Archive for January, 2014

Mortgage rates declined as weaker housing data hit the housing market this past week.

The latest Freddie Mac Primary Mortgage Market Survey revealed the 30-year, fixed rate mortgage averaged 4.32% for the week ending Jan. 30, down from 4.39% but significantly up from 3.53% a year prior.

In addition, the 15-year, FRM hit 3.40%, falling from 3.44% a week ago, but up from 2.81% last year.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage came in at 3.12% this week, a drop from 3.15% last week, but an increase compared to 2.70% in 2013.

The 1-year Treasury-indexed ARM averaged 2.55%, a slight increase from 2.54%, but down compared to 2.59%.

“Mortgage rates eased somewhat as new home sales fell 7 percent in December to a seasonally adjusted pace of 414,000 units, below the consensus,” noted Frank Nothaft, vice president and chief economist with Freddie Mac.

“The S&P/Case-Shiller 20-city composite house price index declined 0.1 percent for the month of November, the first decrease since November 2012,” he added.

Meanwhile, the Federal Housing Finance Agency issued its adjustable rate mortgage index, which posted the ARM index rate on previously occupied homes at 4.25% from December 2013, a slight increase from 4.21% in November.

The FHFA interest rate survey found the average interest rate on conventional, 30-year, FRM of $417,000 or less hit 4.54% in December, up 6 basis points, while the average loan amount for all loans was $277,600 in December, up $12,700 from $264,900 in November.

Bankrate followed suite and recorded the fourth consecutive week of declines.

“Some uneven economic data, particularly disappointments in the December jobs report and durable good orders, along with a bout of stock market volatility, have brought long-term bond yields and mortgage rates lower,” Bankrate said.

The 30-year, FRM fell to 4.50% from 4.56% last week, as the 15-year, FRM dropped to 3.56% from 3.61% a week prior.

The 5/1 ARM also declined and hit 3.37%, down from 3.42% last week.


Consumer optimism about the economy increased in January for the second consecutive month as Americans shook off the effects of last fall’s partial federal government shutdown, the Conference Board said Tuesday.

The organization’s consumer confidence index increased to 80.7 this month from a downwardly revised 77.5 in December. Economists had expected a smaller increase, to 79.

The index inched above the level it hit in September before a partisan budget standoff in Washington caused the federal government to close for 16 days in October and caused confidence to plunge.

The index dropped to 72 in November before rebounding. It now is at its highest level since August.

“All in all, confidence appears to be back on track and rising expectations suggest the economy may pick up some momentum in the months ahead,” said Lynn Franco, the organization’s director of economic indicators.

Consumers’ view of current conditions improved, with 21.5% saying business conditions were good compared with 20.2% in December. Those who said jobs were plentiful rose to 12.7% from 11.9% last month.

Expectations for the next six months also brightened, with 12.1% anticipating conditions to worsen. That was down from 13.9% last month. And consumers were more upbeat about their income — 15.8% expect it to rise compared with 13.9% last month.

But expectations for the labor market were mixed.

Consumers expecting more jobs in the next six months dropped to 15.4% from 17.1%. At the same time, 18.3% of consumers said they anticipated fewer jobs, down from 19.4% in December.

“Americans are feeling more optimistic on the employment and personal income fronts in January,” said Chris G. Christopher Jr., director of consumer economics at IHS Global Insight.

“This is good news for retailers since many outlets had a rough ride in the last quarter of 2013,” he said.


A recent survey of current and potential homeowners shows the majority have a bright outlook on the nation’s housing market and economy for 2014—which may translate to a more active market.

LendingTree released recently the results of an online survey conducted near the end of the last year. The survey collected responses from 609 individuals who either currently own a home or are considering purchasing in the next year.

According to the findings, more than two-thirds—69 percent—of respondents have a positive outlook on housing this year, and 63 percent hold a similar view for the economy at large.

With hopes this high, 71 percent of respondents said they are considering selling their home in 2014.

“As home values continue to improve across the country, sellers who have been sidelined due to low property values will start to take action in the market,” said Doug Lebda, founder and CEO of LendingTree. “Although it’s unlikely that 70 percent of current homeowners will sell this year, it’s a positive sign for the housing market that more homeowners are considering the possibility of moving.”

According to the survey, 72 percent of respondents said home prices in their area increased throughout 2013, while 20 percent said values were down, and 8 percent said they were flat.

In areas where home values were said to have increased, prices rose an average of 10.2 percent; among those areas where respondents said values fell, the average decrease was believed to be 9.2 percent.

The most recent Case-Shiller home price data shows prices in the nation’s 20 biggest markets were up an average 13.6 percent year-over-year as of October.

While those kinds of gains may discourage potential homebuyers as affordability slips, they’ll be necessary to draw sellers in: Of the 71 percent of homeowners who are thinking about selling this year, 47 percent said they plan to sell if they see an increase in their home value. Only 24 percent said they would sell regardless.

The verdict was nearly unanimous at a recent hearing on Capitol Hill: The new federal “ability to repay” and “qualified mortgage” regulations that took effect Jan. 10 will make obtaining credit tougher, not easier, this year, and potentially force large numbers of creditworthy home buyers to defer or cancel their plans.

What nobody addressed at the hearing, though, was the elephant in the room: OK, we’ve got a problem. But what, if anything, can buyers who find it difficult to meet the new standards do about it?

The testimony came from mortgage, banking and credit union leaders — even the head of a nonprofit Habitat for Humanity chapter. Though they didn’t dispute the good intentions of Congress or federal regulators in adopting the sweeping changes — banning or severely restricting most of the worst practices and loan features that facilitated the mortgage debacle of the last decade — they said the new rules amount to overkill.

By forcing creditors to offer mortgages within a tightly confined box of complex underwriting requirements and imposing crushing financial penalties for infractions, the new regulations are making lenders hyper-cautious about approving anybody, especially applicants who appear marginal or don’t quite fit the standard profile.

Bill Emerson, chief executive of Quicken Loans, one of the country’s highest-volume lenders, said the new rules could “impair credit access for many of the very consumers they are designed to protect.” These people are all over the country — young first-time buyers with student debt, middle-income minority buyers, self-employed individuals and those whose incomes are not received at regular intervals, plus just about anybody with household debt that exceeds 43% of income.

But are there ways for folks like these to improve their chances to get a mortgage this year, rather than waiting the estimated 12 to 24 months it may take for regulators to assess the effect of their rules and loosen up? Yes. Here are a few practical strategies.

•Debt ratios. Though the baseline standard for a new “qualified mortgage” is that a borrower’s total debt-to-income ratio should not be greater than 43%, lenders say there is wiggle room if you search for it. For example, conventional loans being sold to giant investors Fannie Mae and Freddie Mac may exceed 43% by a little, provided that your overall application makes it through the companies’ electronic underwriting systems, which take multiple factors into consideration beyond household debt burdens.

Dennis C. Smith, co-owner of Stratis Financial in Huntington Beach, says “we’ve had some people with 44% to 45%” debt ratios get through the hoops. Smith uses another technique when appropriate: getting a qualified co-borrower, typically a close relative, to join with the buyer and sending the application to Freddie Mac, which he says has a more generous rule on non-occupant co-borrowers than Fannie Mae. According to Smith, this allows a sharing or “blending” of household finances and can produce a lower overall debt-to-income ratio if the non-occupant co-borrower has a strong financial profile.

Another option: The Federal Housing Administration offers additional flexibility on debt-to-income ratios in its version of a qualified mortgage. Although the FHA has raised its insurance premiums recently, it is still an important potential resource if your debt levels are high and you have only modest down-payment cash. The FHA’s minimum down is still just 3.5%; Freddie and Fannie require at least 5%.

John Councilman, president of AMC Mortgage Corp. in Fort Myers, Fla., says the FHA’s current maximum acceptable debt-to-income ratio through its underwriting system appears to be around 50%. Applicants who have veterans status should check out VA loans for similar flexibility, and buyers in rural areas should look to the U.S. Department of Agriculture’s loan program.

•Down-payment assistance. Toughened federal rules are shedding new light on some alternatives that get relatively little public attention — hundreds of bond-funded, low-cost mortgage assistance programs run by state and local housing finance agencies. According to an online service that tracks them and helps connect buyers with houses and funding,, there are nearly 1,600 such programs across the country. The site estimates that 70% of for-sale listings in any given market are eligible for at least one of these programs.

Bottom line: You may have options. Check them out with the help of an experienced loan officer who works with a variety of funding sources. Ask about that upfront.


An estimated 44,000 homeowners received permanent loan modifications from mortgage servicers during the month of November under both proprietary servicer programs and the governments Home Affordable Modification Program (HAMP), HOPE NOW reports. While that total represents a 12 percent decrease from the 50,000 loan mods completed in October, the most recent data show a steeper 20 percent decline in foreclosure sales and a 17 percent decline in foreclosure starts between October and November.

The 44,000 loan mods granted in November brings the total number to approximately 6.8 million since HOPE NOW began tracking the data in 2007. Some 5.5 million homeowners have received proprietary loan modifications since 2007, and another 1,297,954 have received HAMP modifications.

As we approach the seven million mark for completed loan modifications, we remain convinced that the collaborative efforts of the industry, non-profits, government agencies and local community groups continues to make a positive impact on the nations housing market, commented Eric Selk, executive director of the private-sector alliance of mortgage servicers, investors, mortgage insurers, and nonprofit counselors.

Did home builders regain their pricing mojo in December?

Several measures indicate that builders again started hiking prices last fall as buyers regained a bit of confidence in the market. A monthly survey of builders conducted by housing analysis firm John Burns Real Estate Consulting Inc. found that 24% of respondents raised their prices in December, up from a recent low of 19% in November.

The Burns survey, which included 231 respondents, also found that the percentage of respondents who lowered their prices declined to 8% in December from a recent high of 12% in October.

“The pricing environment notably improved,” said Jody Kahn, a senior vice president at Burns who organizes the monthly survey, which covers an estimated 10% of the U.S. home-building market. “It’s still not back to where we were earlier in (2013) with builders raising prices aggressively.”

Indeed, in many months in early 2013, Burns’ survey found that more than half of respondents had increased their prices. Double-digit percentage increases from 2012 levels were common in markets such as California and Arizona.

For the first 11 months of 2013, average new-home prices exceeded $300,000, a level rarely achieved since 2007, according to the U.S. Census Bureau. Of late, the average price has risen from $310,800 in August to an all-time high of $340,300 in November. However, the Census data is notoriously volatile and often gets revised. Census is scheduled to release its December figures on Jan. 27.

The recent price increases come after summer months in which buyers balked at higher prices and sales suffered in consequence. In addition, a steep increase in long-term interest rates to 4.57% in September from 3.35% in May rattled buyers.

In recent months, the dynamics have changed, as interest rates have remained fairly steady around 4.4% to 4.5%, and federal lawmakers have made progress toward resolving previously contentious budget and debt-ceiling issues. Meanwhile, the country has added jobs at an encouraging, if not always steady pace.

Those signs are starting to bring momentum back to the new-home market, at least in terms of prices. Michael Gapen, senior U.S. economist at Barclays, expects home prices to increase by 7% to 8% this year on top of last year’s gains of 11% to 12%.

Gene Swang, a division president for closely held builder David Weekley Homes, said his division in booming Houston notched 80 home-sale contracts in the fourth quarter as compared to 71 in the same period a year earlier.

Buyers “know that builders tend to make price increases at the first of the year,” Mr. Swang said. “I think customers are concerned that if they didn’t get a home under contract (in December), they’d see higher prices in another month.”

Burns’ Ms. Kahn posited that the apparent rise in prices indicates that fewer builders are employing sales incentives to entice buyers. Incentives can include offering free upgrades such as premium flooring or providing financial assistance such as covering part of a buyer’s down payment.

The Burns survey found that, in contrast to rising prices, sales volumes declined in December by 5% from November levels. That is typical, however, as builders and buyers often focus on finalizing pending deals in December rather than generating new contracts. Ms. Kahn said the historical drop-off from November to December is 6%.

In addition to the seasonal decline, sales are down from last year. That’s not surprising, since sales were robust in late 2012 and early 2013 when prices were lower. Respondents to the Burns survey reported that last month’s sales were 5% less than those of December 2012.

Dennis Webb, vice president of operations at Fulton Homes, a closely held builder in Tempe, Ariz., said Fulton put 20 homes under contract last month as compared to 30 in December 2012. He sees conflicting signs at the onset of the busy spring selling season. “January is the start of our great selling season, but it just hasn’t materialized yet,” Mr. Webb said. “But traffic is up on both our website and in our sales office.”

The report from the National Association of Realtors showed that there were 5.1 million previously owned homes sold in the year, up 9.2% from 2012 and up nearly 20% from 2011.

December sales were up slightly from November, the first month-over-month rise in the reading since July.Mortgage rates have been rising steadily since hitting record lows in May, raising the
cost of purchases for home buyers.

The Realtors attributed the full-year gain to rising prices, lower unemployment, a drop in foreclosures and pent-up demand, as well as mortgage rates that are still low by historical standards, even with the steady increases most of the year.

The median price of a home sold in the year was $197,100, up 11.4% from the previous year. Rising prices have reduced the number of homeowners who owe more on their mortgage than their home is worth, helping to bring more buyers into the market. Tight supplies of homes for sale are keeping prices high, as the report showed less than a 5-month supply at the end of the year.

Part of the tight supply is due to the sharp drop in distressed home sales. Only 14% of the homes sold in December were in foreclosure or were short sales for less than the amount owed on the existing mortgage. A year earlier, nearly a quarter of sales were distressed home sales.