When Mortgage Rates Rise

Mortgage rates are likely to remain low for a few more months, according to economists. After predicting that an increase was inevitable this year, they now believe the average 30-year fixed mortgage will not hit 5 percent until mid-2015, partly in response to the Federal Reserve's plans to scale down its purchases of mortgage-backed securities. The 30-year national average was 4.28 percent a week ago, according to HSH.com. Although 5 percent is still low by historical norms, such an increase can reduce buying power more than borrowers may think and can have a substantial effect on demand. Nonetheless, homes remain relatively affordable, with people spending about 15 percent of household median income for the median-priced home, compared to about 22 percent from 1985 to 2000.

From "When Mortgage Rates Rise"
New York Times (09/28/14) P. RE12 Prevost, Lisa

Credit Unions Trail Banks in Serving Minority Borrowers

Banks are almost 40 percent more likely to originate home purchase loans to minority borrowers than credit unions, according to the 2013 Home Mortgage Disclosure Act data released last week. The data showed that 16.3 percent of bank home purchase mortgages and 16.5 percent of bank subsidiary home purchase mortgages went to minority borrowers. Only 11.8 percent of credit union home purchase loans went to minority borrowers.

The same pattern existed for refinance loans as 14.6 percent and 13.9 percent of bank and bank subsidiary loans, respectively, went to minority borrowers, while only 10.9 percent of credit union refinance loans went to minority borrowers.

---ABA Daily Newsbytes

Friday Rate Update

Mortgage Rates Down Slightly

The rate for a 30-year fixed-rate mortgage averaged 4.20 percent this week, down from last week’s 4.23 percent, Freddie Mac said yesterday. At this time last year, the FRM averaged 4.32 percent.

ABA Daily Newbytes

Housing Market Hurt By Student Debt


Back in February we reported that student loan debt was preventing some first-time home buyers from entering the housing market. Now a new study aims to put a price tag on those missed opportunities for the real estate world.

The study [PDF] by real estate firm John Burns Consulting found that $83 billion in home sales, or 414,000 homes, won’t happen this year in part because of consumers’ high student loan debt, the Los Angeles Times reports.

The figure works out to be about 8% of all home sales for the year, the firm estimates.
Researchers found that for every $250 per month in student loan debt that consumers owed their home purchasing power decreased by $44,000. With more than 5.9 million consumers under the age of 40 owing more than $250 a month in student debt, that would significantly affect the housing market.

Additionally, the report found that most households paying $750 or more per month in student loans are essentially priced out of the housing market all together.

“We actually think it’s pretty conservative,” said Rick Palacios, director of research at John Burns Consulting, tells the LA Times. “We’re only looking at people age 20 to 40. We know there’s a big chunk of households over age 40 who have student debt, too.”

As reported previously, consumers with student loan debt face an uphill battle when it comes to purchasing a home thanks in part to a new federal rules that went into effect last month. The new rule gives mortgage lenders broad legal protections as long as they do not approve loans for buyers whose total months debt exceeds 43% of their monthly gross income.

Additionally, the Federal Housing Administration is looking to scrap a waiver that helped many first-time home buyers in the past. Currently, the agency allows mortgage lenders it works with to ignore student loans debt that’s been deferred a year or more when assessing a borrower’s eligibility for a loan.

Read more here:

Study: Housing Market Poised To Lose $83B This Year Because Of Consumers’ Student Loan Debt

By Ashlee Kieler  September 22, 2014

Mom-and-Dad Banks Step Up Aid to First-Time Home Buyers

Last year, 27 percent of those purchasing a home for the first time received a cash gift from relatives or friends to come up with a down payment, according to data from the National Association of Realtors (NAR). That’s up from 24 percent in 2012 and matches the highest share since the group began keeping records in 2009. The inability to come up with the down payment was the top reason for renting rather than buying property, according to the Federal Reserve’s report on the 2013 economic well-being of households issued in July. The report also showed 10 percent of those leasing apartments last year were looking to buy a house. Fifty-four percent of first-time buyers in 2013 said their purchases were delayed because the burden of student loans prevented them from saving enough for a down payment, according to the NAR survey. First-time buyers accounted for 29 percent of previously-owned home purchases in July, compared with about 40 percent historically, data from the agents’ group show.

From "Mom-and-Dad Banks Step Up Aid to First-Time Home Buyers"
Bloomberg (09/19/14) Jamrisko, Michelle

Friday Rate Update

Mortgage Rates Climb


The rate for a 30-year fixed-rate mortgage averaged 4.23 percent this week, up from last week’s 4.12 percent and marking the largest one-week gain since the week ending May 1, Freddie Mac reported yesterday. At this time last year, the FRM rate averaged 4.5 percent.

--ABA Daily Newsbytes

Plagge: Community Banks Face ‘Avalanche of Regulation’


An avalanche of regulation is harming community banks, ABA Chairman Jeff Plagge told the Senate Banking Committee yesterday. Plagge, president and CEO of Northwest Financial Corp., Arnolds Park, Iowa, stressed that the imbalanced “one-size-fits-all” regulatory climate has directly hurt the operations of smaller banks and, by extension, raised the costs of credit for bank customers.

“The impact goes beyond just dealing with new compliance obligations -- it means fewer products are offered to customers,” he said. “This means less credit in our communities. Less credit means, fewer jobs, lower income for workers and less economic growth,” For example, he added, 58 percent of banks have canceled or delayed a new product because of regulatory burden, and 44 percent have ended an existing product or service.

Plagge urged senators to pass several relief bills that would reduce unnecessary notice requirements, mandate cost-benefit analysis for accounting rules, expand the safe harbor for mortgage lending, allow more banks to qualify as rural if appropriate. Meanwhile, he added, prudential regulators should adopt a customized examination approach that would give credit to well-run banks that know their customers.

---ABA Daily Newbytes

The Best in Baltimore!

The Baltimore area was shut out of a list of the top 200 healthiest banks in America, although a small community bank based in the city was among the healthiest in the state of Maryland.

St. Casimir's Savings Bank, a four-branch bank based in Canton, was one of the healthiest in the state by the measure of a key ratio called the Texas Ratio, according to data compiled by online rater DepositAccounts.com. The bank was one of only three in Maryland to post a Texas Ratio of 0 percent.

The Texas Ratio alone wasn't enough to push St. Casimir's onto a Deposit Accounts list of the 200 healthiest banks in 2014. Only one bank in Maryland, OBA Bank of Germantown, made that list at No. 42. OBA is being acquired by First National Bank Corp. of Pittsburgh.

Deposit Accounts did give Baltimore's St. Casimir's an overall rating of B+ thanks in part to a strong Texas Ratio buoyed by no non-current loans as of June 30. The bank was hurt by deposits that decreased $3.04 million, or 3.88 percent in the last year. The rater listed the bank's total assets at $97.1 million.

Read more at Baltimore Business Journal.

Mortgage Applications Plunge to 14-Year Low

Mortgage interest rose for the first time in four weeks, creeping up to 4.27 percent last week from 4.25 percent, and even the slight uptick proved a setback for home borrowers. The Mortgage Bankers Association reported that total loan application activity declined 7.2 percent, sinking the group's index to its lowest point in almost 14 years. Refinancing volume fell 11 percent week-to-week on a seasonally adjusted basis, landing at a bottom not seen since November 2008. Requests for purchase loans, meanwhile, were down 3 percent from the previous week to the lowest level since February of this year.

From "Mortgage Applications Plunge to 14-Year Low"
CNBC.com (09/10/14) Olick, Diana

Small Lenders Seek to Thrive in Tough Era

Despite the difficult environment for small banks, characterized by tightening regulations and historically low interest rates, Pat McCune, president and CEO of the $546 million-asset Community Bank in Carmichaels, Pa., wants them to succeed. "Local independent banks provide a valuable service to our community," he says. "They can make decisions and direct the resources of the bank in a way that best helps the local community." Even when Community Bank's merger with Monessen-based First Federal Savings Bank is completed in October, boosting its assets to almost $870 million, McCune says the bank will remain small and focused on the needs of local residents. McCune says Community Bank is concerned about the competition posed by regional banks, as they benefit from their larger size but remain small enough to target Community Bank's customers. However, he expects prudent, measured growth for his bank down the road. "We're not empire builders," he says. "We're trying to gather together the resources to do the most effective job we can at servicing our customer."

From "Small Lenders Seek to Thrive in Tough Era"
Pittsburgh Tribune-Review (09/10/14) Fleisher, Chris

ABA Hits Credit Unions in New Radio Ad

With federal credit unions gathering in Washington, D.C., this week to lobby for their agenda on Capitol Hill, ABA is running a radio ad emphasizing the need to end the credit unions’ outdated tax subsidy. ABA President and CEO Frank Keating will be heard during drive time on WTOP, the most-listened-to station in the D.C. metropolitan area.

“Government data show that just one percent of [credit union] home loans went to low-income borrowers,” Keating says. “For that, credit unions avoided $2 billion in taxes. Ask Congress why taxpayers should give credit unions $2 billion for doing just one percent of their job."--- ABA Daily Newsbytes

5 Million Borrowers Face Imminent Payment Shock

By Black Knight Financial's estimate, 2.5 million Americans will see an average $250 more tacked onto their monthly mortgage payment as interest rates on home equity lines of credit reset over the coming three years. Should borrowers tap into more of their available credit during that time, however, the payment increases could be even more drastic. Kostya Gradushy of Black Knight notes that HELOC borrowers whose rates are coming up for reset currently are using slightly less than 60 percent of their available credit. But if they access more of those funds, the monthly increase in their mortgage payments likely will exceed the $250 estimate. For those who are looking at a rate reset in 2019 -- a group that is using about 40 percent of their available credit -- the monthly hike in their mortgage payments is expected to be about $200.

From "2.5 Million Borrowers Face Imminent Payment Shock"
Housing Wire (09/02/14) Swanson, Brena

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Home Equity Lines of Credit Surge as Banks Approve Loans to More and More Owners

Homeowners nationwide are accessing home equity credit lines at an increasingly faster clip. New data from Experian and researchers at the Oliver Wyman consulting organization shows that owners have extracted approximately $120 billion in new home equity credit lines in the last year -- 27 percent more than in the 12 months prior. In some states, new home equity line borrowing is mushrooming: up 169 percent in Wyoming, 53 percent in Florida, and 52 percent in Ohio. Dollar volumes of new lines are highest in areas with the priciest residences, particularly in the Northeast and along the West Coast. In California alone, almost $6 billion in new equity credit lines have been originated over the last 12 months, researchers report. For owners with high credit scores, the average amount that can be drawn down on new lines is just under $120,000. Banks even appear to be lending to applicants with poor credit. New credit lines to "deep subprime" owners -- those with the worst credit files -- topped out above $30,000 in the three-month period ended June 30.

From "Home Equity Lines of Credit Surge as Banks Approve Loans to More and More Owners"
Washington Post (08/30/14) P. 6 Harney, Kenneth R.

Mortgage Rates Stay at 52-Week Low

Freddie Mac reports that the 30-year fixed mortgage rate came in at 4.10 percent this week, unchanged from last week. The average represents the lowest level in 52 weeks and is down from 4.53 percent at the beginning of 2014. Meanwhile, the average rate for 15-year loans, which are popular for refinancing, bumped up to 3.25 percent from 3.23 percent.

From "Mortgage Rates Stay at 52-Week Low"
Associated Press (08/29/14)