Mortgage Rates Hover at Record Lows; Buying Is Cheaper than Renting

Mortgage rates are hovering at historic lows largely due to implementation of the third round of quantitative easing (QE3). This program, recently orchestrated by the Federal Open Market Committee (FOMC) involves purchasing additional agency mortgage-backed securities at a pace of $40 billion per month.

In an additional effort to keep borrowing costs down and spur economic growth, the FOMC announced it would continue Operation Twist through the end of the year. The plan entails selling $400 billion in short-term Treasurys in exchange for the same amount of longer-term Treasurys.

The FOMC noted that “these actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative,” according to a statement.

This is timely news particularly for a housing market that’s healthier than many realize. According to Trulia, on average, buying a home is now 45% cheaper than renting in the100 largest metro areas in the nation (providing the homeowner plans to stay in the home for the national average time of seven years). That’s a savings of $771 every month!

At the same time, housing prices are now posting solid gains. According to the most recent CoreLogic data, year-over-year home prices have increased 4.6% since August 2011. And according to its most recent Housing Markets Insights report, investment bank Morgan Stanley anticipates a 2012 housing price increase of 7% to 9%.

from Prospect Mortgage Industry Insider

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More Home Owners Lifted From Underwater

Daily Real Estate News |      Thursday, September 13, 2012

As values rise, more home owners are finding equity in their houses again, surfacing after being underwater on their mortgage for the past few years, according to the latest data from CoreLogic.

In the second quarter, 10.8 million, or 22.3 percent, of home owners owed more on their mortgage than their house is currently worth, which is down from 11.4 million — or 23.7 percent — in the first quarter, CoreLogic reported Wednesday.

Often, the fear among the industry with underwater home owners is that they will be much more likely to stop making their mortgage payments and walk away from their properties. However, the majority of underwater home owners — 84.9 percent — are up to date on their mortgage payments despite the decrease in the value of their homes, according to CoreLogic.

“The level of negative equity continues to improve with more than 1.3 million households regaining a positive equity position since the beginning of the year,” says Mark Fleming, chief economist for CoreLogic. “Surging home prices this spring and summer, lower levels of inventory, and declining REO-sale shares are all contributing to the nascent housing recovery and declining negative equity.”

The highest number of underwater home owners are in Nevada (59 percent), Florida (43 percent), and Arizona (40 percent).

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Real estate ‘misery’ and the presidential race

Despite the approach of “Super Tuesday” elections on March 6, it is unlikely that candidates in the Republican presidential primary race will focus much on housing until June, according to real estate search and marketing site Trulia.

That’s because, of the four states hardest hit by the housing crisis, three — Nevada, Florida and Arizona — have already had their primaries. The fourth, California, has its primary June 5.

“If candidates want to talk about what voters want most, they should focus on housing issues where it’s clearly a pain point for voters. This means that … we probably won’t hear much about housing from the presidential candidates again until the summer,” said Jed Kolko, Trulia’s chief economist, in a blog post.

In order to figure out which states are suffering the most from the housing downturn, Trulia developed a Housing Misery Index that adds together the percentage change in home prices from their peak through fourth-quarter 2011, from the Federal Housing Finance Agency (FHFA), and the percent of mortgages either severely delinquent (by 90 days or more) or in foreclosure as of fourth-quarter 2011, from CoreLogic.

Trulia Housing Misery Index: Top 10 ‘most miserable’ states

State Housing Misery Index
Nevada 73
Florida 62
Arizona 55
California 54
Michigan 37
Idaho 35
Rhode Island 34
Georgia 34
Washington 33
Maryland 32

Source: Trulia

Foreclosure hotspots Nevada, Florida, Arizona and California were rated more “miserable” by far than other states, according to the index. Among the top 10 hardest-hit states, three — Washington, Georgia and Idaho — will have their primaries within the next week.

By Inman News, Wednesday, February 29, 2012.

Inman News®



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Major changes likely to ‘qualified residential mortgage’ proposal

Do you hear us now?

No hardwired mortgage down payment requirements for well-qualified homebuyers. Not 20 percent. Not 10 percent. Not 5 percent.

That’s what an unprecedented alliance of dozens of civil rights, real estate, labor, mortgage and consumer advocacy groups — joined by substantial percentages of the membership of Congress — have been shouting at six federal agencies, in a steadily rising pitch, for the past two weeks.

Their objective: convince officials to change their minds about the controversial “QRM” (qualified residential mortgage) proposal that would mandate 20 percent down payments and strict debt-to-income rules.

The U.S. Federal Reserve today announced an extension of the comment period for the proposal, also known as the “credit risk retention requirements,” to Aug. 1, 2011. The original public comment deadlines was June 10, 2011.

Though the regulatory agencies are prohibited by law from discussing the proposal while it is still open to public comment, industry sources say the rule writers are getting the message and will ultimately back down in their final QRM plan.

If they don’t back down enough, however, say sources on Capitol Hill, Democrats and Republicans in the Senate and House are prepared to force them to do so with corrective legislation.

Last week, bipartisan groups of 160-plus members of the House of Representatives and 40 members of the Senate wrote to the six agencies — the FDIC, SEC, HUD, the Office of the Comptroller of the Currency, the Federal Housing Finance Agency and the Federal Reserve — urging them to focus on sound underwriting, safe loan products, and borrowers’ ability to repay, plus full documentation — not down payments.

The three authors of the QRM section of the Dodd-Frank law — Sens. Kay Hagen (D-N.C.), Johnny Isakson (R-Ga.) and Mary Landrieu (D-La.) — called the agencies’ pending proposal “extreme” and directly contradictory to congressional intent.

Rather than the broad set of common-sense standards needed to stabilize the mortgage and housing markets in the wake of the excesses of the housing bust, they wrote, “regulators crafted a narrow definition (of what constitutes a safe loan) that could unnecessarily slow the housing recovery, increase costs to otherwise qualified homebuyers, and dampen incentives for sound underwriting.”

The proposed QRM standard would push nearly a third of American borrowers out of the market, the senators estimated — especially first-time home purchasers, minorities and moderate-income families.

Real estate and mortgage data firm CoreLogic offered an even higher estimate: 39 percent of homebuyers in 2010 made a down payment of less than 20 percent. That would have made them ineligible for a loan that meets the proposed QRM standard. Or it would have forced them to pay as much as 3 percent higher interest rates for a “nonqualified” mortgage.

The QRM section of the Dodd-Frank law requires loan originators to retain at least a 5 percent interest in mortgage securitization pools to give them “skin in the game,” unless the underlying loans meet a national standard for low-risk mortgages.

Dodd-Frank instructed federal regulators to devise a standard using criteria such as loan structures (no balloons, no negative amortization, no pick-a-pay, and no interest-only loans), plus verification of the borrower’s ability to repay, full documentation, and credit enhancements (such as private mortgage insurance).

The law made no reference to down payments — an omission, said the three senators, that was intentional.

The QRM issue has spawned a rare birds-of-different-feathers spectacle on Capitol Hill. Interest groups that often are antagonistic, or pursue sharply different lobbying agendas, have come together to fight the six agencies.

It’s unusual to see the Service Employees International Union, the AFL-CIO, NAACP, National Council of La Raza, the National Association of Consumer Advocates, and the National Consumer Law Center march arm in arm in solidarity with bankers, homebuilders, mortgage lenders, real estate agents and brokers, title companies and mortgage insurers.

But the potentially severe impacts that QRM, if adopted in current form, would have on homeownership opportunities and the broader marketplace, including employment, has brought the groups together to fight the proposed standard, at least for now.

The political implications of such an alliance in a pre-election year cannot have gone unnoticed at the White House. Regulators “are screwing Obama’s core supporters,” said one lobbyist who asked not to be identified because he is not authorized to speak for his trade group. “They can’t just come back and say, ‘Alright, alright, we’ll compromise and go with a 10 percent down payment. That won’t cut it.”

Because of the heavy bipartisan congressional involvement and the demand by QRM’s Senate authors to follow their expressed intent in the legislation to the letter, any type of minimum down payment requirement in the final rule may no longer be acceptable to key members of the alliance.

One prominent trade group official said, “We’ve gone beyond that. If they come back with anything with a down payment in it, you’re going to see a move in Congress to step in again” and amend the law to specifically prohibit down payment criteria as part of the final standard.

By Ken Harney, Tuesday, June 7, 2011.

Inman News™

Ken Harney writes an award-winning, nationally syndicated column, “The Nation’s Housing,” and is the author of two books on real estate and mortgage finance.

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