The Federal Housing Administration (FHA) this morning announced another addition to its programs designed to assist homeowners in danger of losing their homes to foreclosure.
Department of Housing and Urban Development (HUD) Secretary Shaun Donovan released new guidelines for the Federal Housing Administration's (FHA) Affordable Modification Program to bring it into compliance with The Helping Families Save Their Homes Act of 2009 signed by President Obama in May.
Under the new guidelines, which will go into affect on August 15, current FHA borrowers will now be able to permanently reduce their monthly mortgage payments if they seek and receive a modification from their current mortgage company or loan servicer. Previously, only borrowers whose loan was owned by Fannie Mae or Freddie Mac were eligible for the Obama Administration's loan modification programs. The new guidelines are in addition to changes announced earlier this month to assist borrowers with negative equity as high as 125 percent loan to value.
The new modification guidelines will utilize a partial claim option. FHA has used this partial claim mechanism in the past to allow servicers to advance funds to bring a delinquent mortgage current. Now those funds can also be used to lower the monthly payment to an affordable level by reducing the outstanding principal balance of the loan by as much as 30 percent and recalculating payments based on that new amount. These advanced funds are not gifts and the portion of the balance affected will be deferred not written off. Repayment of the deferred amount will begin when the first mortgage is paid off. HUD is, in effect, merely extending the term of the loan beyond the usual 30 years.
In a HUD press release Secretary Donovan said, "Today, we're bringing another important tool to the table to help struggling families who are desperate to keep their homes. Tens of thousands of FHA borrowers will now be able to modify their mortgages in the same manner as s many others who are taking advantage of the Administration’s Making Home Affordable program. This is just the latest tool we are providing to help homeowners prevent foreclosures through the Making Home Affordable program. Earlier this month we announced an expansion of the Home Affordable Refinance Program to borrowers who are up to 125 percent underwater. Together, these actions will significantly increase the help available to homeowners."
To qualify for the modification, a borrower must provide the usual documents detailing his financial situation and attesting to a hardship. His front end ratio (ratio of housing expenses to income) must be “as close as possible to but not less than 31 percent” and the total ratio of recurring debt to income must not exceed 55 percent. In addition the borrower must prove he is capable of making the new payments by entering into a three month trial period at the new payment level. If any of the three monthly payments are not made in a timely manner the borrower will lose any eligibility for the modification.
FHA borrowers who wish to learn more about the program should contact their mortgage servicer or call HUD’s National Servicing Center at (888)297-8685.
FHA will pay an incentive to loan servicers for each loan they process and modify under the new guidelines
Thursday, July 30, 2009
Tuesday, July 28, 2009
Home Prices Improve for 4th Straight Month
Home prices across the nation improved for their fourth consecutive month in May but remain about 17% lower than one year ago, according to the Case-Shiller Home Price Index.
The 10-City and 20-City Composites are 16.8% and 17.1% lower, respectively, compared to May 2008. Historically, those are major declines, but in the current context they represent the slowest annual price drops in close to a year. Just one month before, the figures were -18.0% and -18.1%.
“There is a clear inflection point in the year-over-year data, due to four consecutive months of improved rates of return, after the steep decline that began in the fall of 2005,” said David Blitzer, Chairman of the S&P’s Index Committee. “In addition to the 10-City and 20-City Composites, 17 of the 20 metro areas also saw improvement in their annual returns compared to those of April.”
Home prices in May 2009 are at levels last seen in mid-2003, “indicating that the three years of appreciation that occurred from 2003-2006 were all given back in the following three years,” said a Case-Shiller press release.
Since prices peaked in Q2 2006, the 10-City Composite has fallen by a staggering 33.3%.
“The crux of this report is clearly that the tone in U.S. housing market activity is beginning to improve dramatically", said TD strategist Millan Mulraine. “Indeed, even though prices continue to fall, the pace of decline is undoubtedly diminishing, and one suspects that it will only be a matter of time before a firm bottom is formed on U.S. home prices.”
Regionally, annual price declines remain biggest in the West and the South. Home prices in Phoenix have plummeted 34.2%, while prices are down 32.0% in Las Vegas. 26.2% in San Francisco, and 25.2% in Miami. Here is the summary of results for May 2009.
Looking ahead, Blitzer said prices may be stabilizing but that appreciation will still be some time off. “While many indicators are showing signs of life in the U.S. housing market, we should remember that on a year-over-year basis home prices are still down about 17% on average across all metro areas,” he said, “so we likely do have a way to go before we see sustained home price appreciation.”
The 10-City and 20-City Composites are 16.8% and 17.1% lower, respectively, compared to May 2008. Historically, those are major declines, but in the current context they represent the slowest annual price drops in close to a year. Just one month before, the figures were -18.0% and -18.1%.
“There is a clear inflection point in the year-over-year data, due to four consecutive months of improved rates of return, after the steep decline that began in the fall of 2005,” said David Blitzer, Chairman of the S&P’s Index Committee. “In addition to the 10-City and 20-City Composites, 17 of the 20 metro areas also saw improvement in their annual returns compared to those of April.”
Home prices in May 2009 are at levels last seen in mid-2003, “indicating that the three years of appreciation that occurred from 2003-2006 were all given back in the following three years,” said a Case-Shiller press release.
Since prices peaked in Q2 2006, the 10-City Composite has fallen by a staggering 33.3%.
“The crux of this report is clearly that the tone in U.S. housing market activity is beginning to improve dramatically", said TD strategist Millan Mulraine. “Indeed, even though prices continue to fall, the pace of decline is undoubtedly diminishing, and one suspects that it will only be a matter of time before a firm bottom is formed on U.S. home prices.”
Regionally, annual price declines remain biggest in the West and the South. Home prices in Phoenix have plummeted 34.2%, while prices are down 32.0% in Las Vegas. 26.2% in San Francisco, and 25.2% in Miami. Here is the summary of results for May 2009.
Looking ahead, Blitzer said prices may be stabilizing but that appreciation will still be some time off. “While many indicators are showing signs of life in the U.S. housing market, we should remember that on a year-over-year basis home prices are still down about 17% on average across all metro areas,” he said, “so we likely do have a way to go before we see sustained home price appreciation.”
Monday, July 27, 2009
New Home Sales Up In June
The morning began with positive news for the housing market. Sales of new single-family homes shot up 11% in June ― the biggest one-month jump in eight years ― bringing the annual pace of sales to 384,000, well above the market consensus of just 350,000. “This report along with recent data on housing starts and existing home sales tells us the housing sector is finally in recovery mode,” said Joseph LaVorgna, chief US economist at Deutsche Bank.
In addition, inventory overhang dropped for the third straight month, falling to an 8.8-months’ supply ― the lowest level since October 2007. In May, overhang was 10.2 months, and the peak was a 12.4-month’ supply in January.
The raw number of new homes for sale is 281k, the lowest level since 1993, and compared with 436k in June 2008.
“This will go a long way to eventually helping to stabilize the economy in the second half of this year and to provide us with much better overall economic growth prospects next year,” LaVorgna added. Historically, the pace of sales is still low, as new home sales are struggling with more competitive prices from existing home sales. Since June 2008, the annual rate of sales has fallen 21.3%, but many economists are confident that the housing market hit bottom in January.
Normalization wasn’t seen in prices, however. The median price for a new home was $206,200, 12% lower than one year ago, and a pretty hefty drop from May’s median of $219,000.
Of course, it was those falling prices, in combination with historically low mortgage rates, that spurred the month’s surge in demand.
“New homes continue to fight for the attention of potential buyers, who are torn between the purchase of a new home, and the stock of an existing home or a cheap foreclosed home,” said Jennifer Lee from BMO Capital Markets. “But homebuilders' confidence is generally strengthening, particularly with their expectations of how the market will play out over the next six months or so, which suggests the bottom in the housing market has been reached,” she added.
In terms of GDP, analysts from RDQ noted that the decline in housing construction dragged down total output by 1.4% in Q1, but looking ahead “it appears that this drag is on track to disappear in the second half of 2009, which will help stabilize the macro economy.”
The first official estimate of Q2 GDP will be released Friday.
In addition, inventory overhang dropped for the third straight month, falling to an 8.8-months’ supply ― the lowest level since October 2007. In May, overhang was 10.2 months, and the peak was a 12.4-month’ supply in January.
The raw number of new homes for sale is 281k, the lowest level since 1993, and compared with 436k in June 2008.
“This will go a long way to eventually helping to stabilize the economy in the second half of this year and to provide us with much better overall economic growth prospects next year,” LaVorgna added. Historically, the pace of sales is still low, as new home sales are struggling with more competitive prices from existing home sales. Since June 2008, the annual rate of sales has fallen 21.3%, but many economists are confident that the housing market hit bottom in January.
Normalization wasn’t seen in prices, however. The median price for a new home was $206,200, 12% lower than one year ago, and a pretty hefty drop from May’s median of $219,000.
Of course, it was those falling prices, in combination with historically low mortgage rates, that spurred the month’s surge in demand.
“New homes continue to fight for the attention of potential buyers, who are torn between the purchase of a new home, and the stock of an existing home or a cheap foreclosed home,” said Jennifer Lee from BMO Capital Markets. “But homebuilders' confidence is generally strengthening, particularly with their expectations of how the market will play out over the next six months or so, which suggests the bottom in the housing market has been reached,” she added.
In terms of GDP, analysts from RDQ noted that the decline in housing construction dragged down total output by 1.4% in Q1, but looking ahead “it appears that this drag is on track to disappear in the second half of 2009, which will help stabilize the macro economy.”
The first official estimate of Q2 GDP will be released Friday.
Thursday, July 23, 2009
Existing Home Sales Up But HVCC Looms
First-time homebuyers and the sales of distressed properties helped drive the pace of Existing Home Sales up for the third consecutive month in June. Sales advanced 3.6% in the month, in line with estimates, to an annual rate of 4.89 million units.
“The increase in existing-home sales occurred in all major regions of the country,” said Lawrence Yun, chief economist at the National Association of Realtors, who compile the data. He said sales should continue upwards “due to tax credit incentives and historically high affordability conditions.”
Key Data:
* Single-family home sales rose 2.4% to a pace of 4.32 million in June. That's 0.2% below June 2008 levels.
* The national average for a 30-year mortgage rose to 5.42% in June from 4.86% in May. In June 2008 the 30-year rate was 6.32%.
* Total housing inventory June fell 0.7% in June to 3.82 million homes for sale ― a 9.4-month supply at the current sales pace.
* The median price for a home was $181,800 in June ― 15.4% down from June 2008.
* First-time home buyers made up 29% of the sales.
* Foreclosure-related sales accounted for 31% of sales in June.
“If we can keep the volume of sales above the level of new inventory, prices could stabilize in many areas around the end of the year,” Yun said.
Analysts from the forecasting firm RDQ said the report “provides further evidence that activity in the housing market is stabilizing and that price declines are slowing.”
They note that the 3-month advance in sales was the fastest pace in five years, in percentage terms. “This report, along with recent data on housing starts, building permits, and the survey from the NAHB, suggests that we may have seen the bottom in home sales and housing construction.” TD strategist Millan Mulraine added, “it suggests that the recent momentum in U.S. housing activity may be gathering some traction as U.S. homebuyers take advantage of the very favorable mortgage rates and home prices.
However, analysts still aren’t expecting a quick recovery in the housing market, as unemployment rates are at a 26-year high. Even Fed chairman Ben Bernanke expects unemployment to remain high heading into 2001.
Poor Appraisals Still a Concern: Reiterating concerns that he spoke about last month, Yun said sales were being held back by poor appraisals. In a press release the NAR added that a June survey of realtors found that 37% experienced “at least one lost sale as a result of the new Home Valuation Code of Conduct,” which was put into effect May 1, “with seven out of 10 reporting an increased use of out-of-area appraisers.
In addition, 70% of NAR appraiser members said consumers were paying higher fees, while 85% report a perceived reduction in appraisal quality. “Clearly the process needs to be revised, but the most logical approach is to use appraisers with local expertise, industry designations and access to local data, who make a physical examination of the property and use apples-to-apples comparisons with nearby home sales,” Yun said. “In many cases, normal homes are being compared with distressed homes sold at a discount, which often are in subpar condition – this is causing real harm to both buyers and sellers.”
“The increase in existing-home sales occurred in all major regions of the country,” said Lawrence Yun, chief economist at the National Association of Realtors, who compile the data. He said sales should continue upwards “due to tax credit incentives and historically high affordability conditions.”
Key Data:
* Single-family home sales rose 2.4% to a pace of 4.32 million in June. That's 0.2% below June 2008 levels.
* The national average for a 30-year mortgage rose to 5.42% in June from 4.86% in May. In June 2008 the 30-year rate was 6.32%.
* Total housing inventory June fell 0.7% in June to 3.82 million homes for sale ― a 9.4-month supply at the current sales pace.
* The median price for a home was $181,800 in June ― 15.4% down from June 2008.
* First-time home buyers made up 29% of the sales.
* Foreclosure-related sales accounted for 31% of sales in June.
“If we can keep the volume of sales above the level of new inventory, prices could stabilize in many areas around the end of the year,” Yun said.
Analysts from the forecasting firm RDQ said the report “provides further evidence that activity in the housing market is stabilizing and that price declines are slowing.”
They note that the 3-month advance in sales was the fastest pace in five years, in percentage terms. “This report, along with recent data on housing starts, building permits, and the survey from the NAHB, suggests that we may have seen the bottom in home sales and housing construction.” TD strategist Millan Mulraine added, “it suggests that the recent momentum in U.S. housing activity may be gathering some traction as U.S. homebuyers take advantage of the very favorable mortgage rates and home prices.
However, analysts still aren’t expecting a quick recovery in the housing market, as unemployment rates are at a 26-year high. Even Fed chairman Ben Bernanke expects unemployment to remain high heading into 2001.
Poor Appraisals Still a Concern: Reiterating concerns that he spoke about last month, Yun said sales were being held back by poor appraisals. In a press release the NAR added that a June survey of realtors found that 37% experienced “at least one lost sale as a result of the new Home Valuation Code of Conduct,” which was put into effect May 1, “with seven out of 10 reporting an increased use of out-of-area appraisers.
In addition, 70% of NAR appraiser members said consumers were paying higher fees, while 85% report a perceived reduction in appraisal quality. “Clearly the process needs to be revised, but the most logical approach is to use appraisers with local expertise, industry designations and access to local data, who make a physical examination of the property and use apples-to-apples comparisons with nearby home sales,” Yun said. “In many cases, normal homes are being compared with distressed homes sold at a discount, which often are in subpar condition – this is causing real harm to both buyers and sellers.”
Wednesday, July 22, 2009
FHFA Says Home Values Rise
U.S. home prices rose for the first time in several months in May according to figures released on Wednesday by the Federal Housing Finance Agency (FHFA).
Housing Price Index (HPI) preliminary figures for the month projected that, nationwide, home prices were up 0.9 percent on a seasonally adjusted basis from April’s figures. Those April figures, however, were revised to reflect a -0.3 percent change in prices instead of the -0.1 percent change estimated earlier.
The HPI is a measure of changes in same house sales prices. Purchase transactions are weighed against a data collected from repeat sales or refinancing of homes financed by Freddie Mac or Fannie Mae since 1991. By definition the data does not include new homes nor does it reflect purchases using government insured (FHA, VA) mortgages or non-conforming mortgages. Data is provided monthly on a national and regional basis and every three months a full report is issued which includes data on states and metropolitan statistical areas.
In spite of the up tick in prices in the April-May period, U.S. house prices have fallen 5.6 percent in the 12 months ending in May and the index has declined 10.7 percent since its high point in April 2007.
FHFA Direct James Lockhart stated “Revisions and volatility of the monthly index make it hard to draw any conclusions, but the seasonally-adjusted HPI for the first five months of this year is up 0.3 percent or 0.7 percent on an annualized basis.”
The Pacific Region has been the hardest hit during the recent downturn; the index in that region (HI, AK, WA, OR, CA) lost 16.0 percent of its value during the 12 month period ended in May, but it made the strongest showing in the current period with prices increasing 2.7 percent. The South Atlantic Region ((DE, MD, DC, VA, WV, NC, SC, GA, FL) was second with a 1.4 percent increase. In New England (ME, NH, VT, MA, RI, CT) prices fell 2.0 percent.
FHFA is the regulator of the 12 Federal Home Loan Banks and the regulator and conservator of Freddie Mac and Fannie Mae
Housing Price Index (HPI) preliminary figures for the month projected that, nationwide, home prices were up 0.9 percent on a seasonally adjusted basis from April’s figures. Those April figures, however, were revised to reflect a -0.3 percent change in prices instead of the -0.1 percent change estimated earlier.
The HPI is a measure of changes in same house sales prices. Purchase transactions are weighed against a data collected from repeat sales or refinancing of homes financed by Freddie Mac or Fannie Mae since 1991. By definition the data does not include new homes nor does it reflect purchases using government insured (FHA, VA) mortgages or non-conforming mortgages. Data is provided monthly on a national and regional basis and every three months a full report is issued which includes data on states and metropolitan statistical areas.
In spite of the up tick in prices in the April-May period, U.S. house prices have fallen 5.6 percent in the 12 months ending in May and the index has declined 10.7 percent since its high point in April 2007.
FHFA Direct James Lockhart stated “Revisions and volatility of the monthly index make it hard to draw any conclusions, but the seasonally-adjusted HPI for the first five months of this year is up 0.3 percent or 0.7 percent on an annualized basis.”
The Pacific Region has been the hardest hit during the recent downturn; the index in that region (HI, AK, WA, OR, CA) lost 16.0 percent of its value during the 12 month period ended in May, but it made the strongest showing in the current period with prices increasing 2.7 percent. The South Atlantic Region ((DE, MD, DC, VA, WV, NC, SC, GA, FL) was second with a 1.4 percent increase. In New England (ME, NH, VT, MA, RI, CT) prices fell 2.0 percent.
FHFA is the regulator of the 12 Federal Home Loan Banks and the regulator and conservator of Freddie Mac and Fannie Mae
Friday, July 17, 2009
Housing Starts Up Unexpectedly
A housing construction report indicated higher levels of activity than the range of forecasts, but that had more to do with revisions to the previous month than a rebound in activity. The actual monthly gain was modest.
Housing starts ― new construction of private homes ― gained a 3.6% in June, sending the annual rate of construction to 582,000. The median forecast was just 530,000, but data for May was revised up by 30k.
The gain isn't that large, but a look at the annual figures gives some idea as to why any gain is looked at optimistically: since June 2008, housing starts have fallen 46% from an annual pace of 1.078 million.
In the other half of the report, building permits ― a leading indicator for housing starts ― jumped 8.7% to an annual rate of 563,000 units, suggesting that May’s uptick in starts will be repeated in June.
Single-family housing starts ― a component analysts at IHS Global Insight call “arguably the most informative statistic about the current state of the housing market” ― rose a whopping 14.4% in June to an annual pace of 470,000 units, marking the fourth consecutive increase.
Analyst reactions to the report were positive, with several economists noting that residential real estate could even contribute positively to second quarter GDP.
“The evidence is growing that housing construction has bottomed out and that single-family housing construction is beginning to recover―although, given the volatility from month-to-month in housing starts and building permits, we would like to see the July data before talking too much about recovery versus stabilization,” said analysts from RDQ.
Similarly, Deutsche Bank’s Joseph LaVorgna called the starts and permits figures “the best evidence that housing has bottomed,” adding that recovery could begin sooner than earlier predictions had assumed.
“We are not revising up our H2 forecast because consumption and inventories, the two primary drivers of recovery, could still turn out to be weak,” he said. “Nonetheless, this housing information is good news for a beleaguered economy.”
However, TD strategist Millan Mulraine characterized the report as “bittersweet.”
Looking at construction alone he conceded the report was good news, but in the larger scheme of things a rebound in construction isn’t necessarily a boon. Excess inventories are already a major problem, Mulraine said, and an uptick in construction only makes that problem worse.
Housing starts ― new construction of private homes ― gained a 3.6% in June, sending the annual rate of construction to 582,000. The median forecast was just 530,000, but data for May was revised up by 30k.
The gain isn't that large, but a look at the annual figures gives some idea as to why any gain is looked at optimistically: since June 2008, housing starts have fallen 46% from an annual pace of 1.078 million.
In the other half of the report, building permits ― a leading indicator for housing starts ― jumped 8.7% to an annual rate of 563,000 units, suggesting that May’s uptick in starts will be repeated in June.
Single-family housing starts ― a component analysts at IHS Global Insight call “arguably the most informative statistic about the current state of the housing market” ― rose a whopping 14.4% in June to an annual pace of 470,000 units, marking the fourth consecutive increase.
Analyst reactions to the report were positive, with several economists noting that residential real estate could even contribute positively to second quarter GDP.
“The evidence is growing that housing construction has bottomed out and that single-family housing construction is beginning to recover―although, given the volatility from month-to-month in housing starts and building permits, we would like to see the July data before talking too much about recovery versus stabilization,” said analysts from RDQ.
Similarly, Deutsche Bank’s Joseph LaVorgna called the starts and permits figures “the best evidence that housing has bottomed,” adding that recovery could begin sooner than earlier predictions had assumed.
“We are not revising up our H2 forecast because consumption and inventories, the two primary drivers of recovery, could still turn out to be weak,” he said. “Nonetheless, this housing information is good news for a beleaguered economy.”
However, TD strategist Millan Mulraine characterized the report as “bittersweet.”
Looking at construction alone he conceded the report was good news, but in the larger scheme of things a rebound in construction isn’t necessarily a boon. Excess inventories are already a major problem, Mulraine said, and an uptick in construction only makes that problem worse.
Thursday, July 16, 2009
1 in 84 Homes Receive Foreclosure Notice in First Half of 2009
As the unemployment rate approaches double-digits, almost two million homes received foreclosure filings in the first half of 2009, 15% more than in the same period for 2008, and 9% more than in the previous six month period, according to a new industry survey.
RealtyTrac, an online marketplace for foreclosure properties, said 1.905 million foreclosure filings, default notices, auction sale notices and bank repossessions were reported on 1,528,364 U.S. properties between January and June.
To put that into context, 1 in 84 (or 1.19%) of all housing units in the US received at least one foreclosure notice during that period.
“In spite of the industry-wide moratorium earlier this year, along with local, state and national legislative action and increased levels of loan modification activity, foreclosure activity continues to increase to record levels,” said James J. Saccacio, CEO of RealtyTrac.
The most recent data doesn’t point to an easing in foreclosures. The final month of the period, June, reported 336,173 foreclosure filings, marking the fourth straight month that saw filings exceed 300,000
Moreover, the second quarter was worse than the first. In Q2, 889,829 properties received foreclosure filings, an 11% increase from the previous quarter ― and a whopping 20% higher than Q2 2008.
Saccacio added: “Stemming the tide of foreclosures is a critical component to stabilizing the housing market, so it is imperative that the lending industry and the government work in tandem to find new approaches to address this issue.”
RealtyTrac, an online marketplace for foreclosure properties, said 1.905 million foreclosure filings, default notices, auction sale notices and bank repossessions were reported on 1,528,364 U.S. properties between January and June.
To put that into context, 1 in 84 (or 1.19%) of all housing units in the US received at least one foreclosure notice during that period.
“In spite of the industry-wide moratorium earlier this year, along with local, state and national legislative action and increased levels of loan modification activity, foreclosure activity continues to increase to record levels,” said James J. Saccacio, CEO of RealtyTrac.
The most recent data doesn’t point to an easing in foreclosures. The final month of the period, June, reported 336,173 foreclosure filings, marking the fourth straight month that saw filings exceed 300,000
Moreover, the second quarter was worse than the first. In Q2, 889,829 properties received foreclosure filings, an 11% increase from the previous quarter ― and a whopping 20% higher than Q2 2008.
Saccacio added: “Stemming the tide of foreclosures is a critical component to stabilizing the housing market, so it is imperative that the lending industry and the government work in tandem to find new approaches to address this issue.”
Thursday, July 9, 2009
Over Half of Fed's Allocated Funds Now Used
The Federal Reserve today reported on their weekly purchases of agency mortgage-backed securities (MBS). In the four trading days between July 2 and July 8, the Federal Reserve purchased a gross of $23.250 billion Agency MBS. During this period the Federal Reserve sold $6.2billion agency MBS, which brought their weekly net purchases to a total of $17.050 billion.
Since the inception of the program the Federal Reserve has spent $638.61 billion, 51% of the $1.25 trillion that was allocated.
The goal of the Federal Reserve's agency MBS program is to provide support to mortgage and housing markets and to foster improved conditions in financial markets more generally. Only fixed-rate agency MBS securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae are eligible assets for the program. The program includes, but is not limited to, 30-year, 20-year and 15-year securities of these issuers.
Since the inception of the program the Federal Reserve has spent $638.61 billion, 51% of the $1.25 trillion that was allocated.
The goal of the Federal Reserve's agency MBS program is to provide support to mortgage and housing markets and to foster improved conditions in financial markets more generally. Only fixed-rate agency MBS securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae are eligible assets for the program. The program includes, but is not limited to, 30-year, 20-year and 15-year securities of these issuers.
Wednesday, July 1, 2009
New Hope in HARP
HUD Secretary Shaun Donovan today announced that the Federal Housing Finance Agency has authorized Fannie Mae and Freddie Mac to raise the Home Affordable Refinance Program's (HARP) loan to value (LTV) ceiling from 105% to 125%.
The Home Affordable Refinance Program was designed to assist borrowers who have demonstrated an acceptable payment history on their existing Fannie Mae or Freddie Mac owned mortgage loan. Unfortunately due to rising unemployment levels and increasing foreclosure rates, demand for housing has weakened and property values have continued to decline, which has blocked many borrowers from utilizing HARP.
The expansion of Fannie Mae's and Freddie Mac's LTV guideline aims to expand qualified homeowner's refinance opportunities. The underlying initiative is that lower monthly mortgage payments will raise real household incomes and therefore afford more spending power upon consumers. In a government press releases, Treasury Secretary Tim Geithner stated, "By expanding refinance eligibility, we can bring relief to more struggling homeowners more quickly. It's a crucial step in our broader efforts to get America's housing market and economy on the path to recovery."
Thus far the effectiveness of the HARP program has faced many barriers. Among these roadblocks: lenders adding underwriting overlays and guideline restrictions, lenders all together not participating in the program, difficulty determining if Fannie Mae/Freddie Mac own your mortgage because of addresses not exactly matching the original note, additional costs because of lender imposed risk based loan level price adjustments (on top of GSE LLPAs), the unwillingness of banks to subordinate second mortgages, reluctant mortgage insurers, and the Home Valuation Code of Conduct.
Kent Mikkola, a mortgage consultant from Roseville, Minnesota says "Overall, it is difficult to obtain a HARP approval. Furthermore, it is even more difficult to find out why a seemingly eligible borrower has been denied."
Since the program was launched on April 1,2009 several updates have been made to counteract these roadblocks, however HARP remains unable to live up to the hype surrounding it. That said, today's announcement, although appreciated, was broadly overlooked by skeptical mortgage professionals. John Rodgers, president of Prime Mortgage Lending in Apex, North Carolina, had this to say, "It appears that the Obama Administration is aware of the constraints blocking borrowers from lower mortgage payments. Unfortunately, today's update will likely prove ineffective in lowering those barriers. At this point granting appraisal waivers, allowing reduced documentation, and cutting loan level price adjusters appear to be the only way HARP will ever be effective. Otherwise HARP will turn out to be yet another loan program nobody can use, much like like FHA Secure and the Hope for Homeowners program."
The Home Affordable Refinance Program was designed to assist borrowers who have demonstrated an acceptable payment history on their existing Fannie Mae or Freddie Mac owned mortgage loan. Unfortunately due to rising unemployment levels and increasing foreclosure rates, demand for housing has weakened and property values have continued to decline, which has blocked many borrowers from utilizing HARP.
The expansion of Fannie Mae's and Freddie Mac's LTV guideline aims to expand qualified homeowner's refinance opportunities. The underlying initiative is that lower monthly mortgage payments will raise real household incomes and therefore afford more spending power upon consumers. In a government press releases, Treasury Secretary Tim Geithner stated, "By expanding refinance eligibility, we can bring relief to more struggling homeowners more quickly. It's a crucial step in our broader efforts to get America's housing market and economy on the path to recovery."
Thus far the effectiveness of the HARP program has faced many barriers. Among these roadblocks: lenders adding underwriting overlays and guideline restrictions, lenders all together not participating in the program, difficulty determining if Fannie Mae/Freddie Mac own your mortgage because of addresses not exactly matching the original note, additional costs because of lender imposed risk based loan level price adjustments (on top of GSE LLPAs), the unwillingness of banks to subordinate second mortgages, reluctant mortgage insurers, and the Home Valuation Code of Conduct.
Kent Mikkola, a mortgage consultant from Roseville, Minnesota says "Overall, it is difficult to obtain a HARP approval. Furthermore, it is even more difficult to find out why a seemingly eligible borrower has been denied."
Since the program was launched on April 1,2009 several updates have been made to counteract these roadblocks, however HARP remains unable to live up to the hype surrounding it. That said, today's announcement, although appreciated, was broadly overlooked by skeptical mortgage professionals. John Rodgers, president of Prime Mortgage Lending in Apex, North Carolina, had this to say, "It appears that the Obama Administration is aware of the constraints blocking borrowers from lower mortgage payments. Unfortunately, today's update will likely prove ineffective in lowering those barriers. At this point granting appraisal waivers, allowing reduced documentation, and cutting loan level price adjusters appear to be the only way HARP will ever be effective. Otherwise HARP will turn out to be yet another loan program nobody can use, much like like FHA Secure and the Hope for Homeowners program."
Pendig Sales Up 4th Straight Month
The Pending Home Sales Index improved for the fourth straight month in May, though the gain was just 0.1%. Since last year, the index has now improved 6.7%. NAR's chief economist Lawrence Yun continued to say that poor appraisals were hurting the finalization process of homes transactions.
"Closed existing-home sales have improved but are coming in lower than expected because some contracts are delayed or falling through from the application of new appraisal rules for many transactions," he said. "Rises in contract activity show buyers are becoming more active even as they face much more stringent loan underwriting standards. Speedy clarification of the appraisal rules could smooth a housing market recovery and support the overall economy."
Regionally, results were volatile. The Northeast saw contracts move up 3.1% and the West improved 2.2%, but in the Midwest contracts saw a 1.3% decline, and in the South they fell 1.7%.
"Strong activity by entry level buyers is helping to absorb inventory and allow some existing owners to make a trade," Yun said.
The bad news from 10:00 was Construction Spending, which lost 0.9% in May, pushing the value to its lowest level in more than half a decade. Analysts were expecting a drop of 0.5%.
In addition, the 0.8% gain in April was revised down to 0.6%.
Details were pretty weak: residential construction fell -3.4%, as single-family homes declined 4.5% and multi-family homes plummeted 9.6%. On the plus side, private nonresidential construction inched up 0.5%.
"The construction spending figures should ultimately be lifted by stimulus-related spending on infrastructure projects as well as the bottoming of the housing market," said Deutsche Bank's Joseph LaVorgna. "We expect this to become more apparent later in the second half of the year."
"Closed existing-home sales have improved but are coming in lower than expected because some contracts are delayed or falling through from the application of new appraisal rules for many transactions," he said. "Rises in contract activity show buyers are becoming more active even as they face much more stringent loan underwriting standards. Speedy clarification of the appraisal rules could smooth a housing market recovery and support the overall economy."
Regionally, results were volatile. The Northeast saw contracts move up 3.1% and the West improved 2.2%, but in the Midwest contracts saw a 1.3% decline, and in the South they fell 1.7%.
"Strong activity by entry level buyers is helping to absorb inventory and allow some existing owners to make a trade," Yun said.
The bad news from 10:00 was Construction Spending, which lost 0.9% in May, pushing the value to its lowest level in more than half a decade. Analysts were expecting a drop of 0.5%.
In addition, the 0.8% gain in April was revised down to 0.6%.
Details were pretty weak: residential construction fell -3.4%, as single-family homes declined 4.5% and multi-family homes plummeted 9.6%. On the plus side, private nonresidential construction inched up 0.5%.
"The construction spending figures should ultimately be lifted by stimulus-related spending on infrastructure projects as well as the bottoming of the housing market," said Deutsche Bank's Joseph LaVorgna. "We expect this to become more apparent later in the second half of the year."
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