The Mortgage Market Is About To Get Smaller


The Mortgage Market Is About To Get Smaller

Posted: 27 Feb 2014 11:10 AM PST

As 2014 begins a bureau created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, The Consumer Financial Protection Bureau (CFPB), will set new rules concerning mortgages. Lenders will be required to verify and inspect borrowers’ financial records. The rules discourage lenders from allowing borrowers to carry total debt payments totaling more than 43 percent of the person’s annual income.

That debt also includes existing debts like credit cards and student loans. Starting January 10th the CFPB will put into force a national standard for issuing mortgages that could help prevent the housing crash of 2008 and 2009. Earlier in 2013 CFPB director Richard Cordray called the new rules “the true essence of ‘responsible lending.”

All kinds of consumer advocates and mortgage professionals are lauding the new CFPB requirements. The new rules not only provide more responsibility for lenders, but it also protects them from lawsuits. “Lenders are going to be crossing their t’s and dotting their i’s like never before” said Bob Walters, the chief economist for Quicken Loans.

On the downside, there will be a big number of people who should have been able to qualify for mortgages that won’t be able to and will be shut out of the home-buying market. If you add to that the fact that mortgage rates have risen in the past 6 month and are predicted to gradually move up to the mid 5 percent range by the end of 2014, you can see that the mortgage market will be shrinking.

Others have commented that there’s a good chance that limits on the size of some popular mortgages will be lowered during 2014. CFPB director Corday noted that in the years leading up to the 2008 financial crisis, consumers could easily obtain mortgages that they could not afford to repay. In contrast, in subsequent years banks tightened lending so much that few could qualify for a home loan.

The new rules seek out a middle ground by protecting consumers from bad loans while giving banks the legal assurances they need to increase lending, he said in a press conference at the start of 2013. The new rules will limit offers like teaser rates that adjust upwards and large “balloon payments” that must be made at the end of the loan period.

They include several exceptions aimed at ensuring a smooth phase-in and protecting access to credit for underserved groups. For example, the strict cap on how much debt consumers may take on will not apply immediately. Loans that meet separate federal standards also would be permitted for the first seven years.

Balloon payments would be allowed for certain small lenders that operate in rural or underserved communities, because other loans may not be available in those areas. The bureau also proposed amendments that would exempt from the rules some loans made by community banks, credit unions and nonprofit lenders that work with low- and moderate-income consumers.

You can learn more about the details that the CFPB’s website which is a great source of information on new laws that govern the use of credit and consumer rights. Property managers, here’s an idea for you. Why not send a link to this article to your owner-clients and your prospective client list as a “heads-up” for the year ahead.

As I often like to remind us, being a font of information and the latest insights can separate you from your peers, leading to more referrals and a bigger book of business. On second thought, if you send this article to your owner-clients and your prospective client list, maybe it would be more prudent to copy and paste sections and leave off the last 3 paragraphs.

December New Home Sales report


December New Home Sales report was released today at 468K unites. This came in about 68K higher than expectations of 400K, and higher than December’s upwardly revised 427K.  This was the best number in 5.5 years and shows a 9.6% increase from december to January.  New Home sales is a timely inicator because it shows signed contracts in January. The Median Sales Price fell 2.2% to 260,100.  Supply fell 4.7% from 5.2%. The consensus was for this to be a bad number with last month’s inclement weather conditions. So this is a very good report.

 On the other hand,             The Mortgage Bankers Association released their weekly Mortgage Application data for the week ending February 21st and the index was reported Down 8.5%. The purchase index, which was down 6% last week, fell another 4%. Purchase Applications are now down 15% this year.  Interest rates increased 3bp to 4.53%  with a cost of 0.26%.. This did not help any refinance activity which was down 11%. So, well have to watch the upcomming reports and see why the New Home sales number was so strong, and purchases seem to be hurting. Maybe weather had to do with some of it.

 Attention Realtors:
The CFPB might be stepping beond the Lending institutions and stepping into YOUR business.  Long and Foster Real Estate is in a class action lawsuite for 11.2 million dollars for RESPA violations and NAR  can’t really do anything about this one.  Up in till now, Realtors were pretty much untouched by regulation with all the money and lobbying thats helped them thru NAR. Now, this company Long and Foster, is in hot water with this  lawsuite there facing over allegedly sharing in settlement fees with another company. Read more
Rich Hopkins is a mortgage broker originating both residential as well as commercial mortgages since 1999. Focused primary on new home buyers, Rich works with Realtors in the New York market, helping them increase their listings.

Recovery Stretches to Ninth Consecutive Month; 89 Markets Reaching Full Recovery


Wednesday, February 26, 2014
Recovery Stretches to Ninth Consecutive Month; 89 Markets Reaching Full Recovery
A recently released market index shows significant improvement in the top 100 markets this month. Results show that 60 of the top 200 midsize markets have fully recovered their loss in home prices due to the housing bubble burst. These advancements bring the total markets with full recovery to 89 (30 percent), up two from the previous month’s 87. …Read More >

Delinquency and Foreclosure Rates Decline to Lowest Level in Six Years


Tuesday, February 25, 2014
Delinquency and Foreclosure Rates Decline to Lowest Level in Six Years
The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 6.39 percent of all loans outstanding at the end of the fourth quarter of 2013, the lowest level since the first quarter of 2008. The delinquency rate decreased two basis points from the previous quarter, and 70 basis points from one year ago, according to the Mortgage Bankers …Read More >

Coming to America: More People Moved to U.S. from International Locations in 2013

topStories Saturday, February 22, 2014
Coming to America: More People Moved to U.S. from International Locations in 2013
The United States experienced an influx of people from international locations in 2013, with more household goods moves made to the U.S in 2013 than moves from the U.S., according to the International Migration Study recently released by UniGroup Relocation. The U.K. is the top country of origin for moves to the U.S., as it has been …Read More >

Will Housing Take Gold?

Thursday, February 20, 2014
Will Housing Take Gold?
Freddie Mac recently released its U.S. Economic and Housing Market Outlook for February showing that despite the Federal Reserve’s taper activity, long-term rates have eased over the past month, providing a chance for some borrowers who are holding older mortgages an opportunity to refinance. “It appears mortgage rates may have given the market a reprieve for a month or so and provided some borrowers another chance at refinancing, especially those folks …Read More >

Why You Shouldn’t Use Excel As Accounting Software

Why You Shouldn’t Use Excel As Accounting SoftwarePosted: 19 Feb 2014 10:28 AM PST

First, let me confess that I love Excel. Having used Excel for years, I’m fully aware of its strengths, and will continue to use it to create spreadsheets, graphs, and tables. But for some unknown reason, there is a small group of property managers that continue to extol the benefits of using Excel as their primary accounting software.

I have to admit that this has me stumped. The accounting software of today in no way resembles the awkward software of yesterday. Today, most software products are designed with the end-user in mind, and include easy system navigation, intuitive data entry screens, and system tutorials to make it easy to learn your way around the system.

If you’re using Excel to run your property management business, you may want to consider the following:

Excel’s Primary Functionality is NOT Accounting – Excel’s primary function is creating spreadsheets, not processing transactions, or producing financial statements. Yes, it can be used for those things, but typically with accounting software; not in place of it. As a result, users will spend an inordinate number of hours entering Excel data manually, because it does not have the capability to share data. So anytime your tenant pays rent, you’ll be posting that payment in your checkbook, your accounts receivable journal, and your tenant record. With regular accounting software, you post it once.

Propensity for Errors Increases – The lack of a central database and no double entry accounting system in Excel also means a lot more repetitive data entry. And each time you have to re-enter the same data, the likelihood of making an error increases dramatically. Also consider that without the safeguard of a double entry accounting system, it’s very easy to end up with out of balance accounts.

Lack of a Reliable Audit Trail – Accounting software has become valuable to business owners because of the ability to ensure that data is accurate and secure. Excel offers no such protection; meaning that formulas can be changed, entries accidentally (or purposely) deleted, and transactions erased, all without leaving a trace of the original entry behind.

Ease of Use – or Lack Thereof – While it’s fairly simple to create spreadsheets in Excel, making it a functioning accounting program requires another level of skill that most Excel users will never attain. Creating an invoice, printing a statement, or processing a financial statement in Excel can take up valuable time, while accounting software allows you to create those items in minutes.

While Excel will continue to provide a valuable benefit to property managers, it can provide many more benefits and less headaches by using it for what it was designed to be.

It’s Tough To Afford To Be A Renter These Days

It’s Tough To Afford To Be A Renter These DaysPosted: 17 Feb 2014 10:32 AM PST

Housing affordability isn’t looking too promising as 2014 begins. If you listen to the National Association of Realtors the opportunity to be a homeowner hasn’t been this affordable in a long time.

If you review Figure 2 below you’ll get the impression that American housing is now extremely affordable and the typical household can easily make the monthly mortgage payment on a home. Thanks to historically low interest-rates, fixed rate mortgages have become more affordable for some American families and many analysts expect that this cheap credit will fuel another housing boom.

Figure 2: US Housing Is Affordable

Perhaps another home-buying- boom has begun, but from the index above it still looks like the price of housing is above the levels we saw between 2005 through 2008. Yes, there’s been a dip since 212, but anecdotally I’m not hearing of a big increase in existing housing sales since mortgage rates are climbing.

In fact on Dec.19, 2013 Reuters reported that “U.S. home resales fell sharply in November to their lowest level in nearly a year, hurt by a rise in interest rates since the spring and ongoing price increases that have shut some home buyers out of the market. The National Association of Realtors (NAR) said on Thursday [the 19th] that sales of previously owned homes dropped 4.3 percent last month, the third monthly fall in a row, to an annual rate of 4.90 million units.” That was the lowest annual rate since December 2012, and well below the median forecast in a Reuters poll of a 5.03 million unit pace. “It is a clear loss in momentum for home sales,” NAR economist Lawrence Yun told reporters.

How About The Cost Of Being A Renter? As Mr. Doubtfire said to Mrs. Doubtfire in the movie by the same name, “Brace yourself Effie!”  An online trade journal for folks in the mortgage industry, The National Mortgage Professional had a grim assessment titled, “American Renters Facing Tough Affordability Issues”.

“Affordability problems for renters have skyrocketed over the past decade both in number and the share of renters facing them, according to a new report on rental housing from the Harvard Joint Center for Housing Studies.” “The inability of so many to find housing they can afford dramatically impacts the health and well-being of U.S. renters, as lower-income households cut back on food, healthcare, and savings, just to keep up.”

The Harvard report, “America’s Rental Housing: Evolving Markets and Needs,” found that half of U.S. renters pay more than 30 percent or more of their income on rent, up an enormous 12 percent from a decade earlier. A large amount of the increase was found among renters with severe financial burdens (e.g. paying more than half their income on rent). These levels were unimaginable just a decade ago, when the percentage of American renters paying half their income or higher on housing stood at 19 percent and was already an alarming concern.

“Escalating rental affordability problems come at a time when the share of Americans that rent has increased from 31 percent in 2004 to 35 percent in 2012. In fact, the 2000s marked the strongest numerical growth in renter households in the last fifty years” the report continued. “As ownership rates fell, housing markets have adjusted dynamically to the increased demand for single-family rentals, with about three million existing homes switching from owner to rental occupancy from 2007-2011 alone.”

That number has risen in the last two years, and most of those houses were rented at local fair-market rent levels. So Property Managers, are you keeping up with the rental affordability circumstances in your area? How fast are your vacancies being filled, and will vacancies start a trend in the other direction?

Be prepared to speak with your owners (clients) and let them know what’s going on both regionally and nationally. If fewer Americans can afford the current cost of renting a house or an apartment, perhaps we will all experience the need for temporary rent reductions? Another possibility to consider; Are your owners and you willing to rent to multiple couples, and are you going to need to advertise your unfilled vacancies for singles to share to help the affordability challenge?

Hopefully a rebound in employment and a robust gain in the economic circumstances of the average American will unfold in the year ahead. In case it doesn’t, prudent Property Managers need a back-up, contingency plan. What is yours, and are you communicating with your clients about it? If you don’t have one, create one. Then plan on scheduling individual meetings with owners or do a client-appreciation seminar to let them know your ideas.