Month: March 2013

Report: Mortgages become slightly easier to get as standards ease

Home builder sentiment at a five-year highA home under construction last year in Chester, Va. It’s a bit easier to get a home loan these days, and a higher percentage of mortgages are for purchases rather than refinances, a new report shows. (Steve Helber / AP Photo)
By E. Scott ReckardMarch 22, 2013, LA Times

Here’s some good news on the mortgage availability front as you house-hunt this weekend: Credit standards appear to be easing, just a bit, according to an analytical study and reports from front-line lenders.

The average borrower credit score for a closed loan dropped from 749 in January to 745 in February, Ellie Mae Inc., a provider of software to home lenders, reported Friday. Though still steep, it was the lowest average score since last May, said Jonathan Corr, Ellie Mae’s chief executive.

The average down payment for a home purchase was exactly 20%, the report said — the first time it’s been that low since July.

And the percentage of total income that borrowers were being allowed to devote to debt payments averaged 35% — the highest since June, Corr said, “suggesting that the credit box may be expanding.”

Meantime, the mix of purchase versus refinance mortgages shifted toward the former, reflecting improved buyer confidence and a recent increase in mortgage rates, which dampens demand for refis. In February, 32% of all closed loans were for purchases, compared with 27% in January.

In another sign of easing mortgage standards, a few banks are now providing home-equity lines of credit for as much as 90% of the home value, up from 80%, said Mark Cohen, a Beverly Hills mortgage banker.

That means that someone owing $350,000 on a $500,000 house might get a $100,000 credit line instead of one for $50,000 – assuming they have a minimum credit score of 720 and can fully document their ability to make payments.

Cohen said he’s also seen a slight loosening of borrower worthiness gauges such as the debt-to-income ratio. “There’s a slight credit easing, but in a subtle way,” he said.

For people with less than 20% down payments, mortgage insurance is now easier to get, said Jeff Lazerson,  a Laguna Niguel mortgage broker.

And so-called delayed financing, unavailable in recent years, is back, Lazerson said — someone who paid cash for a one- to four-unit property may be able to get back up to 75% of their money by taking out a loan right away, instead of having to wait for six months.

Case-Shiller Home Price Index: Composite 10 Chart

Case-Shiller Home Price Index: Composite 10 data by YCharts

Lansner: Home price gains smaller than you think

By JONATHAN LANSNER
Business Columnist
THE ORANGE COUNTY REGISTER

March 18th 2013

Local home prices may not be gaining as fast as we think.

Buyers are certainly paying significantly more for homes today that they were a year ago as the real estate market emerges from its lengthy slumber.

Article Tab: image1-Lansner: Home price gains smaller than you think

Virtually all price barometers show local buyers paying up. DataQuick’s median selling price, for example, has found eye-catching double-digits gains for an overall Southern California median of $320,000 in February.

Such gains led some observers — and even DataQuick itself — to warn that some recent increases in this price measure are tied to a changing mix of homes sold. That is, while sales prices are up — the value of individual homes may not be rising as swiftly.

How so? A bit of mathematics, for those who can stand it!

For starters, remember that a median is the midpoint of a string of numbers. At times, this measurement can be tugged up or down by a significant swing of activity at either end of the data series. And Southern California’s housing market offers a prime example of the mechanics inside a median.

DataQuick’s Southern California median selling price includes sales activity for all residences — new and old, single-family and condo — in six counties: Orange, Los Angeles, San Diego, Ventura, Riverside and San Bernardino. For argument’s sake, these counties split nicely into three, roughly equally active housing groupings: the pricey, coastal living (Orange, San Diego and Ventura); inland affordability (Riverside and San Bernardino — the Inland Empire); and Los Angeles (the big middle).

A few years back I reviewed a study by Australians researchers who found that a median price trend could be slightly “improved” by adjusting the math for modest demographic (meaning, geographical) changes in buying patterns. I figured I’d try the experiment with local numbers.

DataQuick was kind enough to give me 15 years of monthly sales and pricing results for the six SoCal counties. I tossed that data into my trusty spreadsheet, and created my Geographically Updated Median Price – can you say “GUMP” — by rebalancing the series of selling prices to match the historical share of sales that each county created.

For example, high-priced Orange County residences averaged 15 percent of sales for this period. So by my math, each month Orange County’s price performance accounted for 15 percent of my regional GUMP index to adjust the median for the product mix flaw that crops up at times.

What did my new GUMP benchmark tell me?

In the year ended in February, SoCal home prices averaged 8.4 percent gains – somewhat significantly less than the 11.9 percent gains shown for the same 12 months running by DataQuick’s traditional median.

But does that mean that the past year’s been an outlier — and that recent gains are illusionary due to current trends not easily repeated?

Actually, no. When you look through my key prism — share of sales by county — you see recent sales patterns by county run virtually equal to the way home sales went since 1997. Yes, this year is a normal sales mix.

The oddity was the three years leading up to this recovery period. As real estate hit bottom, an early segment to find buyers was the cheapest end of the market. Financing was available for lower-priced homes — albeit, hard to get – plus investors liked these residences as rental opportunities. That made the Inland Empire — SoCal’s housing bargain — a hot property.

Inland Empire homes represented 33 percent of SoCal homes sold in the three years ending February 2012 – a noteworthy jump from the 29 percent share of sales activity seen in other years.

That increased share of cheaper homes sold — i.e. Inland Empire – around the market’s bottom boosted the losses shown by DataQuick’s traditional median. When that sales trend reversed, a stronger price recovery is revealed by that same median math.

Look at it this way: DataQuick’s SoCal median selling price fell 51 percent from peak to bottom. My own GUMP index that tries to correct for geographic product mix? It fell only 46 percent in the great slide.

Or the flip side: DataQuick’s SoCal median is now up 30 percent off its bottom — a sharper rebound than the 21 percent price reversal shown by my GUMP measure.

Look, to butcher a Forrest Gump line: “Economic indexes are a lot like a bunch of chocolates; you never know what you’ll get.” And a median has its mathematical limits.

Yet if you want to assume that the DataQuick median’s overstating today’s price gains — for example, if you’re a big housing skeptic — then you must accept that this same math “overstated” the previous price decline, too.

Low down-payments are back as lenders ease rules

Diana Olick , CNBC.com

March 13th 2013

In this Saturday, Jan. 5, 2013, photo a home is for sale in Glenview, Ill.  As the crucial spring season begins, lenders increasingly have begun to ap...

Nam Y. Huh / AP

In this Saturday, Jan. 5, 2013, photo a home is for sale in Glenview, Ill. As the crucial spring season begins, lenders increasingly have begun to approve low down payments.

As housing heads into the critical spring market, credit is finally beginning to thaw. Lenders are increasingly approving low down payment loans, and government sponsored mortgage giant Fannie Mae is buying more of them.

It is a noticeable shift from the last four years, when 20 percent down on a home purchase loan was the only game in the neighborhood.

“In general lenders have been willing to do more than they may have been willing to do in the past,” said John Forlines, chief credit officer for Fannie Mae’s single family business. “Our requirements have not changed significantly, but other parties taking risk, the lenders and mortgage insurance companies in particular, have been more flexible than they may have been in the past.”

Fannie Mae will buy loans with as little as 3 percent down payment, but these loans require private mortgage insurance. During the worst of the housing crash, when the private insurers were sinking under billions of dollars in claims on defaulted loans, that insurance was tough to get.

The only low down payment loan left was through the Federal Housing Administration (FHA)—the government’s loan insurer. The FHA took on a huge share of the market, far more than it was ever meant to, and while that helped prop up the mortgage market in the short term, it was not sustainable, and the FHA took on huge losses.

Now, facing a $16 billion shortfall, the FHA has raised premiums and will raise them yet again next month. FHA loans are becoming increasingly expensive.

Meanwhile, as the housing market improves, private mortgage insurers are starting to remove overlays on higher loan-to-value loans, meaning the percentage of the home value that is mortgaged. Low LTV’s and high credit scores were the rule recently for the private insurers, but that may now be loosening, making these loans cheaper than FHA.

“FHA is certainly becoming more expensive,” noted Craig Strent, CEO of Apex Home Loans in Bethesda, Maryland. “The increase in low down payments is reflective of first time buyers coming off the sidelines and entering the market. We’re going to see more of this trend in the next couple of years as the economy improves and renters start to once again see the benefit of buying over renting. FHA has become more expensive and the mortgage insurance companies are the beneficiary of that, which is really not a bad thing as it means the private market is insuring the lower down payments rather than the government.”

The stocks of mortgage insurers like MGIC and Radian spiked in the first months of this year, as home prices improved and FHA policy changes designed to shrink its share of the market were announced. There is currently a bipartisan effort in the U.S. Senate to reduce the FHA’s role, and in the House of Representatives a hearing is being held Wednesday looking at, “the competitive advantages the Federal Housing Administration has relative to private mortgage insurers and how those advantages contribute to the crowding out of private capital in housing finance,” according to the House Financial Services Committee release.

Despite the advantages, FHA’s share is already shrinking, as Fannie Mae’s is rising. In the first quarter of 2012, loans with between 3 and 10 percent down payment made up 15 percent of Fannie Mae’s business for home purchase loans (not refinances). In the second quarter it rose to 17 percent and in the third to 18 percent. Fannie Mae has not reported its fourth quarter yet, but that share is expected to rise again. While a credit thaw is part of it, as mortgage interest rates rise and fewer borrowers apply to refinance, lenders are simply looking for more business.

The banks are also catching their collective breath now after years of raging refinances. Record-low mortgage rates had borrowers refinancing over and over, and that left little capacity or need for the banks to take on more work in the form of home purchase loans.

With rates now rising to the highest level in six months, according to a report from the Mortgage Bankers Association Wednesday, the banks are seeing fewer refinances.

“Lenders, as traditionally happens, as they have more capacity, they might be willing to stretch their credit limits more,” said Forlines.

Lenders may also be responding to clearer guidelines from Fannie Mae on how it will determine which defaulted loans it can force the banks to buy back. Banks had to buy back billions of dollars worth of bad loans during the housing crash due to failures in so-called “reps and warrants” (representations and warranties) on loans it sold to Fannie Mae.

They are also just responding to more business, particularly from first time home buyers who have been largely on the sidelines until now. Improving employment and more confidence in home prices are bringing these buyers back. Since first-time buyers tend to be younger, they may not have large down payments.

“More first time buyers are coming into the market now and we have seen this more in our pre-approvals in terms of comparing FHA vs. PMI,” noted Strent. “Conventional options with PMI will become even more attractive when FHA premiums increase on April 1.”

One wild card, however, is looming mortgage rules from Federal regulators that could require a minimum down payment for a loan to be considered a “qualified mortgage.” Only these loans could be sold in full to investors; otherwise lenders would have to hold some portion of the loans on their books. Given new rules recently announced by the Consumer Financial Protection Bureau, industry organizations are lobbying heavily against that minimum down payment.

The idea behind the new mortgage regulations are to get lenders to have more skin in the game in order to prevent the reckless lending that brought on the housing crash. This as borrowers are apparently needing less skin in the game now to buy a home.

OC Home Fair | Saturday, March 23, 2013

Free Homeownership Education Event

The Hoag Center for Real Estate and Finance at Chapman University is hosting a Homeownership Fair with the Orange County Young Professionals Network.  Our mission is to educate the public on all aspects of buying or selling a home.  The event is for Southern California home owners, home buyers, and seasoned investors.  Receive free information on:

  • Improving Your Credit
  • Buying A Home
  • Saving Your Home
  • Investing Strategies
  • Reducing Your Utility Bills
  • Selling and Staging For Top Dollar
  • Orange County Real Estate Market Statistics

For more information, how to become a vendor or RSVP for the Homeownership seminars visit – http://www.chapman.edu/research-and-institutions/hoag-center/home-fair/index.aspx

Southland Begins 2013 With Sales and Price Gains Vs. Year Earlier

March 13, 2013

La Jolla, CA—Southern California logged the highest February home sales in six years last month amid relatively strong sales of mid- to high-end properties and a record share of homes sold to absentee buyers. The median sale price edged slightly lower from January but rose nearly 21 percent from a year earlier, marking the 11th straight month in which the median has risen year-over-year, a real estate information service reported.

A total of 15,945 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was down 0.7 percent from 16,058 sales in January, and up 1.0 percent from 15,780 sales in February 2012, according to San Diego-based DataQuick.

Typically there’s not much change in the number of sales between January and February. On average, sales have risen 0.7 percent between those two months since 1988, when DataQuick’s statistics begin.

Last month’s sales were the highest for the month of February since 17,680 homes sold in February 2007, but they were 9.9 percent below the February average of 17,696 sales. The low for February sales was 10,777 in 2008, while the high was 26,587 in 2004.

“Our January and February stats certainly indicate housing remains a big target for investors. But typically those two months don’t offer much insight into how the market will behave the rest of the year. These are sales that closed in January and February, meaning many of the buyers were out home shopping during the holiday season late last year. That’s when many traditional buyers and sellers drop out of the market, leaving a relatively high concentration of very motivated market participants, especially investors,” said John Walsh, DataQuick president.

“March and April will offer a better view of how broader market trends are shaping up this year. One of the real wild cards will be how many more homes go up for sale. More people who’ve long been thinking of selling will be tempted to list their homes at today’s higher prices. Fewer people will be underwater and therefore could at least break even on a sale. Some investors who’ve held for a while will consider cashing in. A meaningful rise in the supply of homes on the market should at least tame price appreciation.”

The median price paid for all new and resale houses and condos sold in the six-county Southland was $320,000 last month, down 0.3 percent from $321,000 in January and up 20.9 percent from $264,750 in February 2012. The median has eased back slightly on a month-to-month basis since December’s $323,000 median, which was the highest since it was $330,000 in August 2008. The median’s year-over-year gains have been double-digit – between 10.8 percent and 23.5 percent – since last August.

“Most every gauge shows prices are up significantly over the past year, even after adjusting for changes in the types of homes selling, ” Walsh said. “But to keep today’s price levels in context, consider that last month’s median sale price was still around 37 percent below its early 2007 peak of $505,000, and it was about where the median was back in mid 2003.”

Around half of the median’s ups and downs the last five years can be attributed to shifts in the types of homes sold. Last month’s 20.9 percent year-over-year gain in the Southland median sale price reflects the combination of price appreciation as well as a shift toward more mid- to high-end sales in coastal markets and fewer sales, especially foreclosed properties, in inland areas.

Looking at a single sub-category to help adjust for this change in market mix: The median price paid for a 3-bedroom, 2-bathroom, 1,250-to-1,450-square-foot house built between 1950 and 1985 was $316,500 last month. That was down 0.2 percent from $317,000 in January, and up 13.4 percent from $279,000 in February 2012.

Move-up markets continued to show big sales gains from a year earlier. The number of homes sold in February for between $300,000 and $800,000 – a range that would include many first-time move-up buyers – rose 33.4 percent year-over-year. The number that sold for $500,000 or more jumped 54.0 percent from one year earlier, while sales of $800,000-plus homes increased 62.7 percent compared with February 2012.

Last month, 24.9 percent of all Southland home sales were for $500,000 or more, compared with a revised 22.2 percent in January and 17.4 percent in February 2012.

Sales continued to fall on a year-over-year basis in many lower-cost communities. The number of homes that sold below $200,000 in February fell 26.7 percent year-over-year, while sales below $300,000 dipped 15.4 percent. Sales in many affordable markets have been limited not by a lack of demand, but by a lack of inventory, caused largely by the slowdown in foreclosures and the relatively high percentage of owners who can’t afford to move because they owe more than their homes are worth.

Last month foreclosure resales – properties foreclosed on in the prior 12 months – accounted for 15.8 percent of the Southland resale market. That was down from a revised 17.2 percent the month before and down from 32.6 percent a year earlier. In recent months foreclosure resales have been at the lowest level since September 2007. In the current cycle, foreclosure resales hit a high of 56.7 percent in February 2009.

Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 22.0 percent of Southland resales last month. That was down from an estimated 24.0 percent the month before and 26.9 percent a year earlier.

Investor and cash buying was at or near all-time highs.

Absentee buyers – mostly investors and some second-home purchasers – bought a record 31.4 percent of the Southland homes sold in February. That was up from 30.4 percent the prior month and up from 29.9 percent a year earlier. The monthly average since 2000, when the absentee data begin, is 17.9 percent. Last month’s absentee buyers paid a median $250,000, up 26.3 percent from a year earlier.

The share of homes that were flipped has risen, too: 6.9 percent of all homes sold on the open market last month had previously sold in the prior six months, up from a flipping rate of 6.6 percent in January and 3.7 percent in February 2012. (The figures exclude homes that were resold after being purchased at public foreclosure auction sales on the courthouse steps.)

Buyers paying with cash accounted for 35.6 percent of last month’s home sales, compared with 33.7 percent both the month before and a year earlier. The peak was 35.8 percent last December. Since 1988 the monthly average is 15.9 percent. Cash buyers paid a median $260,000 last month, up 23.8 percent from a year ago.

Credit conditions don’t appear to have changed much so far this year.

Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 21.0 percent of last month’s Southland purchase lending, up from 19.3 percent the prior month and 14.4 percent a year earlier. In the months leading up to the credit crunch that struck in August 2007, jumbos accounted for around 40 percent of the home loan market.

With fixed rates on 30-year loans so low, and aversion to risk in the marketplace high, the use of adjustable-rate mortgages (ARMs) remains very low in an historical context. Last month 5.6 percent of Southland home purchase loans were ARMs, the same as the prior month and down slightly from 5.8 percent a year earlier. Since 2000, a monthly average of about 33 percent of Southland purchase loans were ARMs.

Government-insured FHA loans, a popular low-down-payment choice among first-time buyers, accounted for 25.0 percent of all purchase mortgages last month. That was about the same as 25.1 percent the month before and down from 30.9 percent a year earlier. In recent months the FHA share has been the lowest since summer 2008. The decline reflects tighter FHA qualifying standards implemented in recent years as well as the difficulties first-time buyers are having competing with investors.

The most active lenders to Southern California home buyers last month were Wells Fargo with 8.7 percent of the market, Prospect Mortgage with 2.7 percent, and JP Morgan Chase with 2.5 percent. Bank of America, which had 2.2 percent of the Southern California market last month, recently announced that it was gearing up for a “new run” at the mortgage market. The bank had around 8 percent of the Southland market two years ago.

DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

The typical monthly mortgage payment Southland buyers committed themselves to paying last month was $1,154, up from a $1,140 the month before and up from $998 a year earlier. Adjusted for inflation, last month’s typical payment was 51.1 percent below the typical payment in the spring of 1989, the peak of the prior real estate cycle. It was 60.0 percent below the current cycle’s peak in July 2007.

Indicators of market distress continue to move in different directions. Foreclosure activity remains far below peak levels. Financing with multiple mortgages is very low, and down payment sizes are stable, DataQuick reported.

Sales Volume Median Price
All homes Feb-12 Feb-13 %Chng Feb-12 Feb-13 %Chng
Los Angeles 5,261 5,481 4.20%    $299,000 $350,000 17.10%
Orange 2,111 2,252 6.70% $390,000 $477,000 22.30%
Riverside 3,011 2,833 -5.90% $193,000 $228,000 18.10%
San Bernardino 2,082 1,959 -5.90% $148,000 $175,000 18.20%
San Diego 2,709 2,779 2.60% $305,000 $359,000 17.70%
Ventura 606 641 5.80% $325,000 $389,000 19.70%
SoCal 15,780 15,945 1.00% $264,750 $320,000 20.90%

Source: DQNews.com Media calls: Andrew LePage (916) 456-7157

Copyright 2013 DataQuick. All rights reserved.

Fannie, Freddie to form new company

Margaret Chadbourn , Reuters

March 5th 2013

WASHINGTON — Fannie Mae and Freddie Mac will build a new joint company for securitizing home loans as a stepping stone toward shrinking the government’s role in the mortgage market, the regulator of the U.S. government-controlled firms said on Monday.

“The overarching goal is to create something of value that could either be sold or used by policymakers as a foundational element of the mortgage market of the future,” Edward DeMarco, acting director of the Federal Housing Finance Agency, told the National Association for Business Economics.

Fannie Mae and Freddie Mac, which were bailed out by the government in 2008, help finance about two-thirds of new U.S. home loans. DeMarco is seeking to shrink their footprint and reduce risks to the taxpayers that support the mortgage giants.

Since they were seized by the government, the companies have drawn nearly $190 billion from the U.S. Treasury to stay afloat.

By creating a new securitization company, FHFA intends to pave the way for a single securitization platform and force Fannie Mae and Freddie Mac to abandon their separate systems.

The aim is to shrink the role the two government-sponsored enterprises play in the housing system in the absence of legislation from Congress or direction from the Obama administration on their future.

DeMarco said the goal is to build a single infrastructure to support the mortgage credit business.

The new company will be structured as a joint venture that is owned by Fannie Mae and Freddie Mac, DeMarco told reporters on a conference call to discuss FHFA’s plans.

He said the new joint venture is not expected to begin securitizing loans next year. Instead, the focus will be on creating the business and hiring staff. The company will have a separate chief executive and board.

DeMarco expects Congress will ultimately decide how the securitization platform is operated and whether it should be privatized.

“We are on a path to replace the outdated proprietary operational systems of Fannie and Freddie,” DeMarco told reporters. “It could be turned to some form of a market utility.”

Fannie Mae and Freddie Mac do not directly make loans. They provide financing to banks and lenders by purchasing mortgages, which they either keep on their books or package as securities which they then sell to investors with a guarantee.

DeMarco, in laying out FHFA’s goals for 2013, said he also plans to start reducing Fannie Mae and Freddie Mac’s role in the housing finance system by shrinking their business by 10 percent in the loan market for multifamily homes.

Fannie and Freddie will also aim to complete $30 billion in single-family credit guarantee business in 2013, sharing some of the risk with the private market. Those transactions could include mortgage insurance or other types of debt securities.

The companies will also be required to reduce the less liquid portion of their portfolio of mortgages by 5 percent next year. This goal comes on top of an existing mandate that requires Fannie and Freddie to shrink their investment portfolios over time and turn over profits to taxpayers.

Fannie Mae and Freddie suffered years of losses after the U.S. housing bubble burst, but have returned to profitability thanks to an improving housing market and their success in reducing their portfolios of poorly performing loans.

Even though the loans they have backed recently are performing well, DeMarco noted that the market was still “reliant on federal support, with very little private capital standing in front of the federal government’s risk exposure.”

Republicans and Democrats agree that Fannie Mae and Freddie Mac should eventually be wound down, but they have yet to find common ground on how to replace them.

Copyright 2013 Thomson Reuters.

O.C. house-price gains 4th-highest in nation

March 05th, 2013

 by JEFF COLLINS OC Register

Orange County house prices jumped 11.7 percent in January from the year before, the fourth-biggest gain among large U.S. metro areas, housing data firm Core-Logic reported Tuesday.

The January increase is the biggest annual price gain in single-family homes since April 2006, figures from the Irvine-based data firm show. Orange County house prices have risen for eight consecutive months.

Los Angeles County had the nation’s second-highest price increase in January, with single-family homes selling for 12.2 percent more than in January 2012. Prices rose 12.1 percent in the Inland Empire, the third-biggest large metro-area gain in the nation.

Phoenix had the nation’s biggest price gain, with an annual increase of 22.7 percent in January.

Overall, California house prices increased by 14.1 percent in January year over year , the fourth-biggest percentage gain among states. The Golden State trailed only Arizona (20.1 percent), Nevada (17.4 percent) and Idaho (14.9 percent) in terms of price gains.

Nationwide, the Core-Logic index showed house prices rose 9.7 percent in the year ending in January.

“Home prices continued to gather steam across a broad swath of the country in January, continuing the positive trend we saw during most of 2012,” said Anand Nallathambi, president and CEO of CoreLogic.

Core-Logic reported that every state except Delaware and Illinois had house price gains in January. Fifteen states are within 10 percent of the peak values they reached during the housing boom.

“With these gains, the housing market is poised to enter the spring selling season on sound footing,” said CoreLogic Chief Economist Mark Fleming.