House Passes Flood Insurance Bill…

House passes flood insurance billDeborah Barfield Berry and Ledyard King, Gannett Washington Bureau

 

Congress moved closer Tuesday to final passage of legislation that would roll back sharp increases in premiums under the National Flood Insurance Program.

WASHINGTON — The House voted overwhelmingly Tuesday to approve bipartisan legislation that would block dramatic increases in premiums paid by some property owners covered under the federal flood insurance program.

The 306-91 vote follows a Senate vote on Jan. 30 approving similar legislation. The Senate could vote on the House version by the end of the week.

"Relief is on the way,'' Rep. Maxine Waters, D-Calif., said before the vote.

Under the House bill, called the Homeowner Flood Insurance Affordability Act, premiums under the National Flood Insurance Program (NFIP) could increase no more than 18% per property annually.

The legislation was crafted by Republican Rep. Michael Grimm of New York in response to premiums that in some cases had increased tenfold.

Rep. Bill Cassidy, R-La., who worked on the compromise, said the House measure strikes "the right balance'' between fiscal solvency for the flood insurance program and consumer affordability.

Supporters of the measure, including Gulf Coast lawmakers, said the increases were making it impossible for many people to keep their homes or sell them.

Critics, however, say taxpayers will be left to foot the bill for the financially troubled insurance program.

The premium increases were required under a 2012 law known as Biggert-Waters that was designed to designed to make the government's flood insurance program financially solvent by bringing rates in line with true flooding risks.

Premiums under the program have been heavily subsidized by taxpayers, and the program is $24 billion in debt.

The House measure also would repeal a provision in the Biggert-Waters law that increases premiums — up to the full-risk rate over five years — when the Federal Emergency Management Agency adopts new flood maps.

Waters, a co-author of the 2012 Biggert-Waters law, worked with Republicans on the recent compromise.

Under the compromise, homes that met code when they were built would be protected from rate spikes due to new flood mapping.

Biggert-Waters imposes 25% rate hikes on some but not all properties that have received premium subsidies through the NFIP. The program, run by FEMA, has traditionally charged premiums at about 40% to 45% of their full cost, with taxpayers subsidizing the rest.

The Senate-passed bill, by Democratic Sen. Robert Menendez of New Jersey and Republican Sen. Johnny Isakson of Georgia, would delay some of the premium increases for four years. The Federal Emergency Management Agency would use the time to complete a study of how to make the higher rates affordable.

"I'm encouraged by this progress and hope we can bring the bill over the finish line very, very soon," Menendez said Tuesday.

The successful effort to win passage of the bill reflected a rare moment of bipartisanship in a highly partisan Congress.

But conservative lawmakers and government watchdog groups oppose the effort to roll back the increased premiums, saying taxpayers should not have to subsidize flood insurance coverage for homeowners who build or buy in high-risk areas.

"It's not going to be very affordable for taxpayers,'' said Steve Ellis, vice president of Taxpayers for Common Sense. "This program, that's $24 billion in debt to the Treasury, is going to be saddled with these changes.''

Critics of the legislation complain it didn't go through the regular committee process.

"Everybody we talked to, virtually without fail, recognize that these delay and repeal efforts are damaging and counterproductive,'' said Andrew Moylan, a senior fellow at the R Street Institute. "Rushing a vote the way that they are is an indication that in their heart of hearts, they know it's the wrong thing to do.''

Rep. Randy Neugebauer, R-Texas, chairman of the House Financial Services Subcommittee on Housing and Insurance, opposed the measure, saying the federal flood insurance program is in "deep debt and it's putting taxpayers at risk for another government bailout.''

"Maintaining these subsidies hurts everyone in the long run,'' Neugebauer said.

In addition to capping annual premium increases at 18%, the House bill also would allow people buying homes covered under the federal flood insurance program to pay the subsidized premium rate at first, rather than the higher rate reflecting true flooding risk.

The House bill would be financed through small assessments on all NFIP policyholders that would go into a reserve fund for FEMA to pay future claims.

 

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Buying vs. Renting…

Buy vs. rent: What you'll pay in the 10 biggest cities

Despite rising home prices and climbing mortgage rates, it's still cheaper to buy a home than rent one in these 10 major cities, according to Trulia. Here's how much you'll save.

Despite rising home prices and climbing mortgage rates, it's still cheaper to buy a home than rent one in major cities across the country, according to real estate web site Trulia, which analyzed data in 100 metro areas.

But home prices are just one factor to consider. Deciding whether to buy or rent also depends on the location and how long you plan to stay there. In most of the Rust-Belt cities, like Toledo and Detroit, the math overwhelmingly favors buying. In more expensive coastal markets, like Los Angeles and New York, it's a closer call.

Nationwide, homebuyers who remain in their homes for seven years will save an average of 38% over renting, Trulia found. A year ago, buying was 44% cheaper.

That means all of the initial transaction costs of buying a home — the broker's commission, title insurance, legal fees and other closing costs — will be offset by benefits, like tax write-offs and price appreciation. And those costs will become cheaper than the total costs of renting, which include insurance and agent commissions.

Best Regards, Chris Mesunas.

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Investors Losing Interest…

Investors Losing Interest in Housing, Despite Rise in Distressed Sales Share

Institutional investors appear to be losing interest in purchasing foreclosed properties for rentals in the face of rising property prices and interest rates and increased competition from homebuyers.   According to RealtyTrac's January 2014U.S. Residential and Foreclosure Sales Report, the share of home sales tied to institutional investors – entities that purchase ten or more properties in a calendar year – dropped to 5.2 percent in January, down from 7.9 percent in December and 8.2 percent in January 2013.  The January number was a 22 month low.

Daren Blomquist, a RealtyTrac vice president said, "Many have anticipated that the large institutional investors backed by private equity would start winding down their purchases of homes to rent, and the January sales numbers provide early evidence this is happening.  It's unlikely that this pullback in purchasing is weather-related given that there were increases in the institutional investor share of purchases in colder-weather markets such as Denver and Cincinnati, even while many warmer-weather markets in Florida and Arizona saw substantial decreases in the share of institutional investors from a year ago."

The fall back in institutional investors occurred in nearly three-quarters of the metropolitan areas tracked by the Irvine California company.  Areas with particularly large declines from a year earlier included Cape Coral-Fort Myers, Florida (-70 percent); Memphis (-64 percent), Tucson (-59 percent), and Tampa (-48 percent).  Institutional activity increased in 23 of the 101 areas with Austin, Texas notable for a 162 percent rise while Cincinnati was up 83 percent and Dallas 30 percent.

Institutional investment remains a major factor in sales in several areas including Jacksonville, Florida at 25.5 percent, Atlanta, (25.1 percent), and Austin (18.0).

Sales of all U.S. residential properties including single family homes, condos, and townhomes were at an estimated annual rate of 5.126 million units in January, a less than 1 percent increase from December and up 8 percent from a year earlier.  The rate of sales declined in seven states and 17 of the 50 largest metropolitan areas.

RealtyTrac said that foreclosure-related and short sales accounted for 17.5 percent of all residential sales in January, up from 14.9 percent in December.  In January 2013 distressed properties accounted for 18.7 percent of sales.  The distressed sales breakdown in January as a percent of all sales was 5.9 percent short sales, 10.2 percent bank owned real estate (REO) and 1.5 percent properties sold at foreclosure auction.

All-cash sales accounted for 44.4 percent of all U.S. residential sales in January, the seventh consecutive month where all-cash sales have been above the 35 percent level.  In several metro areas the majority of sales were all-cash; Miami (68.2 percent), Jacksonville, (66.2 percent), Memphis (64.4 percent) Tampa (61.5 percent) and Las Vegas (56.5 percent.)

The national median sales price of U.S. residential properties – including both distressed and non-distressed sales – was $165,957 in January, down 3 percent from December but up 1 percent from January 2013. The 3 percent monthly decrease was the biggest monthly drop since February 2013.  Some of the markets which had shown the fastest appreciation posted declines in January.  Some cities where prices fell 1 to 2 percent were San Francisco, Sacramento, Memphis, Cincinnati, Phoenix, and San Jose.  Prices in each, however, were a minimum of 19 percent above year-ago levels.

Best Regards, Chris Mesunas.

 

Mortgage Availability Improves…

MORTGAGE AVAILABILITY IMPROVES

Written by 

According to a new survey from Fannie Mae, credit availability is improving. For the first time in over three years, the majority of consumers believe it's easier to get a mortgage.

Doug Duncan, Fannie Mae's chief economist said, "The gradual upward trend in this indicator during the last few months bodes well for the housing recovery and may be contributing to this month's increase in consumers' intention to buy rather than rent their next home."

The Mortgage Bankers Association (MBA) says consumers are correct – credit availability has increased, particularly in the jumbo and refinance loan markets.

Explained Mike Fratatoni, chief economist for the MBA, "The market continues to adapt to the new QM [Qualified Mortgage] regulation by eliminating products that do not fit inside of the QM box. This tightening is being offset, both in the market for higher balance loans, where lenders continue to loosen terms for jumbo loans, and in the refi market, where more lenders are offering streamline refinance programs."

But there could be other reasons that credit is more available. Credit reporting agency Transunion announced that the mortgage delinquency rate for the fourth quarter of 2013 was 3.85 percent, down from 5.08 percent.

Delinquencies have been steadily declining over the past two years, while improved home sales and rising prices have allowed many homeowners on the edge of delinquency to sell their homes and get into something more affordable.

Credit has been extraordinarily tight since 2008, as lenders struggled with federal claims of mortgage fraud. For years, lenders raised credit standards beyond what was required to qualify for federally guaranteed loans and loans destined for purchase by the securities industry.

As the government leveled fines and made repayment settlements with many of the big banks, lenders are more willing to make mortgage loans. With the most toxic loans before 2008 foreclosed and disposed, lenders have more confidence in loans generated since them.

In fact, Transunion also reported that more loans were generated to borrowers with less-than-perfect credit in Q4 2013.

"We are on the downward slope of the mortgage delinquency curve, so we expect to continue seeing delinquency rates that have not been seen for several years," said Steve Chaouki, head of financial services for TransUnion.

With job gains growing, relatively low interest rates available and a tight supply of homes insuring equity gains, mortgage delinquencies should continue declining, and buyers should feel more confident in their decision to buy a home in 2014.

 

Student Debt and it’s Impact on First Time Home Buyers.

Higher Education or a House: Can Young Americans Have Both?

 

Affordability Struggle For First Time Buyers…

Explaining The Affordability Struggle for First-Time-Home-Buyers

In the latest edition of CoreLogic's Market Pulse the company's senior economist Mark Fleming provides adifferent take on housing affordability which he says economists are predicting will experience a "shock" in 2014.  There is a degree of uniformity in their predictions, he says, that rising rates, increasing house prices and stagnant incomes will soon herald the demise of the era of affordable housing. 

While Fleming does not argue with the basic premise he disagrees with the view that that news is "shocking."  "As I often point out with most housing statistics today," he says, "it is less important to focus on the fact that housing affordability is declining, but rather where it stands relative to historically normal levels."  But beyond the historical, Fleming also argues that affordability is actually proceeding along two different tracks, one for existing homeowners and another for those looking to buy their first home.

Using the same methodology as the National Association of Realtors® (NAR) and assuming a 20 percent downpayment and a 25-percent qualifying ratio Fleming constructed his own affordability index.  Using this he says national affordability was down 17 percent from the previous October and 22 percent from its peak in January 2013.  These declines are the result of an 11 percent appreciation in the CoreLogic Home Price Index (HPI) and a 100 basis point rise in interest rates.  Yet CoreLogic's affordability measure is 35 percent higherthan in 2000 when mortgage interest rates were 8 percent and home prices were rising more modestly.  So Fleming says, though clearly less accessible than a year ago, housing remains affordable in the current market."

But that analysis misses an important point.  While affordability can vary by market is also varies dramatically depending on whether you are a homeowner or not because homeowners capture price increases in the form of equity.  Thus affordability for the first time buyer is a measure of his income, the interest rates, and the price of homes; a homeowner's affordability level is functionally unchanged by increases in the latter.

The chart, which is based on a 5 percent downpayment, shows that during the period of 2003 to 2007, declining interest rates improved affordability for existing homeowners but that advantage for first time buyers was more than offset by rising home prices and housing reached its least-affordable level in 2006.  Then in 2007 the recession took hold, interest rates began their fall to historic levels, and home prices also declined dramatically, costing existing homeowners their equity but improving affordability for first-time homeowners, putting the two groups on near equal footing by the end of 2010.

Fleming said that homeowners have disproportionately lost affordability again over the last two years; down 17 percent for that group compared to 6 percent for existing homeowners.  And while first time buyers will still find affordability 35 percent higher than in the early 2000s, affordability for existing homeowners is almost 100 percent above the average back then as modest income gains have compounded and rates are still extremely low. 

Context and ownership clearly matter Fleming says.  "Will a further rate rise and increasing prices in 2014 eventually make housing unaffordable?  That will depend, but one thing is clear:  First-time homebuyers will be more significantly impacted."

Best Regards, Chris Mesunas

 

Non QM Lending…

Wells and Others Gear up For Non-QM LendingJan 8 2014, 11:02AM

With new rules defining Qualified Mortgages (QM) slated to kick in on Friday at least two lenders have indicated they will make room for loans that don't quite fit the government mandated mold.  The two, Wells Fargo and Bank of the West, plan to write at least some of the loans, retaining them for their own portfolios. 

Bank of the West, headquartered in Omaha says it will continue to offer interest only loans to its customers even though the loans fall outside the guidelines established by the Consumer Financial Protection Bureau.  Paul Wible, Senior Executive Vice President and Head of the bank's National Finance Group said in a statement this week, "We extensively reviewed the CFPB's rules and found them broadly consistent with how Bank of the West has always done business. At the same time, we know that interest-only loans can fulfill the mortgage needs of many of our customers. Therefore, even though they do not fit the CFPB's definition of a QM, we will continue to offer them as before."

Wible said that the bank's analysis confirmed its belief that a well-underwritten, interest only loan could be good for its customers and safe for the bank to hold on its balance sheet.  These loans, he said, meet the needs of certain customers such as the self-employed and that the bank will continue to require that such borrowers meet its prudent underwriting criteria.

Bank of the West, a subsidiary of BNP Paribas, has assets of $65 billion and operates 600 retail and commercial banking locations in 19 states.

On a much larger scale, Wells Fargo, the country's largest home lender is reported to be readying a group to handle nothing but portfolio loans.  Bloomberg says the bank has created "a swat team" of about 400 underwriters who will originate mortgages for the bank to hold.  As many as 40 percent of the loans are expected to be outside of new government guidelines. 

Bloomberg said they were told by Brad Blackwell, head of portfolio lending at the bank that the group will review loans that do not qualify for the safe harbor protections of new CFPB rules as a way to increase lending without losing control of quality.   

'"We have separated the underwriting group into a separate team that only underwrites loans" for the bank's own balance sheet,' Blackwell told Bloomberg.  '"We found it impossible to achieve our objectives" with the two groups together, he said.'

The bank's portfolio held $72.4 billion in non-conforming mortgages at the end of the third quarter, 14.5 billion of which Wells Fargo added in the second and third quarters of 2013.

 

How “2014 Changes” pushed transactions to close…

Buyers wrap up surprising number of new home sales from Thanksgiving to New Year’s

 

 

Housing Market 2014…What to expect…

Housing Market 2014: What Buyers, Sellers Should Brace for Now

By Donna Fuscaldo



The days of record-low interest rates and bidding wars may be a thing of the past in the new year. "For 2014, we expect that affordability will be worse," says Jed Kolko, chief economist at real estate website Trulia. Experts say homebuyers and sellers should brace themselves for higher mortgage rates and increased inventory in the new year along with looser mortgage lending standards.



The Federal Reserve's $85 billion bond-buying program has kept interest rates at or near record lows over the last few years, but the central bank will start tapering its purchases in January, a move that some experts say will cause mortgage rates to increase. " … We will see mortgage rates shoot up," says Svenja Gudell, director of economic research at real estate website Zillow. She points out that just talk of tapering in September sent rates jumping to around 4.6 percent. While rates have since moved back down, she doesn't expect them to stay there too long. "Will likely see mortgage rates move up in the coming months."



While buyers will pay more in terms of their interest rate when purchasing a new home, Zillow predicts they will have much more inventory to choose from in 2014. Tight inventory levels in some markets led to bidding wars breaking out across the country in 2013. Not only were would-be buyers competing with other buyers, many were going head to head with investors making all-cash offers.



In 2014, Zillow predicts the appreciation of home values will slow. "We had around 5 percent appreciation in 2013 and next year we think it will be close to 3 percent," says Gudell. She attributes the decline to the market stabilizing. "This year there was such a feeding frenzy, especially in the summer. We don't think we will see that next year."



Higher prices will lead investors out of the market, further helping the inventory levels. Rising mortgage rates will also have a negative impact on demand next year. Kolko at Trulia predicts it will be easier for buyers to get a loan in 2014 as refinancing demand wanes and banks look for other revenue sources. "It will be easier to get a loan but you will be paying more for that loan," he says.



Because interest rates will be higher and investors have exited the market, Zillow is predicting the homeownership rate to continue to fall and dip below 65%. During the height of the housing bubble, homeownership stood around 70% with a large portion of owners not in an ideal position to own a home.



The wave of foreclosures and plunging home prices after the bubble burst made homeownership less attractive and many would-be buyers turned to renting. Given the bidding wars and buying frenzy that defined 2013, one thing real estate experts are expecting to see in the new year are more savvy buyers. According to RedFin spokeswoman Rachel Musiker, there is a lot of demand leftover from 2013 and even 2012 and these buyers know the market and have high expectations.



"Redfin agents have told us that their clients are coming into 2014 ready to win, prepared to negotiate aggressively to get under contract before mortgage rates rise," says Musiker. "We're anticipating that this year's buyers will be savvier than ever."
 
MORTGAGES
Under Dodd-Frank, on Jan. 10 mortgage lenders are given more responsibility for making sure that borrowers have the ability to repay loans. The eight areas subject to more scrutiny by lenders are borrowers' income or assets; employment; projected monthly mortgage payments; payments on other loans; other monthly mortgage-related costs; other debts, alimony and child support; debt-to-income ratio or residual income; and credit history. Lenders are also banned from charging upfront fees or points greater than 3 percent of the loan and for selling mortgages that include negative amortization; interest-only periods; terms longer than 30 years; and rapidly increasing "balloon" payments.
 
Best Regards, Chris mesunas

 

Whats ahead for 2014 housing market….

What's ahead for 2014 housing market

Julie Schmit, USA TODAY10 a.m. EST January 1, 2014
 

The housing recovery hit high gear in 2013 with bigger than expected price gains and solid home sales. This year isn't likely to be as exciting. Rising mortgage interest rates will price out some potential buyers. Instead of double-digit price gains, look for single-digit ones, economists say, while existing home sales remain at last year's level.

Sound boring? "You want boring in the housing market," says Svenja Gudell, Zillow director of economic research.

Here's what's ahead for:

• Home prices. They were the highlight of the 2013 housing market, up 12.5% in October year over year, CoreLogic says. Prices are now 20% off their 2006 peaks after falling more than 30%, shows the Standard & Poor's Case-Shiller index.

Economist John Burns looks for a 6% gain in 2014. Many others see smaller increases ahead. Zillow forecasts just a 3% rise.

Prices will likely rise more slowly as more homes come on the market, fewer investors bid for homes and higher ownership costs — including interest rates and home prices — take a bite out of housing affordability, housing experts say.

Still, U.S. housing remains 4% undervalued when compared with other economic fundamentals, such as consumer incomes and the cost to rent, says Jed Kolko, Trulia economist. At their 2006 peak, home prices were 39% overvalued based on the same metrics, Kolko says.

•Existing home sales. They've started to slow. In November, they were down year over year for the first time in 29 months, National Association of Realtor data show.

The dip was driven by higher interest rates and a tight supply of homes for sale. It doesn't mean the housing recovery has come off the rails, because home prices and housing starts continue to improve, says Capital Economics economist Paul Ashworth.

Existing home sales, which came in at a 4.9 million seasonally adjusted pace in November, are expected to be about 10% higher in 2013 than 2012 and stay about the same at 5.1 million in 2014, NAR forecasts. That's roughly back to 2007 levels but below the inflated levels preceding the housing crash.

New-home sales, which make up a smaller part of the market, have more room to grow. They hit an annual pace of 464,000 in November, up almost 17% from a year ago but still below the 700,000-a-year pace generally considered healthy.

The new year will be different for home buyers, though.

Look for fewer bidding wars and a less frantic market, says Glenn Kelman, CEO of brokerage Redfin. Its data show bidding wars recently falling to one of two offers handled by Redfin agents, down from three of four at the peak in March.

Homes are taking longer to sell, and more sellers are also reducing prices to win sales, Kelman says. At the same time, the supply of existing homes for sale edged up to 5.1 months from 4.9 months in October, NAR says. That's still below the six-month supply that Realtors generally consider to be a balanced market for buyers and sellers.

Supply should get closer to that level in 2014, Kelman says.

Donaee and Jeff Reeve hope he's right. The couple sold their Seattle-area home in just 10 days amid a hot June market. They've been renting as they search for a new home with a few acres. Meanwhile, prices have risen. The lack of suitable homes for sale is "discouraging," says Donaee Reeve, 36, a dental hygienist.

• Housing construction. This part of the housing recovery has been a laggard.

November's data showed an improvement, with housing starts topping 1 million on an annual basis, the Commerce Department says. That was up almost 30% from a year earlier, but it's still far below the norm. Starts averaged 1.5 million a year before the mid-2000s housing boom.

Construction won't return to normal this year, but it will strengthen enough to be the main driver of the housing recovery as home price gains shrink, says investment manager Goldman Sachs Asset Management.

It sees housing starts increasing 20% a year for the next several years as household formation picks up with the strengthening economy.

More home construction means more jobs for construction workers, plumbers, civil engineers and others in the building trades, as well as related industries such as furniture manufacturing, it says.

Construction alone will add 300,000 to 500,000 jobs a year to the nation's job base for the next three years, GSAM predicts. That's up from about 100,000 in 2013.

"The construction revival is primarily a matter of when, not if," says Tom Teles, GSAM head of securitized and government investments.

• Mortgage rates. Sarah and Andrew Katz know home prices are going up, and mortgage interest rates, too. But they're still convinced it's a good time to buy a first home. They've set their sights on spring.

"We're banking on interest rates staying under 5%, but they are what they are," says Sarah, 29, who works in public relations in Manhattan.

The couple better not wait too long, economists warn.

Average rates for a fixed 30-year mortgage will rise to 5.5% by the end of 2014, says Lawrence Yun, NAR chief economist. Rates have already risen about 1 percentage point in the past year as the economy has strengthened. They'll be pushed up further as the Federal Reserve winds down its $85 billion monthly bond-buying program.

Each percentage point increase in mortgage rates makes homes about 10% more expensive in terms of higher housing payments.

Another factor could weigh on borrowers. Starting in January, lenders must make home loans that meet new federal qualified mortgage standards or face greater liability from borrower lawsuits, should the loans go sour.

At least 5% of mortgages extended in 2013 wouldn't meet the new standard, Yun says. More than that will likely face additional scrutiny from lenders as they implement all parts of the new rule, says Brian Koss, executive vice president of lender Mortgage Network.

He says the higher rates and tighter rules will likely drive some home buyers out of the market or into lower-priced homes than they could have afforded last year.

"People have gotten spoiled," Koss says. Higher rates and home prices will test the strength of the housing recovery in 2014, he says.