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Don't Throw Money, Time and Energy Away
With rates rising, you must close every prospect. A compliant credit repair company you can rely upon for advice and service -- Credit Repair Resources was voted the best small credit repair company in America! Get your prospects qualified with the best service available.
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| July 23, 2013 ⇒ Where are Rates Going?
⇒ Homebuyers Off The Fence Says Fannie
⇒ Avoid Losing Loans to Builder Lenders--Part 2
⇒ Branch Manager Comp Rises
⇒ Appraisal Proposal May Change
Is This What It Feels Like?
The Great Recession officially started in December of 2007. It officially ended in June of 2009, according to the National Bureau of Economic Research. However, the economic recovery since that time has been anemic to say the least -- "In determining that a trough occurred in June 2009, the committee did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity," the NBER reported in September 2010. After meandering around for over three years since the end of the recession, the economy seems to be returning closer to a normal recovery pattern. This is an extremely long time for a period of returning to normalcy. There is some good news regarding this struggle we have had. For one, the overall recovery has been weaker than normal, yet should last longer than a normal recovery. And we have already seen that interest rates have stayed lower for a longer period of time.
As a matter of fact, this period of record low interest rates is absolutely unprecedented in our history. We will note that oil prices have fully recovered from recessionary prices a while ago. It was only recently that rates started to rise. So the next question is--will rates continue to rise as the economy gets stronger? The most important data to watch in this regard are the employment numbers and releases within the real estate sector. Certainly, these two factors are tied because as one gets stronger so does the other. Right now, we are not seeing numbers that show our economy is overheating. Retail sales are still struggling, especially outside the automobile sector and energy expenditures. Car sales continue to be in recovery mode along with the real estate markets. The bottom line? Yes, the recovery seems to have reached a new phase, but this is not a strong recovery as of yet. We are still in danger of influences that could scale back the recovery and if these scenarios occur, rates could continue to stay low. However, if momentum continues to build, rates could continue to increase in the short run.
 Rates eased back in the past week. Rates eased back in the past week. Freddie Mac announced that for the week ending July 18, 30-year fixed rates fell from 4.51% to 4.37%. The average for 15-year loans decreased to 3.41%. Adjustable rates were mixed, with the average for one-year adjustables unchanged at 2.66% and five-year adjustables falling to 3.17%. A year ago 30-year fixed rates were at 3.53%. Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac -- "Fixed rates on home loans fell as Federal Reserve (Fed) Chairman Bernanke helped ease market concerns about the Fed reducing its bond purchases. During a question and answer session following a speech on July 10th, Chairman Bernanke indicated that a highly accommodative monetary policy is what's needed in the U.S. economy. Indications of a slowing in the economic recovery also placed downward pressure on rates. Consumer sentiment fell to a three month low in July while retail sales in June grew by only 0.4 percent, which was half of the market consensus forecast." In addition, housing starts fell in June to the slowest pace since August 2012." Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.
Current Indices For Adjustable Rate Mortgages
Updated July 19, 2013
Index
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July 18
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June
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6-month Treasury Security
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0.07%
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0.09%
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1-year Treasury Security
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0.11%
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0.14%
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3-year Treasury Security
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0.61%
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0.58%
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5-year Treasury Security
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1.35%
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1.20%
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10-year Treasury Security
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2.56%
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2.30%
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12-month LIBOR
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0.684% (June)
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12-month MTA
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0.159% (June)
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11th District Cost of Funds
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0.951% (May)
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Prime Rate
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3.250%
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  The Ask The Expert Column is sponsored by NACSO. NACSO –- National Association of Credit Services Organizations -- advocates for strong industry standards, consumer protection, and ethical business practices for the credit repair industry. For more information of NACSO's Standards of Excellence and NACSO membership, Click Here. To read the latest blog article on NACSO's site, Why Disputing Credit Report Errors The Way The Experts Recommend Could Hurt, Not Help, Click Here
I took a loan application from a previous client, but then they purchased a new home and the builder gave them $5,000 in options if they went with their preferred lender. Isn't this against the law? Larry from Washington
The question which followed from last week is -- how do you avoid losing your clients in this situation? Two factors are very important in this regard. First, make sure your clients are pre-approved, not pre-qualified, before they start house shopping. This not only enables them to approach a builder with a full-pre-approval, but gives you time to counsel them. For example, you should have them contact you when looking at builder sites and volunteer to review contracts before they are ratified. When you see the contract afterwards, you are not in a good position to get an exception. Secondly, you need to be known to the builders. Builders do make exceptions, but they are likely to make an exception only when the client insists and their loan has already been processed and they are familiar with and like the lender. This means you need to call on and provide value to builders even when you are not the preferred lender. Dave
Do you have a reaction to this commentary or another question you would like answered? Email us at success@hershmangroup.com.
 Breaking News: Potential homebuyers may enter the purchase market sooner rather than later as more Americans expect rates and home prices to climb, according to results from Fannie Mae’s June 2013 National Housing Survey. The share of respondents who say rates on home loans will go up during the next 12 months jumped 11 percentage points to 57 percent, the highest level in the survey’s three-year history. Meanwhile, consumers’ home price expectations have stayed strong in the face of rising rates. The share of respondents who believe home prices will go up in the next year also hit a survey high of 57 percent, while those who say prices will go down stayed steady at 7 percent. Although sentiment toward both the current home buying and selling environments retreated slightly, it remains near the survey highs of last month, with 72 percent saying it is a good time to buy and 36 percent saying it is a good time to sell. “The spike in rate expectations this month seems to have had an impact on a number of the survey’s indicators and may increase housing activity in the near term by driving urgency to buy,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “Consumers may recognize that today’s still favorable interest rates and homeownership affordability levels will recede over time. Given rising home and rental price expectations and improving personal financial attitudes, more prospective homebuyers may be deciding that now is the time to get off the fence.” Among those surveyed, 56 percent say rental prices will go up during the next year – an 8 percentage point increase and the highest level since the survey’s inception – and the average 12-month rental price change expectation jumped 1.2 percent to 4.6 percent. Americans’ outlook on their personal finances also increased significantly in June. The share who expect their personal financial situation to improve during the next year climbed to 46 percent, the highest level since June 2010. The share who say their household income is significantly higher than it was 12 months ago jumped 6 percentage points to a survey high 26 percent. Source: Fannie Mae
Incentive pay to executives and senior managers at independent mortgage banking companies increased significantly in 2012, compared to the leaner years, according to an annual survey by Richey May & Co. “We really did see a remarkable increase” in incentive compensation structures, according to Trevor Reinhart. The Richey May manager for advisory services noted that most loan officers have a base salary plus they receive loan commissions. Despite the regulatory changes involving LO compensation, “we have not seen a remarkable shift,” he said. “There was an uptick” in loan officer compensation in 2012. Loan officers received total compensation averaging 99.7 basis points per loan. On a $100,000 loan that is nearly $1,000 per loan. Total compensation paid to fulfillment personnel (underwriters, processors and closers) averaged $55,000 in 2012, according to the survey. Source: Origination News
CoreLogic released its May National Foreclosure Report with a supplement featuring quarterly shadow inventory data as of April 2013. There were 52,000 completed foreclosures in the U.S. in May 2013, down from 71,000 in May 2012, a year-over-year decrease of 27 percent. On a month-over-month basis, completed foreclosures increased 3.5 percent, from 50,000 in April 2013 to the May level of 52,000. Current residential shadow inventory as of April 2013 was under two million units, representing a supply of 5.3 months. The overall shadow inventory is down 34 percent from its peak in 2010, when it reached three million homes, and down 18 percent from a year ago, when it was at 2.4 million. As a basis of comparison to the 52,000 completed foreclosures reported for May 2013, prior to the decline in the housing market in 2007, completed foreclosures averaged 21,000 per month nationwide between 2000 and 2006. Completed foreclosures are an indication of the total number of homes actually lost to foreclosure. Since the financial crisis began in September 2008, there have been approximately 4.4 million completed foreclosures across the country. As of May 2013, approximately one million homes in the U.S. were in some stage of foreclosure, known as the foreclosure inventory, compared to 1.4 million in May 2012, a year-over-year decrease of 29 percent. Month-over-month, the foreclosure inventory was down 3.3 percent from April 2013 to May 2013. The foreclosure inventory as of May 2013 represented 2.6 percent of all homes with a loan compared to 3.5 percent in May 2012. "The stock of seriously delinquent homes, which is the main driver of shadow inventory, is at the lowest level since December 2008," said Dr. Mark Fleming, chief economist for CoreLogic. "Over the last year it has decreased in 42 states by double-digit figures, resulting in rapid declines in shadow inventory for the first quarter of 2013." At the end of May 2013, there are fewer than 2.3 million home loans, or 5.6 percent, in serious delinquency (SDQ, defined as 90 days or more past due, including those loans in foreclosure or REO). The rate of seriously delinquent home loans is at its lowest level since December 2008. "We continue to see a sharp drop in foreclosures around the country and with it a decrease in the size of the shadow inventory. Affordability, despite the rise in home prices over the past year, and consumer confidence are big contributors to these positive trends," said Anand Nallathambi, president and CEO of CoreLogic. "We are particularly encouraged by the broad-based nature of the housing market recovery so far in 2013." Source: MBA
A proposed rule was issued by six federal financial regulatory agencies that would create exemptions from specific appraisal requirements for a subset of higher-priced home loans. The proposed exemptions would save borrowers both time and money as well as promote the safety and soundness of creditors. The Dodd-Frank Act imposed appraisal requirements for high-priced loans. Under the act, loans are deemed "higher-priced" if they are secured by a consumer’s home and have rates above a certain threshold. The rule proposed would allow the following three types of higher-priced home loans to be exempt from the Dodd-Frank Act appraisal requirements: loans of $25,000 or less, certain streamlined refinancings and certain loans secured by manufactured housing. In January, the Federal Reserve Board, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the National Credit Union Administration, and the Office of the Comptroller of the Currency issued a final rule implementing the new Dodd-Frank Act appraisal requirements. As of January 18, 2014, compliance with the final rule will become mandatory. The agencies listed above are jointly issuing the proposed rule on additional exemptions in response to public comments received previously. Source: HousingWire
First-time home buyers make up about 29 percent of the housing market, which is “weaker than the historic norm” of 40 percent, according to Walt Molony, spokesman for the National Association of Realtors ®. As the housing market’s recovery strengthens, why are the numbers of first-time home buyers numbers still so low? The leading culprits have been identified as tight credit conditions, limited housing inventories, and steep competition from investors for the same properties. “Many lower-income home buyers have been effectively cut out of the market” since the housing bubble burst in 2007, says economist Kevin Gillen of the University of Pennsylvania’s Fels Institute. "Whether they're unemployed, underemployed, can't assemble a sufficient down payment or can't get credit, these are problems that disproportionately affect young, first-time home buyers. We've been left with a housing market composed of relatively wealthier households trading relatively high-priced homes with each other." Some economists say they’re starting to see that change, however, with the number of first-time home buyers increasing in some regions, particularly where inventory levels are increasing. "I think there was a huge buildup of potential buyers 'on the fence,' waiting to see what the economy and housing market were going to do," says John Duffy of Duffy Real Estate in Narbeth, Penn. Source: The Philadelphia Inquirer
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