Owners Upbeat About Their Home Values

DAILY REAL ESTATE NEWS | MONDAY, MARCH 02, 2015 

Home sales may be off to a sluggish start this year, but home owners are still upbeat when it comes to the value of their homes. They’re willing to spend to preserve that value too. 

Home-improving giants Lowe’s Co. and Home Depot Inc. reported “blowout fourth quarter profits,” which beat expectations with sales advancing more than 7 percent at both retailers, Bloomberg News reports. Purchases greater than $500 surged 13 percent at Lowe’s. What’s more, January is showing strong gains too, which could prove a boon heading into the spring selling season.

"Consumers are feeling better about their jobs, their wages, and certainly feeling better about the value of their home," Lowe’s Chief Executive Officer Robert Niblock told Bloomberg. "They are re-engaging in projects that they have put off."

With these big box home-improvement stores, home values are key to growth, company officials say. That’s because when home owners feel good about the value of their home, they tend to be more willing to spend on repairs and remodels.

And home prices have been on the rise: The median price of an existing single-family home in the past year rose in 86 percent of the 175 metro areas tracked, according to the National Association of REALTORS®.

Lowe’s, which surveys consumers every quarter, says that its most recent poll showed that 50 percent of the home owners surveyed reported that the value of their home is rising – marking a survey high (ever since Lowe’s began polling home owners in 2007).

"That’s certainly good for their willingness to spend on the home," Niblock says, adding that rising values of existing houses will be the single-biggest driver of Lowe’s business.

The remodeling industry also confirms the gains. The number of remodeling companies seeing increases in major projects and committed work for the next three months are at all-time highs, according to a fourth quarter survey conducted by the National Association of Home Builders.

Source: “Americans Are Still Housing Bulls, Just Ask Home Depot or Lowe’s,” Bloomberg News (Feb. 25, 2015)

Foreclosures on a Free Fall, 66% Below Peak

DAILY REAL ESTATE NEWS | WEDNESDAY, FEBRUARY 11, 2015

Foreclosures are making up a much smaller share of many markets’ housing inventories and slowly falling back in line with historical norms. Completed foreclosures totaled about 39,000 nationwide in December 2014, a 13.7 percent year-over-year decrease and a 66 percent plunge from the peak in September 2010, according to CoreLogic’s December National Foreclosure Report.

What’s more, the 12-month sum of completed foreclosures for 2014 — 563,294 — is at its lowest point since November 2007, according to the report. Completed foreclosures have fallen every month for the past 34 consecutive months. Historically, prior to the housing crisis, completed foreclosures averaged 21,000 per month nationwide.

"Completed foreclosures last year were less than half the 1.2 million peak in 2010, but remain twice the level of normal activity over 10 years ago," says Sam Khater, CoreLogic’s deputy chief economist.

Yet, "the steady decline in the number of completed foreclosures is a good sign of healing in the U.S. housing market," adds Anand Nallathambi, president and CEO of CoreLogic. "Nonetheless, there remain many pockets of the country with very high foreclosure inventories, underscoring the unevenness of the nation's housing recovery."

Completed foreclosures reflect the total number of homes actually lost to foreclosure. Since the financial crisis began in September 2008, about 5.5 million completed foreclosures have occurred across the country.

While foreclosures overall are falling, many markets continue to struggle with the clearing of foreclosures from their pipelines. About 552,000 homes nationwide, as of December 2014, are in some state of foreclosure, known as foreclosure inventory. That represents a 34 percent year-over-year decrease. Also, all states posted double-digit year-over-year decreases in foreclosure inventory, except for West Virginia (which saw a 9.5 percent decrease) and the District of Columbia (which posted a 21.7 percent increase).

In its latest existing-home sales report, the National Association of REALTORS® reported that many markets are seeing foreclosure and short sales fetch higher dollars at sale with discounts slowly shrinking. Foreclosures sold for an average discount of 15 percent below market value in December, down from 17 percent in November. Short sales were discounted, on average, by 12 percent below market value, compared to 13 percent in November.

5 States With the Highest Completed Foreclosures

Five states alone accounted for nearly half of all completed foreclosures nationally. The following five states posted the highest number of completed foreclosures for the 12 months ending December 2014, according to CoreLogic’s report:

Florida: 118,000
Michigan: 49,000
Texas: 35,000
California: 29,000
Ohio: 28,000
5 States With Highest Foreclosure Inventory

The following states saw the highest foreclosure inventory as a percentage of all mortgaged homes in December 2014:

New Jersey: 5.2%
New York: 4%
Florida: 3.7%
Hawaii: 2.7%
District of Columbia: 2.4%

Source: “CoreLogic Reports 39,000 Completed Foreclosures in December 2014,” CoreLogic (Feb. 10, 2015)

The "Equity Rich" Home Owner is Back

DAILY REAL ESTATE NEWS | MONDAY, JANUARY 26, 2015

About 20 percent of all properties with a mortgage – or 11.3 million -- are now considered “equity rich,” with home owners who have at least 50 percent positive equity in their properties. The number has been steadily climbing, up from 9.1 million a year ago, according to RealtyTrac’s U.S. Home Equity & Underwater Report for the fourth quarter of 2014.

“Median home prices bottomed out in March 2012 and since then have increased 35 percent, lifting 5.8 million home owners out of seriously underwater territory,” says Daren Blomquist, vice president at RealtyTrac. “While the remaining seriously underwater properties continue to be a millstone around the neck of some local markets, the growing number of equity rich home owners should help counteract the downward pull of negative equity in many markets, empowering those housing markets — and by extension their local economies — to walk on water in 2015.”

Equity rich properties rose nearly by 2.2 million in 2014 alone.

What’s more, equity has returned to many properties in distress too. The number of distressed properties – those in some stage of foreclosure – with positive equity is higher than the share of distressed properties that were seriously underwater in the fourth quarter, according to RealtyTrac’s report. At the end of the fourth quarter, 42 percent of distressed properties had positive equity compared to 31 percent a year ago.

“Over the last year and a half I have had more people come to me thinking they need a short sale only to be shocked by the current market value and the positive equity in their home,” Frank Duran, broker at RE/MAX Alliance in Westminster, Colo., told RealtyTrac. In the Denver metro area, for example, 81 percent of distressed home owners had positive equity at the end of 2014 – which is the highest percentage of any market tracked by RealtyTrac nationwide.

Additional major markets where the number of distressed properties that have positive equity of more than 60 percent include: Pittsburgh (81%); Oklahoma City (76%); Austin, Texas (73%); Nashville (70%); San Antonio (63%); San Francisco (62%); and Raleigh, N.C. (61%).

Meanwhile, the number nationwide of home owners who are seriously underwater – where the borrower’s mortgage amount is at least 25 percent higher than the property’s estimated market value – continues to fall. Seriously underwater properties comprised about 13 percent of all homes with a mortgage by the end of 2014, significantly down from a peak reached in the second quarter of 2012 when that percentage stood at 29 percent.

Source: RealtyTrac

2 Bank Giants Fined for Mortgage Kickbacks

DAILY REAL ESTATE NEWS | FRIDAY, JANUARY 23, 2015

Government regulators have ordered Wells Fargo and JPMorgan Chase to pay $35.7 million to settle charges for their part in an illegal mortgage marketing kickback scheme that involved a title company that sought consumer referrals from lenders in exchange for cash.

On Thursday, the Consumer Financial Protection Bureau and the Maryland Attorney General’s Office accused a former title company, Genuine Title, of offering the banks’ loan officers cash, marketing materials, and other consumer information in exchange for business referrals. Such actions violate the Real Estate Settlement Procedures Act – RESPA – which prohibits giving a “fee, kickback, or thing of value” in exchange for a referral of business related to a real estate settlement service.

Genuine Title, based in Maryland, closed in April 2014.

“Home owners were steered toward this title company, not because they were the best or most affordable, but because they were providing kickbacks to loan officers who referred consumers to them,” says Maryland Attorney General Brian Frosh. “This type of quid pro quo arrangement is illegal, and it’s unfair to other businesses that play by the rules.” 

Regulators have ordered Wells Fargo to pay $24 million, as well as $10.8 million to consumers. JPMorgan will pay $600,000 and another $300,000 in redress to consumers, according to the CFPB.

"These banks allowed their loan officers to focus on their own illegal financial gain rather than on treating consumers fairly,” CFPB Director Richard Cordray said in a statement. “Our action today to address these practices should serve as a warning for all those in the mortgage market.”

Wells Fargo says the bank has taken “strong corrective action” as a result, citing that it’s terminated any involved staff members and that it is improving the monitoring of its processes and team members. JPMorgan issued a statement that said “these former employees clearly violated our policies, procedures, and training.”

Source: “CFPB Takes Action Against Wells Fargo and JPMorgan Chase for Illegal Mortgage Kickbacks,” Consumer Financial Protection Bureau (Jan. 22, 2015) and “U.S. Fines Wells Fargo, JPMorgan Over ‘Illegal Mortgage Kickbacks,’” Reuters (Jan. 22, 2015)

Consumers WiIl Have Access to FICO Scores

DAILY REAL ESTATE NEWS | TUESDAY, JANUARY 13, 2015 

Bank of America and J.P. Morgan Chase, two of the largest lenders in the U.S., have agreed to start showing some of their borrowers their FICO scores for free. FICO scores are a key metric lenders use to decide who to lend to and what interest rate to charge.

President Barack Obama announced the move on Monday at the Federal Trade Commission, emphasizing the importance of making these "once-secretive scores" more transparent to millions of consumers. In February 2014, the Consumer Financial Protection Bureau called on large credit-card lenders to make credit scores more available to consumers. CFPB says it received complaints from consumers who couldn't access their credit score.

FICO scores are used in about 90 percent of consumer-lending decisions, according to financial services research firm CEB TowerGroup. Consumers can purchase some of their scores, but everyone has several FICO scores — and they can't necessarily see the one the lender is using.

By knowing their credit score, consumers can take steps to improve it over time, which may result in greater loan savings and making credit more available to them, financial experts note.

Bank of America says that it will begin providing its consumer credit-card users with their FICO score later this year. Ally Financial plans to offer car-loan customers their score in February and roll it out to all customers in the summer. Chase plans to offer FICO credit scores at no charge to the roughly 10 million users of its "Slate" credit card.

FICO, through its growing list of partnerships, told The Wall Street Journal that it expects nearly 60 million consumers in the U.S. to soon have access to their FICO scores.

Source: “Millions More to See Their FICO Scores,” The Wall Street Journal (Jan. 12, 2015)

A Guide to Finding Mortgage Savings

DAILY REAL ESTATE NEWS | TUESDAY, JANUARY 13, 2015 

Many borrowers are paying more than they need to for a mortgage because they didn't shop around for lenders enough, according to a new study released by the Consumer Financial Protection Bureau. In response, CFPB is releasing an interactive online toolkit called "Owning a Home," which aims to help consumers better understand the mortgage process, compare lenders, and find the best deal.

Three out of four borrowers apply only with one lender or broker when seeking a mortgage, according to the study, which was based on consumers who took out a mortgage in 2013. That means most aren't checking with multiple lenders to see which one can offer them the best deal.

"Consumers put great thought into the choice of a home, but the mortgage process continues to be intimidating," says CFPB Director Richard Cordray. "The 'Owning a Home' toolkit makes it easy to see how shopping for a mortgage can translate into big dollars saved in the long run. We want to enable consumers to be more savvy shoppers."

Consumers who inquire about mortgages with multiple lenders or brokers are finding greater savings. CFPB found that interest rates can vary by more than half a percent among lenders for a conventional mortgage going to a borrower with a good credit rating and a 20 percent down payment. That means a borrower seeking a 30-year fixed-rate loan of $200,000 may snag an interest rate of 4 percent instead of 4.5 percent -- a savings of about $60 per month. Over five years, the borrower could save $3,500 in mortgage payments. The lower interest rate also means the borrower would be able to pay an additional $1,400 to the mortgage principal in the first five years and build greater equity, CFPB notes.

The agency's online toolkit offers up a guide to loan options, terminology, costs, and a closing checklist to help borrowers through the mortgage process. It includes a Rate Checker tool, still in beta testing, that helps consumers understand the interest rates available to them based on the same underwriting variables that lenders use, including loan type, property value, loan amount, and credit score.

With the Rate Checker, borrowers can see the rates that lenders are offering as well as a graph of how many lenders are offering each rate. The tool also allows borrowers to compare different interest rates and how much they will cost over the life of a loan, as well as apply different down payments to see how they would impact the cost of the mortgage. The CFPB is also providing steps consumers can take to get a better interest rate.

"Knowing the rates lenders are offering to consumers in a similar situation -- buying a home of equal value, in a comparable area, with the same credit score -- enables a consumer to enter conversations with multiple lenders armed with greater information and prepared with better questions," CFPB said in a statement. "'Owning a Home' also demystifies mortgage jargon, so consumers can have conversations with lenders more confidently."

Source: Consumer Financial Protection Bureau

FHA Lowers Its Mortgage Costs

DAILY REAL ESTATE NEWS | THURSDAY, JANUARY 08, 2015 

The Federal Housing Administration is reducing its annual mortgage insurance premiums by 0.5 percentage points in a move "to expand responsible lending to creditworthy borrowers," the White House said in a statement Wednesday afternoon.

FHA also said it would take added steps over the next few months to "cut red tape and clarify lending standards" in reducing mortgage costs for hundreds of thousands of creditworthy borrowers, according to the White House.

The FHA's move comes after several calls from industry trade groups, associations, and members of Congress urging the agency to lower its insurance premiums, which were increasingly blamed for sidelining thousands of would-be buyers. FHA-backed loans allow buyers to put down as little as 3.5 percent of the purchase price, and they are a major financing resource for first-time buyers.

FHA's mortgage insurance premiums will be reduced from 1.35 percent to 0.85 percent. The reduction in premiums on mortgages could save an average borrower $1,000 a year on a $200,000 loan, says Mark Zandi, chief economist at Moody's Analytics.

"We are optimistic that more affordable FHA loans will have a positive impact on first-time buyers who have been entering the market at a lower-than-normal rate," National Association of REALTORS® President Chris Polychron said in a statement. "NAR is a strong supporter of the FHA and its vital role in the mortgage marketplace for home buyers. We will continue our work with the administration to help make the dream of home ownership a reality for millions more Americans."

In 2013, the FHA required a $1.7 billion bailout from the government after suffering losses from a high number of loan defaults in the aftermath of the financial crisis. Since 2008, FHA has increased its annual premiums for FHA borrowers five times. The National Association of REALTORS® has estimated that nearly 400,000 creditworthy borrowers were priced out of the housing market in 2013because of the higher costs in FHA insurance premiums. But in recent months, FHA has turned a profit, which has renewed calls from other groups to lower their insurance premiums to help open the credit box to more qualified borrowers.

"This action will make home ownership more affordable for over two million Americans in the next three years," says Julian Castro, secretary of the Department of Housing and Urban Development, which oversees FHA. "By bringing our premiums down, we're helping folks lift themselves up so they can open new doors of opportunity."

President Barack Obama is expected to announce more about FHA's new policy on Thursday in a speech in Phoenix. The housing policy is expected to go into effect by the end of the month.

Source: “White House Says FHA to Cut Mortgage Insurance Premiums,” Reuters (Jan. 7, 2015) and “Plan Trims Cost of Some Mortgages,” The Wall Street Journal (Jan. 7, 2015)