Archive for July 2014

Home Ownership Rate Dips to Lowest Level in Almost Two Decades

July 31, 2014

American-flag-house

This is not really a surprise. With home prices on the rise, fairly high unemployment (especially among millennials) and the difficulties in obtaining credit it only makes sense that the homeownership is  down. For a more detailed look at this subject – please read the article below.

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Homeownership in the United States lost a little more ground last quarter, declining to a new 19-year low as consumers—particularly young adults—continue to grapple with debt and difficulties obtaining credit.

According to an estimate from the Census Bureau, the U.S. homeownership rate was 64.7 percent in the second quarter, a decrease of 0.1 percentage point from the first quarter’s previous low and 0.3 percentage points from the same time last year. It was the lowest rate since 1995.

Homeownership continued to slide among the millennial age group, who find themselves more burdened than other groups by high debt, tight credit conditions, and limited job prospects. The percentage of young adults who own their homes was 35.9 percent last quarter, down nearly a full point from last year.

As housing trends move in a healthier direction, one of the biggest headwinds has been a lack of activity among first-time homebuyers, who historically account for 40 percent of sales activity, according to the National Association of Realtors (NAR). Through this year, that share has hovered around 28 percent.

While today’s young adults have so far been inactive compared to historical norms, a recent report from NAR suggests a number of markets, particularly those in the Midwest and West, are likely to see more activity from millennials as labor market conditions and home prices create a more favorable market for buyers.

To read the complete article – please use the link below.

Home Ownership

Default Risk Drops, Still Above Normal Levels

July 30, 2014

Make a Journey

This is kind of good news however the decline is not enough to make a big deal out of. As long as lenders do not pay enough attention to a prospective homeowners debt to income ratio the risk will be there. For a more detailed look at this subject – please read the article below.

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Loan risk in the agency mortgage market came down slightly in June, but analysts warn that risk levels are still unacceptably high.

According to the American Enterprise Institute’s (AEI) latest National Mortgage Risk Index, the share of home purchase loans at risk of going sour in the event of an economic downturn fell nearly half a percentage point last month to 11.44 percent.

AEI said the drop reflected declines for three of the four agencies tracked—Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA)—as well as a decline in the share of loans guaranteed by FHA and Rural Housing Services (RHS).

According to the group, the risk value of loans securitized in Fannie and Freddie’s portfolios fell slightly to 5.8 percent, while the risk index for FHA slipped to 23.6—still nearly four times the maximum acceptable level of 6 percent, AEI says.

Meanwhile, the index for RHS hit a new series high, climbing to 19.75 percent.

The biggest factor underlying the current high-risk environment is the abnormally high amount of debt consumers are paying relative to their incomes, say analysts at AEI’s International Center on Housing Risk.

To read the complete article – please use the link below.

Default Risk Drops

CoreLogic: Student Loans Not Depressing Home Ownership

July 25, 2014

depleted-moneyThis study makes a lot of sense. Student debt is probably no more of a determent to home ownership that it was 25 years ago. For a more detailed look at this subject – please read the article below.

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One of the pet reasons for explaining the lack of demand for houses among millennials is the presence of ever-escalating student loan debts. The thinking goes that college graduates are so mired in debt that they either cannot afford to buy or are too afraid to run up more debt, and so they stay living with their parents or find cheap places to rent.

However, Mark Fleming, chief economist at CoreLogic, isn’t buying it.

Citing a recent panel discussion at the Urban Institute on “Quantifying the Impact of Student Loan Debt on Homeownership,”  and recently published reports by the Brookings Institute and Jeffrey Thompson, economist at the Board of Governors of the Federal Reserve System, Fleming draws the conclusion that  while student loan debt undoubtedly affects financial decisions for those post-college, there is zero empirical evidence to back up the claim that these debts are keeping young people from buying their first homes.

For one thing, Fleming says, the monthly payback amount anyone has to spend on a student loan is based on a percentage of income. This percentage has remained virtually unchanged since the mid-1990s, but then, so have earnings—and members of Generation X didn’t shy away from buying houses just because of these obligations.

Student loan debt is at the $1 trillion mark, and there are more outstanding loans than ever. But Fleming says these facts alone do not show that student loan debt is a bigger burden for millennials, much less one that will prevent homeownership.

To read the complete article – please use the link below.

Home Ownership

Consumer Sentiment Drops to Four Month Low

July 22, 2014

depleted-moneyThis is not a sign of the onslaught of a new recession  but just a normal ebb and flow of consumer attitudes in the US. These trends  can’t be accurately judged month to month be they should be looked at year to year.  For a more detailed look at this subject – please read the article below.

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A preliminary measure of consumer sentiment released Friday shows confidence in the economy has dropped to its lowest level in the last four months.

The Thomson Reuters/University of Michigan Index of Consumer Sentiment measured 81.3 in its first July reading, falling more than a point from its final June reading of 82.5.

Analysts surveyed before Friday’s release had predicted the index would climb up slightly to 83.

Paul Diggle, U.S. economist for research group Capital Economics, said it was fuel costs that brought down the latest measure.

“The rise in gasoline prices was behind the dip in consumer confidence in July,” Diggle said in a note. “But rising equity prices and the improving labour market should help consumer confidence to increase before too long.”

The decline in the headline index came from a decrease in the consumer outlook index, which fell 2.4 points to 71.1.

On the other hand, the index measuring confidence in the current economic environment ticked up 0.5 points to 97.1, helped in part by June’s strong gain in payrolls.

Looking ahead, Diggle expects continued employment growth, along with declining mortgage interest rates, should boost consumer confidence in the months ahead.

To read the complete please use the link below.

Consumer Sentiment Drops

CFPB Proposes to Publish Complaint Narratives against Banks, Servicers

July 21, 2014

complaintThis is really one of those ideas that has two sides with real strong pros and cons. More detailed dissemination of customer’s complaints is good for consumers and very useful when a prospective client is trying to choose who to bank with. On the other side of this question the real worry that this could turn into an online forum with exaggerated and, in some cases, false claims. If the banks are truly prohibited from a public reply  to these complaints then it is not a good or fair idea. For a more detailed look at this subject – please read the article below.

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In the wake of the financial crisis, the trust level between the banks who are seen by many as a culprit in the downturn and consumers who are, in many cases, still attempting to fully recover is tenuous at best. In the middle, you’ve got the referee: a federal government, charged with ensuring that the circumstances seen in the latter part of the previous decade do not repeat themselves.

To that end, the Consumer Financial Protection Bureau (CFPB) proposed a new rule to allow consumers that post complaints to the option to opine on the details of their complaint made on the bureau’s public facing complaint database.

The CFPB argues that allowing consumers to expand on the circumstances surrounding their complaints allows for greater transparency in the system.

“The consumer experience shared in the narrative is the heart and soul of the complaint,” said CFPB Director Richard Cordray. “By publicly voicing their complaint, consumers can stand up for themselves and others who have experienced the same problem. There is power in their stories, and that power can be put in service to strengthen the foundation for consumers, responsible providers, and our economy as a whole.”

The banking and servicing community is, perhaps understandably, concerned.

To read the complete article – please use the link below.

CFPB Proposes to Publish Complaint Narratives

Default Falls to Historically Low Levels in Large Metros

July 18, 2014

loan-defaultThis is a very good sign for the housing market as it indicates that homeowners  have the means and desire to pay their bills. For a more detailed look at this subject – please read the article below.

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As the unemployment rate and other economic measures continue to improve, American consumers appear to be gaining a greater ability to meet their credit obligations.

A report released Tuesday by S&P Dow Jones Indices and Experian showed a decline in default rates among five of the largest cities in the nation to historically low levels.

The national composite for all types of credit default posted 1.02% in June, its lowest reading since the organization began collecting the data ten years ago.

Consistent with recent reports that payment priorities may be shifting among Americans back to pre-downturn norms, mortgages lead the way with first mortgages clocking in at just 0.89 percent default. The default rate at second mortgages was even lower at 0.57 percent.

“Consumer credit default rates continue to drift lower and have reached a historical low,” says David M. Blitzer, Managing Director and Chairman of the Index Committee for S&P Dow Jones Indices.

“Recent economic reports are encouraging with the unemployment rate now at a six year low and strong job creation in recent months. The continued declines in consumer default rates confirm other indicators of an improving economy. Credit standards for mortgage loans continue to be somewhat restrictive and may be contributing to low first mortgage default rates”.

To read the complete article – please use the link below.

Default Falls to Historically Low

JPMorgan Wary of FHA Business

July 17, 2014

boxing-glovesDoes it  seem a little strange that  the CEO of JPMorgan is stating that the fact that they approved loans loans that didn’t meet the FHA requirements but they wrote them anyway  to boost their bottom line – got caught – paid over a 1/2 billion dollars in fines is somehow the FHA’s fault. As for as to not offering any more FHA guaranteed loans that wont happen. For a more detailed look at this subject – please read the article below.

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In a conference call with analysts following the release of its second quarter earnings report Tuesday, JPMorgan CEO Jamie Dimon took the time to single out Federal Housing Administration (FHA) backed lending as a source of risk for the Megabank.

In February, the bank announced that it would pay $614 million to settle claims that it had improperly approved thousands of government backed mortgages, including those approved by the bank as a participant in the FHA’s Direct Endorsement Lender program.

Under the program, lenders who have direct endorsement power can consider single-family FHA mortgage applications without first submitting paperwork to HUD. Skipping that step allows FHA mortgages to be processed as rapidly as other mortgages.

Dimon said that the bank’s FHA business has cost them money.

“So the real question is should we be in the FHA business at all? We’re still struggling with that,” Dimon said. “Until they come up with some kind of safe harbors or something, we’re going to be very, very cautious in that line of business,” Dimon said.

JPMorgan is not alone in its struggle with FHA compliance. In June, Suntrust Banks, Inc. announced that it would pay $418 million to resolve its potential liability for originating and underwriting FHA loans between January 2006 and March 2012 that did not meet agency requirements.

To read the complete article – please use the link below.

Wary of FHA Business