WASHINGTON—The U.S. consumer-finance regulator has hired a longtime Washington housing and mortgage industry executive to monitor the impact of the agency’s new mortgage-lending rules, an official familiar with the matter said.
Patricia McClung is expected to join the Consumer Financial Protection Bureau next month as assistant director of mortgage markets. She succeeds Peter Carroll, who left the CFPB this spring to join Wells Fargo Co. She has been a senior adviser at the Federal Housing Administration for the past year, and previously worked for a year at the National Association of Realtors and for 23 years at mortgage-finance company Freddie Mac.
Ms. McClung, whose hiring was first reported by Politico, will be starting her new job as mortgage lenders adjust to new lending and servicing rules that went into effect at the start of the year.
She will lead the agency’s efforts in monitoring the rules’ impact on the market for home loans. Industry players have been pushing for the CFPB to relax the standards, arguing they are crimping lending. So far, the regulator has largely resisted the pressure, making only minor tweaks. Officials have left the door open to making changes, but only if there is evidence the rules are deterring safe lending activity.
CFPB officials have been publicly critical of some mortgage industry practices. In a speech earlier this year, the bureau’s deputy director, Steven Antonakes, said he is “deeply disappointed by the lack of progress” in mortgage-servicing firms’ treatment of customers.
AVERAGE long-term US mortgage rates declined this week, with the 30-year loan rate hitting its 52-week low.
By Michael Aneiro
The sharp drop in the 10-year Treasury yield late last week pulled mortgage rates lower too, with the average 30-year fixed-rate mortgage rate slipping to 4.10% from 4.12% a week ago, per Freddie Mac’s (FMCC) latest weekly Primary Mortgage Market Survey. It marks a new 2014 low and matches the lowest rate since June 2013. That rate hasn’t risen above 4.2% since May. The 15-year fixed-rate mortgage rate also fell to 3.23% from 3.24% a week earlier.
A similar 30-year mortgage rate measured by the Mortgage Bankers Association’s latest weekly survey fell to 4.29% from 4.35% a week earlier. That survey also showed the average rate for jumbo loans of more than $417,000 fell to 4.18% from 4.24% a week earlier. Historically that jumbo rate has tended to run higher than the rate for smaller loans, but that relationship has inverted this year partly due to the higher average credit quality of jumbo borrowers, at a time when banks are focusing more on high-quality loans.
The MBA’s survey also showed mortgage applications rose by 1.4% in the latest week.
“Interest rates dropped last week as a result of the ongoing turmoil in Ukraine and other international concerns, which in turn pushed mortgage rates lower,” said Mike Fratantoni, MBA’s chief economist, in a statement. “Overall application volume for conventional mortgages increased. However, there was a 5.9 percent decline in the number of applications for government mortgages, with both purchase and refinance applications declining.”
MCLEAN, VA–(Marketwired – Aug 21, 2014) – Freddie Mac (OTCQB: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates following bond yields lower. Averaging 4.10 percent for the week, the 30-year fixed-rate mortgage fell below its previous 2014 low of 4.12 percent.
- 30-year fixed-rate mortgage (FRM) averaged 4.10 percent with an average 0.5 point for the week ending August 21, 2014, down from last week when it averaged 4.12 percent. A year ago at this time, the 30-year FRM averaged 4.58 percent.
- 15-year FRM this week averaged 3.23 percent with an average 0.6 point, down from last week when it averaged 3.24 percent. A year ago at this time, the 15-year FRM averaged 3.60 percent.
- 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.95 percent this week with an average 0.5 point, down from last week when it averaged 2.97 percent. A year ago, the 5-year ARM averaged 3.21 percent.
- 1-year Treasury-indexed ARM averaged 2.38 percent this week with an average 0.5 point, up from last week when it averaged 2.36 percent. At this time last year, the 1-year ARM averaged 2.67 percent.
Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following links for the Regional and National Mortgage Rate Details and Definitions. Borrowers may still pay closing costs which are not included in the survey.
Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac.
“Mortgage rates were down slightly this week, following the decline in 10-year Treasury yields. Meanwhile, housing starts in July jumped 15.7 percent to 1.093 million units after falling 4.0 percent a month earlier. Also, July’s consumer prices increased at a 0.1 percent seasonally adjusted pace, the slowest in five months.”
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.
- Investing Education
- Freddie Mac
WASHINGTON, DC–(Marketwired – Aug 21, 2014) – The following is a statement by National Association of Realtors® President Steve Brown:
“U.S. Attorney General Eric Holder called on Congress today to do the right thing for financially distressed American families who lost homes to foreclosure or short sales this year, and Realtors® agree. After announcing the details of the U.S. Department of Justice’s settlement with Bank of America, which includes $7 billion in relief to consumers, Holder lamented that Congressional inaction to extend the Mortgage Forgiveness Debt Relief Act will mean that people meant to be helped by the settlement funds will instead be penalized on their income taxes.
“The tax relief expired on December 31 last year and unless Congress acts to extend it, every person who has already sold or plans to sell a home in a short sale in 2014, will pay taxes on nonexistent mortgage debt, which is money many don’t have.
“Realtors® are strong supporters of the bipartisan Mortgage Forgiveness Tax Relief Act, sponsored by Sens. Debbie Stabenow, D-Michigan, and Dean Heller, R-Nevada, and Reps. Tom Reed, R-New York, and Charlie Rangel, D-New York, to prevent underwater borrowers from paying taxes on any mortgage debt forgiven or cancelled by a lender after their home is sold for less money than is owed. Taxing forgiven mortgage debt as income is an unfair practice that also incentivizes defaults and foreclosures, which could torpedo the housing recovery.
“Congress should take immediate action to pass this legislation.”
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.
Information about NAR is available at www.realtor.org. This and other news releases are posted in the “News, Blogs and Videos” tab on the website.
- Investing Education
- Attorney General Eric Holder
- Bank of America
WASHINGTON, DC–(Marketwired – Aug 21, 2014) – Existing-home sales increased in July to their highest annual pace of the year, and the ongoing decline in distressed sales reached an important milestone, according to the National Association of Realtors®.
Total existing-home sales1, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 2.4 percent to a seasonally adjusted annual rate of 5.15 million in July from a slight downwardly-revised 5.03 million in June. Sales are at the highest pace of 2014 and have risen four consecutive months, but remain 4.3 percent below the 5.38 million-unit level from last July, which was the peak of 2013.
Lawrence Yun, NAR chief economist, says sales momentum is slowly building behind stronger job growth and improving inventory conditions. “The number of houses for sale is higher than a year ago and tamer price increases are giving prospective buyers less hesitation about entering the market,” he said. “More people are buying homes compared to earlier in the year and this trend should continue with interest rates remaining low and apartment rents on the rise.”
Yun does warn that affordability is likely to decline in upcoming years. “Although interest rates have fallen in recent months, median family incomes are still lagging behind price gains, and mortgage rates will inevitably rise with the upcoming changes in monetary policy,” he said.
The median existing-home price2 for all housing types in July was $222,900, which is 4.9 percent above July 2013. This marks the 29th consecutive month of year-over-year price gains.
Total housing inventory3 at the end of July rose 3.5 percent to 2.37 million existing homes available for sale, which represents a 5.5-month supply at the current sales pace. Unsold inventory is 5.8 percent higher than a year ago, when there were 2.24 million existing homes available for sale.
Distressed homes4 — foreclosures and short sales — accounted for 9 percent of July sales, down from 15 percent a year ago and the first time they were in the single-digits since NAR started tracking the category in October 2008. Six percent of July sales were foreclosures and 3 percent were short sales. Foreclosures sold for an average discount of 20 percent below market value in July, while short sales were discounted 14 percent.
Yun says the deepest housing wounds suffered during the Great Recession are beginning to fully heal. “To put it in perspective, distressed sales represented an average of 36 percent of sales during all of 2009,” he said. “Fast-forward to today and rising home values are helping owners recover equity and strong job creation are assisting those who may have fallen behind on their mortgage due to unemployment or underemployment.”
All-cash sales in July were 29 percent of transactions, down from 32 percent in June and representing the lowest overall share since January 2013 (28 percent). Individual investors, who account for many cash sales, purchased 16 percent of homes in July, unchanged from last month and July 2013. Sixty-nine percent of investors paid cash in July.
According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage fell for the third consecutive month to 4.13 percent in July from 4.16 percent in June, and remains the lowest rate since June 2013 (4.07 percent).
The percent share of first-time buyers in July rose slightly for the second straight month to 29 percent (28 percent in June), but remain historically low.
NAR President Steve Brown, co-owner of Irongate, Inc., Realtors® in Dayton, Ohio, says the new credit scoring calculation recently announced by Fair Isaac Corp., or FICO, will improve access to homeownership. “NAR supports efforts to broaden access to credit for qualified homebuyers, especially those who have been shut out of the housing market or forced to pay higher interest rates because of flawed credit scores,” he said. “A solid credit score is necessary to keep borrowing costs down.”
The median time on market for all homes was 48 days in July, up from 44 days in June; it was 42 days on market in July 2013. Short sales were on the market for a median of 93 days in July, while foreclosures sold in 58 days and non-distressed homes typically took 45 days. Forty percent of homes sold in July were on the market for less than a month.
Single-family home sales increased 2.7 percent to a seasonally adjusted annual rate of 4.55 million in July from 4.43 million in June, but remain 4.2 percent below the 4.75 million pace a year ago. The median existing single-family home price was $223,900 in July, up 5.1 percent from July 2013.
Existing condominium and co-op sales remained unchanged in July from June at an annual rate of 600,000 units, and are 4.8 percent below the 630,000 unit pace a year ago. The median existing condo price was $215,000 in July, which is 3.3 percent higher than a year ago.
Regionally, July existing-home sales in the Northeast stayed at an annual rate of 640,000 for the second consecutive month and are now 9.9 percent below a year ago. The median price in the Northeast was $273,600, an increase of 2.4 percent from July 2013.
In the Midwest, existing-home sales increased 1.7 percent to an annual level of 1.22 million in July, but remain 4.7 percent below July 2013. The median price in the Midwest was $175,200, up 4.1 percent from a year ago.
Existing-home sales in the South rose 3.4 percent to an annual rate of 2.12 million in July, and are now up slightly (0.5 percent) from July 2013. The median price in the South was $192,000, up 5.0 percent from a year ago.
Existing-home sales in the West climbed 2.6 percent to an annual rate of 1.17 million in July, but remain 8.6 percent below a year ago. The median price in the West was $304,100, which is 6.3 percent above July 2013.
NOTE: For local information, please contact the local association of Realtors® for data from local multiple listing services. Local MLS data is the most accurate source of sales and price information in specific areas, although there may be differences in reporting methodology.
1 Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings from Multiple Listing Services. Changes in sales trends outside of MLSs are not captured in the monthly series. NAR rebenchmarks home sales periodically using other sources to assess overall home sales trends, including sales not reported by MLSs.
Existing-home sales, based on closings, differ from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which account for more than 90 percent of total home sales, are based on a much larger data sample — about 40 percent of multiple listing service data each month — and typically are not subject to large prior-month revisions.
The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.
Single-family data collection began monthly in 1968, while condo data collection began quarterly in 1981; the series were combined in 1999 when monthly collection of condo data began. Prior to this period, single-family homes accounted for more than nine out of 10 purchases. Historic comparisons for total home sales prior to 1999 are based on monthly single-family sales, combined with the corresponding quarterly sales rate for condos.
2 The median price is where half sold for more and half sold for less; medians are more typical of market conditions than average prices, which are skewed higher by a relatively small share of upper-end transactions. The only valid comparisons for median prices are with the same period a year earlier due to seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if additional data is received.
3 Total inventory and month’s supply data are available back through 1999, while single-family inventory and month’s supply are available back to 1982 (prior to 1999, single-family sales accounted for more than 90 percent of transactions and condos were measured only on a quarterly basis).
The national median condo/co-op price often is higher than the median single-family home price because condos are concentrated in higher-cost housing markets. However, in a given area, single-family homes typically sell for more than condos as seen in NAR’s quarterly metro area price reports.
4 Distressed sales (foreclosures and short sales), days on market, first-time buyers, all-cash transactions and investors are from a monthly survey for the NAR’s Realtors® Confidence Index, posted at Realtor.org.
Realtor.com®, NAR’s listing site, posts metro area median listing price and inventory data at: www.realtor.com/data-portal/Real-Estate-Statistics.aspx.
The second quarter Commercial Real Estate Report/Forecast will be released August 26, the Pending Home Sales Index for July will be released August 28, and existing-home sales for August is scheduled for September 22; release times are 10:00 a.m. EDT.
Information about NAR is available at www.realtor.org. This and other news releases are posted in the “News, Blogs and Videos” tab on the website. Statistical data in this release, as well as other tables and surveys, are posted in the “Research and Statistics” tab.
- Real Estate
- Selling Real Estate
The U.S. housing recovery gained traction in July as sales of previously owned homes rose to their highest level in 10 months.
Sales of existing homes increased 2.4% from June to a seasonally adjusted annual rate of 5.15 million, the National Association of Realtors said Thursday. July sales were down 4.3% from a year earlier, when sales peaked for 2013 before a jump in mortgage rates threw the housing recovery off track. July was…
WASHINGTON – The National Association of Realtors reports on sales of existing homes in July. The report is scheduled to be released at 10 a.m. Eastern on Thursday.
SALES FALL: The expectation is that sales dropped slightly to a seasonally adjusted annual rate of 5.01 million last month, according to a survey by data firm Fact Set. In June, homes sold at a yearly pace of 5.04 million.
SUMMER BUYING: Home-buying was hammered at the start of the year by harsh winter weather, rising interest rates and sluggish wage growth. Rising prices hurt affordability and mortgage rates opened the year at levels that slowed buying activity. Sales of existing homes continue to lag last year’s pace of 5.1 million. Annual sales of 5.5 million are consistent with a healthy housing market, according to analysts.
Many economists consider home sales to be a missing piece of the economic recovery. Federal Reserve Chair Janet Yellen recently told Congress that housing has proven to be disappointing this year.
But several indicators suggest that activity has begun to improve during the summer.
New-home construction increased 15.7 percent in July to a seasonally adjusted annual rate of 1.09 million homes, the Commerce Department reported Tuesday.
Applications for building permits, considered a good sign of future activity, also showed strength in July, advancing 8.1 percent to an annual rate of 1.05 million after declining in the prior two months.
Separately, the sentiment index from the National Association of Home Builders and Wells Fargo rose in August to 55, up two points from a revised 53 for July. Readings above 50 indicate more builders view sales conditions as improving.
Home prices are also increasing at a slower clip, which should help ease affordability pressures.
Data provider CoreLogic said that prices rose 7.5 percent in June compared with 12 months earlier. That’s the smallest year-over-year gain in 20 months.
All of that should help housing overcome the obstacles it encountered last summer, when rising prices and higher mortgage rates pushed would-be buyers onto the sidelines.
Average rates for 30-year mortgages fell to 4.12 percent from 4.14 percent, mortgage company Freddie Mac said last week. Mortgage rates are below the levels of a year ago. They have fallen in recent weeks after climbing last summer when the Fed began talking about reducing the monthly bond purchases it was making to keep long-term borrowing rates low.
Even though the Fed has trimmed it bond-buying, rates have fallen below its average of 4.53 percent at the start of the year.
The housing market can no longer be counted on as a driver of U.S. economic growth in either 2014 or 2015 according to August data released today by Fannie Mae. The home lending insurer cut its forecast for third quarter 2014 housing starts by 7% and its third-quarter estimate on home sales by 2.7% from its July forecast.
Year-over-year housing starts for single-family homes are now expected to rise by 3.9% over the 2013 total, down from a projected increase of 12.6% in July. Housing starts in 2015 were projected to rise 31.2% above 2014 starts according to Fannie Mae’s July forecast, but that has been cut to a gain of 22% in the August forecast.
The agency’s chief economist said:
[W]e have downgraded our outlook following the disappointing housing activity seen during the first half of the year. The impact on mortgage rates from the market’s expectation that the Federal Reserve would soon start tapering their securities purchases, combined to some degree with the weather effect in the first half of 2014, led to very little seasonal growth in housing. In the first six months of the year, total sales have run below last year’s pace. Additionally, on the demand side, there appears to be a conservatism among consumers and their willingness to take on big-ticket purchases, such as homes. We currently estimate that 2014 will finish lower in total sales figures than 2013 – and that 2015, while stronger than 2013 and 2014, will not be the breakout year some are expecting.
Total sales of new and existing homes in 2014 were expected to be down 1.2% in Fannie Mae’s July forecast and are now forecast to be down 3.2%. The total sales growth forecast year-over-year for 2015 fell from 7% to 6%.
Fannie Mae noted that the housing market lost momentum at the end of the second quarter and that near-term indicators show little sign of improvement for the second half of the year. Residential investment is still expected to grow in both 2014 and 2015, but Fannie Mae does not now expect home building and home sales to be strong growth drivers.
Must-know: Realist Real Estate Roundup 8/11–8/15 (Part 6 of 6)
Ginnie Mae TBAs rally with the bond market
The Fannie Mae to-be-announced (or TBA) market represents the usual conforming loan—the plain Fannie Mae 30-year mortgage. Meanwhile, Ginnie Mae TBAs are where government loans go—like to the Federal Housing Administration (or FHA) and Veterans Affairs (or VA) loans.
The biggest difference between a Fannie Mae mortgage-backed securities (or MBS) and a Ginnie Mae MBS is that Ginnie’s have an explicit guarantee from the federal government. Fannies don’t have a guarantee. However, there’s a “wink wink, nudge nudge” guarantee. As a result, Ginnie Mae MBS trade at a premium to Fannie Mae TBAs.
There are also two different Ginnie Mae TBAs—Ginnie 1s and Ginnie 2s. Ginnie 1 TBAs include mortgages with the exact same coupon payment. Ginnie 2 TBAs can include a variety of coupons within a range.
Since you can have more certainty with Ginnie 1s compared to the 2s, the 1s typically trade at a premium. This premium can vary. You’ll often see investors switch between 1s and 2s as a relative value trade. The Ginnie Mae 1s tend to be more liquid than the 2s and have narrower bid-to-ask spreads.
Ginnie Mae MBS rally
The front-month Ginnie Mae TBAs were bid up as bonds rallied eight basis points. Ginnie Mae TBAs began the week at 105 31/32 and picked up 18 ticks to close at 106 17/32.
Implications for mortgage REITs
Mortgage real estate investment trusts (or REITs)—like Annaly Capital (NLY), American Capital (AGNC), MFA Financial (MFA), and Capstead Mortgage (CMO)—announced big drops in book value per share. Rising rates hurt the value of their mortgage-backed security holdings. The REIT sector spent most of 2013 deleveraging to position itself for increases in rates.
As a general rule, a lack of volatility is good for mortgage REITs and the mortgage REIT ETF (MORT) because they hedge some of their interest rate risk. Increasing volatility in interest rates increases the cost of hedging. As interest rates rise, the expected maturity of the bond increases because there will be fewer pre-payments. On the other hand, if interest rates fall, the maturity shortens due to higher pre-payment risks.
Mechanically, this means mortgage REITs have to adjust their hedges and buy more protection when prices are high. They have to sell more protection when prices are low. This “buy-high, sell low” effect is called “negative convexity.” It explains why Ginnie Mae MBS yield so much more than Treasuries, which have an identical credit risk—none.
Browse this series on Market Realist:
- Part 1 – Must-know: FOMC minutes will dominate the week ahead
- Part 2 – Why there were conflicting reports about the labor market
- Part 3 – Why bonds continue to make strategists look bad
- Real Estate
- Fannie Mae
- Ginnie Mae