Archive for October, 2013

2014 Loan Limits Announcement


Since 2011, investors have purchased more than 950,000 homes; and with 370,000 purchases so far this year, they have already surpassed the number of purchases they made in either of the past two years, according to a new report from RealtyTrac.

In total, investors spent $1 trillion on home purchases since 2011, according to RealtyTrac’s first-ever Investor Insight report released Monday, titled Real Estate Investor Purchase and Finance Patterns: 2011 to 2013.

RealtyTrac noted more than half of investor buys were all-cash purchases, and the percentage goes up dramatically when considering investor entities that purchased at least 1,000 homes since 2011.

In fact, RealtyTrac pointed out several differences in buying activity between smaller and larger investors.

While 54 percent of all investor purchases were made with cash, 93 percent of purchases made by investors that bought at least 1,000 properties since 2011 were cash buys, the company reported.

The status and characteristics associated with the properties acquired also varied somewhat depending on whether the investor was a more prolific purchaser.

Overall, 54 percent of homes purchased by investors were underwater but not in foreclosure, compared with 37 percent of homes purchased by investors that bought at least 1,000 properties.

On the other hand, larger investors purchased more homes in foreclosure. About 36 percent of homes purchased by large investors were in foreclosure, compared with 24 percent of total investor purchases, according to RealtyTrac’s data.

Twenty-three percent of all investor purchases were regular equity sales, whereas 27 percent of homes purchased by investors making at least 1,000 purchases were your traditional equity sales.

While more than half of investor purchases over the past few years—57 percent—have already been resold, larger investors appear to be holding onto their properties for the time being.

Among investors that have purchased 100 properties or more in the past few years, the percentage of homes that have been resold drops to 25; and among investors that have purchased 1,000 or more properties, the resold share drops to a meager 1 percent, according to RealtyTrac.

Residential properties sold at a faster pace in September according to a recent report from RealtyTrac.

Single-family homes, condominiums, and townhomes sold at an annualized pace of 5,673,249 in September, up 2 percent from August and up 14 percent year-over-year, indicating that the market is still ripe for investors with deep pockets looking to make an imprint on regional markets.

“The housing market continues to skew in favor of investors, particularly deep-pocketed institutional investors, and other buyers paying with cash,” said Daren Blomquist, vice president at RealtyTrac.

“While the institutional investors are pulling back their purchases in many of the higher-priced markets-places like San Francisco, Washington, D.C., New York, Seattle and Sacramento-they are continuing to ramp up purchases in markets where median prices are still below $200,000-places like Jacksonville, Atlanta, Charlotte, St. Louis and Dallas,” Blomquist said.

“The availability of distressed inventory also makes a difference. For example, institutional investor purchases have rebounded in Las Vegas corresponding to a recent rebound in foreclosure activity there,” he continued.

In September, the median price of a distressed residential property-in foreclosure or bank-owned-was $112,000, 41 percent below the median price of $189,000 for a non-distressed residential property. Distressed sales continued to account for a portion of all sales, climbing to 25 percent, up from 18 percent of all sales a year ago.

“Distressed sales remain persistently high, particularly short sales,” Blomquist added. “Markets with the biggest increases in short sales tend to be those where either foreclosure starts or scheduled foreclosure auctions have rebounded in the last 18 months – translating into more motivated short sellers – or those with a still-high percentage of underwater homeowners with negative equity.”

Institutional investors, those purchasing 10 or more properties in the last 12 months, comprised 14 percent of all sales in September. This figure is up 9 percent since September 2012. Investors flocked to big cities for investment, with Atlanta, Georgia being the biggest big city (defined as a metro area with more than 1 million people) with 29 percent of purchases by institutional investors.

The report shows that home price appreciation showed signed of plateauing in these top six appreciating markets. In all six markets, the annual increase in home prices was down compared to previous months this year.

Mortgage application fraud subsided a bit in the second quarter, but a new area of concern popped up with more lenders worried about origination fraud as homeowners struggled to acquire homes in a tighter, more stringent origination environment.

Loan applications overall increased with home sales, as metros across the nation realized home price gains in the first half of the year, real estate analytics firm CoreLogic said in a new mortgage fraud report.

Consequently, an estimated $5.3 billion in fraudulent mortgage applications were submitted to lenders in the second quarter as applications grew.

Yet, the mortgage application fraud risk index actually fell 5.6% in the second quarter when compared to year ago levels.

“As third- and fourth-quarter mortgage fraud loan application trends become apparent, it is quite possible that the total estimated dollar value of fraudulent applications will have decreased relative to the second quarter as a result of refinance application volumes experiencing a large drop-off,” explained CoreLogic chief economist Mark Fleming.

For the past several years, Freddie Mac mortgage fraud analysts have focused on short sales and real-estate owned properties, given that housing continues to crawl back from market lows.

But now that property values and loans are improving, the enterprise is witnessing more instances of reported origination fraud, Freddie Mac director of financial instrument fraud investigation Robb Hagberg said.

“We’re moving into a purchase market and that means that the opportunity for fraud increases because it’s the nature of the environment,” he said. “We are not witnessing astronomical numbers of origination fraud, but it’s a modest increase.”

Housing dynamics continue to have a role in shifting what type of mortgage fraud is more common at any given time.

The increase in home prices earlier this year, combined with new demands for originators to ensure borrowers have an “ability-to-repay” the loans switched around the type of fraud that is more prevalent in today’s market.

With the implementation of the Consumer Financial Protection Bureau’s ability-to-repay standards for the Qualified Mortgage rule and a focus by underwriters on ensuring the proper income is available to support mortgage payments, falsely claiming the required income to support the loan application could become a bigger problem in the future, CoreLogic said.

“Expressing it in slighter starker terms, times have changed from past periods when underwriters didn’t see income as a reason for declining the loan application in the first place,” Fleming argued.

He continued, “Now underwriters do care, and they care greatly, about the borrower’s ability to pay back the loan.” Because of this, that is one area where applicants are more likely to exaggerate or lie.

Of the largest 25 metropolitan markets, the highest propensity for mortgage application fraud occurred in Atlanta, Ga.; Miami, Fla.; and Riverside, Calif.

While the overall risk of fraud continues to persist, the amount of fraud continues to decline from peak levels reached in 2012.

U.S. home buyers are regaining their purchasing power, the effect of falling mortgage rates.

Since peaking in mid-August, the 30-year fixed rate mortgage has now shed 0.45 percentage points. Renewed economic pessimism along with a change in Federal Reserve messaging has erased this summer’s mortgage rate surge. The 30-year fixed rate mortgage rate now averages 4.13% nationwide — the lowest in 19 weeks.  Today’s Rapidly Dropping Mortgage Rates

It was a rough summer for U.S. home buyers. Demand outstripped supply, leading to multiple-offer situations and rising prices. Plus, mortgage rates were soaring. Between May and mid-July, the 30-year fixed rate mortgage added more than one percentage point. By mid-August, the 30-year fixed averaged 4.58 percent, effectively erasing the gains of the last two years. Not since 2011 had mortgage rates been so high. But then, a reversal. Changing market sentiment led U.S. rates steadily lower until, earlier this week, Freddie Mac reported the average 30-year fixed rate mortgage at 4.13%. Mortgage rates haven’t been this low since June.

The shift in rates has been both abrupt, and surprising. After all, just a few months ago, analysts had warned buyers to expect rates near 5 percent before 2013’s end. Today, though, rates with a 3-handle seem much more likely.

There are two big reasons why rates have reversed.

The first reason is that Federal Reserve appears unlikely to “taper” its third round of qualitative easing (QE3) in 2013. QE3 is a mortgage rate-suppressing program through which the Fed buys $40 billion of mortgage-backed securities (MBS) monthly. Earlier this summer, Wall Street believed QE3’s end was imminent. This led to a mortgage bond sell-off which directly caused the summer spike in rates. Then, in September, Wall Street changed its mind. Reacting to Federal Reserve comments that growth was slow, labor markets were weak, and inflation remained too low to be healthy, investors began to wonder if their QE3 predictions had been a bit overdone. Next, the Fed affirmed it for them. In a series of statements from Federal Reserve officials, the central banker suggested that QE3 would need to extend in early-2014, at least. Mortgage bonds rallied on the comments, and mortgage rates sank.

The second reason why rates are down is the U.S. economy.

Economic growth has slowed since summer, illustrated, in part, by lackluster jobs reports and consumer spending tallies. However, it was the 16-day government shutdown which caused Wall Street to worry most. Besides the shutdown’s estimated $180 million daily cost to the economy, the event had “soft” costs to the U.S., too. Consumer confidence has been harmed; businesses have slowed spending and investment; and housing may have been affected. Investors believe that the shutdown will have lasting effects on the economy will hinder growth through 2014. This, in turn, will give the Fed good reason to keep QE3 running longer which will help keep rates suppressed. For now, rates look great. They’re ultra-low and ready to be locked.

Purchasing Power Rises 5.5% Since Summer

When mortgage rates are low, homes are more affordable, and refinance opportunities arise. Just ask the hundreds of thousands of U.S. homeowners who bought a home this summer — some are already refinancing to save one-half percent or more.

Today’s buyers, though, may get the best benefits. As mortgage rates have dropped, purchasing power has climbed. Home buyers can buy 5.5% more home today as compared to 10 weeks ago.

Assuming a principal + interest payment of $2,250 and a 20 percent downpayment :

  • Mid-August 2013 : Maximum home purchase price of $550,000
  • Mid-October 2013 : Maximum home purchase price of $580,000

And the math work at all price points, with all loan types. Buyers using a VA mortgage with 100% financing have realized a 5.5% gain in purchasing power, as have Fannie Mae borrowers using the Conventional 97 program which requires just 3 percent down. It’s simple math. As mortgage rates drop, purchasing power climbs. Have you seen how much home you can afford today?

How Much Home Can You Afford?

As purchasing power increases, you can buy “more home” for the same monthly payment. With the extra 5.5 percent, maybe you can get an extra bathroom, or an extra bedroom, or a better location.

You’ll want to know how much home you can afford, and doing the math begins with getting a personalized mortgage rate quote. Rates are available online, at no cost and with no obligation whatsoever.

Lender Processing Services provided the media with a “first look” at the company’s mortgage performance statistics for the month of September.

The industry’s foreclosure inventory continued its downward trend, and while delinquencies were up slightly from the previous month, they were down when comparing the numbers year-over-year.

LPS counts a total of 3,266,000 mortgages nationwide that are 30 or more days past due but not yet in foreclosure. That tally represents 6.46 percent of all outstanding mortgages.

September’s delinquency rate is 4.23 percent higher than the rate reported for August, but remains 12.63 percent

below September 2012’s rate. Of the more than 3 million delinquent loans, LPS says 1,331,000 have missed at least three payments but haven’t started the foreclosure process.

Another 1,328,000 mortgages are currently winding their way through foreclosure pipelines, according to LPS’ data. That total puts the nation’s pre-sale foreclosure inventory at 2.63 percent in September, down 1.29 percent from the month prior and down 32.18 percent from last year.

All-in-all, there are 4,594,000 mortgages going unpaid in the United States. Comparatively speaking, the nation’s non-current total stood at 5,640,000 in September 2012.

LPS reports the states with the highest percentage of non-current loans (non-current combines foreclosures and delinquencies as a percentage of all active loans in the state) include: Florida, Mississippi, New Jersey, New York, and Maine.

North Dakota has the lowest percentage of non-current loans among states, followed by South Dakota, Alaska, Montana, and Wyoming.

LPS’ findings are derived from its loan-level database representing approximately 70 percent of the overall mortgage market. The company will provide a more in-depth review of this data in its monthly Mortgage Monitor report, which is scheduled for release in early November.

Spending on U.S. construction projects rose at a solid pace in August, helped by further gains in residential building. Overall construction activity climbed to the highest level in more than four years.

Construction spending increased 0.6 percent in August compared with July when spending increased a strong 1.4 percent, the Commerce Department reported Tuesday. The July gain was revised to show an increase that was more than double the initial estimate.

Total construction rose to a seasonally adjusted annual rate of $916.1 billion, the fastest pace since April 2009. The strength in construction should help the overall economy, which has been struggling this year with the adverse effects of government tax increases and spending reductions.

The August gain reflected a solid rise in housing activity, which was up 1.2 percent. The housing increase included a 1.6 percent rise in single-family construction and a 3.2 percent increase in the smaller apartment sector.

Non-residential construction rose a slight 0.1 percent in August after a much stronger 3.7 percent July advance. In August, there were solid gains in office building and motel and hotel construction but the category that includes shopping centers fell.

Spending on government projects rose 0.4 percent, reflecting a 0.8 percent increase in state and local government activity. That offset a 3.8 percent drop in spending on federal projects, which fell to their lowest level since June 2008.

The construction report had been scheduled to be released on Oct. 1 but was delayed because of the 16-day partial government shutdown.

Total construction is 7.1 percent higher than a year ago with residential activity up 18.7 percent, nonresidential up 4.3 percent and government construction activity down 1.8 percent from a year ago.

The housing rebound that began in 2012 has helped drive economic growth and create jobs in construction. But mortgage rates are nearly a full percentage point higher than the spring, an increase that began in May when the Federal Reserve first signaled that it might slow its $85 billion in monthly bond purchases.

However, at its Sept. 18 meeting, the central bank decided to keep its pace of bond purchases unchanged after lowering its outlook for economic growth. Mortgage rates have retreated a bit since that announcement. Economists are hoping that the housing recovery will keep moving forward given that even with the summer increase in rates, mortgages still remain near historic lows.

Sales of new homes rose in August by 7.9 percent, rebounding after a 14.1 percent drop in July. August also marked the best month for sales of previously occupied homes in more than six years, an annual level of 5.5 million homes. And homebuilders remain more confident in the market than they have been in eight years.

The housing market has been one of the strongest performers this year in an otherwise sluggish economy.