Mortgage rates saw some improvement this week, but it wasn’t enough to revive flagging refinance demand, which fell a whopping 30 percent.
The popular 30-year fixed averaged 5.32 percent for the week ending July 2, down from 5.42 percent a week ago and 6.35 percent a year ago, according to mortgage financier Freddie Mac.
“Lower mortgage rates are helping to support the housing market,” said Freddie Mac chief economist Frank Nothaft, in a statement.
“The 30-year fixed-rate mortgage rate peaked this year over the week of June 11 and is now around a quarter-of-a-percentage point lower this week,” he added.
Unfortunately, it’s up markedly from the record low of 4.78 set back in early April, killing a refinance bonanza in the process.
The 15-year fixed averaged 4.77 percent, down from 4.87 percent a week earlier and 5.92 percent a year ago.
The five-year ARM slipped to 4.88 percent from 4.99 percent, and sits well below its year-ago average of 5.78 percent.
The one-year ARM averaged 4.94 percent, up a single basis point from a week ago, but below the 5.17 percent average seen this time last year.
The rates above are good for conforming loan amounts with a down payment of 20 percent; jumbo loans continue to price significantly higher.
Four professional appraisal organizations have called on the HUD to rescind a 12-year old policy limiting the total appraisal fees that can be charged on FHA loans, warning that it presents significant risks to the federally-backed program.
Since the HVCC was implemented, appraisal management companies (AMCs) have been ordering most of the appraisals, but taking an unknown share of the total cost paid by borrower.
“Given the rapidly growing reliance by residential mortgage lenders on AMCs to provide appraisal services, the restriction on total appraisal fees to ‘no more than’ the customary fee for an appraisal has driven down the fees paid to large numbers of appraisers to well below what has been customary and reasonable in given market areas,” the groups wrote.
“Mortgagee Letter 97-46’s pricing restriction is causing many experienced and qualified appraisers decline FHA appraisal assignments ordered by AMCs because of their below market appraisal fees., adding unnecessary and substantial risk to the FHA program.”
The groups noted that the Mortgagee Letter makes no distinction between the fee paid to the individual who performs the work and the fee(s) charged by the AMC.
In other words, the AMC charges one lump sum to the borrower and gives the appraiser an unknown cut, presumably a smaller portion than they might have received in the past if ordered by a mortgage broker (One appraiser says his fee got cut in half).
“This leaves consumers with the mistaken impression that they are paying the customary fee for the highest level of service from an appraiser who has substantial experience in performing appraisals in their geographic area when, in fact, the consumer is receiving a much lower level of service.”
The appraiser groups argued that highly qualified and experienced appraisers are declining to perform assignments for the AMCs, forcing the companies to rely upon appraisers from distant locations with less experience and training, thus putting assessed values in question.
It looks now as if the HVCC may be crumbling.
Major homebuilder Beazer Homes has reached a settlement involving the company’s loan origination practices in which it will pay roughly $50 million in restitution to home buyers and the HUD.
The company was accused of fraudulently originating FHA loans by charging illegal fees, making loans to unqualified buyers, gifting down payments improperly and then increasing home prices to offset the expense, and conspiring to hide its high default rate from the FHA.
“We deeply regret these matters and have used what we have learned to strengthen our control and compliance culture and reinforce our absolute commitment to act according to the highest standards of ethical conduct throughout our organization, said Ian J. McCarthy, president and CEO of Beazer Homes, in a release.
“We are pleased that the governmental authorities recognized our cooperation and remedial measures.”
The SEC also filed a criminal complaint against Beazer’s former chief accounting officer Michael T. Rand for using improper accounting procedures to ensure the company met earnings expectations.
In February 2008, Beazer shut its mortgage origination business, dismissed the employees involved in the alleged fraud, and implemented changes in its internal controls over financial reporting.
The company now works with Bank of America Home Loans to provide mortgage financing.
So that’s what Beazernomics is…
As expected, more underwater borrowers will be able to take advantage of the Obama Administration’s Home Affordable Refinance Program (HARP), with loan-to-values up to 125 percent now considered acceptable, according to HUD.
“I am pleased Secretary Donovan accepted my invitation to come to Nevada and see firsthand the challenges homeowners here are facing,” said Senate Majority Leader Harry Reid (D-NV), in prepared remarks.
“His announcement that the loan-to-value requirement for the Administration’s refinance program has been raised to 125 percent is good news for Nevadans fighting to stay in their homes.”
The city of Las Vegas leads the nation in rate of foreclosure and more than two-thirds of its current mortgage holders are underwater, meaning they have home loan balances that exceed their current property values.
Previously, only borrowers whose loan-to-value was 105 percent of lower could qualify for assistance via the HARP, meaning a mortgage could not exceed $210,000 if the property was now worth just $200,000.
Now that same borrower’s mortgage balance could be as high as $250,000, meaning help for that many more struggling homeowners.
This also reveals the growing desperation to curtail foreclosures and buoy falling home prices; of course, the program may need to be further expanded to help borrowers even deeper in negative equity, though you could that these homeowners are too far gone to benefit.
Since February 18, 200,000 borrowers have received offers for trial loan modifications under the Making Home Affordable program and “ten of thousands of refinances and trial modifications are under way.”
Maybe it’s the fact that there’s a giant piece of plywood sticking up 50 feet in the air next to the home you’re attempting to sell or get the “right value” on.
The home builders and real estate agents are complaining about appraisals being impacted by nearby bank-owned properties, but often these new developments are a big mix of foreclosed homes, new, never occupied homes, half-constructed homes, and giant plots of dirt.
If you look at the photo below, you’ll see what I’m getting at; on the same street you’ve got one potentially occupied or foreclosed finished home, a nearly finished home, and a skeleton of a home.
Next to those are empty dirt lots; how can you really get a good value on a street like that, especially when there’s a similar development another mile away?
Builders haven been pushing for big tax credits, low mortgage rates, and more, because they want to improve affordability without lowering prices to more suitable levels.
But now appraised values are getting in their way, which is why they want the HVCC moratorium in place, though it’s unclear if that will actually improve values much, as the banks and lenders seem to want appraisals on the low end anyways.
Pending home sales, a gauge of what’s to come, increased 0.1 percent in May and were 6.7 percent higher than numbers seen a year ago, according to the National Association of Realtors.
While it’s seemingly normal to see pending home sales increase throughout the home buying season, it’s the first time they’ve been able to string together four consecutive months since October 2004.
“Closed existing-home sales have improved but are coming in lower than expected because some contracts are delayed or falling through from the application of new appraisal rules for many transactions,” said NAR Chief Economist Lawrence Yun.
By region, pending home sales increased 3.1 percent in the Northeast and 2.2 percent in the West; they fell 1.7 percent in the South and 1.3 percent in the Midwest.
“Rises in contract activity show buyers are becoming more active even as they face much more stringent loan underwriting standards. Speedy clarification of the appraisal rules could smooth a housing market recovery and support the overall economy.”
As expected, NAR took this opportunity to push for the HVCC moratorium, which they feel is hampering a housing recovery; maybe home prices just aren’t there?
Meanwhile, housing affordability fell last month from its historic high set in April as mortgage rates climbed higher.
A median-income family earning $60,800 could afford a home priced at $296,700 last month with a 20 percent down payment, assuming 25 percent of gross income is reserved for mortgage principal and interest.
Mortgage applications nosedived during the week ending June 26 as purchase applications gobbled up the majority share, the Mortgage Bankers Association reported today.
Home loan application volume was off 18.9 percent on a seasonally adjusted basis (-18.5 percent unadjusted) compared to one week earlier, and off 7.4 percent compared with the same week a year ago.
Refinances plunged 30 percent to the lowest point since November 2008, while purchases slipped just 4.5 percent.
The refinance share of mortgage activity fell to just 46.4 percent of total applications, down from 54 percent a week earlier.
I don’t know the last time purchases outweighed refinance applications, but it’s had to have been a while.
Meanwhile, interest rates saw some improvement, but apparently not enough to keep the refinance boom alive.
The 30-year fixed averaged 5.34 percent, down from 5.44 percent, while the 15-year fixed decreased to 4.81 percent from 4.93 percent.
The one-year ARM dipped two basis points to 6.52 percent and the adjustable-rate mortgage share of applications increased to 4.3 percent from 4.1 percent.
The MBA’s weekly survey, conducted since 1990, covers roughly half of all retail residential loan applications, but does not take into account multiple or declined apps.
My first thought that comes to mind is what will happen to all those employees hired on to handle the influx of mortgage applications?
That’s now looking to be very temporary employment.
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There’s been a lot of talk about jumbo lending making a comeback after coming to a standstill last year, and the data from National Mortgage News seems to back it up.
During the first quarter, the top jumbo lenders saw marked improvement, with Bank of America leading the way on $9 billion in loan volume.
That’s up from $4 billion in the fourth quarter, and actually well above the $2.8 billion seen in the first quarter of 2008, perhaps thanks to its acquisition of Countrywide.
CitiMortgage came in a distant second with $2.9 billion during the first quarter, up from $2.2 billion in the fourth quarter, but well below the $11.1 billion seen a year ago.
SunTrust claimed the third spot with $2.65 billion, up from $870 million in the linked quarter and $1.2 billion a year ago.
Wells Fargo saw jumbo loan volume of $2 billion, up from $898 billion in the fourth quarter, but less than half the $5.1 billion seen in the first quarter of 2008.
Union Bank of California grabbed the fifth spot with $752 million, while Chase saw volume of $672 million, up slightly from the fourth quarter, but well below the $5.9 billion originated a year earlier.
So jumbo lending is indeed up from lows seen late last year, but it still appears tight, as only 12 percent of Southern California home sales were financed with jumbo loans last month.
Of course, that could be attributed to the fact that most home sales were distressed/low priced, so a jumbo loan isn’t actually necessary.
Unfortunately, jumbo loans continue to be excluded from many loan modification efforts, which could hamper a recovery in hard-hit areas of the country like California and Florida.
(photo: daquellamanera)
Chase approved 138,000 loan modifications since April 6, including 87,100 via the Making Home Affordable program and 50,900 via its own loan modification program.
Of those offered, borrowers have made their first modified payments on 53,600 of them.
“We are encouraged that more than 53,000 families have already made the first payment for their trial modifications,” said Charlie Scharf, head of Retail Financial Services at JPMorgan Chase, in a statement.
“But we know it is extremely early in the program, so it is difficult to gauge its ultimate success.”
Oh right, that pesky re-default rate; well, Chase said its target front-end debt-to-income ratio is 31 percent for loan modifications, so hopefully that cuts payments drastically and keeps more loan mods current.
Another 155,000 loan modification applications are in process, bringing Chase’s so-called foreclosure prevention total to 565,000 since 2007.
Since January 1, the company has hired more than 950 loan counselors, bringing the total to 3,500, with plans to hire more in coming weeks.
Chase also hired an additional 2,000 mortgage operations employees to handle the unprecedented loan volume that resulted from the record low mortgage rates, though activity has since cooled.
The Chase loan modification program, which got underway back in November, originally began with a foreclosure moratorium so the company could assess its loan portfolio.
Chase services about 10.3 million loans, including roughly eight million loans on behalf of investors.
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Defaults on prime mortgages increased 20 percent during the first quarter of the year, according to the latest Mortgage Metrics Report released today by the OCC and OTS.
Prime mortgages, which represent about two-thirds of all mortgages covered by the agencies, saw their 60 day plus delinquency rate climb to 2.9 percent.
At the same time, loan modifications increased 55 percent from the previous quarter and 172 percent from the same period a year ago, with servicers implementing 185,156 new mods.
“While I’m very concerned about the rise in delinquent mortgages and foreclosure actions, the shift in emphasis by servicers to more sustainable, payment-reducing modifications is a positive step that should show significant benefits in the coming months,” said Comptroller of the Currency John C. Dugan.
“In addition, as the Administration’s Making Home Affordable program gains traction and helps offset the impact of this very difficult economic cycle, we should continue to see progress in future reports.”
More than half of loan modifications executed during the first quarter resulted in lower principal and interest payments; mods that reduced monthly payments by more than 20 percent increased 19 percent to 29 percent of all modifications.
Loan mods that increased payments made up 19 percent of modifications, a 25 percent drop from the previous quarter.
And it seems to be paying off somewhat; only 24 percent of mortgages that had monthly payments reduced by more than 20 percent were 60 days or more past due after six months.
That compares to a re-default rate of more than 50 percent on loan mods where the payment didn’t change or was increased.
Unfortunately, foreclosures also increased, climbing 22 percent from the previous quarter and 73 percent from a year ago, with 844,389 in process during the first quarter as various moratoria expired.
