Tuesday, April 15, 2014

Mortgage Delinquencies Creep Up Again

Reports are surfacing again of more home owners falling behind on their mortgage payments, a reversal from the dropping numbers seen over the last several quarters. Delinquency rates are also on the rise for credit card and auto loan borrowers, according to the Experian-Oliver Wyman Market Intelligence Reports.

More mortgages were 30 to 59 days past due in the fourth quarter of 2013, rising to 2.13 percent from 2.05 percent at the end of 2012, according to the report.

A new survey by FICO reports that nearly half of bank-risk professionals expect delinquency rates on all consumer loans to reach their highest levels this year since late 2011.

"We've seen concerns about delinquencies creeping up for a few quarters," says Andrew Jennings, FICO's chief analytics officer. "These numbers mean more people are gaining access to credit, but we need to keep a close eye on the risk levels of these new loans. If delinquencies reach an uncomfortable level, we may see lenders pull back again."

Source: “Missed Mortgage Payments Are Back on the Rise,” Credit.com (April 14, 2014)

Friday, April 11, 2014

Sunnier Days Ahead in Housing, Freddie Says

The housing market is stronger today than at any point since the Great Recession and has made progress in several key areas after hitting bottom in 2009, Freddie Mac reports in a blog post looking at the state of the housing market heading into spring.

Home sales are up 13 percent since their low point, Freddie Mac reports. Frank Notaft, Freddie Mac’s chief economist, predicts that home sales will rise about 3 percent in 2014.

Also, the agency reports that housing starts are up 50 percent since hitting bottom. Freddie Mac is predicting a nearly 20 percent increase in new-housing starts in 2014, “which will begin to help ease tight inventories in many markets.”

Housing prices have also been on the upswing, about 16 percent higher than their bottom in 2009, Freddie Mac reports. They expect home values to continue to rise this year, but at a more moderate 5 percent pace. Also, researchers say many markets are still posting housing values that are below their 2006 peaks.

Freddie Mac is forecasting mortgage rates to remain near their historic lows this year, but rates are expected to rise about a half-percentage point during the year to around a 5 percent average by the end of the year.

Source: “After Winter Chill, Time to Spring Forward,” Freddie Mac (April 10, 2014)

Tuesday, March 25, 2014

More Banks Lower FICO Score Requirements

More banks are lowering minimum FICO score requirements in an attempt to shore up lending for underserved borrowers.

Carrington Mortgage Services is the latest company to announce that it has lowered its minimum FICO score to 550. It also has expanded guidelines on several FHA, VA, and USDA loan programs to aid those with FICO scores below 640.

Wells Fargo, the nation’s largest mortgage lender, said in February that it was lowering its minimum FICO score requirements on FHA-backed mortgages from 640 to 600. The move, bank officials said, was aimed at “opening up our credit box more.”

One in three consumers have a FICO score below 650, according to Carrington. The lender is refocusing its business on targeting the underserved segment and eliminating conventional and jumbo loans. It is limiting its acceptance of wholesale submissions with FICO scores above 680 starting April 1, except for VA loans, HousingWire reports.

“Effectively meeting the needs of clients in the underserved market requires the ability to both originate quality loans and appropriately service them after the fact,” says Ray Brousseau, executive vice president of Carrington's mortgage lending division. “Both Carrington’s lending platform and specialty servicing business were created to serve this particular market segment. That uniquely positions us as the lender of choice for this population of borrowers and the mortgage brokers and real estate agents who work with them. Our message is clear: You can count on Carrington to serve the underserved and get the tough loans done right.”

Source: “Carrington Ups Ante on Wells Fargo by Lowering FICO Standard,” HousingWire (March 24, 2014)

Wednesday, March 19, 2014

Retirees Reaching For Reverse Mortgages Again

Baby boomers are fueling a resurgence in reverse mortgages as boomers are in search for extra retirement income, and small lenders are stepping up as they view reverse mortgages as a way of growing their business, Reuters reports.

In 2013, $15.3 billion of reverse loans were issued, a 20 percent increase from the year prior, according to trade publication Inside Mortgage Finance. Still, that’s only about half the number seen during a record year in 2009, in which $30.21 billion of reverse mortgages were issued.

A reverse mortgage allows home owners to borrow against their home. They don’t have to make payments on the loan until they move or die.

Many lenders remain leery of reverse mortgages. In 2011, Wells Fargo & Co. and Bank of America backed out of the reverse mortgage business, citing reasons like unpredictable home values and the high level of delinquencies at the time.

As such, smaller lenders are stepping in, seeing reverse mortgages as an opportunity to grow their business.

"The market is huge. It's underpenetrated," Denmar Dixon, chief investment officer at independent mortgage company Walter Investment Management Co., said at a recent conference. Lenders often charge high fees for issuing these loans since they do carry more risk.

More lenders may view it as a growth opportunity too, particularly as traditional mortgage lending is expected to decrease 37 percent in 2014 due to higher mortgage rates dampening refinance activity.
"There are lots of mortgage lenders who see declining volumes and may view [reverse mortgages] as an opportunity to increase revenues," says David Stevens, president of the Mortgage Bankers Association.

The U.S. Federal Housing Administration posted big losses from reverse mortgages in the past, but has made changes to its reverse mortgage program last year in trying to protect the agency from steep losses from reverse mortgages again. In April 2013, the FHA limited the amount a home owner can borrow as a lump sum to 60 percent in the first year, up to a maximum of $625,500, Reuters reports. Previously, the limit was 100 percent. The FHA also now requires lenders to ensure borrowers can pay for taxes, insurance, and upkeep on their home when issuing these loans.

Source: “U.S. Retirees Return to Reverse Mortgages, Big Banks Stay Away,” Reuters (March 17, 2014)

Friday, March 7, 2014

Credit Unions Offer Up Unique Home Loan Products

Credit unions are offering borrowers some creative home loan products compared to the more standard options at big banks, The New York Times reports. These member-owned nonprofit institutions don’t usually tolerate high-risk with their products, but they’re seeking unique products that may better cater to borrowers’ needs.

For example, Pentagon Federal Credit Union in Alexandria, Va., is offering its 1.2 million members a new 15/15 adjustable rate mortgage. It boasts a lower interest rate than 30-year fixed-rate loan, and the rate won’t change for the first 15 years. After that, it will adjust once, thereby setting the new rate for the final 15 years of the loan.

“This is an excellent opportunity for anybody who doesn’t think they’re going to be in the same house for 15 years,” says Craig Olson, Pentagon’s senior vice president of mortgage operations.

Another credit union, Redwood Credit Union based in the Bay Area of Calif., is offering a 5/5 ARM that adjusts only once after the five years. The rate remains fixed for another five years then. The rates also tend to be better than the 10/1, says Cynthia Negri, the chief lending officer.

One of the nation’s largest credit unions, Navy Federal, is offering its more than 4.5 million members interest-only loans, which include a set term where the borrower only pays interest on the principal balance. Navy also is offering the Homebuyer’s Choice Program, which is a program that offers 100 percent purchase financing.

“We have a lot of young, first-time buyers, and this is great for someone who’s not eligible for a Veterans Administration loan,” says Katie Miller, the vice president of mortgage lending.

Source: “Credit Unions Offer Creative Home Loans,” The New York Times (Feb. 27, 2014)

Tuesday, February 25, 2014

Boomerang Buyers Making Moves to Return to Home Ownership

Daily Real Estate News | Tuesday, February 25, 2014

Now that the worst of the foreclosure crisis is in the rearview mirror, former home owners who lost their homes to a short sale or foreclosure are re-entering the housing market. They've spent the last few years rebuilding their credit — and they're ready to buy again.

"We're about three years past the peak of the foreclosures, and that's about the time when most people would qualify for another loan," says Daren Blomquist, spokesman for RealtyTrac. "The market really needs boomerang buyers to maintain the current recovery."

Some boomerang buyers heading back to the housing market may find they have to make down payments of at least 20 percent to qualify for a loan, but others are finding opportunities to put down as little as 3.5 percent or 5 percent.

The wait times for qualifying for a loan can vary depending on the former home owners' circumstances. Typically, the wait times following a short sale or foreclosure are as follows:

• Seven-year wait for home owners with a previous foreclosure before they can qualify for a new mortgage through mortgage giants Fannie Mae and Freddie Mac. If the foreclosure was included in a bankruptcy, the borrower has to wait only four years.

• Two-year wait for home owners who underwent a short sale before they're eligible for another Freddie Mac and Fannie Mae loan.

• Three-year wait for home owners seeking a Federal Housing Administration loan after a foreclosure or short sale. Some home owners who underwent a foreclosure because of at least a 20 percent cut in their pay may be able to qualify for a new mortgage after just a year through FHA's Back to Work program.

Source: "'Boomerang' Buyers Get Another Chance at Homeownership," Sun Sentinel (Feb. 24, 2014)

Thursday, February 13, 2014

New Home Owners Targeted In Deed Scam

Scammers are approaching new home owners and trying to trick them into paying $83 for unnecessary property records — including deeds that are available for a few bucks at county government offices or are already supplied at the end of a real estate transaction, the Milwaukee Sentinel Journal reports.

Fake companies reportedly are soliciting customers with a formal-looking letter that resembles a government bill. The companies are using multiple names for their business, such as Record Transfer Services, Property Transfer Services, Conveyance Transfer Services, Record Retrieval Department, and National Deed Service. They often use a similar phone number: 888-874-4669

In a recent case in Wisconsin, new home owners were asked for an $83 "document fee" for a deed and "real property records" by a certain deadline.

"Some people don't even call and ask the question," says Sherieda Wilder, a records clerk with the Milwaukee County register of deeds office. "They just automatically send [the money]. They're just excited they get their house."

Graig Goldman, a real estate broker with RE/MAX Lakeside Realty in Milwaukee, first alerted the Sentinel about the scam after two of his clients approached him separately within two months of purchasing a house to ask why they had received another bill.

At the bottom of the letter was a disclaimer: "The company Record Transfer Services is not affiliated with the State of WI or the County Recorder. ... This offer serves as a solicitation for services and [is] not to be interpreted as a bill due."

"For people who don't understand the real estate process or that a deed exists, they think they have to pay this," says Cori Lamont, director of regulatory affairs with the Wisconsin REALTORS® Association.

Source: “Deed Scam Tricks New Home Owners into Buying Useless Documents,” Milwaukee Journal Sentinel (Feb. 12, 2014)

Friday, February 7, 2014

Prior Short Sellers: Watch for Credit Errors

Those who have undergone a previous short sale need to pay careful attention to their credit report to make sure it was reported accurately by the lender, especially if they want to apply for a new mortgage anytime soon. The short sale may erroneously appear on their credit report as a foreclosure, a blemish that could haunt them much longer and prevent them from obtaining a new mortgage because it’s a red flag to a lender.

Typically, when lenders report on a short sale, they’ll say, “settled for less than full balance.” That’s a key indicator for a buyer's new mortgage lender to see because it shows that the previous property was a short sale, not a foreclosure, according to Credit.com. Lenders have the responsibility to report accurately to the credit bureaus.

Credit.com says these credit report codes will also hamper a borrowers’ ability to qualify for a mortgage any time soon: Chapter 5, 8, or 9 – which are often synonymous with a foreclosure.

A short sale borrower is eligible for conventional loan financing 24 months after a short sale at 80 percent loan-to-value or lower. If it’s a foreclosure, however, they may have to wait up to seven years to qualify for a conventional loan, or four years if they can prove it was a one-time economic hardship situation that caused the foreclosure.

Borrowers who have the short sale inaccurately noted in their credit report will need to contact the creditor and likely supply a final settlement statement showing the previous property was a short sale, and a copy of the grant deed transferring the property from them to the buyer.

Source: “Credit Report Error Sinks Short-Sellers Bids for a Mortgage,” Credit.com (Feb. 6, 2014)

Friday, January 24, 2014

Home Sales in 2013 Rise to Strongest Level in 7 Years

The housing market has been experiencing a “healthy recovery” over the past two years, with home sales last year rising to the highest level since 2006, according to the National Association of REALTORS®' latest housing report.

“Existing-home sales have risen nearly 20 percent since 2011, with job growth, record low mortgage interest rates, and a large pent-up demand driving the market,” says Lawrence Yun, NAR’s chief economist. “We lost some momentum toward the end of 2013 from disappointing job growth and limited inventory, but we ended with a year that was close to normal given the size of our population.”

Existing-home sales rose 1 percent in December 2013 compared to November and reached a seasonally adjusted annual rate of 4.87 million.

Existing-home sales for all of 2013 reached 5.02 million sales, 9.1 percent higher than 2012, and the largest rise since 2006 when sales were at 6.48 million at the close of the housing boom, NAR reports.

Home prices were also on the rise in 2013, up 11.5 percent over 2012, with a median existing-home price of $197,100 last year compared to $176,800 in 2012. It was the strongest gain in home prices in a year since 2005, when home prices rose 12.4 percent, NAR reports.

NAR President Steve Brown says that with job growth expected this year, home sales should hold despite rising home prices and higher mortgage rates.

“The only factors holding us back from a stronger recovery are the ongoing issues of restrictive mortgage credit and constrained inventory,” Brown says. “With strict new mortgage rules in place, we will be monitoring the lending environment to ensure that financially qualified buyers can access the credit they need to purchase a home.”

Housing Recovery Regional Snapshot

Here’s a look at how existing-home sales fared in December and for the year across the country:
  • Northeast: Existing-home sales fell 1.5 percent in December but remain 3.2 percent higher than December 2012. Median price: $239,300, up 3.6 percent from year ago levels
  • Midwest: Existing-home sales dropped 4.3 percent in December and are 0.9 percent below year ago levels. Median price: $150,700, 7 percent higher than December 2012.
  • South: Existing-home sales rose 3 percent in December and are 4.6 percent higher than December 2012. Median price: $173,200, up 8.9 percent from a year ago.
  • West: Existing-home sales increased 4.8 percent, but are 10.7 percent below a year ago. Median price: $285,000, up 16.0 percent from December 2012.
By REALTOR® Magazine Daily News

Thursday, January 16, 2014

For Some Borrowers, It's Now Easier to Get a Mortgage

Borrowers may be having an easier time applying for a mortgage compared to a year ago.

The average credit score for approved mortgages dropped to 727 in December, down from 748 one year prior, according to Ellie Mae, a mortgage technology firm. FICO credit scores run on a scale from 300 to 850.

Forty-six percent of mortgages that closed in December had credit scores above 750. One year earlier, 57 percent of mortgages posted credit scores that high. In December, about 31 percent of loans had credit scores below 700. One year earlier, that percentage stood at 21 percent, according to Ellie Mae.

Debt-to-income ratios are growing. The average total monthly debt for borrowers of closed loans in December stood at 39 percent of their incomes. That’s up from 35 percent in June.

“Rising interest rates and home prices could account for some of the increase in debt-to-income ratios,” MSN Real Estate reports.

More lenders may be getting comfortable easing standards since home prices have been rising over the past year. Also, lenders are facing a big drop in refinance business, which may prompt them to get more competitive in trying to nab more borrowers for home purchases, housing experts say.

However, the effect of new mortgage regulations, which took effect last week, have yet to be seen.

Tighter credit standards may be making for better borrowers, according to a new report. Loans originated last year are performing better than any year since tracking began in 1997, according to a report by Black Knight Financial Services.

Source: “Credit scores drop for new mortgages in 2013,” MSN Real Estate (Jan. 15, 2014)