Home ownership fell to 66.9% in the second quarter, which is the lowest level since 1999.  The Case-Shiller index showed home prices rose 1.3% in May..don’t expect this trend to continue.  With homeowner markets stressed, it appears renting has become more appealing than owning.  More than 20% of the nation’s mortgage borrowers owe more than their homes are worth.  The Obama administration is making another $3 billion available to help troubled homeowners avoid foreclosures..if it does not first succeed try try again… In the second quarter of 2010, the median price of a single-family crept up just 1.5% to $176,000.   The 30-year fixed rate mortgage slipped to 4.44% during the first week in August, the lowest rate since 1971, the 15 –year rate dropped to 4.06%.  Foreclosures were up 3.6% in July, the 17th straight month total filings exceeded 300,000.   

New Home sales rose 23.6% in June, year-over-year sales fell 16.7% which is the important number to observe.  Home prices riose slightly in May, they were up 1.3% from April, expect them to be flat or fall in the coming months.  Home prices peaked back in July 2006 and fell for 33 straight months before bottoming out in April 2009.  The peak-to-trough decline amounted to more than 32%.   New home construction fell to an 8-month low in June, housing starts fell 5% in May, building permits were up 2.1%, their first gain since March.  Existing home sales fell 5.1% in June, year-over-year sales were up 9.8%, take away the phony tax credit and they would of been flat.  Most Americans, 20%, have been hit by a major economic loss last year, most were job loss, loss of home equity, or retirement savings losses.   The City of Cleveland’s bid to sue nearly two dozen banks over the cities housing woes have lost in court, Baltimore, Chicago and Memphis have brought similar law suits…one common theme, they are all Democratic cities… 

Refinance Apps Increase. Originators Work in Highly Competitive Environment

by Adam Quinones on

The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending July 2, 2010. 

The Mortgage Bankers Association application survey covers over 50% of all US residential mortgage loan applications taken by mortgage bankers, commercial banks, and thrifts. The data gives economists a look into consumer demand for mortgage loans. In a low mortgage rate environment, a trend of increasing refinance applications implies consumers are seeking out a lower monthly payment which can increase disposable income and consumer spending (or give consumers a chance to pay down other debts like credit cards). A falling trend of purchase applications indicates a decline in home buying interest, a negative for the housing industry and the economy as a whole.
Excerpts from the Release…

The Market Composite Index, a measure of mortgage loan application volume, increased 6.7 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 6.5 percent compared with the previous week. The four week moving average for the seasonally adjusted Market Index is up 6.4 percent.
The Refinance Index increased 9.2 percent from the previous week and is the highest Refinance Index observed in the survey since the week ending May 15, 2009. The four week moving average is up 8.3 percent for the Refinance Index. The refinance share of mortgage activity increased to 78.7 percent of total applications from 76.8 percent the previous week, which is the highest refinance share observed in the survey since April 2009

The seasonally adjusted Purchase Index decreased 2.0 percent from one week earlier. The unadjusted Purchase Index decreased 2.3 percent compared with the previous week and was 34.7 percent lower than the same week one year ago. The four week moving average is up 0.1 percent for the seasonally adjusted Purchase Index.

The Purchase Index has decreased eight of the last nine weeks.

The average contract interest rate for 30-year fixed-rate mortgages increased to 4.68 percent from 4.67 percent, with points decreasing to 0.86 from 0.96 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.  The effective rate slightly decreased from last week.
The average contract interest rate for 15-year fixed-rate mortgages increased to 4.11 percent from 4.06 percent, with points decreasing to 0.93 from 0.97 (including the origination fee) for 80 percent LTV loans. The effective rate also increased from last week.
The average contract interest rate for one-year ARMs increased to 7.20 percent from 7.05 percent, with points decreasing to 0.24 from 0.27 (including the origination fee) for 80 percent LTV loans.  The adjustable-rate mortgage (ARM) share of activity increased to 5.4 percent from 4.7 percent of total applications from the previous week.

Michael Fratantoni, MBA’s Vice President of Research and Economics:

“Mortgage rates remained near record lows last week, as incoming data on the job and housing markets were weaker than anticipated.  As more homeowners locked in to these low rates, the level of refinance applications increased to a new 13-month high…For the month of June, purchase applications declined almost 15 percent relative to the prior month, and were down more than 30 percent compared to April, the last month in which buyers were eligible for the tax credit.”

Is the rise in the refi index a factor of new borrowers entering the refi market or is it a factor of borrowers re-locking at another lender for a lower rate/cheaper cost? Originators, did you lose a deal or two last week?

Based on the mixed messages I’ve been hearing from lock desks, it appears that some lenders are enjoying a larger pipelines at the expense of another originator(s). Martial law is definitely in effect on the street. Lenders are undercutting other lenders out of pure necessity (survival).  L.Os are losing deals for an 0.125%.  The environment is super competitive….

Existing home sales fell 2.2% in May, mostly due to the expired tax credit.  New Home sales plunged 32.7% in May, it was the slowest pace since 1963 when the Commerce Department began keeping track, once again this drop is because of the expired tax credit.   More than half of all homeowners with modified mortgages fell at least two months behind in their payments a year after adjustments were made.  The average 30-year fixed mortgage rate just hit an all-time low of 4.69%.  Nearly 200,000 homebuyers could benefit from the extended deadline for the homebuyers tax credit.  Home prices were up 3.8% in April, expect these gains to stop with the tax credit expiring.  Predatory lending would likely become a thing of the past if proposed regulatory reform rules are put into place.  As a result, mortgages might get more expensive and difficult to obtain.  Foreclosures are selling at a 30% discount, and accounted for a third of all home sales in the first quarter of 2010.    

HAMP Had Good Intentions But Was Doomed to Disappoint

by Joe Murin

"We only have three months left with hundreds of thousands of families facing foreclosure, is it time to rethink whether or not a mortgage foreclosure prevention program that is based on a group of servicers whom you describe as having done a ‘terrible job’ is a program that perhaps should be redesigned?"

These comments were shared by Congressional Oversight Panel Chairman Elizabeth Warren on Tuesday. They were directed at Treasury Secretary Timothy Geithner.

I hope this statement related to the poor performance of the government’s loan modification program did not shock anyone. We’ve known from the beginning that it had as much chance of success as the Pittsburgh Pirates have in winning the National League pennant race.

Don’t get me wrong the effort put forth to help homeowners stay in their homes is a noble initiative. However, the reality of its success depended on the largest mortgage servicers having the capability to pull it off.

Mortgage modifications were an enigma to these service providers. They did not have the experience, technical capabilities and in spite of their efforts have more internal bureaucracy than the federal government. Add to that the size of the problem, I am talking millions of defaulted loans, and the probability of success dwindles rapidly.

All the government successfully accomplished was the delay of the inevitable. These delays will ultimately hurt the housing market by building an unrealistic stockpile of foreclosed properties that will affect housing prices.

If you take into consideration the high level of frustration and disappointment the homeowners faced in dealing with these mortgage servicers you end up with nothing more than an expensive exercise in futility.

As long as the government sticks to its policy of engaging theory instead of implementing practical solutions we can expect more of the same.

Personal Bankruptcy Filings up 14% in first 6 months of 2010

by CalculatedRisk

From the American Bankruptcy Institute: Consumer Bankruptcy Filings up 14 percent through First Half of 2010

U.S. consumer bankruptcy filings totaled 770,117 nationwide during the first six months of 2010 (Jan. 1-June 30), a 14 percent increase over the 675,351 total consumer filings during the same period a year ago, according to the American Bankruptcy Institute (ABI), relying on data from the National Bankruptcy Research Center (NBKRC). The consumer filings for the first half of 2010 represent the highest total since 2005, when Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act to try and stem the tide of filings, although the number of monthly consumer filings has been steadily decreasing since March.
"Years of rising consumer debt and low savings rates, combined with the housing and unemployment crises, are causing bankruptcy levels not seen since the 2005 amendments to the Bankruptcy Code," said ABI Executive Director Samuel J. Gerdano. "We expect that there will be more than 1.6 million new bankruptcy filings by year end."
The overall June consumer filing total of 126,270 was 8.5 percent more than the 116,365 consumer filings recorded in June 2009.

Click on graph for larger image in new window.
This graph shows the non-business bankruptcy filings by quarter using monthly data from the ABI and previous quarterly data from USCourts.gov.
Excluding 2005, when the so-called "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005" was enacted (really a pro-lender act), the record year was in 2003 when 1.62 million personal bankruptcies were filed. This year will be close to that level.

Mortgage Rates Set New Record at 4.69%, So Why Is Demand Weak?

By Nick Timiraos

Average rates on 30-year fixed-rate mortgages reached their lowest levels in more than 50 years this week. On Thursday, rates tracked by HSH.com hit 4.69%, down from 4.75% on Wednesday and an average 4.85% last week.

Freddie Mac also said on Thursday that rates this week had fallen to an average 4.69%, which is the lowest level recorded since it began its survey in 1971. Brokers were quoting rates as low as 4.25% on 30-year loans on Thursday for well-qualified borrowers.

HSH.com says you’d have to go back to at least the 1950s to find comparable rates—and those may not be perfect comparisons given how different the mortgage market was back then.

Rates have fallen over the past month, first as the European debt crisis sparked a flight to safety that helped drive down rates for American borrowers. Over the past week, renewed concerns about the health of the U.S. economy have also put pressure on rates. Rates on 30-year fixed-rate jumbos are down to 5.65%, a seven-year low, while banks offered “hybrid” jumbo adjustable-rate loans with a five-year fixed rate of 4.49%, according to HSH.

But if rates are so low, why isn’t demand for new loans picking up?

For one, most borrowers who could refinance probably did so last year, when rates fell below 5% in March, August, and December as the Federal Reserve purchased mortgage-backed securities to push down rates. Few expected rates to fall even further when the Fed ended its purchases at the end of this past March.

Many borrowers with an incentive to refinance can’t qualify with today’s tougher lending standards or don’t think it’s worth paying the closing costs on a new loan.

Credit Suisse estimates that around 61% of all borrowers with a 30-year fixed rate mortgage could lower their mortgage rate by 0.75 percentage point at current rates. But analysts estimate that only 38% of those borrowers could actually qualify at current standards.

More borrowers can’t qualify because they don’t have enough equity in their homes, their credit scores have taken a hit, or they’ve seen their income reduced. Mortgage application activity is down 0.5% over a four-week moving average tracked by the Mortgage Bankers Association. Weak demand for refinancing suggests that banks have exhausted the pool of homeowners who can refinance at today’s rates given the current tight lending standards.

Low rates typically spur waves of refinancing, but low rates aren’t enough to spur home purchases independent of other factors, such as a healthy economy that fuels job growth and household formation.  That can lead to some of the dissonant headlines of the present, where home sales plunge even as mortgage rates reach generational lows.

Applications for new purchase loans have fallen in five of the past six weeks, according to the MBA, and loan applications are down 37% from one year ago to lows last recorded in February 1997.