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| May 28, 2013 ⇒ Deficits Shrink
⇒ Pocket Listings - Ethical?
⇒ Suspicious Activity Reports Down
⇒ Advising Customers on Rate Direction
⇒ QM Rule Will Change
A Lesson To Be Learned
Whipsaws and whiplash. We all know what the term whiplash means when someone gets into a car accident. When we hear the term, we envision a painful neck injury and maybe a neck brace. This term is also often used with the term "whipsaw" when observing the markets. A whipsaw occurs when the market moves erratically in several directions. And if you follow that market, you can get economic whiplash. Now the stock market has not been that erratic as it has steadily moved upward this year with a few days of retrenchment here and there. However, the bond market has been a bit more schizophrenic in its personality this year. For the past few years, the bond market has been a safe haven from volatile markets. The Federal Reserve Board pushed rates down and the struggling economy kept them down.
Anyone who purchased or refinanced a home or bought a car has seen the benefit of low rates in the past few years. And those who put their money into bonds have seen a good steady return for the most part. At the beginning of this year, it appeared that the economy was going to start to roll. Rates made their first move upward in the first several months. Then came some headlines in Cyprus, the Boston bombing and some weaker economic reports. Rates edged back down to near historic levels. The stronger-than-expected employment report caused rates to move up in short order. That is a lot of movement for a market which still features historically near record lows. On the other hand, it is a lesson to be learned. When rates decide to move upward, there is nothing the Fed can do about it. And we will get no warning.
 Rates rose for the third straight week. Freddie Mac announced that for the week ending May 23, 30-year fixed rates rose from 3.51% to 3.59%. The average for 15-year loans increased to 2.77%. Adjustable rates were stable, with the average for one-year adjustables remaining at 2.55% and five-year adjustables climbing slightly to 2.63%. A year ago 30-year fixed rates were at 3.78%. Attributed to Frank Nothaft, Vice President and Chief Economist, Freddie Mac, "Fixed-rates moved up for the third consecutive week, with the average 30-year fixed-rate about a quarter-percentage point higher than three weeks ago. While this may slow some of the refinance momentum, rates are nonetheless low and home-buyer affordability high, which should further aid home sales and construction in coming weeks. For instance, in April, single family housing permits rose to the strongest pace since May 2008 while existing home sales for the same month grew the most since November 2009. Moreover, the National Association of Realtors® reported that the median number of days on the market for these sales fell from 62 to 46 days, the fewest since it began collecting the data in May 2011." 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 May 24, 2013
Index
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May 23
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April
|
6-month Treasury Security
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0.08%
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0.09%
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1-year Treasury Security
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0.12%
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0.12%
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3-year Treasury Security
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0.37%
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0.34%
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5-year Treasury Security
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0.79%
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0.71%
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10-year Treasury Security
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1.87%
|
1.76%
|
12-month LIBOR
| |
0.717% (Apr)
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12-month MTA
| |
0.169% (Apr)
|
11th District Cost of Funds
| |
0.967% (Mar)
|
Prime Rate
| |
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. Click Here to read the latest NACSO Blog Article: Negotiating Collections.
I am confused about the direction of interest rates. I told all my clients that rates were going up from here. Yet, in the past several weeks, they went down before popping up again. What is your take? Samuel from Georgia
Though I write an economic commentary every week, don't get the impression that I know where rates are going. Fed Chairman Bernanke refinanced a few years back and then refinanced again because rates went down some more. If the Chairman of the Fed can't predict rates and neither can economists, how can we? Here is about all I would say to a customer -- Rates are great right now. It is your decision, but if you are happy where they are, I would not hesitate. Because rates are so low, there is a greater chance they will go up than go down. However, I am not going to predict one way or the other because you can't predict the future.
It is their loan. When you tell them rates are going one way or the other and you are wrong -- who pays? They do. You don't make their monthly payment. Since you will be wrong sometimes, there is no reason to risk losing an important relationship with advice that gets you nowhere. Dave
Do you have a reaction to this commentary or another question you would like answered? Email us at success@hershmangroup.com.
 Breaking News: Did you hear about the loan underwriter who demanded a letter from the borrower's doctor stating the borrower had been healed and his illness would not come back? How about the underwriter who wanted a verification of employment from the borrower who listed her occupation as "homemaker"? Yes, things are tough out there. And despite some evidence that lenders are easing up just a tad, in the new world of "prove everything — and prove it twice," there have been some unusual demands, to say the least For example, lenders like to determine the source of funds that are deposited into applicants' accounts. They want to make sure that money for a down payment is the applicant's, as opposed to loan from a friend, relative or other lending institution. That makes sense. After all, if it's not the borrower's money, he has no skin in the game. And it becomes too easy for him to walk away from the loan later if he should not be able to pay as promised. Or he might not be able to afford to pay back two loans, one from the bank and the other from some unknown entity. But in one case, the underwriter — the person who is responsible for reviewing all documentation for a loan to make sure that it conforms to the lender's requirements — asked for a letter of explanation on a $6 deposit from a borrower who earned $10,000 a month. And in another instance, a borrower who had deposited $235 from a garage sale was asked for an ad proving that she did, indeed, have the sale. Yes, despite the need to know, some requests are just plain ridiculous. "Absurd," said Karen Deis, who operates MortgageCurrentcy.com, a website that keeps loan officers, processors and underwriters current on the ever-changing regulations and guidelines for FHA loans, VA loans, Fannie Mae and Freddie Mac. Source: Los Angeles Times
With the housing rebound in full swing, “pocket listings” are growing in many parts of the country as some sellers look to preserve their privacy, and brokers use them to trigger an aura of exclusivity to a listing. But some in the industry worry that exclusivity may be crossing an ethical line. Pocket listings refer to situations in which real estate agents purposely keep sales information about a home off the multiple listing services, and brokers only show that house to people they expect to actually purchase it. The National Association of Realtors® does not have an official policy on pocket listings, spokesman Walt Molony told CNNMoney. But some real estate boards say they don’t like the practice. In New York, the practice of “pocket listings” violates the Universal Co-Brokerage Agreement, which requires agents to share listings, maintains Neil Garfinkel, counsel for the Real Estate Board of New York. Some housing experts also say that pocket listings create a gray area when an agent is able to collect double commission from the deal by acting as the agent for both the buyer and seller. "If an agent is putting their own economic interest ahead of the seller’s, it’s a violation of state law," Garfinkel says. However, "most of the time, pocket listings are done ethically and fairly," Betty Graham, president of Coldwell Banker Previews International/NRT, told CNNMoney. If the home doesn’t sell quickly as a "pocket listing," many agents say they’ll then advise their clients to readjust their price and list the home publicly on the MLS. But some agents say a few sellers may prefer the privacy of pocket listings because they’re not highly motivated to move — unless someone offers them a “make-me-move” deal with a great price, CNNMoney reports. Source: CNNMoney
For the second time this year, the U.S. Department of Housing and Urban Development (HUD) will sell thousands of severely delinquent loans insured by the Federal Housing Administration (FHA) as part of a broader effort to address the housing market’s shadow inventory and to target relief to areas experiencing high foreclosure activity. This summer, HUD will sell approximately 20,000 distressed loans through its expanded Distressed Asset Stabilization Program (DASP) to increase recoveries to FHA’s Mutual Mortgage Insurance (MMI) Fund from non-performing FHA-insured loans, while contributing to stabilization and recovery in some of the nation’s communities hit hardest by the housing crisis. Like previous note sales, HUD’s offerings will be conducted through two auctions – on June 26th, the Department will sell approximately 15,000 notes through ‘national pools’ and on July 10th will offer approximately 5,000 notes through Neighborhood Stabilization Outcome (NSO) pools. The NSO pools will offer qualified bidders notes located in the following areas: Southern California, Chicago, southern Ohio (including Cincinnati, Columbus and Dayton), and the entire state of North Carolina. HUD is expanding the use of single-family loan sales through a competitive bidding process in which loan pools are sold to the highest bidder, including non-profit and community-based organizations. “We’ve seen a tremendous response to our note sales which allow us to support particular areas of our country hard-hit by foreclosures while improving outcomes for FHA,” said FHA Commissioner Carol Galante. “These auctions allow us to continue stabilizing hard-hit housing markets and to improve FHA’s overall financial position at the same time.” Source: NMP Daily
The Consumer Financial Protection Bureau has proposed a number of technical changes to the qualified mortgage rule that are pretty substantial when it comes to underwriting QM loans. The final QM ability-to-repay rule issued in January suggested that underwriters should be predictive and gauge the borrower’s ability to hold their job over the next three years. The CFPB adopted this requirement from a HUD handbook on credit analysis. But lenders complained that employers refuse to confirm a borrower’s future job status. In a proposed rule issued April 19, the bureau agreed with stakeholders and drafted a more practical approach. “The bureau is proposing to remove the requirement that creditors obtain the ‘employers confirmation of continued employment’ and instead require only that creditor examine a confirmation of current, ongoing employment,” the proposal says. The CFPB is seeking comment on the proposed QM rule changes for a short 30-day comment period. In issuing the QM rule, CFPB officials said they would provide guidance and respond to questions. But industry groups were skeptical, according to Richard Andreano, a practice attorney at Ballard Spahr. But it looks like the bureau is following through on that and the industry generally views that as positive,” Andreano told NMN. “They are trying to make the underwriting guidelines they adopted work in the real world,” he added. Source: National Mortgage News
The number of suspicious activity reports from banks citing possible loan fraud decreased by 29% last year, the first drop in 16 years. Until 2012, mortgage loan fraud was the only suspicious activity report that increased every year, beginning in 1996. The past three years alone accounted for nearly 46% of all instances of potential residential loan fraud in the past decade, the Financial Crimes Enforcement Network said in a report Wednesday. Fraud-related activities, including residential loan fraud, accounted for 23% of all suspicious activities reports from depository institutions in 2012. This is a modest decrease when compared to FinCEN's 2011 calendar year. However, only two of the seven fraud types saw a decline in reported activity in 2012, with each of these experiencing double-digit decreases, including residential loan fraud. Attention to insider abuse activities within financial institutions is high, and insider abused-related criminal prosecutions have increased. The Federal Bureau of Investigation said while a majority of bank failures in recent years resulted from declining market conditions, insider abuse caused by bank officers and directors remains a factor in many loan fraud activities recorded in the past decade. Some of the activities that raised red flags include engaging in loan fraud by submitting misrepresentations of borrowers’ income, employment, credit, occupancy and other requirements. Loan officers were often identified as employees in some of these activities. Meanwhile, broker relationships comprised 4% of the total data-set. All SARs reviewed in this category involved real estate or mortgage brokers engaged in loan fraud. Typical activities tied to brokers include submission of fraudulent information or statements, misrepresentations of occupancy or employment, or other tactics utilized in fraudulently obtaining a home loan for which a borrower would not otherwise qualify. "Some accountant borrowers committed residential loan fraud on their own behalf by providing false financial or occupancy information with their loan application," FinCEN explained. The agency added, "In order to appear better qualified for a loan, some non-accountant borrowers committed fraud by altering documents that had been prepared by their accountant." Source: HousingWire |
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