Monthly Archives: October 2013

Foreclosure Improvements Held Back by Judicial States New York Among Highest Percentile

Completed foreclosures in September totaled 51,000 nationwide, down 39 percent from a year earlier when banks repossessed 84,000 homes.   CoreLogic said, in its September National Foreclosure Report, that the number of foreclosures last month was virtually identical to that in August.

By way of comparison, CoreLogic said that in what might be considered a more normal market, the period from 2001 to 2006, there were an average of 21,000 foreclosures completed each month.  The approximately 4.6 million foreclosures completed in the 60 months since the financial crisis began in September 2008 average 76,700 per month.

In September the foreclosure inventory, that is the number of homes in some stage of foreclosure, stood at approximately 902,000, down one third from 1.4 million one year earlier.  The inventory decreased by 3.3 percent from August to September.  The inventory in September represented approximately 2.3 percent of mortgages homes in the U.S., down from 3.2 percent in September 2012.

“The foreclosure inventory continues to decline, now standing at an early 2009 level,” said Mark Fleming, chief economist for CoreLogic. “Just over 900,000 properties remain in the inventory, two thirds of them in judicial states where the foreclosure process is typically slower. Consequently, the pace of overall improvement in the inventory will slow down and distressed assets will cast a long shadow over housing markets in states with judicial foreclosure.”



“The number of seriously delinquent mortgages continues to drop across the country at a rapid rate with every state showing year-over-year declines in foreclosure inventory,” said Anand Nallathambi, president and CEO of CoreLogic. “We’re not out of the woods yet, but these are encouraging signs for a return to a healthier housing market in the U.S.”

Five states accounted for almost half of all completed foreclosures over the 12 months ended in September.  Florida had 115,000 foreclosures, California 52,000, Texas 43,000, Michigan, 40,000, and Georgia 39,000. The states with the highest foreclosure inventory as a percent of mortgaged homes were Florida (7.4 percent), New Jersey (6.5 percent), New York (4.8 percent), Maine (4.0 percent) and Connecticut (3.7 percent).


MBS MID-DAY: Cautious but Meaningful Rally After ADP Data

Overnight trading deposited bond markets in just slightly better territory to start the domestic session.  Right off the bat, the ADP employment numbers had a positive effect on prices, but there was a strong push back from 8:30am to 9:00am for no overt reason.  Covert reasons abound, however, as traders increasingly show their hands regarding resistance around 2.47-2.48% in 10yr yields.


In other words, 10yr yields have continually shied away from breaking any lower than that, though MBS have increasingly outpeformed in the meantime.  Whereas 10’s are no lower than overnight lows, MBS are at their best levels since June.  The afternoon events could draw out some more conviction in Treasuries (meaning either a firmer bounce against recent yield floors or finally breaking them).

The Day Ahead: Several Potential Market Movers; Focal Point is Retail Sales

The Day Ahead: Several Potential Market Movers; Focal Point is Retail Sales


– Extremely light volume; Data mattered very little

– Most trading surrounded the Fed’s daily buying operation

– Pending Home Sales were negative year/year, 1st time in 29 months

– Factoring out homebuyer tax credit, Pending Sales were much much worse


– Expecting a bit more activity due to more robust data offerings

– Focal points on Retail Sales (830am) and Consumer Confidence (10am)

– 5yr Treasury Auction is a supporting actor, but no star

– Bond Markets look “ready to rally” if given a reason


From the standpoint of trading levels, yesterday was meaningless.  Both Treasuries and MBS remained inside the ranges set by Friday’s highs and lows.  Data had limited effect and the biggest volume was seen surrounding the Fed’s scheduled Treasury buying operation.  That’s a clear-cut indication of day that may as well not have happened.  Pending Home Sales at least made it worth tuning in (more on that in the “charts” section below).

Today should make up for yesterday’s boredom.  At the very least, it stands a better chance.  Retail Sales is the focal point of the day from a data standpoint with Consumer Confidence helping round out the morning.  As has been the case for several years now, Producer Prices are essentially worthless when it comes to suggesting interest rate directionality.  At this point, it’s going to take a concerted effort across several inflation metrics before anyone cares.  That said, a lot of old dogs still care due to force of habit, but that doesn’t mean they should or you should.   So focus on Retail Sales at 8:30am.

If the beat or miss is big enough at 8:30, that may well set the tone for the day.  Consumer Confidence is notable in that it’s an October report, whereas the others are September (except Case Shiller which is August).  This either means it will matter more or that it will be disregarded as overly distorted by the shutdown.

The 5yr Auction at 1pm can provide a moderate course correction in the afternoon hours but isn’t the same sort of market mover as the morning data.


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Mortgage Rates Hit 4 Month Fixed Low

Freddie Mac (OTCQB: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates hitting their lowest levels since this summer amid market speculation that the Federal Reserve will not alter its bond buying purchases this year.

News Facts

  • 30-year fixed-rate mortgage (FRM) averaged 4.13 percent with an average 0.8 point for the week ending October 24, 2013, down from last week when it averaged 4.28 percent. A year ago at this time, the 30-year FRM averaged 3.41 percent.
  • 15-year FRM this week averaged 3.24 percent with an average 0.6 point, down from last week when it averaged 3.33 percent. A year ago at this time, the 15-year FRM averaged 2.72 percent.
  • 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.00 percent this week with an average 0.4 point, down from last week when it averaged 3.07 percent. A year ago, the 5-year ARM averaged 2.75 percent.
  • 1-year Treasury-indexed ARM averaged 2.60 percent this week with an average 0.5 point, down from last week when it averaged 2.63 percent. At this time last year, the 1-year ARM averaged 2.59 percent.

Home Prices Rise for 19th Straight Month; Pace Decelerating

Home prices posted a 19th consecutive monthly gain in August the Federal Housing Finance Agency (FHFA) said on Wednesday.  FHFA’s purchase only Home Price Index (HPI) rose 0.3 percent on a seasonally adjusted basis from July but the 1.0 percent increase previously reported for July was revised down to 0.8 percent.

On a year-over-year basis the August index was up 8.5 percent.  Prices have now returned to the April 2005 index level but remain 9.4 percent below the home price peak attained in April 2007.

The index increased in seven of the nine U.S. Census Divisions in August with the South Atlantic and East North Central divisions experiencing declines.  The South Atlantic region, which encompasses all coastal states from Delaware to Florida plus West Virginia, was down 0.5 percent and the East North Central (Michigan, Wisconsin, Illinois, Indiana, and Ohio) division saw prices go down 0.3 percent.

The largest month-over-month increases were in the Mountain (Utah, Montana, Colorado, Nevada, Arizona, New Mexico, Idaho) and West North Central (Minnesota, both Dakotas, Nebraska, Iowa, Kansas, Missouri) divisions which rose 1.3 percent and 1.2 percent respectively.

The August 2012 to August 2013 changes were largest in the Pacific Region (California, Oregon, Washington, Hawaii, and Alaska) where prices appreciated 18.2 percent and the Mountain division with a 13.8 gain.  The smallest annual increase was in the Middle Atlantic division which consists of New York, New Jersey, and Pennsylvania and where prices were up 4.0 percent.

The FHFA index is calculated using home sales price information from mortgages sold to or guaranteed by the government sponsored enterprises Fannie Mae and Freddie May.


Article by Jann Swanson

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Fannie and Freddie Announce Expanded HARP Eligibility Dates

In a move some borrowers and originators might consider “too little, too late” both Fannie Mae and Freddie Mac announced today they are expanding the eligibility dates for the Home Affordability Refinance Program (HARP).  While tremendously useful to the small amount of borrowers who benefit from the change, it’s not quite as magnanimous as it might sound.

Previously, loans had to have been delivered to the agencies by 5/31/2009 to be eligible for HARP, which led to widespread confusion as lenders and borrowers had difficulty determining actual loan delivery dates without researching agency records.  In general, loans closed by April 2009 were delivered to Fannie/Freddie by end of May, so were previously eligible; those closing in May 2009, however, may have missed the initial delivery date requirement.

With the changes announced today, the eligibility date will now be based on the NOTE date,  thus opening the window of HARP eligibility to all those borrowers who may have closed their loans before the May 31st cutoff, but whose loans weren’t acquired by the GSEs until after the cutoff.

Fannie Mae (per Selling Guide SEL-2013-08) will update their Desktop Underwriter (DU) system on Nov 16 to reflect the new eligibility dates;  Freddie Mac will update its Loan Prospector (LP) underwriting system to reflect the changes on Oct 27.  Lenders are required to have DU/LP approvals for HARP loans, so may be hesitant to start them until the underwriting guidelines are revised.

Best execution rates in May 2009 rose from 4.69 to 4.88%, versus the current 4.25% rate for ideal borrowers.  A borrower with a $200,000 loan could anticipate saving approximately $80/mn, an amount that could increase if rates continue their downward trend of the last month amid reduced expectations of Fed tapering.

The chief advantages of HARP loans include their reduced equity requirements, a feature that enables many equity challenged borrowers to reduce their rates without incurring additional mortgage insurance costs, and, in some cases, relaxed income documentation as well.

Home owners who closed their existing conforming loans in May 2009, and who were previously told they were not HARP eligible may want to contact a lender to discuss their HARP eligibility.  Both lenders and borrowers might be excused if they wonder why Fannie and Freddie waited until the HARP program was 3 years old to make this logical change.

The Week Ahead: Ongoing Data Uncertainty, but Jobs Report Returns

Last Week

– Bond markets increasingly sold off heading into debt ceiling deadline

– Short term debt market panic led the way lower for other bond prices

– MBS gained back a point of losses after the debt deal

– highest prices and lowest rates since June

This Week

– Week begins with more economic data on the horizon, Existing Home Sales Monday

– Still unclear as to which remaining reports may be delayed

– Census Bureau says working “aggressively” on updated timeline

– Jobs Report is confirmed for Tuesday; should be focal point of the week


For all the sound and fury produced over the past two weeks, trading levels in bond markets returned more-or-less in line with the trajectory that preceded the debt-ceiling drama.  Now, as then, it seems that the preoccupation has been with the lack of data, especially the Employment Situations Report (or NFP, or “Jobs Report,” or “Payrolls”).  The report that had been due out on October 4th will now be released on Tuesday the 22nd.

Several Fed speakers–even those who haven’t been supportive of continuing QE–mentioned that the removal of accommodation is likely to be on hold until effects from the Fiscal drama can be assessed.  Put another way, the Fed wants to be sure the economy can demonstrate enough forward progress before beginning to withdraw accommodation.  While October’s FOMC meeting has been all but ruled out as the scene of a tapering announcement, December’s remains an outside possibility–even if a dim one, owing to the looming expiration of the short-term debt ceiling deal in February 2014 (and no “hard deadline” until March).

Existing Home Sales is scheduled for release at 10am this morning and expected to come in at a 5.32 annual pace.  This would be the biggest counter-trend movement since early 2011, but apart from the past 2 months, still the highest reading since 2009.  There is no other significant economic data scheduled.  To reiterate, the focus is on Tuesday’s payrolls data.

Mortgage Rates Much Lower After Debt Deal

Mortgage rates fell significantly today, returning in line with the lowest levels seen in recent weeks for some lenders.  Not every lender experienced the improvement in the same way, however, with some still not back to last week’s best offerings.  Whatever the case, the average top-tier Conforming 30yr fixed rate is back to 4.25% .

Despite our analysis suggesting rates didn’t care about fiscal drama as much as they cared about economic data, and despite rates making it right back to pre-shutdown levels, the past week had seen them move higher than they otherwise might if they truly didn’t care about the fiscal drama.  And now they’ve moved significantly lower due to the fiscal drama subsiding, one might wonder what gives.


Rates actually did quite a fine job of holding steady during the first part of the shutdown, and the sense that markets were more concerned with economic data and Fed policy was reinforced.  Indeed, the shutdown itself was of little concern for rates.  The approach of the debt ceiling, however, had a domino effect that ended up doing some damage.


To understand the damage, we need to understand something that rarely comes into play in a discussion of mortgage rates but is always operating silently behind the scenes: the short term funding market.  This simply refers to the shortest term borrowing and lending that takes place in massive quantities each day in financial markets.  These are the transactions that have shorter time windows than the 2yr Treasury notes, and range all the way down to “overnight” maturities.


This is the lifeblood of all other lending, and it never usually makes the news because it’s never stirring the pot in the same way it just did.  Of course market participants assumed that the risk of a default would take a toll on these short term funding lines, but the toll ended up being much bigger than expected.  If we consider 1-month Treasury bills, for example, the very worst of the 2011 budget battle brought those yields to 0.25%.  By comparison, Tuesday night saw them hit 0.50%.


It was by far the biggest spike in short term funding costs we’ve seen since the onset of the Financial Crisis and it dealt an unexpected blow to the longer term debt market.  That means that securities such as the 10yr Treasury and the Mortgage-backed-securities (MBS) that dictate mortgage rates were noticeably affected.  Were it not for this short term debt market surprise, longer term rates like mortgages may well have not budged much at all.


Now that the debt deal has been reached, those short term debt markets have thawed quickly, and mortgage rates have been able to correct accordingly.  In addition to that, Fed speakers have been unified in suggesting that this fiscal uncertainty and the unknown impact on the economy from the shutdown likely means that any decrease in Fed asset purchases is on hold for the next few meetings (meaning tapering gets pushed into 2014).  This only adds to the momentum lower in rates, making the snap back to the best recent levels especially quick.

SONYMA Mortgages Definitions

Funds that can be verified as the borrower’s own, the source of which can be: (a) monies from borrower’s checking or savings account, or other similar time deposit account, which have been on deposit in the account for at least 2 months prior to loan application, (b) cash up to $1,000, (c) cash deposit towards property purchase, and (d) the market value of the lot owned by borrower, exclusive of any liens, on which the SONYMA financed home was or will be constructed, or the purchase price of the lot if it was purchased in the past 2 years, whichever is less. Other sources may be considered on a case-by-case basis.

Closing Costs
Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Closing costs normally include, but are not limited to, fees charged by lenders, attorney fees, taxes, insurance premiums (e.g. flood insurance, hazard insurance, PMI), escrow charges, title insurance costs and survey costs. Lenders or realtors can often provide estimates of closing costs to prospective home buyers.

Down payment
The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage.

Existing Housing
A property that has been previously occupied as a residence.

First-Time Home Buyer
A person who (i) has not had any ownership interest in his/her primary residence at any time during the three years prior to the date of making an application for a SONYMA mortgage loan; and, (ii) at the time of making the loan application to SONYMA, does not own a vacation or investment home. This definition includes residences owned in the United States and abroad.

Home Buyer Education
A course given by a SONYMA approved organization (usually a PMI company) in which participants learn budgeting techniques relevant to home owners. This is required for all loans with LTVs over 95% or down payments less than 5%. It is also required for all applicants applying for the Achieving The Dream and Remodel New York Programs.

Household Income
The total combined income of all persons who are age 18 or older and who are expected to live in the SONYMA financed property regardless of whether they have signed or will sign the mortgage application.

Housing Expense
The monthly costs associated with a mortgage loan, specifically: Principal, Interest, Taxes, and Insurance (PITI). Monthly costs also include maintenance fees, where applicable (e.g. condominiums, cooperatives, Planned Unit Developments, or Homeowners Associations).

Income Limit
SONYMA finances mortgage loans for persons with low or moderate incomes. The maximum incomes of persons eligible to receive SONYMA financed mortgage loans are subject to the requirements of federal and state law. The maximum income allowable may vary by SONYMA program, region of the state, and household size. Click here for current income limits.

Loan to Value
The relationship between the requested mortgage amount and the appraised value, or, sales price (whichever is lower) of the property. For example, a home valued and priced at $100,000 on which there is an $80,000 mortgage has an LTV of 80 percent.

Lock-In Fee
A fee equal to 1% of the requested loan amount, which is paid to the lender by the borrower within 14 days of loan reservation to hold (“lock”) a specific interest rate for a specific period of time. In SONYMA programs the fee is non-refundable unless the mortgage application is denied by the Participating Lender or SONYMA.

Long-Term Lock-In
Type of interest rate lock that may only be used for properties under construction or rehabilitation as of the SONYMA loan application date. The lock-in period is 240 days from the application date.

Mortgage Servicer
The mortgage company that services your SONYMA loan after closing. All mortgage payments and inquiries should be made directly to the mortgage servicer.

Newly Constructed Housing
A property that has not been previously used for residential purposes.

One-Family Home
A building designed for occupancy by one family, which includes a condominium unit, cooperative unit, town home, planned unit development (PUD) unit, or factory-made housing permanently attached to real property.

Origination Fee
A fee that is paid by the borrower to compensate the Participating Lender for assisting the borrower to obtain a SONYMA mortgage loan.

Participating Lender
A lending institution that has been approved by SONYMA to originate, close and sell mortgage loans to SONYMA. Participating Lenders are familiar with SONYMA loan programs and requirements. Click here for a list of participating lenders.

Payment Reserves
Funds required by some lenders to be retained in a borrower’s bank account after loan closing in an amount equal to a specific number of monthly mortgage payments.

One point equals 1% of the mortgage loan amount. Fees associated with mortgage loans are often calculated in points.

Pool Insurance
Mortgage insurance paid for by SONYMA that is required for all loans which provides protection in the event of a loss resulting from a borrower default.

Private Mortgage Insurance (PMI)
Mortgage insurance paid for by the borrower that SONYMA requires for all loans where the Loan to Value exceeds 80%. PMI protects the Participating Lender and SONYMA in the event of a loss resulting from borrower default.

Purchase Price Limits
SONYMA provides mortgage loans for moderately priced homes. The maximum sale price of homes eligible for SONYMA financed mortgage loans is subject to the requirements of federal and state law. The maximum sale price allowable may vary by SONYMA program, region of the state, and size of the home. Click here for current purchase price limits.

Seller Concession
An agreement specifically stated in the sales contract between the seller of the property and the buyer of the property in which the seller commits to pay a specific portion of the buyer’s closing costs. SONYMA limits the amount of Seller Concessions allowed.

Short-Term Lock-In
Type of interest rate lock that must be used for all Existing Housing and completed new construction or rehabilitation properties. The SONYMA rate lock-in period is 100 days from the application date.

Target Area
An entire census tract or portion thereof which has been designated by the federal government as economically distressed. For borrowers who purchase in these areas, in accordance with federal law, SONYMA waives the First-Time Home Buyer requirement, applies higher income and purchase price limits, and will finance two-family homes that are less than 5 years old.

Total Monthly Expense
Expected monthly expenses of the borrower including, but not limited to, the Housing Expense, car lease payments, credit card payments, and, any installment debt with more than 10 monthly payments remaining (i.e., personal loans, car loans, student loans, 401K or pension loans, etc.).

Underwriting Ratios
The maximum debt burdens allowable to applicants for mortgage loans expressed as two separate ratios – Housing Expense to gross monthly income and Total Monthly Expense to gross monthly income. SONYMA requires that the Housing Expense not exceed 33% of the borrower’s gross monthly income, and that the Total Monthly Expense not exceed 38% of the borrower’s gross monthly income. These percentages are increased to 40% and 45%, respectively, for applicants having a down payment of 3% or more.

Value of the Property
The lower of the purchase price being paid for the property or the property’s market value as established by a qualified property appraiser.

Seven Good Reasons To Re-finance


Why refi? There are at least seven reasons to refinance a mortgage. You probably can think of the first one — to get a lower mortgage rate.

The average interest rate on an outstanding mortgage at the beginning of 2010 was 5.979 percent, according to the Bureau of Economic Analysis. However, lenders today are offering rates well below that benchmark, making a refinance a no-brainer for many.

But low rates are not the only motive for refinancing a home loan nowadays. The following are good reasons to consider a new
The No. 1 reason to refi is to get a lower mortgage rate. Despite sinking rates, a lot of people haven’t refinanced.

Many homeowners would like to refinance but can’t because they have little or no equity due to falling home values. Jim Sahnger, mortgage consultant for Palm Beach Financial Network in Stuart, Fla., says too many of his clients can’t refi for this reason.

“But there are people who can, and some people who get so into whatever they’re doing that they don’t pay attention to the news and don’t pay attention to where rates are at,” Sahnger says.

So Sahnger will call to tell them that rates are near record lows.
Stability-hungry borrowers are ditching adjustable-rate mortgages and refinancing into fixed-rate loans.

“Everybody’s frightened about inflation, so if they have an adjustable loan, that’s the No. 1 reason they’re getting out of them,” says Jeff Lazerson, president of Mortgage Grader, a lender based in Laguna Niguel, Calif. “It’s not because you can get them at a better rate, but because you can get them at a stable rate.”

Other borrowers swing from one hybrid ARM to another, says Matt Hackett, underwriting manager for Equity Now, a direct mortgage lender based in New York City.

“We’ve done a few of those for people who were in a five-year ARM that they originated four years ago, that was getting ready to adjust,” Hackett says.

Even though the rates were about to adjust downward, they got new 5/1 ARMs to extend low rates another five years.
This isn’t, technically, a refi, but it’s close. Mortgage-free homeowners sometimes get mortgages to put cash in their pockets.

“There’s a lot of people who don’t have a mortgage,” Hackett says. “Maybe they want to go to Florida, buy a second home with cash. So they cash out their first home and take the cash and go down there and don’t need a financing contingency, and they’re in a better position to bargain.”

They could also take out a mortgage on a paid-off property to start a business or for other reasons.
When house prices were rising by 10 percent or more a year, millions of borrowers got cash-out refinances. They refinanced for more than they owed, got cash, and spent or invested it.

The cash-out refi craze ended when the housing bust began. But there are still a few cash-out refis.

“We’re still in the business of cashing out people — paying off credit cards, for example,” says Michael Moskowitz, president of Equity Now.

Michael Becker, mortgage banker at Happy Mortgage in Lutherville, Md., says: “It’s not like it was years ago, when people took cash out to buy things, like a pool, a car or an RV. It seems more to be paying down debt, lowering their debt service, trying to save money.”
Lately, Lazerson has noticed an interesting refinancing trend.

“One thing that’s a trend now is that people are taking money out to purchase other properties,” he says.

Often, it’s to buy investment properties.

Refinancing to buy property can bring up unexpected tax and mortgage underwriting issues. A lot depends upon how the refinanced house and the new property will be used.

For example, which property will be the primary residence? Will the other property be rented out? Those are issues for a financial adviser or tax professional to untangle.
Some homeowners want to combine their first mortgage with the home equity line of credit.

“I’m seeing a lot of people, even if their rates on their home equity line of credit is 3 percent, refinancing to get rid of them,” Becker says.

Why get rid of a loan with such a low rate?

“Because they’re worried if five years from now, what if that rate jumps up to 12 (percent), 11 (percent), 13 percent?” Becker says.

Divorces often lead to refis as a means of removing the absent former spouse from the note.

“That has less to do with rates and is more about timing,” Lazerson says.

Moskowitz says he recently did a $110,000 cash-out refi from a woman who used the money to bail out a son facing foreclosure on his own house.

That’s not how Moskowitz would spend his money from a cash-out refi. But to anyone who agrees with him, he says, “You’re clearly not a mother.”