Economic activity was suppressed in the first quarter due largely to the West Coast port disruptions and difficult weather patterns across the Northeast, but the economy is expected to gain momentum throughout the spring and reach previously anticipated levels by year-end, according to Fannie Mae’s Economic Strategic Research Group.
While they have adjusted downward first-quarter growth from the prior forecast, the ESR Group’s full-year 2015 growth projection remains unchanged at 2.8%. Risks remain tilted to the downside, however, as consumer spending may be weaker than anticipated and the financial markets are likely to experience some volatility leading up to the Fed’s first expected rate hike in the coming months.
“We have downsized our first-quarter economic growth expectations in light of several transitory factors that weighed on consumption, but our outlook is largely the same as what we forecasted in March,” said Fannie Mae Chief Economist Doug Duncan.
“Although some momentum was lost in the first quarter as consumers remained cautious in their spending, perhaps putting an emphasis on repairing their personal balance sheets and replenishing savings, we expect that consumer spending will catch up during the second quarter and continue in subsequent months, supporting our forecast of 2.8% growth for the year,” Duncan said. “We believe this momentum will carry over into the housing market, as well, particularly if strong consumer income growth continues.”
Fannie Mae integrated Collateral Underwriter with Desktop Underwriter and EarlyCheck in order to help lenders more effectively manage risk and underwrite stronger loans.
Collateral Underwriter is Fannie Mae’s proprietary appraisal analysis application, providing lenders access to analytics as well as underlying appraisal, public records and other data when evaluating the risk on an appraisal.
In October of last year, Fannie announced lenders could use its proprietary appraisal analysis application, Collateral Underwriter, to analyze loans prior to closing to ensure that the loans conform to Fannie’s standards, which should decrease repurchase risk.
With this integration, Collateral Underwriter risk score, flags and messages for appraisals submitted to Fannie Mae through the Uniform Collateral Data Portal will be available for display in DU and EarlyCheck.
As a result, it will provide a more holistic view of risk on a loan across multiple applications, enabling lenders to better address potential issues prior to loan delivery.
“This integration is the next step in our efforts to make it easier to work with Fannie Mae by helping lenders to efficiently manage risk and build strong, profitable businesses,” said Marianne Sullivan, Fannie Mae’s Senior Vice President for Single Family Business Capabilities. “DU, CU and EarlyCheck are foundational tools for a strong housing finance system going forward.”
Late Friday, mortgage-finance companies Fannie Mae and Freddie Mac unveiled changes to the fees they charge to back mortgages. The Federal Housing Finance Agency, which regulates the companies, also disclosed finalized capital requirements for private-mortgage insurers who want to do business with the companies.
Both announcements might seem obscure, but they directly affect mortgage costs for thousands of borrowers. Here’s what you need to know.
What are the fees and why should I care?
Fannie and Freddie don’t make mortgages, but they do buy them from lenders, put them into securities and guarantee to make investors whole if the mortgages default. That guarantee is in part what enables 30-year, fixed-rate mortgages to exist in the United States, while they’re not available in many other parts of the world.
But to make that guarantee, Fannie and Freddie charge lenders fees, based in part on the perceived riskiness of the borrower. For Fannie and Freddie, the fees offset expected losses from some borrowers defaulting, pay for administrative expenses and provide income to Fannie and Freddie. They would also help Fannie and Freddie build a capital buffer in case a more serious economic event caused a wave of defaults, but an agreement with the government sends most of Fannie’s and Freddie’s profits to the U.S. Treasury right now.
Lenders pass the fees to borrowers in the form of higher mortgage rates. So when the fees go up or down, borrowers can expect rates also to change.
What did they change this time?
After more than a year of review, the FHFA basically decided to hold fees constant. Although some of the internal moving parts that make up the companies’ fees changed, the fees’ overall level was meant to stay steady.
There are some exceptions for certain kinds of borrowers. Fannie and Freddie by Sept. 1 will raise fees on certain kinds of loans, such as those for investment properties, mortgages with secondary financing (a.k.a. “piggyback loans”) and cash-out refinances.
On the other hand, fees will go down slightly for some riskier borrowers who make smaller down payments or have lower credit scores.
The changes are so miniscule that you probably won’t even notice. Typical borrowers won’t see a break in their mortgage rates of more than 0.05 percentage point or a hike of more than 0.07 to 0.1 percentage point. That’s less than rates move in a week.
So why are some people mad about this?
In taking a middle route, the FHFA has likely angered parties on each end of the political spectrum. Affordable housing advocates, and some in the real-estate industry, had wanted to see a bigger break, especially for borrowers with low down payments and low credit scores. The Federal Housing Administration—a separate agency that also backs loans to such borrowers—cut fees by half a percentage point earlier this year, creating hope among some that the FHFA might also make a big move.
On the conservative side, many will be disappointed that Fannie and Freddie aren’t going to raise fees. Under former leadership, the FHFA had raised fees several times with the idea of enticing more private investors to expand into the mortgage market. Those efforts so far haven’t worked.
What does private-mortgage insurance have to do with this?
On Friday, the FHFA also announced new capital requirements for private-mortgage insurers who want to do business with Fannie and Freddie.
Borrowers typically must buy private-mortgage insurance when they make a down payment of less than 20%. The PMI protects Fannie and Freddie from some losses if a borrower defaults.
During the financial crisis, losses from defaults proved to be more than some insurers could bear, throwing them into peril. The new, tougher capital standards are intended to ensure that doesn’t happen again and reduce risk for Fannie and Freddie.
The FHFA thinks that even under the new standards, MI prices should stay about the same, but some insurers might charge more to meet the new requirements, which would mean higher costs for low-down-payment borrowers.
If mortgage insurers do decide to raise prices, “taken together, the moves that FHFA has announced on pricing and the MIs will have almost no effect on the total cost of credit for most consumers,” writes James Parrott, a former Obama White House adviser and senior fellow at the Urban Institute.
“Mortgage rates were little changed following a light week of economic reports and remaining low at the spring homebuying season,” said Len Kiefer, Freddie Mac’s deputy chief economist. “Of the few releases, the advance estimate of retail sales [PDF] rebounded 0.9 percent in March though slightly below market expectations. Meanwhile, the National Association of Home Builders/Wells Fargo Housing Market Index jumped 4 points to 56 in April, suggesting home builders are optimistic and the housing market will continue to strengthen in 2015.”
• 30-year fixed-rate mortgage (FRM) averaged 3.67 percent with an average 0.7 point for the week ending April 16, 2015, up from last week when it averaged 3.66 percent. A year ago at this time, the 30-year FRM averaged 4.27 percent.
• 15-year FRM this week averaged 2.94 percent with an average 0.5 point, up from last week when it averaged 2.93 percent. A year ago at this time, the 15-year FRM averaged 3.33 percent.
• 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.88 percent this week with an average 0.5 point, up from last week when it averaged 2.83 percent. A year ago, the 5-year ARM averaged 3.03 percent.
• 1-year Treasury-indexed ARM averaged 2.46 percent this week with an average 0.4 point, unchanged from last week. At this time last year, the 1-year ARM averaged 2.44 percent.
The Power Broker Roundtable is brought to you by the National Association of REALTORS®. Watch for this column each month, where we address broker issues, concerns and milestones.
Jim Imhoff, Chairman, CEO, First Weber Group, Madison, Wisc.; Special Liaison for Large Firm Relations, the National Association of REALTORS®
Sherry Chris, President/CEO, Better Homes Gardens Real Estate, Madison, N.J.
Candace Adams, President/CEO, Berkshire Hathaway Home Services New England Properties, Wallingford, Conn.
Rick Haase, President, Latter Blum REALTORS®, New Orleans, La.
Jim Imhoff: No matter the state of the market or the economy, buying a home is still one of life’s most important decisions—and most people faced with making it expect the same level of knowledge and integrity from their real estate agent as they expect from their medical doctors. That in itself is nothing new. It was foreseen and addressed more than 100 years ago when the founders of the National Association of REALTORS® (NAR) wrote the REALTOR® Code of Ethics into the fabric of our industry. Now, in the age of social media, with consumers searching for references and reviews on everything from dentists to mustard sauce, it is more critical than ever to the success of real estate professionals to be cited and recommended publicly as trusted, reliable advisors. That’s why the REALTOR® Code of Ethics has been our standard for over 100 years. So we are asking our panelists today—outstanding leaders known for their integrity—how we can ensure that our agents are living up to the standards set by the Code of Ethics that guarantee honest dealings with clients, the public and other REALTORS®? Sherry, what do you think?
Sherry Chris: I think there is nothing more important in our industry than the reputation of an agent and the brokerage he or she works with. Referrals, which are the lifeblood of our business, are a direct result of the ethical standards we demonstrate—and there’s no question the REALTOR® Code of Ethics is critical to keeping those standards high. It’s the reason we insist on mandatory Ethics training by every REALTOR®.
Candace Adams: The standards set by the Code are central to every transaction—so central that we laminate bookmarks and frame posters with the Articles of the Code as constant reminders to our agents. Although we have an on-staff attorney, every agent is held strictly accountable for knowing and maintaining the principles of the Code of Ethics.
Rick Haase: What the Code is, really, is a set of pledges for how REALTORS® will engage with each other and with the public—for example, with disclosure issues, or ensuring earning commissions is secondary to the needs and interests of clients. We govern ourselves, so that government and other entities don’t do it for us—because they will almost surely get it wrong.
JI: NAR’s Professional Standards Committee has the opportunity to consider potential changes to the Code twice a year, in May and November. These are all volunteers—members of the Interpretations and Procedures Advisory Board, staff at state and local associations, and REALTORS® who take the time to determine what issues might be addressed—so there are a lot of eyes and different groups involved at the national level to be sure the Code is updated and relevant. But complaints and alleged violations, as you know, are handled at state and local association levels. Do you think that’s important?
RH: Yes, issues should be handled locally. It’s the process you agree to when you join your local Board of REALTORS®, and it’s a process that works.
CA: Enforcement is important as well. Every REALTOR® must be held accountable.
SC: There is not much point in continuing education unless you are aware what can happen down the line if you do not maintain your obligations as an ethical, professional agent.
JI: On the other hand, it’s just as critical for brokers to recognize and reward quality service. In our company, based on customer surveys, we present agents with quality of service awards that have nothing to do with production—only with recognized service excellence.
RH: Times have changed, but our values haven’t, thanks to the REALTOR® Code of Ethics. If anything, we keep updating our values with specific reference to issues like gender identification and sexual orientation as they relate to fair housing.
SC: NAR does a great job keeping us aware of expectations. As brokers, we need to look for creative ways to keep those standards top of mind. You said it, Jim—consumers trust us to help them make some of the most important decisions of their lives. We must aspire to the highest ideals so that we never violate that trust.
JI: Much more about the REALTOR® Code of Ethics can be found at www.REALTOR.org/code-of-ethics.
The government housing agency Fannie Mae has launched HomePath Ready Buyer program, which allows
qualifying candidates to receive up to 3 percent of the purchase price of a Fannie Mae
To qualify, buyers must not have owned a home within the past three years, must complete an
online homebuyer education program and must plan to live in the home, among other criteria.
As of last week, Fannie Mae listed 114 central Ohio homes for sale, ranging from a two-bedroom
condominium on Burgandy Lane near Eastland Mall for $14,900 to a four-bedroom, three-bath,
3,481-square-foot home on Mumford Road in Upper Arlington for $429,900.
For a list of the properties and details about the program, visit www.homepath.com.
— Jim Weiker
The Mansfield Association of Realtors does not require its members to submit commercial property listings into the Multiple Listing Service, although some members do. Because there is no requirement, the MLS cannot track accurate local data on commercial sales for Richland and Crawford counties. However, based on figures taken from the National Association of Realtors Research Division, MAR expects commercial sales, leasing and rents to increase in 2015.
Below is a look at the commercial outlook report from February 2015, where we base our optimism.
• Commercial — Fundamentals improved in the fourth quarter 2014, with rising net absorption driving rents higher across the major property types. As employment gains are expected to continue into 2015, demand for commercial space is expected to advance.
The pace of advance likely will vary by property type. While office absorption is projected to total 47.7 million square feet in 2015, vacancy rates will continue a gradual decline to 15.7 percent by the end of the year. Office vacancies remain elevated because of continued gains in space-utilization efficiencies. Office rents are forecast to rise 3.3 percent in 2015.
• Industrial markets — These have been benefiting from rising trade and the continued shift toward electronic commerce, both of which have led to strong demand for distribution warehouse space. Net absorption of industrial space is estimated to total 102.2 million square feet this year. With new supply projected to reach 82 million square feet, availability rates likely will decline to 8.3 percent by the fourth quarter. Industrial rents should experience a 3.0 percent gain for the year.
• Retail markets — Retail markets are experiencing improvement at an uneven pace. Coastal markets remain top performers, displaying low vacancies and rising rents. However, space utilization is undergoing a transformation, as retail outlets are scaling back floor space in favor of e-commerce distribution channels. Absorption is expected to reach 15.7 million square feet nationally in 2015, lowering vacancies to 9.6 percent by the last quarter of the year. Rents are projected to rise 2.5 percent this year.
• Multi-family — Demand is expected to remain strong, as the pace of household formation closes on historical averages. However, 2015 will mark the first year since the recession that supply likely will outpace demand. Apartment net absorption is estimated to reach 171,978 units in 2015. New apartment completions will add 230,411 units on the market this year. The volume of new space is expected to lead to an increase in apartment vacancies from 4.1 percent in the first quarter to 4.3 percent by the fourth quarter 2015. Rent growth is likely to slow from above 4.0 percent over the past few years to 3.7 percent in 2015.
• Investment sales — Investment sales for properties in Realtor markets advanced 9.5 percent year-over-year in the fourth quarter of 2014. Prices rose 3.8 percent year-over-year during the period. Cap rates averaged 8.0 percent in the fourth quarter, a 23 basis point decline from the previous quarter and 167 basis point drop year-over-year.
Barbara Murray is executive officer of the Mansfield Association of Realtors.
PROPERTY INDEX RETURNS: 2014.Q4
Fannie Mae and Freddie Mac are embarking on an ambitious pilot program designed to remove thousands of vacant, foreclosed homes from their books and repair neighborhoods throughout Chicago and suburban Cook County.
The two agencies, which own more foreclosed properties than anyone else, are expected to announce Wednesday they will offer qualified nonprofit groups and their developers an option to buy foreclosures, often at a discount, before the properties are publicly listed for sale. The program will initially include about 3,800 single-family homes, condominiums and two- to four-flats but that number will fluctuate as Fannie and Freddie take possession of properties at the end of the foreclosure process.
The worst of the blighted properties will be offered for as little as $1, with a major contribution to cover the cost of demolition. Other residences that can be salvaged, rehabbed and returned to the market could also be sold at a discount, but generally the discounts will not exceed 20 percent of market value.
Also Wednesday, the agencies are expected to announce they are undertaking another loan modification effort in Cook County, to help seriously delinquent borrowers who have homes valued at $250,000 and less.
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A similar two-pronged effort to repair the damage wreaked by the nation’s housing crisis was begun in Detroit last year, but officials of the Federal Housing Finance Agency, which oversees Fannie and Freddie, don’t consider the Detroit program a benchmark, given that city’s state of disrepair. However, if the Chicago-area pilot makes inroads, it could be replicated in other hard-hit housing markets.
“The goal here is to get these properties in our portfolio sold sooner rather than later and to get them into the hands of these partners, who are doing good work in a community,” said Eric Will, a senior sales director at HomeSteps, Freddie Mac’s foreclosed homes sales unit.
Mary Ellen Podmolik Consumers think it’s a good time to sell a home but they aren’t so keen on buying one. Consumers think it’s a good time to sell a home but they aren’t so keen on buying one. ( Mary Ellen Podmolik ) –>
The initiative has been months in the making but is no slam-dunk and local housing organizations, briefed on the program Tuesday, say its success largely will depend on a few key factors tied to its execution. Chief among them are the price tags attached to the properties. Home prices have improved in the broader market, and if foreclosures are priced higher than local organizations think they are worth, the discounts don’t make them any more attractive. Also, organizations will have to be strategic in their choices and concerted in their efforts so they can work in areas where the purchases will make a difference and where consumers want to buy renovated homes.
And then there’s the homes left out: Fannie Mae and Freddie Mac own another 1,300 properties in Chicago and Cook County that are listed for sale publicly. Those properties are not part of the program and carry no discounts. The existence of some of those unwanted, boarded-up eyesores owned by Fannie and Freddie, as well as the thousands of foreclosures held by banks, may limit a potential turnaround in some communities.
Still, local groups are optimistic, saying it’s a start.
“Fannie and Freddie are the largest single holder of properties in Cook County,” said Bridget Gainer, Cook County commissioner and chairwoman of the Cook County Lank Bank Authority. “We don’t want to buy a house here, a house there. You want to have all the houses on a block. Up until now, when you’ve had access to only a portion of that portfolio, it’s harder to be strategic.”
Under the Enhanced First Look program, nonprofit organizations that are qualified as buyers by the National Community Stabilization Trust will have 12 days to express interest in and negotiate a price for a vacant, foreclosed home that Fannie Mae or Freddie Mac take possession of at the end of the foreclosure process. If no one steps forward, the home will move to both agencies’ First Look programs, which means they are listed with real estate agents and offered for sale for 20 days to owner-occupants before offers from investors are considered.
A searchable map will show the addresses of properties expected to be available to nonprofits after repairs are made, they are vacated or the home completes the foreclosure process. Currently, the stabilization trust has 22 vetted community buyers in the Chicago area that work with 39 nonprofit and for-profit developers, and it hopes more will step forward.
“The key here is time is not our friend,” said Craig Nickerson, president of National Community Stabilization Trust. “A foreclosed property has a viral, contagious effect on a neighborhood. It’s incumbent on us to move quickly and find a buyer.”
Chicago Neighborhood Initiatives, a community development group working in the city’s Pullman neighborhood and a pre-qualified buyer, expects to be among the potential buyers combing the map for acquisitions. If the program works as planned, David Doig, the group’s president, thinks the effort will get some hard-hit communities over the hump and into recovery mode.
“An effort to get these properties back into productive use is important psychologically, for the community, for the neighbors from a crime-safety standpoint,” Doig said. “When these things just sit on the market, they inevitably get vandalized and trashed and it becomes all that more expensive to rehab them. The more we can save in acquisition, the more we can put into rehab and keep it affordable.”
The pilot program comes as Fannie and Freddie are taking other steps to whittle their portfolio. The two entities also are conducting bulk sales of nonperforming loans.
Copyright © 2015, Chicago Tribune
Fannie Mae and Freddie Mac will reduce fees for some borrowers with low credit scores and little cash for down payments, the mortgage companies said on Friday, but the changes are so small that few borrowers will notice.
The companies’ regulator, the Federal Housing Finance Agency, on Friday unveiled long-awaited changes in the fees that Fannie and Freddie charge to back loans, which are typically passed through to borrowers in…
Freddie Mac (OTCQB: FMCC) recently priced its first 10-year floating rate offering of Structured Pass-Through Certificates (“K Certificates”) which are multifamily mortgage-backed securities. The company priced approximately $1.1 billion in K Certificates (“K-F07 Certificates”), which are expected to settle on or about April 24, 2015. This is the company’s seventh K Certificates offering this year.
Quote from Mitchell Resnick, vice president of Freddie Mac Multifamily Capital Markets:
The K-F07 Certificates will not be rated, and include one senior principal and interest class and one interest only class. The K-F07 Certificates are backed by corresponding classes issued by the FREMF 2015-KF07 Mortgage Trust (“K-F07 Trust”) and guaranteed by Freddie Mac. The K-F07 Trust will also issue certificates consisting of the Class B, C, and R Certificates, which will be subordinate to the classes backing the K-F07 Certificates. The K-F07 Trust Class B, C, and R Certificates will not be guaranteed by Freddie Mac.
Freddie Mac Multifamily is a leading issuer of agency-guaranteed structured multifamily securities. K-Deals are part of the company’s business strategy to transfer a portion of the risk of losses away from taxpayers and to private investors who purchase the unguaranteed subordinate bonds. K Certificates typically feature a wide range of investor options with stable cash flows and structured credit enhancement.
This announcement is not an offer to sell any Freddie Mac securities. Offers for any given security are made only through applicable offering circulars and related supplements, which incorporate Freddie Mac’s Annual Report on Form 10-K for the year ended December 31, 2014, filed with the Securities and Exchange Commission (SEC) on February 19, 2015; all other reports Freddie Mac filed with the SEC pursuant to Section 13(a) of the Securities Exchange Act of 1934 (Exchange Act) since December 31, 2014, excluding any information “furnished” to the SEC on Form 8-K; and all documents that Freddie Mac files with the SEC pursuant to Sections 13(a), 13(c) or 14 of the Exchange Act, excluding any information furnished to the SEC on Form 8-K.
Freddie Mac’s press releases sometimes contain forward-looking statements. A description of factors that could cause actual results to differ materially from the expectations expressed in these and other forward-looking statements can be found in the company’s Annual Report on Form 10-K for the year ended December 31, 2014, and its reports on Form 10-Q and Form 8-K, filed with the SEC and available on the Investor Relations page of the company’s Web site at www.FreddieMac.com/investors and the SEC’s Web site at www.sec.gov.
Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation’s residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Today Freddie Mac is making home possible for one in four home borrowers and is one of the largest sources of financing for multifamily housing. Additional information is available at FreddieMac.com, Twitter @FreddieMac and Freddie Mac’s blog FreddieMac.com/blog.