Eminent Domain News; Community Bank Update; Clear Capital's Home Price Drop
Don't forget to wear a little green today, and this was seen at a local bar: "Special Today Only! Buy one beer for the price of two, and receive a second beer absolutely free!" Some numbers are deceiving, others pretty straightforward. Mortgage banks are focused on mortgages, but bigger banks have other lending channels. For example, SNL Financial reports the top 5 depositories in auto loans as of Q4 2013, in billions, are Ally Financial ($52b in auto loans), Wells Fargo ($51b), JPMorgan Chase ($42b), Capital One ($32b) and Bank of America ($30b). This group alone represents about 58% of the $353 billion in aggregate auto loans at banks and thrifts at the end of 2013.
I'm not there yet, but CNN reports that 33% of people 65-69 years old are in the workforce vs. 22% in 1990. In the Venn diagram of life, young people just ain't buying homes like their predecessors. Formerly known as "Gen Y" (or "generation whine" to some), this age group lies somewhere in birth range from the early '80s to early '00s, placing some of them in the ready-to-stop-renting-time-to-start-buying category. This is the generation blamed most in recent times for not "behaving rationally," which really makes "housing experts" nervous. However, Housing Wire writer Kerri Ann Panchuk, sees the overall lackluster demand not in this age group, but those well into their 30's who haven't stepped up to the plate. She writes, "For years now, everyone has been blaming the Millennials for stalling the housing recovery because of their reluctance or inability to purchase a home, but it may be the cohort right before them - the generational cuspers, or those born from 1978 to 1982 - who started this trend. This age group now has the lowest homeownership rate in decades. They're best defined as not quite Gen-X, not really Millennials, but stuck somewhere in between. Back in 2012, this same group had a 47.9% homeownership rate, which is 6.5 percentage points lower than what those five years older had achieved at the same point." Is it safe to assume those most caught in a <insert option ARM, 100% financed> in '07 fell into this generational definition, and now have a different view of what "home ownership" means? Does this generation identify more with the "occupy Wall St" movement, than it does with The Cosby family? I don't know, but this conversation is nothing new. Almost a hundred years ago they asked the question: 'How 'ya gonna keep 'em down on the farm, after they've seen Paree?'
Eminent, imminent, what's the diff? Both seem to be still alive when it comes to domain, and from Washington State, Aaron C. contributes, "I'm not an English major, but they oddly refer to it as 'Imminent Domain' which made me laugh."
Uh oh - are we running out of steam? Clear Capital released its February 2014 home price trends a couple weeks ago, and apparently it is more current than both CoreLogic and Case-Shiller numbers. This month Clear Capital reported on the first drop in quarterly gains since 2010.
Community banks have long played an important role in the U.S. economy, providing loans and other financial services to households and small businesses within their local markets. These banks have many unique challenges in the lending industry. One of those challenges include how to offer "big bank services" and compete in local economies of scale while maintaining the advantages of being a true local bank. Many lose their way (see: Tarp Auctions 19-23), but more stay within themselves and continue to concentrate on profitable business channels, market share, and customer service. Even with concentrating on all the things community banks get right, volumes last year were down. Ken McCarthy and Marshall Schraibman write in SNL Financials eBulletin, that loan growth is still a tough find for community bankers. They write, "Last year was relatively slow in terms of loan growth for community banks around the country, and many small financial institutions seem to be guiding somewhat conservatively for 2014 as well...median fourth-quarter 2013 loan growth among commercial banks with less than $10 billion in assets, when compared with the previous quarter, came in at 1.48% nationwide. Compared with a year earlier, median growth nearly reached 4%." According to the article, generally weak demand resulted in slow growth in every region of the country during the fourth quarter of last year, with signs of no improvements heading into 2014. The Mid-Atlantic region (for banks under $10B in assets), along with New England, showed approximately 2% growth Q3-to-Q4, while the Southeast lagged far behind, showing .68% growth.
The National Reverse Mortgage Lender's Association has announced the agenda for its Northeast Regional Meeting, to be held March 18 - 19 in New York, N.Y. The meeting, dubbed "New HECM, New York," will focus on improvements to the Home Equity Conversion Mortgage, or HECM, and highlight its use as a key financial planning tool for retirees. In July 2013, the U.S. Department of Housing and Urban Development (HUD) was authorized by Congress to establish additional requirements to improve "the fiscal safety and soundness" of the HECM program. The changes resulting from that authorization are now underway and will be a major focus of the meeting.
The Illinois Mortgage Bankers Association is hosting a mortgage industry seminar on March 26th in Lyons, Illinois. A representative from the CFPB will be a guest speaker providing an update. Additional panels and sessions include the internal audit function and issues associated with the implementation of the latest regulations, including QM, the 3% limitation, and preparing for a CFPB audit. Advanced registration is required. Contact IMBAInfo@att.net to register for the seminar.
In order to comply with ATR and QM, Mountain West Financial is now requiring closing agents to prepare a separate addendum to the HUD-1 summarizing the fees included in lines 801 and 802. When listing third-party pass-through fees, closing agents must clearly list the fee type, who it was paid to, and what kind of entity it was paid to (broker/lender, third-party service provider, affiliate, lender, etc.). Seller credits reflected on section 200 must be itemized either in this section or on an addendum page, and in order for these to be excluded from the points and fees test, there must be a written agreement executed by the buyer and seller that specifies and itemizes the fees paid to the seller by name and dollar amount. MWF will also be conducting a Final HUD-1 review and points and fees test once the loan has closed, and if there are any fees that have changed from the original HUD-1 escrow will be contacted for any changes and/or corrections necessary.
In response to the California Homebuyer's Downpayment Assistance Program accepting manual underwriting on all loans with a non-CalFHA manually underwritten FHA first mortgage, MWF is requiring all applicable loan files to include a HUD 92900-A with page 3 signed by the underwriter. The HUD-92900-LT only requires an underwriter's signature on downgraded or manually underwritten loans.
MWF has updated its DU Refi Plus guidelines to allow LTVs up to 125% on primary residences provided that the FICO is 660 or above and the DTI is 50% or below, regardless of AUS approval. These requirements only apply to loans with LTVs over 105%.
Third Federal Savings and Loan has expanded the number of states in which it offers a first mortgage refinance product to include New York, Maryland, New Hampshire and the entire state of Kentucky. Additionally, it is expanding its home equity line of credit offering to include the above states, as well as California, New Jersey and Pennsylvania. Third Federal announced it now offers first mortgage loans in 17 states; and home equity lines of credit in nine states.
Parkside Lending is has added low-, mid-, and high-rise attached condos to the list of property types eligible for Jumbo loans (Jumbo I and III). Condo projects must meet FNMA eligibility requirements and be warrantable through CPM Expedited Review types R or S, as limited reviews will not be permitted.
Titan has changed its 5/1 ARM cap structure from 2/2/6 from 5/2/5, effective immediately; however, a 2/2/5 cap structure may still be accommodated with a pricing adjustment.
Lending Tree's new Reverse Mortgage product has enjoyed increased popularity over the last couple of months, recording an uptick of 50% in daily volume. For those interested, the program is available for primary residences with loan balances under $375,000, home loan amounts less than $625,000, and LTVs of 0-50% for borrowers over the age of 62.
Yes, interest rates in the United States are down since the start of the year - but if our economy is doing better, shouldn't rates have moved higher? The heightened perception of uncertainty obscures some recent positive metrics. And the uncertainty comes from Europe and Russia. But in this country we'll have plenty to digest for scheduled news. Today we'll have Empire Manufacturing, and Industrial Production & Capacity Utilization at 3:15 AM HST (Hawaii), and the NAHB Housing Market Index. Tomorrow the Consumer Price Index (CPI) hits the markets at 2:30AM HST, along with Housing Starts and Building Permits. On Wednesday, March 19th, the FOMC meeting announcement hits the tape - look for no change to overnight rates, but another drop of $10 billion in tapering. Thursday we'll dine on Existing Home Sales, Initial Jobless Claims, and Leading Economic Indicators.
Even with all of that, we're most likely looking at another week of geopolitically-driven market movement, as the headlines from Ukraine may dominate. On top of that - where is that jet? There is some thinking that if terrorists took it, they now are in possession of a jet which can be outfitted to do a lot of damage somewhere in the world - talk about a "flight to quality" if something terrible happens.
The biggest event may be the vote in Ukraine's Crimean region on Sunday. As expected, Crimea voted to secede from Ukraine; investors will be concerned that it could lead to an escalation in the tensions between Russia and the US/Europe. That is what is happening, although as I mentioned it was expected, and the U.S. 10-yr T-note, which closed Friday at 2.64%, is now at 2.68% and agency MBS prices are worse between .125-.250.