Trump Puts a Halt to FHA Mortgage Cuts

Trump Puts a Halt to FHA Mortgage Cuts

Just hours after being sworn in, President Donald Trump moved to suspend a plan to reduce the Federal Housing Administration’s mortgage insurance premiums that was set to go into effect on Jan. 27. The plan had been announced just a few days ago by the outgoing Obama administration and Housing and Urban Development head Julian Castro.

The reduction in premiums by 25 basis points, or a quarter percentage point, “has been suspended indefinitely,” according to an FHA news release. “More analysis and research are deemed necessary to assess future adjustments,” according to FHA.

National Association of REALTORS® officials say they are disappointed by the decision. The association estimates that about 750,000 to 850,000 home buyers will face higher costs, and 30,000 to 40,000 new home buyers will be left on the sidelines in 2017 without the cut. FHA originally had estimated that borrowers could save an average of $500 per year with the reductions in place.

“We’re disappointed in the decision but will continue to make the case to reinstate the cut in the months ahead,” NAR President William E. Brown said.

Source: “Trump Already Suspends Obama-Era FHA Mortgage Insurance Cuts,” MarketWatch (Jan. 21, 2017) and “FHA Suspends Planned Mortgage Insurance Cut,” Scotsman Guide (Jan. 20, 2017)

Where Foreclosure Backlogs Remain a Problem

Where Foreclosure Backlogs Remain a Problem

Banks continue to clean out the pipeline of loans that were originated during the housing boom days that have since turned sour.

Most of the homes that are still being foreclosed on are from loans originated between 2004 and 2008, known as “legacy foreclosures,” according to ATTOM Data Solutions’ 2016 U.S. Foreclosure Market Report.

The following markets are seeing the biggest cases of backlogs with legacy foreclosures:

• District of Columbia: 76% (share of legacy foreclosures)
• Hawaii: 66%
• New Jersey: 64%
• Nevada: 63%
• Delaware: 61%
• Massachusetts: 61%

On a county level, the highest number of legacy foreclosures are occurring in:

• Nassau County (Long Island), N.Y.: 8,632 representing 74 percent of all loans actively in foreclosure
• Cook County (Chicago), Ill.: 7,357 representing 53 percent
• Kings County (Brooklyn), N.Y.: 6,207 representing 68 percent
• Miami-Dade County, Fla.: 5,262 representing 64 percent
• Los Angeles County, Calif.: 4,956 representing 64 percent

While foreclosures are elevated in some areas, nationwide they mostly are continuing to drop. ATTOM Data Solution’s report showed that overall foreclosure filings – which include default notices, scheduled auctions, and bank repossessions – dropped 14 percent in 2016 from 2015 to the lowest level since 2006. There were 933,045 foreclosure filings in 2016.

“The national foreclosure rate stayed within an historically normal range for the third consecutive year in 2016, even as banks continued to clear out legacy foreclosures from the last housing bubble, particularly in the final quarter of the year,” says Daren Blomquist, senior vice president at ATTOM Data Solutions. “Foreclosures completed in the fourth quarter had been in the foreclosure process 803 days on average, a substantial jump from the third quarter and indicating that banks pushed through significant numbers of legacy foreclosures during the quarter. Despite that push, we still show that more than half of all active foreclosures nationwide are on loans originated between 2004 and 2008, with a much higher share of legacy foreclosures in some markets.”

Source: RealtyTrac

Mortgage Rates Dip to Lowest in Month

Total mortgage applications – including for refinances and home purchases – were essentially flat last week, rising just 0.8 percent on a seasonally adjusted basis, despite mortgage rates at their lowest averages in a month. The Mortgage Bankers Association reported Wednesday that applications are now 14 percent lower than a year ago.

Refinance applications have been falling significantly over the last few weeks as interest rates have edged higher. However, refinance volume reversed course last week, increasing 7 percent for the week. The increase was largely driven by an announcement by HUD that FHA would lower its annual insurance premium by 25 basis points. MBA reported that the FHA share of total applications rose to 13.1 percent from 11.7 percent last week.

Still, “refi volume is down sharply from the end of last year, remaining 13 percent below the level from four weeks ago,” says Mike Fratantoni, MBA chief economist.

Home buyers also barely budged last week. Mortgage applications for home purchases dropped 5 percent last week and are down 1 percent from a year ago, MBA reports.

MBA reported that average 30-year fixed-rate mortgages averaged 4.27 percent last week, down from 4.32 percent the previous week.

Source: “FHA Premium Drop Ignites Mortgage Refinances, But Applications Overall Are Flat,” CNBC (Jan. 18, 2017)

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Hot New-Home Trends to Watch

Hot New-Home Trends to Watch

There were plenty of new ideas, features, and designs of interest to the real estate community at the 2017 International Builders’ Show and the Kitchen & Bath Industry Show, both held in Orlando, Fla. last week. We were there to gather the top trends and buzzwords you need to know about now.

Modernity in Moderation

It turns out designers, home builders, and consumers have different ideas of the meaning and salability of the term “modern,” and the industry is working to bridge that gap. Seth Hart of DTJ Design in Boulder, Colo. explained how “moderated modern,”—where asymmetrical windows and color and material combinations that provide high contrast—can be used on more traditional homes to provide an updated feel without breaking the bank or turning off buyers.

“It’s not about doing wild roof forms,” Hart told attendees. “It’s all about how you create a modern design in something that still has a broad market appeal and is done affordably.”

Eric Brown, a builder representative with Artisan Homes Realty, LLC in Phoenix uses the term “comfortable contemporary” to help identify the style. “It’s going to attract baby boomers,” he predicted, noting this style offers “something that reminds them of their old home, but it’s updated.”

Another twist on this trend comes in the form of the “modern farmhouse,” which was another popular buzzword at the show. Many of the winners of the National Association of Home Builders’ 2016 Best in American Living Awards featured farmhouse sinks, reclaimed wooden beams, and barn doors layered into modern designs. Even the farmhouse elements themselves are being updated, as is evident in cleaner, more minimalist designs made of contemporary materials.

The Secret Hideaway

Don’t we all want to turn a cluttered space into a fun design novelty? Another trending term at the show this year was “the messy kitchen,” which is a hidden space away from the gleaming center island where homeowners can prep food and stow Mr. Coffee far from guests.

Wayne Visbeen, president of Visbeen Architects, told attendees he also uses this technique to hide away the “home management space.”

“I put hidden rooms in offices a lot,” he said. “I think it’s a great place to hide the junk, and people think its sexy.” He notes that hidden space doesn’t have to be huge to work well, suggesting a four-by-eight foot space would be sufficient. Also, with all the easy-to-install sliding barn and pocket doors in the consumer market now, this is a project some homeowners can undertake themselves.

Fewer Bathroom Barriers

One trend that was heavily featured in Orlando last week was the idea of an open shower, or “wet room.” Some even contained both a shower and bath in one, which designers reported saves space in master baths where homeowners don’t want to skimp on a stall shower to fit in a pretty tub.

This is a good option to consider for anyone looking to add the element of zero-barrier entry to bathing, which is an important consideration for those with limited mobility. However, Mary Jo Peterson, a kitchen, bath, and universal design consultant in Brookfield, Conn., noted there are drawbacks.

“If I really want a hot, steamy shower, it’s hard to do in these open spaces,” she said. She also noted that it’s difficult to calculate ahead of time if the water will escape the intended area and make the whole bathroom into a “wet room.” She cautioned builders to avoid the temptation to put rain-style showers up too high, to minimize the spray’s radius.

Auto-Smart Homes

We’ve all heard the talk about how smart home devices are going to change our lives forever, but Dave Pedigo doesn’t think we’re quite there yet. Pedigo, vice president of emerging technologies at the Custom Electronic Design and Installation Association, told attendees that until we can move “away from using a mobile phone as remote control,” we won’t really have smart homes.

He said natural user interfaces, such as the voice commands consumers can use to control Amazon’s Alexa and other smart home devices, are only the first step toward creating a truly smart home that can anticipate residents’ needs ahead of time. For example, there are already sensors out there that “see” when a sleeper has gotten up at night and can automatically illuminate night lights to lead them safely to the bathroom.

“Ultimately, we are moving toward not having to deal with technology,” Pedigo said. “You shouldn’t have to tell the lights to turn off or tell the shades to go up.”

—Source REALTOR® Magazine

Millennials Are Missing Out on Home Equity

Millennials Are Missing Out on Home Equity

The delay of millennials into home ownership will likely affect their finances for years to come. Real estate wealth has proven to be a major contributor to the financial wealth of previous generations.

Indeed, “the most impactful contributor to consumer wealth since the great financial crisis has been growth in home equity,” says Brad Friedlander, managing partner at Angel Oak Capital Advisors. “Similarly, there has been a growing wealth gap between homeowners and renters, largely due to home equity.”

U.S. homeowners captured more than $12.7 trillion in home equity by the end of the second quarter of 2016, the highest since the end of 2006, according to the Federal Reserve.

Home values have been on the rise, but renters continue to miss out. Instead, renters are faced with rental payments that are about 20 percent more than what they were in September 2010.

Younger Americans are missing out on home ownership and they’re falling behind financially than older generations, economists note.

“The last few years have been an opportunity to make equity and grow wealth, but it’s not too late for millennials,” Friedlander says.

Underwriting standards for loans are easing somewhat, which could allow more to qualify for a mortgage. Lawrence Yun, chief economist of the National Association of REALTORS®, notes that FHA loans require only 3.5 percent down – or translated to about $8,750 on a $250,000 mortgage.

Younger home buyers who welcome the idea of a “starter home,” like previous generations did, may find more opportunities to enter the market than continue to wait until they can buy their dream home, Yun says.

“Maybe they need to lower their expectations of what that first home should be or settle for a smaller home in a different neighborhood,” Yun says.

Source: “Lack of Young Home buyers Fuels Generational Wealth Gap,” USA Today (Jan. 12, 2017)

21-Day Closing Window

21-Day Closing Window

In an era of bloated closing times, some lenders are looking to quicken the pace it takes to get a buyer to the settlement table. Some lenders are retooling operations and aiming to close a loan within 21 days.

For example, national retail lender CrossCountry Mortgage Inc. in Brecksville, Ohio, is committing its staff to aim to close a purchase loan from application to funding within 21 days.

“When you look at contracts, they are typically written for 30 days,” says Chief Operating Officer Jodi Hall. “Many of them have gone out to 45 and 60 day contracts because of the long turn times that have occurred within the industry. If you can deliver well ahead of a 30 day contract it’s very attractive to our REALTOR® partners and customers. That is the best practice.”

In 2016, closing times for purchase loans averaged 47 days, according to Ellie Mae, an information origination system provider.

CrossCountry tries to get its borrowers to commit to a timeline upfront.

“One of the first things that we coach our loan officers on, in terms of their engagement with the borrower, is to explain our loan process and turn times,” Hall says. “If the borrower commits, we can often close their loan in 21 days or less.”

In 2014, one wholesaler vowed to be “ready to close” qualifying loans within 15 business days of appraisal receipt. If they were unable to meet that goal, the lender would even apply a $500 closing cost credit to the loan at closing.

Today’s 21-day-close goal doesn’t include any such promises from lenders, however.

“We don’t guarantee the 21-day turn time because there are so many things that play into a guarantee,” Hall said.

Delays can happen, most notably from appraisals. A growing appraiser shortage threatens to lengthen timelines, says William Fall, chief executive officer of appraisal management company Valuation Partners. Appraisals are “much less predictable than title, credit or other parts of the process,” he says.

Lenders who adopt more technology may help to decrease time spent on certain steps like asset verification, says Jonathan Corr, president and chief executive officer of Ellie Mae.

“Lenders could eventually bring their closing times down under 30 days if they embrace technology and do everything perfectly,” says Corr. “Maybe you could even get it down to a couple of weeks.”

Source: “Why Lenders Are Shooting for a 21-Day Turn Time,” National Mortgage News (Jan. 9, 2017)