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Were you surprised by the most recent drop in interest rates and the government shutdown?
How much of your income depends upon the direction of rates & the government?
Understanding Rates and the Secondary Markets
Wednesday, October 16
2:00 to 3:30 pm EDT
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The changes in the markets obviously affect your business more than any other single factor. But what do you really know about the influences of the markets? Get the latest economic commentary, plus...
⇒ New! Selling rate shoppers.
⇒ Understanding mortgage commodities: interest rate denominated instruments.
⇒ Understanding spreads that explain rate sheet variances -- such as servicing values.
⇒ The three risks that determine rates.
⇒ Warehouse lines and funding of loans.
⇒ The myths of points and fees.
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| October 15, 2013
⇒ The Employment Report That Wasn't
⇒ FHA Bailout Spurs Reform Efforts--5% down?
⇒ Asking Yes Questions to a Realtor
⇒ HUD Proposes QM Rules for FHA
⇒ Rental Prices Continue to Rise
The Employment Report that Wasn't...
This week of the month we usually present an analysis of the monthly employment data. Only last week the report was not released because of the government shutdown. And if it was released, we really couldn't trust the numbers because the report itself would not reflect the damage that was done during the government shutdown. The employment data covers September and the shutdown began October 1. As a matter of fact, it will be some time before we see how the period of the shutdown really influences the economy. Even the thought of the end of the shutdown brought cheer to the stock market last week. And while we could very well see interest rates and oil prices head back up after a real deal is solidified -- these moves could be short lived because of these unknowns regarding the long-term effects of the shutdown upon the economy.
With the approximate date of the debt ceiling limit approaching, we write this column confident of at least a last minute short-term deal coming to fruition this week. Beyond that, the shutdown of government will serve as a good test of the strength of the recovery. This year the stock market has soared and rates have risen in response to the fact that we were no longer threatened with a double dip recession. The shutdown is a reminder that intervening variables -- both positive and negative -- have a way of telling us that all bets are off the table. You just can't predict the future when it comes down to variables that you can't foresee. And so it will go with the reaction of the economy to the shutdown. Perhaps we will be resilient and bounce right back. Or perhaps this shutdown will wind up slowing the economy down for awhile. Only time will tell us and hopefully there will not be additional intervening variables in the meantime.
Breaking: Rural Housing Loan Program Still Closed. FHA Addresses Approval of Non-Profits During Shutdown.
Rates stabilized in the past week after dropping for the previous three weeks. Freddie Mac announced that for the week ending October 10th, 30-year fixed rates increased slightly to 4.23% from 4.22% the week before. The average for 15-year loans also rose slightly to 3.31%. Adjustable rates followed fixed rates slightly higher as well, with the average for one-year adjustables rising to 2.64% and five-year adjustables increasing to 3.05%. A year ago 30-year fixed rates were at 3.39%. Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac -- "Rates on home loans were little changed amid the federal debt impasse in Washington, D.C. and a light week of economic data releases. Of the few releases, the private sector added an estimated 166,000 jobs in September, which were fewer than the market consensus and followed a downward revision of 17,000 workers in August, according to the ADP Research Institute. The Institute for Supply Management reported a greater slowing in growth in the nonmanufacturing industry in September than the market consensus forecast." 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 October 11, 2013
Index
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October 10
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September
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6-month Treasury Security
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0.07%
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0.04%
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1-year Treasury Security
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0.14%
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0.12%
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3-year Treasury Security
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0.68%
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0.78%
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5-year Treasury Security
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1.44%
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1.60%
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10-year Treasury Security
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2.71%
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2.81%
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12-month LIBOR
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0.653% (Sept)
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12-month MTA
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0.144% (Sept)
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11th District Cost of Funds
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0.956% (Aug)
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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
Part 2 of the answer to this question: I read your column last week and I have a similar question. I have been referred to a Realtor and I want to make sure I get the appointment. How can I increase my chances of making this happen? Phil from Maryland
Last week we moved to the questioning stage of the Realtor meeting. Let's start with my attorney analogy. If an attorney is putting someone on a witness stand, the attorney wants to know exactly what that witness is going to say--both to their questions and to the questions from the other attorney. So they drill and drill the witness to make sure that all bases are covered. I know this personally because I have been an expert witness on a major case in the industry. For us, the analogy would be role playing to make sure we have all possibilities covered. It also means asking the right questions in the right way. For example, let's say that it is apparent that this agent and you will not be doing business. You can then ask them to refer you to another Realtor. That is a good idea. But it is not the proper question. I might ask--is there another Realtor you know that you respect in the industry that perhaps I could learn from? When I call them, can I mention your name? You are much more likely to get a yes to this question. So now we ask--what other non-threatening questions might you ask from an agent after you procured the appointment. More on this next week. Dave
Interested in learning how to move your database of your sphere from a few hundred to a few thousand? It is simple, but not easy. I go over how in my Sphere Marketing Webinar. If you would like to listen to a recording, Click Here for the free trial of the OriginationPro Marketing System which includes the Certified Mortgage Advisor Program and you will get access to the last two recorded CMA webinars, including Maximum Sphere Marketing.
Do you have a reaction to this commentary or another question you would like answered? Email us at success@hershmangroup.com.
 Breaking News. HUD officially proposed its own rule to define a Qualified Mortgage that would be insured, guaranteed or administered by HUD, including single-family forward loans insured by FHA on September 30th. The proposed rule defines all FHA-insured single family loans to be QMs, with the exception of reverse mortgages insured under HUD’s Home Equity Conversion Mortgage program. The Dodd–Frank Act required HUD to propose a QM definition that is aligned with the Ability-to-Repay criteria set out in the Truth-in-Lending Act, as well as the department’s mission to promote affordable financing options for qualified lower income borrowers. HUD’s proposed definition also builds off of the existing QM rule finalized by the Consumer Financial Protection Bureau earlier this year. Key provisions of the proposed rule, of which HUD said a home loan must meet:
- The HUD QM adopts the distinctions between loans that have a safe harbor of compliance with the ability to repay requirement and those that receive a rebuttable presumption of compliance. HUD proposes to change the safe harbor and rebuttable presumption dividing line from the CFPB rule, granting a safe harbor to FHA loans where the Annual Percentage Rate relative to the Average Prime Offer Rate is less than 1.15 percent plus the amount of the annual mortgage insurance premium. Loans above that threshold would receive the rebuttable presumption of compliance. In the CFPB rule, loans received the safe harbor if the APR was not 1.5 percent over APOR. Loans with an APR that exceeded APOR by 1.5 percent were rebuttable presumption QMs.
- The HUD QM adopts the CFPB points and fees cap of 3 percent for loans over $100,000 and the same structure of different caps for lower loan amounts.
- The HUD proposed rule changes the requirements for a borrower to rebut the presumption. The CFPB rule requires that a borrower prove that they had insufficient residual income to meet their housing finance obligations. HUD would require “that despite meeting the ‘rebuttable presumption QM ’ requirements, the mortgagee did not make a reasonable and good-faith determination of the borrower’s repayment ability at the time of consummation, as applicable to the type of loan, when underwriting the loan in accordance with HUD requirements, or that the points and fees limit was exceeded.”
- For FHA streamlined refinances, the proposal would require FHA streamlined refinances to comply with the proposed HUD QM rule. In the case of streamlined refinances however, HUD adopts a rebuttable presumption of compliance that “only be rebutted by showing that the lender did not meet the applicable HUD requirements for originating streamlined refinances, including the points and fees limit.” Source: MBA
The Federal Housing Administration’s admission that it faces a budget shortfall for fiscal year 2013 and must take a $1.7 billion draw from the U.S. Treasury is increasing pressure within Congress to pass a FHA reform bill. “There is broad consensus that the FHA must be reformed: this draw from Treasury will only serve to further solidify this consensus,” said Edward Mills, a policy analyst with FBR Capital Markets. The House and Senate banking committees passed FHA reform measures this summer. But they are very different bills. The Senate version, which enjoys bipartisan support, mainly strengthens and clarifies FHA authority to police lenders and manage the FHA mortgage insurance fund. Senate Banking Committee chairman Tim Johnson, D-S.D., and ranking member Mike Crapo, R-Idaho, co-sponsored the FHA bill. Crapo said the Treasury draw “reinforces the need for Congress to pass FHA and broader housing finance reform.” Meanwhile, House Financial Services Committee chairman Jeb Hensarling, R-Texas, warned that FHA is headed toward financial disaster. “Unless Congress enacts sustainable housing finance reform, it is possible taxpayers will be forced to write blank bailout checks to the FHA indefinitely,” the Texas congressman said. The House FHA reform bill would restrict FHA loans to first-time homebuyers and low- and moderate-income borrowers. It also raises the FHA downpayment requirement to 5%. The House bill, also known as the PATH (Protecting American Taxpayers and Homeowners) Act also reduces the 100% FHA mortgage insurance coverage over five years to 50% of the loan amount. Despite the sense of urgency, the FBR Capital Markets analyst says FHA reform will probably be sidelined until next year. The debate over Fannie Mae and Freddie Mac has “eclipsed the FHA reform debate,” Mills said. Source: National Mortgage News
CoreLogic has released its Mortgage Fraud Report showing that fraud risk among U.S. applications for home loans declined 5.6 percent year over year in the second quarter of 2013. According to the report, fraudulent residential loan applications totaled an estimated $5.3 billion nationally in the second quarter of 2013, down from $5.5 billion in the second quarter of 2012, but up slightly from $5.2 billion in the first quarter of 2013. Fraudulent loan applications reached a combined value of approximately $10.5 billion for the first half of 2013. The analysis indicates that during the second quarter of 2013 approximately 19,700, or 0.8 percent, of applications were identified as having a high risk of fraud, down from 20,900, or 0.7 percent, in the second quarter of 2012. Quarter over quarter, fraudulent application volume remained relatively flat. The CoreLogic Mortgage Fraud Report examines the collective level of fraud risk among applications at the national, state and Core Based Statistical Area (CBSA) levels. Developed using the company’s proprietary fraud data and predictive scoring technology, the report measures overall fraud activity based on the CoreLogic Mortgage Application Fraud Risk Index, as well as within six specific indexes: income, occupancy, employment, identity, property and undisclosed debt. Source: NMP Daily
According to the Wall Street Journal, rising home-buying costs are pushing people into apartments, causing landlords to pass along hefty rent increases this summer. The average monthly rent in the third quarter was $1,073, up 1% from the prior quarter, the largest quarterly gain in a year, according to a report to be released Tuesday by Reis Inc., a real-estate research firm. Compared with the third quarter a year ago, average monthly rent was up 3%. None of the 79 markets tracked by Reis saw rents fall. Source: The WSJ |
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