Mortgage Rates Rise

The rate for a 30-year fixed-rate mortgage averaged 3.98 percent this week, up from last week’s 3.92 percent, Freddie Mac said yesterday. At this time last year, the FRM rate averaged 4.10 percent.

---ABA Daily  Newsbytes

CoreLogic: Mortgage Application Fraud Risk Rising


The risk of mortgage application fraud rose 3.2 percent from the second quarter of 2013 to the second quarter of 2014, according to a new report from CoreLogic. However, the fraud risk index is down from the previous three quarters. The index component of fraud when a property’s value is misrepresented rose 3.3 percent year on year.

Other components of risk fell, including risk associated with misrepresentations about occupancy (which fell 1.5 percent), employment application fraud (2 percent) and income application fraud (4 percent). The risk of identity application fraud fell 18.5 percent, CoreLogic said, and the risk that applicants will have undisclosed debts fell by 22.7 percent, which the firm attributed to lender efforts to comply with the Ability to Repay rule.

Fraud risks associated with jumbo and conforming mortgages have fallen to their lowest points since the survey began in 2010, while the risk of fraud from mortgages with a loan-to-value ratio of more than 80 percent has risen to its highest point since 2010. Mortgage fraud risk was highest in Florida, Nevada, New York, Rhode Island and Hawaii, CoreLogic found. Florida and Nevada retain a large stock of foreclosed and vacant properties, which elevates the risk of property valuation fraud.

--ABA Daily Newsbytes

Fed, SEC Approve Risk Retention Rule

The Federal Reserve Board and the Securities and Exchange Commission yesterday voted to finalize the Dodd-Frank Act’s mortgage risk retention rule, aligning the qualified residential mortgage, or QRM, standard with the Consumer Financial Protection Bureau’s Qualified Mortgage rule. Other regulators finalized the joint rule on Tuesday.

The SEC voted 3-2, with both Republican commissioners opposing the final rule, while the Fed board voted unanimously.



ABA Applauds Changes to CFPB Points and Fees Cure Provision


The Consumer Financial Protection Bureau yesterday finalized a limited “cure” provision for the Qualified Mortgage rule, allowing a lender that intends to originate a QM but that later finds that points and fees exceeded the 3 percent cap to refund the excess, plus interest, within 210 days and maintain the legal protections afforded to QMs.

The bureau made several ABA-advocated changes to the final rule. It increased the cure period by 90 days and eliminated the “good faith” requirement, which ABA said injected a subjective element that negates a cure provision’s legal protections. However, the bureau limited creditors’ ability to cure after legal action, a 60-day delinquency or when a borrower identifies a points and fees miscalculation.

The cure provision takes effect upon publication in the Federal Register and will last until Jan. 10, 2021, at which point “creditors should become less reliant on points and fees buffers,” the CFPB said.

---ABA Daily Newsbytes

A Second Try at Home-Buying

Borrowers who go through foreclosure or short sale of their home usually are blocked from buying again for two to seven years afterward, depending on their individual situation. RealtyTrac estimates that 3.5 million former homeowners who succumbed to foreclosure and another 757,000 who underwent a short sale during the peak of recession between 2006 and 2010 have now satisfied the time requirement and are slowly returning to the market. "We certainly have heard from a number of lenders that boomerang buyers are coming back," confirms Mortgage Bankers Association chief economist Mike Fratantoni. As of the end of 2013, however, only a tiny fraction of these borrowers had actually gone through with a new home purchase.

From "A Second Try at Home-Buying"
New York Times (10/23/14) P. B1 Bernard, Tara Siegel

S&P/Experian: Mortgage Default Rates Increase Two Months Straight

Slightly more Americans defaulted on their home loans last month, based on the S&P/Experian Consumer Credit Default Indices. September's overall reading was 1.04 percent, a rise of three basis points from July's bottom. Defaults on first-lien mortgages bumped up 0.93 percent, while the default rate for second mortgages rose 0.52 percent. Mortgage default rates remain lower, however, than a year ago -- when they hit 1.28 percent and 0.69 percent, respectively.

From "S&P/Experian: Mortgage Default Rates Increase Two Months Straight"
Housing Wire (10/21/14) Swanson, Brena

Fannie Mae, Freddie Mac Reach Deal to Ease Mortgage Lending

The Federal Housing Finance Agency has crafted new rules in an effort to relax tight mortgage standards that have made it challenging for borrowers with imperfect credit to obtain affordable home loans. The agency oversees Fannie Mae and Freddie Mac, which in recent years have forced banks to buy back loans that turned out to be poorly underwritten. The threat of legal liability has prompted banks, in turn, to cater to consumers with stellar credit. The FHFA's proposed new rules aim to reassure banks by explicitly spelling out what conditions warrant repurchase demands and lowering the minimum down payment for loans sold to Fannie Mae and Freddie Mac to 3 percent from 5 percent.

From "Fannie Mae, Freddie Mac Reach Deal to Ease Mortgage Lending"
Los Angeles Times (10/18/14) Reckard, E. Scott; Logan, Tim

Mortgage Rate Falls Under 4 Percent for 30-Year

Fixed, 30-year mortgage interest dipped to 3.97 percent this week -- the lowest average since June of last year, according to Freddie Mac. The benchmark rate is down from 4.12 percent last week, largely in response to broader economic developments and concerns. If the bargain borrowing costs linger, experts say a refinance boomlet could surface. Many "underwater" homeowners who could not refinance during previous low-rate periods have returned to positive equity and may now be in a position to rework their loan terms.

From "Mortgage Rate Falls Under 4 Percent for 30-Year"
Wall Street Journal (10/17/14) P. C6 Light, Joe

No Need To Be Perfect...

Since the 2008 housing crash, most lenders have refused to give loans to borrowers with minor imperfections on their applications, but that is starting to change. This year, at least 15 smaller lenders have begun offering slightly riskier mortgages that are not government-backed and may come with higher interest rates or require bigger down payments. The mortgages are held on balance sheets or sold to investment funds, given the slow recovery in the securitization market. "Some lenders became afraid of their own shadows," says RPM Mortgage Inc. CEO Rob Hirt, whose company in August began lending to borrowers who have higher debt burdens or had sold a home for less than what they owed on the mortgage. "The market is beginning to realize that if you make smart and sound loans to people who don't fit in the narrow box, it doesn't make them a worse risk." The Mortgage Bankers Association says credit availability has loosened by 4.7 percent this year, but credit remains nearly 90 percent tighter than during the housing bubble.

From "You Don't Need to Be Perfect to Get a U.S. Loan Anymore"
Bloomberg (10/13/14) Shenn, Jody; Leondis, Alexis

Friday Rate Update

Mortgage Rates Decline


The rate for a 30-year fixed-rate mortgage averaged 4.12 percent this week, down from last week’s rate of 4.19 percent, Freddie Mac said yesterday. At this time last year, the FRM rate averaged 4.23 percent--

ABA Daily Newsbytes

Home Equity Lending Surges in U.S. to Five-Year High

Lenders increased their origination of home equity lines of credit by 21 percent in the 12 months ending in June, data firm RealtyTrac Inc. reports. The 797,865 Helocs given in the period represent the highest level since 2009. Bank of America and other lenders are providing more Helocs, often to their existing customers at reduced rates, as rising prices give them more equity in their homes. "This is an opportunity for the banks to offer an additional product to those homeowners they see as already well qualified and have that equity," says Daren Blomquist, vice president of RealtyTrac. "Helocs are a way for them to actually expand their mortgage businesses rather than have to cut back." BofA expanded its Heloc marketing efforts in 2013 with direct mailers, says Matt Potere, a home equity product executive at the lender. In June, the bank began offering interest-rate discounts on Helocs to customers if they have at least $20,000 in deposit or investment accounts. They get 0.13 percentage points off their rate, while those with $50,000 in accounts get a 0.25 percentage point discount.

From "Home Equity Lending Surges in U.S. to Five-Year High"
Bloomberg Business Week (10/09/14) Leondis, Alexis; Howley, Kathleen

Loan Delinquencies Drop in Nearly All Categories

Delinquencies fell in nine of 11 loan categories in the second quarter, according to the ABA Consumer Credit Delinquency Bulletin that was released today. Delinquencies rose only for mobile home loans and non-card revolving loans.

The composite ratio, which tracks delinquencies in eight closed-end installment loan categories, fell 6 basis points to 1.57 percent of all accounts -- well below the 15-year average of 2.32 percent. Meanwhile, bank card delinquencies fell one basis point to 2.43 percent of all accounts, also well below their 15-year average of 3.79 percent.

ABA Chief Economist James Chessen attributed the improving delinquencies to strong job growth, which he called the “most important factor behind keeping delinquencies at these historically low rates.” He added that “continued vigilance by consumers in managing their debt is the best protection against rising delinquencies.”

--ABA Daily Newsbytes

Keating Discusses Reg Burden, Housing Market on Bloomberg


The consolidation of community banks is due to excessive regulatory costs, ABA President and CEO Frank Keating said in an appearance on Bloomberg’s “Bottom Line” program yesterday.

Noting that we have lost, on average, one bank per weekday since 2008, he emphasized that “many of them were merged or sold because of the regulatory burden -- 15 to 20 percent of your operating income going to compliance. That’s silly, and I hope the regulators would recognize that to stifle a vital part of the financial services marketplace is not in the country’s best interests.”

Keating also discussed the housing market. He observed that sluggish wage and job growth, as well as student debt, are inhibiting the market, but he also fingered the Dodd-Frank mortgage rules, which he called “pretty strict” in their check-the-box limitations.

--ABA Daily Newsbytes

Home price growth in 20 major metro areas slowed to 0.6 percent in July, with year-over-year growth declining from 13.1 percent in January to 6.7 percent in July, according to yesterday’s Standard & Poor’s/Case-Shiller Home Price Index release.

Nineteen of the 20 cities in the Case-Shiller 20-city composite saw slower growth, and only Las Vegas, Miami and San Francisco reported double-digit increases. The 20-city index remains 16.1 percent below its 2006 peak.---


ABA Daily Newsbytes