‘Nonprime’ Loans Expand Mortgage Options

Subprime mortgages—which were blamed for sparking the last housing crisis—are reappearing, this time being dubbed “nonprime” loans. This lending option, which carries new quality standards, is growing for buyers who have damaged credit.

California-based Carrington Mortgage Services is one company expanding its nonprime loan offerings. “We believe there is actually a market today for people who want to buy nonprime loans that have been properly underwritten,” saysRick Sharga, of Carrington Mortgage Holdings, told CNBC.

Carrington Mortgage Services, which plans to manually underwrite each loan, will qualify borrowers with FICO credit scores as low as 500. The lender also will qualify borrowers who’ve had recent problems reported on their credit histories, such as a foreclosure, bankruptcy, or a history of late payments. But borrowers who are at higher risks will be required to make a bigger down payment, and the interest rate on the loan will be higher.

Other lenders also are getting into the nonprime space, including Angel Oak and Caliber Home Loans; more than 80 percent of Angel Oak loans are nonprime.

Source: “Subprime Mortgagees Make a Comeback—With a New Name and Soaring Demand,” CNBC (April 12, 2018)

Another Week of Mostly Flat Mortgage Rates

Borrowing costs haven’t budged much in recent weeks, offering some relief from the weekly rate increases that had almost become routine at the start of 2018.

“Rates have bounced around 4.4 percent since mid-February. Rates could break out and head higher if inflation continues to firm. … If inflation continues to trend higher, we may see two or three more rate hikes from the Fed this year, and mortgage rates could follow. For now, mortgage rates are still quite low by historical standards, helping to support home buyer affordability as the spring home buying season ramps up.” says Len Kiefer, Freddie Mac’s deputy chief economist.

Freddie Mac reports the following national averages for the week ending April 12:

  • 30-year fixed-rate mortgages averaged 4.42 percent, with an average 0.4 point, up from last week’s 4.40 percent average. Last year at this time, 30-year rates averaged 4.08 percent.
  • 15-year fixed-rate mortgages averaged 3.87 percent, with an average 0.4 point, holding the same average as last week. A year ago, 15-year rates averaged 3.34 percent.

Source: Freddie Mac

Desperate Buyers ‘Snag Homes Sight Unseen’

Some home shoppers are feeling hopeless this spring and making competitive moves in order to get a home. They’re reportedly rushing to making offers without seeing homes first, bidding well above the asking price, or waiving inspections entirely to get sellers to find their offer the most alluring.

Record low supplies of homes for sale are driving up prices across the country.

As for sellers, they may find some big profits when they do sell. “It’s going to have the feel of a hot market” with multiple offers and bidding wars, says Lawrence Yun, the chief economist for the National Association of REALTORS®. Still, Yun expects sales to be flat compared to a year ago due to the shortage of homes for sale as well as reduced affordability for many house hunters.

Source: “Home Buying Market so Brutal, Some Home Buyers Make Offer Sight Unseen,” USA Today (April 5, 2018)

Homeowner Equity Is Hitting a Record High

Homeowners are getting richer, thanks to rising home values. The amount of equity that homeowners can tap into is now at the highest level on record, according to Black Knight Financial Services, a mortgage and finance industry solution provider.

The amount a borrower can take out of a home—while still leaving 20 percent in it—increased by a collective $735 billion during 2017. That is the largest annual increase by dollar value on record, according to Black Knight. The collective amount of tappable equity now stands at $5.4 trillion, 10 percent more than the prerecession peak in 2005.

The amount of homeowner equity varies depending on location. Thirty-nine percent of the nation’s total tappable equity is in California alone. Seattle and Las Vegas have also seen large increases in home equity, Black Knight notes.

Source: “Homeowners Are Sitting on $5.4 Trillion in Ready Cash, the Most Ever,” CNBC (April 2, 2018)

Will ‘Granny Flats’ Resolve Housing Shortages?

Some housing economists believe that “granny flats” could be the key to alleviating housing shortages across the country, and they are calling on more municipalities to ease up the rules to allow such dwellings to be built on or into more single-family homes. Nicknamed “granny flats,” these accessory dwelling units tend to be separate, cottage-like structures, but may be a converted garage or basement that houses an extra living area.

In California, three new zoning laws in 2017 allowed for expanded development of granny flats. California has since seen a 63 percent increase in the number of building permits for these units—more than any other state, according to ATTOM Data Solutions, a real estate data firm. But many counties either still have zoning restrictions that don’t allow these units, or they are making the building permit process difficult.

Source: “Could ‘Granny Flats’ Be the Solution to America’s Affordable-Housing Crisis?” MarketWatch (March 26, 2018)

Mortgage Rates Barely Budge This Week

After last week’s first rate drop of the year, mortgage rates showed little change this week—a welcome sign for the week’s kickoff to the spring home shopping season. But home buyers and borrowers should expect several rate increases over the next few months, economists caution.

“The Federal Reserve raised interest rates [this week]—a much-anticipated move that comes as both U.S. and global economic fundamentals continue to strengthen,” says Len Kiefer, Freddie Mac’s deputy chief economist. “The Fed’s decision to raise interest rates by a quarter of a percentage point puts the federal funds rate at its highest level since 2008. The decision, while widely expected, sent the yield on the benchmark 10-year Treasury soaring.” (Read: Fed Raises Rates: What This Means for Mortgages)

Freddie Mac reports the following national averages for the week ending March 22:

  • 30-year fixed-rate mortgages: averaged 4.45 percent, with an average 0.5 point, rising from last week’s 4.44 percent average. Last year at this time, 30-year rates averaged 4.23 percent.
  • 15-year fixed-rate mortgages: averaged 3.91 percent, with an average 0.5 point, rising from last week’s 3.90 percent average. A year ago, 15-year rates averaged 3.44 percent.

Source: Freddie Mac

Home Loan Rates Post First Decline of 2018

Following nine consecutive weeks of increases, borrowers finally got some relief this week with mortgage rates. The 30-year fixed-rate mortgage posted its first week-over-week decrease of 2018.

“Tuesday’s Consumer Price Index report indicated inflation may be cooling down; headline consumer price inflation was 2.2 percent year over year in February,” says Len Kiefer, Freddie Mac’s deputy chief economist. “Following this news, the 10-year Treasury fell slightly. Mortgage rates followed.”

Freddie Mac reported the following national averages for the week ending March 15:

  • 30-year fixed-rate mortgages: averaged 4.44 percent, with an average 0.5 point, dropping from last week’s 4.46 percent average. Last year at this time, 30-year rates averaged 4.30 percent.
  • 15-year fixed-rate mortgages: averaged 3.90 percent, with an average 0.5 point, dropping from last week’s 3.94 percent average. A year ago, 15-year rates averaged 3.50 percent.

Source: Freddie Mac

Household Net Worth Reaches Record High

Americans are feeling richer. Household net worth neared $100 trillion in the final quarter of last year, falling into record territory, according to new data released by the Federal Reserve on Thursday. Rising stock markets and property prices were attributed to the jolt in the fourth quarter. (Household net worth is the value of all of a consumer’s assets, like stocks and real estate, minus any liabilities like mortgage and credit card debt.)

Household net worth increased more than $2 trillion last quarter to a record $98.7 trillion in the final three months of last year, according to the report. Households in the U.S. saw their net worth increase to nearly seven times their disposable personal income in 2017.

More at source: “U.S. Household Net Worth Pushes Further Into Record Territory,” The Wall Street Journal (March 8, 2018) [Log-in required.] and “Stock Market Lifts U.S. Household Wealth to $98.7 Trillion,” The Associated Press/USA Today (March 8, 2018)

Survey: Home Owners Worried, Buyers Excited

Consumer sentiment is following an unusual trend for a seller’s market: Home buyers are upbeat, but homeowners are less so, according to ValueInsured’s latest quarterly survey of about 1,600 consumers. Why the divergence between buyers and owners? Some homeowners may feel stuck, while buyers are anxious to jump into real estate before home prices and mortgage rates rise further.

Fifty-eight percent of homeowners surveyed say they want to sell but are holding off because they don’t want to purchase again at today’s higher prices. Fifty-nine percent of owners say they believe buyers in their area are overpaying for a home, according to the survey.

Buyers still have plenty of concerns, such as saving for a down payment and eroding housing affordability, particularly in the nation’s hottest housing markets. Some say they are ready to make some sacrifices to afford their first home.

We suggest you view charts and data at: ValueInsured Modern Homebuyer Survey

Hispanics: ‘Helping Home Ownership Rates’

For the third consecutive year, the Hispanic population is driving growth in homeownership, according to the latest State of Hispanic Homeownership Report. Hispanics’ rising populations and household formation, as well as their increased workforce participation, is behind the uptick, according to the report by the Hispanic Wealth Project and National Association of Hispanic Real Estate Professionals.

The Hispanic population in the United States increased by 1 million last year and accounted for 51 percent of U.S. population growth. Hispanics increased their homeownership rate slightly from 46 percent to 46.2 percent, or a net increase of 167,000 new-owner households in 2017. Hispanics boasted the highest workforce participation rate among any other ethnic or racial demographic at 66.1 percent, according to the report.

The three biggest obstacles facing Hispanic homeownership: Lack of inventory, recent natural disasters, and the nation’s immigration policy, according to the report.

Source: National Association of Hispanic Real Estate Professionals