Adding Value by Dennis O'Hagan

Millennials Grab Greatest Market Share of Home Purchases...

For all the discussion in the industry surrounding Millennials and their apparent lack of presence in today’s housing market, a new study from the National Association of Realtors (NAR) found they now account for the greatest market share of recent home purchases.

According to the association’s Home Buyer and Seller Generational Trends study for 2014, Millennials—aka “Generation Y” or “Generation Next”—comprised 31 percent of recent purchases, leading all other age groups. Following that were Generation X (defined as those born between 1965 and 1979), which made up 30 percent.

NAR chief economist Lawrence Yun said the increase isn’t that surprising, given that many in the younger generation are now in the peak period in which people buy their first home.

“Given that Millennials are the largest generation in history after the baby boomers, it means there is a potential for strong underlying demand,” Yun said. “Moreover, their aspiration and the long-term investment aspect to owning a home remain solid among young people.”

Indeed, about 87 percent of recent buyers age 33 and younger said they consider their home purchase a “good financial investment” compared to 80 percent of the total survey population.

Millennials were also among the age groups most likely to a simple desire to own a home of their own as their motive for purchasing—as opposed to senior generations, who relocated due to retirement or to be closer to friends and family.

Still, despite their evident interest, “the challenges of tight credit, limited inventory, eroding affordability and high debt loads have limited the capacity of young people to own,” Yun said.

Out of recent Millennial homebuyers, 20 percent said they had to delay their purchase because of difficulties saving for a down payment, with 56 percent of that group pointing to student loan debt as the greatest hurdle.

In purchasing characteristics: The median age of recent Millennial buyers was 29, according to NAR, while their median income was $73,600. The typical choice of homes among the group was a 1,800-square foot house costing $180,000.

Eighty-seven percent purchased an existing home, and they plan to stay in their homes for a median 10 years.

When it comes to shopping, all age groups typically began by looking online for for-sale properties and then contacting a real estate agent, though NAR found Millennials are more likely to also use the Internet to find information about the buying process. When it comes time to actually buy, though, it seems there’s no replacement for a human—according to the study, younger buyers relied more heavily than older groups on real estate agents to help them navigate the process.

114 More Jobs Cut by Bank of America...

Bank of America filed a Worker Adjustment and Retraining Notification (WARN) with the Texas Workforce Commission (TWC), alerting the TWC of impending layoffs in three of the bank's North Texas offices.

The notice was sent on March 3, detailing layoffs of 114 workers from two offices in Plano, Texas and one in Richardson, Texas.

The layoff date is April 13, for the Plano, Texas offices, and April 23, for the Richardson office.

Previously in February, Bank of America released 280 workers from their mortgage operations area in St. Charles, Missouri, as well as 450 workers from the bank's West Coast offices in light of declining business in new loan production.

At the time of the February layoffs, a company spokesperson said, "The number of delinquent mortgage loans we service has decreased to less than one-third of the peak levels. As we continue to resolve the needs of customers with delinquent loans, we are reducing the size of the operations that support these specialized programs."

Bank of America is not the only bank to layoff workers in the wake of declining home mortgage services. Wells Fargo released 700 workers across the country in late February, continuing previous layoffs from August, September, and October.

More GREAT Housing news...

January House Sales Shine Bright

RISMEDIA, Thursday, February 27, 2014— Home sales rose in January, clocking in at the fastest pace since July 2008, offering hope that despite arctic winter temperatures, the market is still on the right track.

Sales of new single-family houses were at a seasonally adjusted annual rate of 468,000, according to estimates released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 9.6 percent (±17.9 percent) above the revised December rate of 427,000 and is 2.2 percent (±20.2 percent)* above the January 2013 estimate of 458,000.

The median sales price of new houses sold in January 2014 was $260,100; the average sales price was $322,800. The seasonally adjusted estimate of new houses for sale at the end of January was 184,000. This represents a supply of 4.7 months at the current sales rate.

For more information, visit http://www.census.gov/.

House Prices End the Year Higher...

RISMEDIA, Thursday, February 27, 2014— Data from Standard and Poor’s indicates that house prices rose in December 2013. According to the release, the seasonally adjusted S&P/Case-Shiller HPI – 20 City Composite rose by 0.8 percent in December 2013. This is the 23rd consecutive month-over-month increase for the Index. Over this time period, the Index has risen by 21.7 percent. For the entire year of 2013, the 20 City Composite Index grew by 13.4 percent.

The Federal Housing Finance Agency (FHFA) also released data on house prices. According to its seasonally adjusted House Price Index – Purchase-Only, house prices rose by 0.8 percent in December 2013. The FHFA House Price Index – Purchase-Only has now increased for for 24 of the past 26 months, rising by 14.8 percent during this period. Over the year, the FHFA House Price Index – Purchase-Only has climbed by 7.7 percent. Following the 15.3 percent increase in the FHFA House Price Index – Purchase-Only that took place between April 2011 and December 2013, house prices are roughly the same as the level recorded in May 2005 and are now at 92 percent of the peak level reached in March 2007.

A previous post demonstrated that the recovery in house prices is a key contributor to the renewed expansion in housing equity. In a related fashion, rising house prices should also help expand the amount of homeowners with positive housing equity, shrinking the amount with negative housing equity. House prices in December 2011 were at 81 percent of their March 2007 peak. By September 2013, house prices reached 91 percent of this peak level. At the same time, the share of homes with negative equity reached 25.2 percent by the end of the fourth quarter of 2011. However, by the end of the third quarter of 2013, the share of homes with negative equity had fallen to 13.0 percent. Given that the FHFA House Price Index – Purchase Only ended the fourth quarter of 2013 at 92 percent of its peak, the share of homes with negative housing equity is expected to end the year even lower.

For more information, visit http://eyeonhousing.org

Increased Home Listings Signal Positive 2014...

Realtor.com released Thursday its National Housing Trend Report for January. Despite severe weather conditions, the report notes positive trends in the number of listings and median list prices of homes.

The number of listings rose to 3.1 percent from January, 2013, and the median list price of homes is up 8.3 percent year-over-year to $195,000.

"In January 2013, just 8 markets registered increases in inventory. This January, 83 markets (58 percent) of the 143 markets tracked by realtor.com showed increases in inventory, year-over-year," the report said.

The median age of inventory is unchanged at 115 days, indicating a potential shift to a more stable market in 2014.

"January's start compared to year-ago levels is an encouraging sign of sellers' interest, particularly given the adverse conditions brought on by the polar vortex," said Errol Samuelson, president of realtor.com.

"We saw the tight-supply market of last fall carry all the way into November—later than is typically expected—and this early rise in inventory is a welcome trend. The sustained median list price growth supports the gains we saw last year, and sellers are responding with confidence in that consistency," Samuelson said.

The National Association of Realtors (NAR) projects home prices to rise by 5 to 6 percent, in 2014. Job growth and pent-up demand are cited as motivating factors of the positive outlook from NAR.

Delinquency Rates Drop to Lowest Since 2008...

The Mortgage Bankers Association (MBA) released its National Delinquency Survey Thursday, reporting the seasonally adjusted rate for delinquent mortgages is 6.39 percent, the lowest level since 2008.

The figure represents mortgage loans for 1 to 4 unit residential properties, and takes into account all loans outstanding at the end of the fourth quarter of 2013. Any loans that are at least 1 payment past due are counted in the delinquency rate, but not loans that are in the process of foreclosure.

The rate for loans in the foreclosure process was reported as 2.86 percent, down 22 basis points from the third quarter. The figure was 88 basis points lower than last year.

"We continue to see substantial improvement in both delinquency and foreclosure rates, with most measures now back to pre-crisis levels," said Michael Fratantoni, MBA's Chief Economist and SVP of Research and Industry Technology.  "The delinquency rate, at 6.39 percent, is more than 3 percentage points lower than its peak of over 10 percent in 2010 and is edging closer to the historical average of around 5 percent."

Fratantoni continued, "The percentage of loans in foreclosure has fallen for the seventh consecutive quarter, decreasing to 2.86 percent, the lowest level in 6 years. The percentage of new foreclosures started, at 0.54 percent, is the lowest in 8 years and is back within its typical historical range."

The .54 percent rate of non-seasonally adjusted foreclosure starts is the lowest level since 2006.

The percentage of loans that are 90 days or more past due or in the foreclosure process was 5.41 percent, representing a 24 basis point decrease from last quarter, and a decline of 137 basis points from Q4 2012.

The report notes that most of the seriously delinquent loans are remnants from the housing crisis.

"Loan cohorts from 2009 and earlier continue to make up more than 90 percent of seriously delinquent loans," Fratantoni said. "Loans originated in 2007 and earlier accounted for 75 percent of the seriously delinquent loans, while loans originated in 2008 and 2009 accounted for another 16 percent. This is important to note because current home prices, while still rising, are about 9 percent below the peak in 2007."

Statewide, 49 states and the District of Columbia recorded a decrease in foreclosure rates. Florida leads the nation with a foreclosure rate of 8.56 percent. New Jersey and New York had the next 2 highest rates, but both states recorded a decline in foreclosure rates from the previous quarter.

Just What Our Economy Needs. More Layoffs... REALLY???

Bank Of America Cuts More Jobs

Bank of America laid-off more workers, releasing 280 workers in the mortgage operations area in St. Charles, Missouri. The Charlotte, North Carolina-based business is closing a department that oversaw mortgage operations, leaving 90 workers in the St. Charles Office. The lay-offs continued from earlier in the week, when Bank of America reportedly planned to let go of 450 workers in their West Coast offices.

Bank of America, the second-largest U.S. lender, is cutting 450 mortgage jobs from its West Coast offices. The lending giant is reducing staff after new loan production fell short of internal forecasts.

In a report by Bloomberg, affected employees were told Wednesday that workers involved in processing home loans would be let go. California locations that will lose workers include an office in Concord; an office in Pasadena will be shutdown entirely.

Terminations are effective immediately, and employees will receive salaries for 2 months and be eligible for severance pay, said sources familiar with the proceedings.

"These notifications have been ongoing and reflect our previously announced efforts to reduce our size, resolve legacy issues and simplify our company," said Dan Frahm, a spokesman for Bank of America. The lender is still hiring in non-mortgage areas, and some employees will find jobs in other parts of the firm, he said.

This is the fourth time in a year that Bank of America has reduced personnel amid reduced demand for home loans. The firm cut 3,000 employees involved in making home loans in the last quarter of 2013. Other offices closed this year include Las Vegas, Nevada and St. Charles, Missouri.

Retail originations sank 49 percent to $11.6 billion in the fourth quarter, said CFO Bruce Thompson on January, 15.

Bank of America employed about 242,000 people as of December 31, 2013.

Need a good lender??? Give me a call...

Mortgage Credit Availability Ramps Up in January...

RISMEDIA, Wednesday, February 12, 2014— Mortgage credit availability increased in January according to the Mortgage Credit Availability Index (MCAI), a report from the Mortgage Bankers Association (MBA) which analyzes data from the AllRegs® Market Clarity® product.

"Overall, mortgage lenders and investors slightly expanded credit offerings in January on net, but this represented the combination of two divergent trends,” says Mike Fratantoni, Chief Economist at MBA.  “First, the market continues to adapt to the new QM regulation by eliminating products that do not fit inside of the QM box.  This tightening is being offset, both in the market for higher balance loans, where lenders continue to loosen terms for jumbo loans, and in the refi market, where more lenders are offering streamline refinance programs."

Fratantoni continued, “The Federal Reserve's Senior Loan Officer Survey showed that mortgage credit standards loosened somewhat among larger institutions, but tightened for smaller lenders.  The data underlying the MCAI is predominantly from larger, wholesale lenders and investors.”

The MCAI increased 1.85 percent from 110.9 in December to 113.0 in January.  A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of a loosening of credit.  The index was benchmarked to 100 in March 2012.  If it had been tracked in 2007, it would have been at a level of roughly 800, indicating the credit was much more available at that time.

For more information, visit http://www.mortgagebankers.org.

Interest Rate Declines Continue Into February...

This week brought more news of declines in mortgage interest rates, according to releases from Freddie Mac and Bankrate.com.

In its weekly published Primary Mortgage Market Survey, Freddie Mac put the average 30-year fixed mortgage rate at 4.23 percent (0.7 point) for the week ending February 6, down from 4.32 percent previously. A year ago, the 30-year fixed-rate mortgage (FRM) sat at 3.53 percent.

The 15-year FRM averaged 3.33 percent (0.7 point) this week, down from last week’s 3.40 percent.

Averages on adjustable-rate mortgages (ARMs) also fell, with the 5-year Treasury-indexed hybrid ARM dropping 4 basis points to 3.08 percent (0.5 point) and the 1-year ARM decreasing the same amount to 2.51 percent (0.5 point).

Frank Nothaft, VP and chief economist for Freddie Mac, once again pointed to weaker housing data as a factor in this week’s rate changes, noting declines in December pending home sales and a negative contribution to GDP from fixed residential investment.

“Also, the Institute for Supply Management reported a significant slowing in growth in the manufacturing industry in December than the market consensus forecast,” Nothaft added.

In its own weekly survey, Bankrate reported a drop of 7 basis points in the 30-year fixed average to 4.43 percent, with the 15-year fixed falling 6 points to 3.50 percent.

The 5/1 ARM also declined, decreasing 10 basis points to 3.27 percent.

“Worries about a slowdown in the U.S. and global economics and continued skittishness about the health of emerging markets is pushing investors into safe haven U.S. Treasury securities,” Bankrate said in a release. “This has brought the benchmark 10-year Treasury yield from 3 percent down into the 2.6 percent neighborhood, with mortgage rates hitting levels last seen just before Thanksgiving.”

Just The Facts...

Which party picks the title company?

01/29/2014 | Author: Editorial Staff

Who gets to pick the title company that will issue the owner policy of title insurance?

It depends. If the seller pays for both the owner policy and the lender policy of title insurance, then the seller can pick the title company without violating the Real Estate Settlement Procedures Act (RESPA). However, if the buyer pays for the owner policy, then the seller cannot condition the sale of the property on the buyer purchasing the owner policy from a particular title company. Rather, the buyer would get to pick the title company. 

In situations where the seller pays for the owner policy and the buyer pays for the lender policy, RESPA application is less clear. At least one court has held that, where the seller paid for the owner policy and the buyer paid for the lender policy, the seller did not violate RESPA by insisting on a particular title company for the owner policy. The court explained that the seller did not require as a condition of sale that the buyer use that same title company to issue the lender policy. However, the Consumer Financial Protection Bureau, the government agency that enforces RESPA, has yet to take an official position on the law’s application in this scenario. Therefore, if a seller wants to avoid a possible violation of RESPA, the seller should not insist on a particular title company for the transaction unless the seller is paying for both the owner policy and the lender policy of title insurance.

Read more legal questions and answers at the Legal FAQs page.