Last week, the Federal Housing Administration announced it will cut its annual mortgage insurance premiums, likely resulting in about $900 in savings for borrowers and potentially opening the door to thousands of new buyers. But there are no further FHA fee reductions under consideration, Julian Castro, secretary of the U.S. Department of Housing & Urban Development, told a crowd at the National Press Club on Tuesday. The FHA decided to reduce its annual mortgage insurance premium fees from 1.35 percent to 0.85 percent because its Mutual Mortgage Insurance Fund for single-family programs was “back in the black.” In his speech, Castro cited National Association of REALTORS® research that estimated that nearly 400,000 creditworthy borrowers were being priced out of the housing market in 2013 due to the high premiums. “We expect our premium reduction to help more than 2 million borrowers save an average of $900 annually over the next three years,” Castro told the crowd. “It will also encourage nearly a quarter-million new borrowers to purchase their first home.” Source: “Castro: No Further FHA Fee Reductions Under Consideration,” HousingWire (Jan. 13, 2015)
Mortgage giants Fannie Mae and Freddie Mac, two government-sponsored enterprises, will likely be guaranteeing a lot fewer new loans over the next decade, as the private sector steps up its role, according to a new report by the Congressional Budget Office.
During and after the financial crisis — from 2008 to 2013 — Fannie Mae and Freddie Mac backed about 60 percent of new mortgages. However, the CBO report predicts a big change: The two firms likely will only back about 40 percent of new mortgages by 2024 as private sources of capital take their place.
Fannie and Freddie’s market share is already showing signs of shrinking. In the first half of 2014, they backed about 50 percent of new mortgages.
Neither Fannie Mae or Freddie Mac issue loans directly. Instead, they purchase loans and resell them in bundles. In 2011 and 2012, they increased the fees they charge to guarantee mortgages, which reduced their advantage over private-sector firms.
Source: “Fannie Mae, Freddie Mac to Lose Market Share to Private Capital: CBO,” Reuters (Dec. 16, 2014)
Fannie Mae (FNMA/OTC) today announced the expansion of the HomePath® for Short Sales website, a communication tool created to help real estate professionals efficiently complete short sales and resolve challenges directly with Fannie Mae. The new functionality will allow agents to contact Fannie Mae sooner in the short sale process and preempt potential challenges, decreasing the need to escalate concerns further down the road. The website is open to any real estate professional working on a short sale involving a Fannie Mae-owned loan.
Through the expanded HomePath Short Sale Portal, listing agents can work directly with Fannie Mae to:
- Request list price guidance prior to listing a property
- View the status of submitted cases
- Negotiate and receive first lien approval on a short sale directly from Fannie Mae (This feature will be rolled out over the next few months through individual servicers.)
“This is an important step in continuing to build a strong relationship with the real estate community, which will ultimately contribute to the stabilization of neighborhoods,” said Tim McCallum, Vice President for Short Sales, Fannie Mae. “Allowing real estate professionals to negotiate an offer directly with Fannie Mae is the next step in streamlining the short sale process. Our goal is to provide transparency throughout these transactions and arrive at an agreement that benefits all parties involved.”
New mortgage rules that set out to protect borrowers against risky lending practices. One of the biggest changes is that borrowers will likely need to show more proof that they can actually afford the mortgage they’re applying for.
Here are two main terms to know from the new rules:
“Ability-to-repay” rule: Mortgage lenders must ensure borrowers can actually afford their loans over the long term. Applicants’ income, assets, savings, and debt against their monthly house payments will be more closely scrutinized. Borrowers likely will need to produce “even more tax records, pay stubs, and bank and investment account information,” USA Today reports.
Qualified Mortgage: Borrowers who meet the ability-to-repay requirements may be eligible. QM loans must meet at least some of the following guidelines: They cannot contain risky features, such as terms that exceed 30 years or interest-only payments; carry more than 3 percent in upfront points and fees for loans above $100,000; or push a borrowers’ total debt above 43 percent of their monthly income unless the loan qualifies to be backed by Fannie Mae, Freddie Mac, the FHA, or a small lender.
The Consumer Financial Protection Bureau estimates that about 92 percent of mortgages currently meet QM requirements.
Still, the real estate and mortgage industry, the CFPB, and others will watch implementation of the new rules closely to determine whether they make it more difficult for borrowers to qualify for mortgages.
Source: “New Mortgage Rules Aim to Prevent Risky Loans,” USA Today (Jan. 9, 2014)
Mortgage rates were little changed this week, with the 30-year fixed-rate mortgage averaging 4.51 percent, Freddie Mac reports in its weekly mortgage market survey.
Freddie Mac reports the following national averages for the week ending Jan. 9:
- 30-year fixed-rate mortgages averaged 4.51 percent, with an average 0.7 point, dropping from last week’s 4.53 percent average. Last year at this time, 30-year rates averaged 3.40 percent.
- 15-year fixed-rate mortgages averaged 3.56 percent, with an average 0.6 point, rising slightly from last week’s 3.55 percent average. A year ago, 15-year rates averaged 2.66 percent.
- 5-year hybrid adjustable-rate mortgages averaged 3.15 percent, with an average 0.4 point, rising from last week’s 3.05 percent average. Last year, 5-year ARMs averaged 2.67 percent.
Source: Freddie Mac
REALTORS® and the Consumer Financial Protection Bureau announced in a press conference that they will be closely monitoring the impact of the new rules on borrowers.
NAR has expressed concern over a 3 percent cap on points and fees, fearing that it “unfairly discriminates against affiliated lenders who have to count many more items toward fees and points than large retail financial institutions, such as title insurance charges and escrow for homeowner’s insurance,” according to an NAR release.
“The problem is that under this rule, affiliated and nonaffiliated firms are treated differently,” says Chris Polychron, NAR president-elect. “It’s NAR’s view that this would be a disadvantage to many real estate affiliated lenders and reduce the choices available to consumers of where they can get a mortgage, and because the unaffiliated lender must still use a title company, the consumer pays the same amount either way.”
Source: National Association of REALTORS(R)
Fixed-rate mortgages changed little this week, but remain near its highs in recent months.
Freddie Mac reports the following national averages for the week ending Dec. 12:
- 30-year fixed-rate mortgages: averaged 4.42 percent, with an average 0.7 point, dropping from last week’s 4.46 average. Last year at this time, 30-year rates averaged 3.32 percent.
- 15-year fixed-rate mortgages: averaged 3.43 percent, with an average 0.7 point, falling from last week’s 3.47 percent average. A year ago, 15-year rates averaged 2.66 percent.
- 5-year hybrid adjustable-rate mortgages: averaged 2.94 percent, with an average 0.4 point, also dropping from last week’s 2.99 percent average. Last year at this time, 5-year ARMs averaged 2.70 percent.
Source: Freddie Mac
The housing recovery is at a “turning point,” say economists at Wells Fargo Securities, but it needs more jobs and income growth in order to pick up steam.
High unemployment remains a drag on the housing recovery, severely limiting the upside for housing demand nationwide, according to the latest WFS Housing Chartbook. For the housing recovery to gain more traction, “overall employment conditions need to improve further.”
Wells Fargo economists have lowered their projections for new home sales, estimating 440,000 new home sales this year, which would be up 19 percent from last year. In July, Wells Fargo economists had predicted a 24 percent increase in new home sales.
Source: “Wells Fargo Economists Reduce New Home Sales Forecast,” National Mortgage News (Oct. 3, 2013)
In what appears to be a reversal of an earlier position stated last week, the U.S. Department of Housing and Urban Development (HUD)’s Office of Single Family Housing will continue to endorse new loans “in order to support the health and stability of the U.S. mortgage market” should there be a lapse in appropriations, the agency said in its latest contingency plan.
“The single-family aspect of FHA is funded through multiyear appropriations,” a HUD spokesman told Inman News. Therefore, while there will be some reductions in staff and furloughs, that part of the FHA will be able to operate, “at a slower pace,” he said.
Home owners who have a mortgage insured by the Department of Veterans Affairs or Federal Housing Administration are often unaware of one feature: The buyers may be able to take over the home owner’s loans under the same terms. This prevents the buyer from having to take out a new mortgage, and may be an incentive that can be used as a marketing tool to sell a home — particularly at a time when mortgage rates are on the rise, The New York Times reports.
“You could now have a seller saying, ‘I have a great house to sell you and a great mortgage to go with it, which is better than my neighbor, who only has a great house,’ ” Marc Israel, an executive vice president of Kensington Vanguard National Land Services and a real estate lawyer, told The New York Times.
The advantage to buyers is that they may be get a lower mortgage rate by assuming the seller’s loan. It also can be cheaper than applying for a new one with fewer settlement fees. An appraisal is not required, but buyers must prove their creditworthiness.
Another potential perk to assuming the seller’s loan may be that buyers then will be further in the amortization schedule than on a new loan, which could mean more of the monthly payment would go toward the principal.
Source: “Taking Over a Seller’s Loan,” The New York Times (Sept. 19, 2013)