7 in December, the sharpest month-over-month drop since April, the National Association of Realtors reported Monday. Economists had expected a smaller 0.3 percent decrease to 106.1 from November’s originally reported 106.4. The November index was revised down to 106.3.

The December index reading was the lowest since September.

The PHSI is a supposed to be a leading indicator of completed transactions, though it’s not always accurate. The index rose in eight months in 2012 (on a two-month lag), but existing home sales rose in only six. Following the 5.5 percent drop in pending sales in April, existing home sales in June fell 250,000, the steepest monthly decline in 2012.

Nonetheless, the NAR expressed optimism, noting the index was above year-ago levels for the 20th straight month in December.

NAR economist Lawrence Yun blamed a tight inventory for the weakening index.

“The supply limitation appears to be the main factor holding back contract signings in the past month,” he said, adding a separate NAR survey “shows that buyer foot traffic is easily outpacing seller traffic.”

Indeed, the inventory of homes for sale dropped sharply in December, according to the NAR’s home sales reportreleased last week, falling to 1,820,000. The months’ supply of homes for sale—computed against the sales pace—dropped to 4.4 months in December, the lowest since May 2005, when it was 4.3.

Yun acknowledged price may be another factor holding down sales.

“Supplies of homes costing less than $100,000 are tight in much of the country, especially in the West, so first-time buyers have fewer options,” he said.

The month-over-month trend in sales correlates inversely with the movement in the median price—that is, when the median price rises, sales dip, as happened four times in 2012; in the four months in which the median price dropped, sales rose.

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Sales Index Records Sharp Drop

Cordray’s Appointment Questioned Following Appeals Court Ruling

January 29, 2013

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A federal appeals court in Washington, D.C., ruled Friday that the controversial recess appointments made by President Obama in January 2012—which includes the appointment of Richard Cordray as director of the Consumer Financial Protection Bureau (CFPB)—are “invalid from their inception.”

In Noel Canning v. National Labor Relations Board, the court examines the recess appointments of three members of the board—Sharon Block, Terence Flynn, and Richard Griffin, all of whom were appointed January 4, during a three-day Senate break. While he is not specifically named in the court’s opinion, Cordray was also appointed to his CFPB post that day.

Administration officials insisted the president was acting correctly under the recess appointments clause of the Constitution; critics argued that the Senate was not actually in recess at the time and that the president was skirting around the confirmation process.

In its opinion, the court agreed that a short break does not constitute a “recess,” noting “the appointments structure would have been turned upside down if the President could make appointments any time the Senate so much as broke for lunch.”

“The natural interpretation of the [recess appointments] Clause is that the Constitution is noting a difference between ‘the Recess’ and the ‘Session,’ the court writes. “Either the Senate is in session, or it is in recess. If it has broken for three days within an ongoing session, it is not in ‘the Recess.’”

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Cordray’s Appointment Questioned

Fitch: Potential Impact of CFPB’s New Servicing Rules

January 29, 2013

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The new servicing rules recently issued by the Consumer Financial Protection Bureau (CFPB) will benefit the mortgage servicing industry by creating uniform standards, but it will also increase compliance costs for the servicers, which will put pressure on smaller-sized entities, according to a report from Fitch Ratings.

“[T]he rules are a positive step toward improving the consistency and quality of servicing in the industry and may ultimately foster greater confidence in the sector,” the rating agency said. “However, similar to other servicing-focused initiatives, the CFPB rules will further increase compliance costs for the industry, extend timelines, and potentially drive further consolidation within mid to smaller servicers.”

The final servicing rules, which were released January 17, include rules on communication procedures with borrowers and loss mitigation practices for homeowners facing foreclosure, among other requirements and restrictions.

The rules will take effect January 10, 2014, but there are certain exemptions for small servicers, which CFPB defines as servicers who service 5,000 or fewer loans and service only mortgage loans that they or an affiliate originated or own.

While the largest servicers have already implemented a number of servicing requirements due to the $25 billion national mortgage settlement with federal and state officials, as well as consent orders from regulators, a key change to the CFPB’s rules is the “greatly extended scope, as they will govern both banks and nonbanks of all sizes and types,” Fitch explained.

“While these changes should be manageable for larger servicers, Fitch believes their impact will be most directly felt by mid-sized to smaller institutions due to the greater impact of compliance costs,” the rating agency stated.

As smaller and mid-sized servicers get squeezed, they may also feel pressure to leave the servicing business due to the raised compliance costs coupled with insufficient returns. Large banks, on the other hand, are expected to focus on core prime servicing while substantially decreasing their nonprime presence as a result of increased scrutiny and compliance risks, according to Fitch.

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New Servicing Rules

Pro Teck Ranks 10 Best Performing Metros

January 28, 2013

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I think that this is a positive sign however I don’t agree that “Conditions for a quick recovery have been in place for a long time now”. I don’t think that conditions are totally in place now for a Quick Recovery. Until the lenders cut loose a lot more funds for mortgages a quick recovery is not possible. Please read the article below and let me know what you think.

Housing markets are improving across the country with even some bottom-performing markets showing signs of improvement, according to Pro Teck Valuation Services.

“The conditions for a quick recovery have actually been in place for some time due to the combination of very low levels of new construction over the past five years, very favorable price and affordability levels, and a strong rental market in many parts of the country,” said Tom O’Grady, CEO of Pro Teck Valuation Services.

Pro Teck measures inventory, days on market, sales and listing activity, the ratio of sales price to list price, and foreclosures and REOs to determine the best- and worst-performing markets in the nation.

January’s top 10 list includes a mix of markets from all regions across the country, and “even those in the Bottom 10 list are showing a fair percentage of positive trends,” said Michael Sklarz, principal of collateral analytics at Pro Teck.

“This is quite different from last year when the majority of the Bottom 10 markets had most or all of their indicators trending negative,” Sklarz said.

Austin-Round Rock-San Marcos, Texas ranked as the No. 1 market in the country and was one of two Texas markets to make the top 10 list this month.

Baltimore-Towson, Maryland ranked second, followed by another Northeast market, Boston-Quincy, Massachusetts.

The next three markets were Southern markets – Charlotte-Gastonia-Rock Hill, North Carolina and South Carolina; Fort Lauderdale-Pompano Beach-Deerfield Beach, Florida; and Houston-Sugar Land-Baytown, Texas.

The list was rounded out by Los Angeles-Long Beach-Glendale, California; Miami-Miami Beach-Kendall, Florida; Minneapolis-St. Paul-Bloomington, Minnesota and Wisconsin; and Seattle-Bellevue-Everett, Washington.

“The Florida markets are among those which experienced bubble and burst conditions in the last real estate cycle and are now very appealing to both U.S. home buyers and foreign investors,” Sklarz said.

To read the complete article please use the link below.

Best Performing Metros