Homeownership Stats; CFPB Penalties; Rant on Millennials, Why They Aren't Buying
First off, let me apologize for having the incorrect site in yesterday's commentary regarding the funny history of the term "escrow" - this is the site for the short clip.
For many April will be on par with the great March numbers, and the pipelines are still decent - boding well for May! Tens of thousands of LOs and lenders helping borrowers achieve the American Dream! Very cool. Speaking of "exciting" times, what was Maryland up to leading up to the Civil War? (I know - a weak crossover.) How about, "trying not to take sides"? "On this date in 1861 its legislature voted 53-13 against secession, though they also voted not to reopen rail links with the North and they requested that Lincoln remove Union troops from Maryland. At this time the legislature seems to have wanted to maintain Maryland's neutrality in the conflict."
The upcoming spring home buying season is projected to be the best year for home sales since 2007 as the rental market is pushing consumers towards homeownership. Rent prices have increased by 3.6 percent in 2014 and almost 11 percent the past three years, while interest rates remain at historic lows and home prices are still affordable. According to a renter survey initiated by Freddie Mac in November of last year, of those renters who said they would consider buying, 39 percent thought purchasing a home is a better financial option than renting. To reach out to this market, Freddie Mac has customized marketing materials that you can send to potential buyers who are currently renting. For more information, click here.
I received this e-mail. "Hey Rob - it seems that every Realtor, lender, reporter, and politician are asking why Millennials aren't buying 1 million homes a month. After all, they outnumber Baby Boomers - there are 75 million of them! What kind of probing question is that? How about they can't afford it, they're only 25, they don't know where they're going to be working in a year, they've seen their parents or family friends lose a house, they don't have the down payment, they're pushing out marriage or having kids, or they'd rather spend cash having fun and traveling or save it instead of installing a new garbage disposal? Did we all run out right out of college and buy a house? Can you tell I am fed up with the press examining this generation of kids? Their parents spent thousands upon thousands of dollars giving most of them trophies and taking them to sporting events, and now we can watch analysts spend thousands and thousands of dollars for the next 50 years analyzing this generation and trying to predict their next move. Maybe they'd prefer to be left alone and not over-analyzed."
Yup. I tend to agree, although that was a bit of a rant. There are plenty of great people in their 20s and early 30s - they'll figure it out without everyone telling them what to do, when to do it, how to do it, and why they should do it. Sure what they do will move housing markets - it already has. But are their priorities much different than when Baby Boomers were 25 or 30 years old? Is the fact that people in their 20s are moving into apartments fascinating news? I don't think so.
Maybe Millennials are worried about losing their jobs. Radian Guaranty has recently announced that they will soon be offering job loss insurance. The new program dubbed, Radian MortgageAssure, will pay a borrower's mortgage if they involuntarily lose their job and can no longer pay their mortgage. The program will be automatically provided to certain borrowers at no extra cost and Radian will provide up to six monthly mortgage payments, with a maximum monthly benefit up to $1,500 or a total protection of $9,000 during the two-year coverage period. The program will be effective for mortgage insurance applications received on or after May 1st. "This program reduces the risk of job loss-related late or missed mortgage payments, while offering lenders further protection against default." Click the link for details regarding Radian MortgageAssure job loss insurance program.
As if to remind us that not everyone within our borders deserves to own their own home, in spite of what Bill Clinton pushed the industry to do, the homeownership rate fell to 63.7% in Q115, from 64% in the fourth quarter of 2015. Homeownership rates continued to fall during the first quarter of 2015 while vacancy rates were stable in the short term. The Census Bureau said that the homeownership rate was 63.7 percent during the quarter, 1.1 points below the rate one year earlier and 0.3 percentage point lower than in the fourth quarter of 2014. The homeownership rate in the U.S. peaked in the second and fourth quarters of 2004 when it hit 69.2 percent but has fallen steadily since then. The current rate is lower than at any time in the data provided by the Census Bureau, dating back to the first quarter of 1995.
Zillow analyzed renters across America and found that over the past decade, the majority of the growth in America's households has been driven by renters of single-family residences (SFRs). Many previous homeowners were driven to rent due to the Great Recession, while potential homebuyers have been unable to pursue homeownership dreams due to tight credit and low inventory. Zillow's research found that compared to SFR owners, SFR renters are more likely to be younger, less-affluent families. From 1995 to 2005, household growth was driven by owner-occupied units, whereas within the past decade, growth has been driven by rentals due to an increase of the amount of SFRs being rented. This has led to almost one-in-five SFRS becoming a rental unit. The foreclosure crisis can be attributed to this change, along with investors purchasing homes with the intent of renting them and many potential buyers were driven to rent due to low inventory and high homes prices.
Home Prices increased .93% month-over-month and 5.03% year over year, according to Case-Shiller. Overall, prices are about 10% below their 2006 peak but some hot markets like Denver and San Francisco have surpassed that peak already. Price inflation is being driven by a lack of supply, not wage growth, which means that prices will probably flat line once new home construction kicks into gear or until wages start increasing.
Deutsche Bank's London unit will plead guilty to wire fraud for manipulating the London Interbank Offered Rate as part of a deal with the US Justice Department, authorities say. Germany's largest bank will pay UK and US authorities $2.5 billion, the biggest penalty in a seven-year investigation of LIBOR manipulation. The bank must also terminate employees involved.
Green Tree is out $63 million. According to a statement on the CFPB's website, "The mortgage servicer failed to honor modifications for loans transferred from other servicers, demanded payments before providing loss mitigation options, delayed decisions on short sales, and harassed and threatened overdue borrowers." Further, Green Tree was accused of misleading consumers about their monthly payments, harassing them if they were as little as one day late and forcing them to making payments using a pricey "Speedpay" system. The firm will return $48 million to consumers and pay a $15 million civil penalty; it admitted no wrongdoing.
And then yesterday the CFPB made its first enforcement ruling against a bank that was accused of issuing illegal overdraft fees from its customers. Alabama-based Regions Bank allegedly failed to take the proper steps to ask its customers if they'd like to enroll in overdraft services before the bank charged them for fees for the service. The bank allowed this practice to continue for nearly a year, the CFPB said, which "amplified the harm." The bank also charged overdraft and non-sufficient funds fees of deposit advances, even though the bank said it wouldn't conduct this practice. The bank's failure to comply with regulations resulted in hundreds of thousands of consumers being impacted - and to an amount of $49 million in illegal charges.
As if that isn't enough, turning to the markets...Federal Reserve policymakers wrap up their meeting today to consider when to raise interest rates, but the strong dollar and inflation risks put them between a rock and a hard place. Let's face it: most believe that the economy is not doing well enough to jack up short term rates in June - maybe September. Other countries are seeing tough structural problems and disappointing growth, and thus monetary authorities in Europe, China, and Japan have cut interest rates and taken extraordinary measures-such as aggressive quantitative easing and charging interest on reserves banks hold at central banks-to push liquidity through banks and boost private spending.
So low rates and more liquidity abroad has attracted more investment to U.S. alternatives, boosting the dollar against the currencies of major trading partners by about 15 percent since last summer. This makes foreign goods and services less expensive in U.S. markets and American exports more expensive and harder to sell abroad. And the stronger dollar drags on the profitability of U.S. firms that both produce and sell abroad like McDonald's, United Technologies, Caterpillar, Kimberly-Clark, and on and on.
The Fed will dominate the news later today but yesterday we did have some announcements of note. Consumer Confidence slipped in April to "95.2" versus "101.3" last month. As noted several paragraphs up the Case-Shiller Home Price Index climbed modestly in February. You'd think that with mediocre news like that the bond markets would have been stable, or maybe improved. They didn't, and the wweaker-than-expected consumer confidence and solid demand for 5-year notes could not support rates and 30-year yields made a 6-week high. (There was an intraday spike when news outlets falsely reported that Iran had seized an American ship. This rumor proved to be unfounded.) The best anyone could come up with is "nervousness ahead of the Fed's announcement" and "a large amount of corporate debt being issued." The 5-year and 7-year Treasury prices were down between .25-.5, and that pretty much was what current coupon agency MBS prices did.
Today we've already learned that the MBA's application index for last week showed that apps fell 2% (refis dropped 4% and purchases were unchanged - refis are down to 55% of all apps). We've also had the first look at the 1st quarter's GDP number. Expected to fade, it did: +.2% - weakest showing in a year. Later we'll have March Pending Home Sales, a $29 billion 7-year T-note auction, and then the Fed statement at 2PM EDT. After the GDP number we're at 2.01% with agency MBS prices unchanged from Tuesday's close.
Jobs and Announcements
Southern California's Residential Mortgage Lender Majestic Home Loan is expanding its wholesale and correspondent presence and is looking for AEs and Area Sales Managers across the nation. "Approved in 24 states, MHL offers a full line of products, aggressive pricing, revolutionary proprietary system and more importantly, cycle time under 21 days. "If you are losing business due to turn times, or unable to work with your top accounts because your territory is saturated with AEs, give us a call. If you or your customers don't have direct access to underwriters and can't get anything done, or can't close the majority of your approved loans, give us a call. At MHL we know that each transaction creates the overall success of the Account Executives." If you're interested in learning more about working for a true customer oriented company, email Thomas Michel, EVP, National Sales Manager or call him directly at 909-912-7102. MHL is also looking for underwriters, funders, doc drawers. If interested send your resume to careers@mhlmtg. com."
And MBA member RatePlug is hiring! "RatePlug integrates mortgage data directly into local Multiple Listing Services, and currently supports over 600,000 agents who generate over 2 million MLS property reports monthly that co-brand their Loan Originator(s) of choice by displaying a dynamic mortgage tool." Awarded the 2014 10X Mortgage Technology of the year, RatePlug is looking to add a Southern California based Regional Sales Representative. Send confidential inquiries and resumes to Rate Plug's National Sales Director Brent King.