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.

 

Assuming a Home Loan…

Real Estate Q&A: Is Assuming a Home Loan a Good Idea? Do I Need More Than One Title Insurance Policy?

Sacramento County Home Prices Remain Steady…

Sacramento County's median home price remains steady

 

 

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.

 

HARP myths debunked by Freddie Mac Exec…..

HARP Myths Debunked by Freddie Mac Exec

A Freddie Mac senior vice president is using the company's blog to debunk a few myths she says may be keepinghomeowners from refinancing through HARP, the Home Affordable Refinance Program.  Tracy Mooney's information about on nine HARP misconceptions might not only be helpful for homeowners themselves but a good resource for lenders to share with customers and the public.

1.      Myth One is that refinancing with HARP (or any other program for that matter) would reset the clock and the borrower would again be looking at 30 years of mortgage payments.  This, as Tracy points out, is not true as almost any refinancing allows the borrower to pick a term from 10 to 30 years for the new loan.  The counterpoint is that most borrowers opt for a 30yr term and this does indeed entail a new 30 years of payments.  Even then, if the interest rate is lower and the borrower simply continued paying the original mortgage payment, less interest would be paid over time and the loan would be paid off faster than the original would have been.  Bottom line: all things being equal, dropping the rate is advantageous in most cases.

2.      Some borrowers have so many offers to refinance coming their way they fear some may be scams.  Mooney says that many legitimate offers have specific information identifying the borrower's existing loan such as the account number.  Also the borrower can report any suspicious offers at 888-995-HOPE. When in doubt borrowers should check with their current lender.

3.      Another myth is that HARP can't help homeowners who are underwater on their mortgage.  That, in fact, is what HARP was designed to do and has no restrictions on loan-to-value ratios for fixed-rate mortgages.

4.      The fourth myth is that refinancing is hopeless for the unemployed.  HARP does offer options that might work such as underwriting based on assets rather than income.  Borrowers should reach out to their lender to discuss available solutions.

5.      It is possible to refinance through HARP even if the borrower's current lender doesn't participate in the program.  Freddie Mac and Fannie Mae have lists of lenders who can discuss options and eligibility with anyone.

6.      Some people believe they are ineligible if they currently have an adjustable rate mortgage (ARM).  HARP was in fact created to help such homeowners obtain mortgages that are more stable and sustainable.  With rates still so low it is the perfect time to lock into a fixed-rate mortgage

7.      Myth Seven is that condos are not eligible for HARP refinancing.  Not only are condos eligible but so are investment properties and second homes.

8.      It isn't always necessary to have sufficient cash up front to pay closing costs.  Lenders can evaluate whether a borrower qualifies to have closing costs and other necessary expenses rolled into the new loan.  

9.      Finally many homeowners think HARP is only for those who are behind in their payments and in danger of foreclosure.  In fact HARP is intended specifically for homeowners who are current on their mortgages but are underwater and unable to refinance through a traditional refinance programs

Moony said potentially millions of homeowners could save money each month by refinancing through HARP.  The program has more than 2.9 million success stories so hopefully if you now know these myths are just that, she says, reach out to your lender and get started with HARP because, "Saving money is a good thing!"

Best Regards, Capital Valley Team