Dispelling Lending Myths....


 By Danny Gardner, vice president of single-family affordable lending, Freddie Mac


Obstacles in the path to homeownership have reached mythical proportions, preventing many would-be homebuyers from even starting the journey. Loan originators are in a unique position to help cut borrowers’ concerns down to actual size and give them confidence that they can achieve their goals.

Myths about mortgages abound in the minds of many homebuyers. Loan originators must be aware of the presence of these myths and, armed with the facts, provide potential borrowers with a better understanding of the realities and possibilities of the loan-origination process. Let’s take a look at some of the most common myths, along with the facts originators can use to dispel these fairy tales.

Downpayment-amount myth

The notion that downpayments have to be in the 20 percent range is the most persistent myth out there, and we need to debunk it. The average downpayment among first-time homebuyers in 2016 was 6 percent, and for repeat buyers, downpayments were between 13 percent and 14 percent, according to the National Association of Realtors. Some mortgage products let eligible borrowers put down as little as 3 percent — or even less, in some cases.
Many people believe that the best — perhaps only — low-downpayment option is a Federal Housing Administration (FHA) loan. It’s worth checking into other offerings. A conventional product might prove more affordable for some borrowers. Loan originators can help spread this word to real estate professionals and consumers.
A survey of real estate professionals conducted for Freddie Mac by market-research company, GfK, found that 50 percent of potential borrowers trust real estate professionals to educate them on mortgage products that best meet their needs. Eighty percent of respondents were extremely or moderately familiar with FHA products, yet only around one-quarter knew about low-downpayment products from Freddie Mac or Fannie Mae (the government-sponsored enterprises, or GSEs).
More importantly, loan originators need to know that the return of low-downpayment loans does not mean we’re about to repeat the housing crisis. The eligibility requirements on these new loans set a higher creditworthiness bar and aim to expand homeownership responsibly.

Read the rest here.

Mortgage Rates Edge Up
 
The rate for a 30-year fixed-rate mortgage averaged 4.16 percent this week, up slightly from the previous week's™s 4.15 percent rate, Freddie Mac said yesterday. At this time last year, the 30-year FRM rate averaged 3.62 percent.

This week;s™s 15-year FRM rate averaged 3.37 percent, up from last week's™s 3.35 percent. A year ago, the 15-year FRM rate averaged 2.93 percent.

--ABA Daily Newsbytes

 

Friday Rate Update

Mortgage Rates Edge Down 

The rate for a 30-year fixed-rate mortgage averaged 4.15 percent this week, down slightly from the previous week's 4.17 rate. At this time last year, the 30-year FRM rate averaged 3.65 percent.

This week's 15-year FRM rate averaged 3.35 percent, down from last week's 3.39 percent. A year ago, the 15-year FRM rate averaged 2.95 percent.

---ABA Daily Newsbytes

Economic Update

Fed Expects Moderate Economic Expansion, Gradual Rate Increases 

The U.S. economy will likely continue to see moderate expansion, a strengthening job market and inflation gradually rising to 2 percent in the months ahead, Federal Reserve Chairman Janet Yellen said yesterday in her semi-annual report to Congress on the state of monetary policy. She added that the Federal Open Market Committee expects additional gradual increases in interest rates, cautioning that "waiting too long to remove accommodation would be unwise" and could lead to market disruption.

Yellen cited a lower unemployment rate and increased consumer spending, GDP and personal consumption expenditures as signs of a strengthening economy, but noted that "considerable uncertainty attends the economic outlook. Among the sources of uncertainty are possible changes in U.S. fiscal and other policies, the future path of productivity growth, and developments abroad."

In a question and answer session following her testimony, Yellen highlighted an increase in bank lending, both overall and specifically to small businesses, with greater numbers of consumers reporting that they were successful in securing financing. U.S. banks are also continuing to gain strength relative to their international competitors, she added.

Yellen also expressed support for the "core principles" for financial system regulation outlined in President Trump's recent executive order, and pledged to work constructively with newly confirmed Treasury Secretary Steven Mnuchin and others members of the Financial Stability Oversight Council to conduct a review of current regulations to ensure that they are effective and appropriately tailored. Read Yellen's testimony. http://abamaestro.aba.com/trk/click?ref=zt50ebrbb_0-11cigiv-0-3bb8x2860cx3122917&

--ABA Daily Newsbytes

 

Happy Valentine's Day!

Baltimore Home Prices Rose Nearly 7% in January


 By Natalie Sherman
The Baltimore Sun
February 13, 2017


Baltimore area home prices continued to climb in January, as steady demand and fewer foreclosures pushed a streak of year-over-year gains into the 11th month.
The median home price in the metro region last month was $234,950, up 6.8% from a year earlier, according to a monthly report based on data from the MRIS listing service.
The gains come as Baltimore's housing market appears to be shaking off several years of sluggish appreciation.
Excluding distressed sales such as foreclosures, the median price increased 5.4% from a year ago to $268,750.
That was the biggest year-over-year gain for standard sales in more than three years, according to the report, which was provided by ShowingTime, a firm that provides market statistics to the residential real estate industry.

Read more here. 

--National Mortgage News

Merger announced between Kopernik Bank and St. Casimir's Savings Bank

St. Casimir's Savings Bank will become part of Kopernik Bank under a merger announced Monday that will create a single institution with about $180 million in assets. Both are Maryland-chartered mutual savings banks. Kopernick, located on Eastern Avenue, was founded in 1924 as Kopernik Building and Loan Association of Baltimore City and specializes in personal and business banking, home loans and commercial real estate lending.

 St. Casimir's was started as a building and loan institution in 1911 by a group of businessmen who would meet in a tavern on Fait Avenue to grant lines of credit, home loans and business financing to immigrants. The bank has four branches in Baltimore, on Eastern Avenue, Erdman Avenue, North Point Road and Foster Avenue in Canton.

"The combination of our two institutions will allow us to better serve our communities," said Timothy Prindle, president and CEO of Kopernik Bank, in the announcement.

Under the merger agreement, St. Casimir's CEO and president, Ronald D. Jasion, will become a senior vice president of Kopernik. Two directors of St. Casimir's will join Kopernik's board of directors.

 Connection Between Tax Refunds and Mortgage Delinquencies

by: Jann Swanson

Apparently we aren't all procrastinators.  Black Knight Financial Services looked at Internal Revenue Service (IRS) filing statistics and how they relate to loan level mortgage performance data for its current edition of Mortgage Monitor and found that 40 percent of tax filers are in and done by the first week in March.  In fact, half of that number or one in five have finished and filed their returns within the first two weeks of tax season.

The company says incentive plays a role in this diligence as Americans who file early are more likely to be expecting a refund.  On average, they also receive a larger refund than those who file later.  The average refund for those filing on or before February 5^th was $3,400, more than 35 percent higher than the refund for those filing in early April and nearly 50 per higher than those filing the last week of the season.  In fact, IRS has already distributed most tax refunds well before the April 15 tax deadline.

So, what does this have to do with mortgages?  Black Knight says if history repeats, nearly 300,000 more borrowers can be expected to bring their delinquent mortgages current in February and March than in a typical month, and changes are they are using their tax refunds to do so.  Black Knight Data & Analytics Executive Vice President Ben Graboske said, "We see this increase in cures across the delinquency and foreclosure spectrum, but it is most pronounced in the early and moderate stages of delinquency. This makes sense, in that a tax refund may be sufficient to pay a few months of past-due mortgage payments, but is likely not enough to bring a homeowner out of severe delinquency. Likewise, the most pronounced impact was seen among FHA/VA borrowers, who might be expected to have less cash reserves on hand and therefore be more dependent upon the infusion of funds during tax refund season to pay down late payments. All things being equal, there's no reason to expect this tax season to be any different."

Read more here at Mortgage News Daily.

Friday Rate Update

30-Year Mortgage Rates Hold Steady 

The rate for a 30-year fixed-rate mortgage averaged 4.19 percent this week, unchanged from the previous week's rate. At this time last year, the 30-year FRM rate averaged 3.72 percent.

This week's 15-year FRM rate averaged 3.41 percent, up from last week's 3.4 percent. A year ago, the 15-year FRM rate averaged 3.01 percent.   

---ABA Daily Newsbytes

Freddie Mac on the Economy

Grappling with Uncertainty

Outlook | January 30, 2017

The U.S. economy is now in its eighth year of expansion and the housing market is coming off its best year in a decade. Prospects remain good for future growth. However, uncertainty weighs on our Outlook for 2017 and 2018. We must grapple with uncertainty about fiscal policy, foreign investments in U.S. real estate, and the size of the mortgage market.

Uncertainty about fiscal policy

After the U.S. presidential election, expectations about economic policy have shifted, particularly expectations about fiscal policy. We still do not know all the parameters of fiscal policy changes, but we assume an expansionary policy will boost both growth and inflation over the next two years and corporate tax reform will increase long-run potential economic growth by about two-tenths of a percentage point.
President Trump’s tax proposals include increasing standard deductions and flattening marginal personal income tax rates. Increasing the standard deduction will reduce the number of households who find it advantageous to itemize deductions. This will reduce the homeownership incentives that comes from the mortgage interest deduction. Changing marginal tax rates shifts the attractiveness for homeownership among those who itemize. The Tax Policy Center estimates the increase in the standard deduction will reduce the number of filers who itemize by 60 percent from 45 million to 27 million.
As an illustrative example, the average monthly cost of owning a $250,000 house financed by a 4.25 percent 30-year fixed-rate mortgage increases by approximately $200/month for a borrower who no longer itemizes deductions.¹ Reducing marginal tax rates will also increase the cost of homeownership, but by a smaller amount ($75/month or less, varying by tax bracket).
The extent to which tax policy changes will impact housing is hard to determine. Reducing taxes may boost income and general economic efficiency. But as we illustrated above, shifting tax policy may increase the cost of homeownership. The net impact on housing markets is uncertain.

Read more here.