Investors Losing Interest…

BY JANN SWANSON

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…

Written by Blanche Evans

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?

by Ellen Haberle 

16 Percent of First-time Homebuyers Say Student Debt Has Kept Them From Buying

My husband and I would love to own a home, but right now we just can’t. Why? Grad school debt. Yep, we’re in our 30s, we both have great jobs and, as an economist at Redfin, I spend my days obsessing over real estate. But our crushing six-figure debt from graduate school means we will likely be the last of our friends to become homeowners.

Obviously, we’re not the only ones who have mountains of college loans to pay off. Last week, the Federal Reserve Bank of New York reported that student loan debt rose more than 5 percent in the fourth quarter of 2013 and now exceeds $1 trillion.

Redfin’s Q1 homebuyer survey suggests that these rising debt loads are delaying homeownership among young Americans. From Feb. 20 to 23, Redfin surveyed 1,912 home-buying clients, of which 965 were buying a home for the first time. Among the first-timers,16 percent said that student debt had previously kept them from buying a home.

* First-time homebuyer respondents only

Of these homebuyers surveyed, 33 percent said that student debt had led them put off a home purchase for one to two years while 31 percent said four years or more.

* First-time homebuyer respondents only

Despite these statistics, Redfin Open Book Lender, John Wheaton, said home buying is still attainable for many student debt holders. According to Wheaton, “Many young people with student loans delay buying a home because they don’t think they can qualify for a mortgage. Yet, many of them actually can. Underwriters generally treat student debt in a more positive light than credit card or auto loan debt.”

For example, a person with $45,000 in student loans (about $500 per month for a 10-year term), a FICO score of 741 and an income of about $75,000 per year could likely qualify for a property starting at around $375,000 with a 5 percent down payment, Wheaton said.

When we do the math, my husband and I could technically afford to buy a home right now. But it feels risky. If one of us lost a job, could we still pay a mortgage and make our school debt payment? We probably couldn’t.

For others, buying now would mean sacrificing on the home they really want. According to Redfin agent Alex Haried, “For my home-buying clients, student debt hasn’t prevented them from buying a home, it has prevented them from buying the home they want. Instead of buying a $350,000 home, they would rather rent for a few more years as they pay down their student debt and then buy a $500,000 home.”

With tuition costs soaring, potential homebuyers in the future may have even bigger debt hurdles to overcome. From 2008 to 2013, annual tuition for a public four-year universityrose 20 percent to $18,391, according to the College Board. For graduate students, tuition growth is even steeper; the cost for a Master’s in Business Administration grew 33 percent between 2008 and 2012. For a top-tier MBA program such as the one at Duke University, students dole out $110,600 in tuition.

More Student Debt, Fewer First-Time Home Sales

As if young Americans aren’t already strained by a weak job market and rising home prices and mortgage rates, climbing tuition costs give them one more reason to put off buying a home. The National Association of Realtors said last week that the share of existing home purchases by first-time buyers slipped to 26 percent of sales, down from 30 percent last year. For the economy as a whole, this means that rising student debt loads — which should, in theory, be a positive sign of a more educated workforce — may be a short-term hindrance to the housing recovery.

 

Affordability Struggle For First Time Buyers…

BY JANN SWANSON

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

 

REO Incentives for Sellers, Listing Agents and Homebuyers…

BY JANN SWANSON

More REO Incentives, This Time $1500 for Realtors

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Feb 18 2014

Freddie Mac has joined Fannie Mae in offering limited time and location inducements to move sales on its owned real estate (REO).  The company today rolled out sets of incentives for listing and selling real estate agents and for homebuyers.  Fannie Mae announced its incentive program last week. 

(Read More: Fannie Offers REO Incentives to Owner Occupants)

Freddie Mac will pay a $1,000 bonus to selling agents and a separate $500 incentive to listing agents who sell a home through the company's HomeSteps program.  For homeowners there will be $500 that can be used to pay condominium fees, flood insurance premiums or to purchase a home warranty.  

To be eligible for either agent or homebuyer incentives, the home must be located in one of 23 target states and offers must be received between February 18 and April 15.  The transaction must close by May 31, 2014.  Only owner occupied first or second residences are eligible and the promotion does not apply to investor purchases, auction, sealed-bid sales, or bulk sales.  

Chris Bowden, Senior Vice President, HomeSteps said, "HomeSteps' 2014 winter sales promotion is focused onfiring up sales in 'cold weather' states and condominium deals everywhere. With mortgage rates still low and home inventories tightening, the 2014 HomeSteps Winter Sales Promotion is a great opportunity for families ready to buy and real estate agents ready to sell."

States where the 2014 HomeSteps Winter Sales Promotion is now active include Alabama, Connecticut, Colorado, Iowa, Illinois, Indiana, Kansas, Kentucky, Louisiana, Michigan, Minnesota, Missouri, North Carolina, New Jersey, New York, Ohio, Pennsylvania, South Carolina, Tennessee, Utah, Virginia, Washington, and Wisconsin.

Fannie Mae's program is more directly targeted to homebuyers who can receive up to 3.5 percent of the loan amount toward closing costs if they buy a home through its HomePath program.  Fannie Mae is offering the program for offers received before March 31 and is targeting 27 states, 12 of which are also eligible for the Freddie Mac promotion.

Best Regards, Chris Mesunas

 

Fannie Offers REO Incentives to Home Owner Occupants…

BY JANN SWANSON

Fannie Offers REO Incentives to Owner Occupants

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Feb 13 2014

Starting tomorrow Fannie Mae will offer some homebuyers aspecial incentive to purchase through its HomePath program which the company uses to market foreclosed properties.  There are several restrictions on eligibility, but those qualifying can receive up to 3.5 percent in closing cost assistance. 

First, the property must be located in one of 27 eligible states.  Second, the house must be in HomePath's FirstLook period – a 20 day window during which only owner occupants are eligible to submit an offer on the property, giving them the opportunity to purchase without competition from investors.  The offer must be an initial one and submitted between February 14 and March 31, 2014.  The transaction must close before May 31, 2014.

"This incentive will provide more opportunities for families to find a property to call home," said Jay Ryan, Vice President of REO Sales.  "Our goal is to sell as many HomePath properties as possible to owner-occupants who will stabilize neighborhoods and help the housing recovery." 

Qualified buyers can receive up to 3.5 percent of the final sales price to pay closing costs which, Fannie Mae says, could also include buying down the mortgage interest rate through upfront points, resulting in additional savings over time.

The 27 states where the incentive is available are: 

Arizona	Maryland	New Mexico
California	Massachusetts	Ohio
Florida	Michigan	Oregon
Idaho	Minnesota	Puerto Rico
Illinois	Missouri	Tennessee
Indiana	Nebraska	Virginia
Iowa	Nevada	Washington
Kansas	New Hampshire	West Virginia
Maine	New Jersey	Wisconsin

 

 

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?

Feb 12, 2014
 / By Leonard Baron

Zillow real estate investment writer and long-term investor Leonard Baron, MBA, is answering questions from MintLife readers.

If you have a question about investment properties, cash flows, insurance, mortgage financing, homeowners associations, renting versus owning, foreclosures and more, drop Leonard an email.

Assuming a Home Loan

Neri of Yuma, AZ asks:

I wanted to know if assuming a loan is a wise idea.

I have great credit and money saved. Would this be a good option for me? 

The house I’m interested in is for sale by owner. The owner wants $284,000, and Zillow estimates the house value at $235,000.

Would taking over payments and giving cash for equity be a good idea? How about taxes?

Answer: I see you have a couple of questions here.

The first question seems to be whether assuming a loan is a wise idea. I’ll answer that second.

One of the most important principles in making smart real estate purchase decisions is to buy properties you will own for a long time.

In order to do this, you should buy properties that fit well with your reason for purchasing property in the first place, and that are smart financial decisions.

A very small percentage of homes for sale in a given area are available with assumable loans (roughly 5 to 10 percent).

My first question to you is whether this assumable loan-type property is the right property for you for all the reasons you want to buy real estate?

If not, hold out for one that suits you, especially since you could probably get traditional financing.

Most people who buy homes with assumable loans are doing so because they can’t get traditional financing.

And, the sellers often ask too much for these properties.

This is likely the case for the property you’re considering based on the home value estimates you provided.

You should also consider the interest rate on the assumable loan.

If it’s a high interest rate, it doesn’t make much financial sense to assume it, especially since you could likely get traditional financing at a low rate.

Title Insurance

Mark of Fredericksburg, VA asks:

I’m buying a home, and the seller is purchasing title insurance for me. Why do I need to also pay for a separate policy – it’s on my estimated settlement sheet?

Answer: Who pays for the title insurance can vary by local custom in different areas and/or by what the parties agree to in the contract.

It’s typical in California that the seller pays for a policy for the buyer, and the buyer pays for a policy for the lender.

It seems like you are paying for a policy for your lender. Assuming you are financing the property, the lender will require a policy so they are protected in case of a title issue.

While the seller’s policy is typically for the full amount of the purchase price, you normally buy a policy for the lender that is only for the mortgage amount.

It seems redundant to buy two separate policies that essentially cover the same thing. But as of now, lenders require their own policy to protect them.

As far as I’m aware, title insurance companies do not sell a combined policy that covers both the buyer and lender.

Homebuyers Get Break…

Homebuyers Get Break as Loan Rates Defy Fed Tapering

By Kathleen M. Howley

Ashley Underwood is taking advantage of the unexpected drop in mortgage rates by rushing to buy her first home before they go up again.

“I’m ready to cancel plans at a moment’s notice to go look at a house,” said Underwood, 27, who lives in Indianapolis, Indiana. “I didn’t expect to see rates falling again, and I want to lock in something before I lose out.”

The drop in the last month proved forecasters wrong, said Douglas Duncan, chief economist of Fannie Mae in Washington. After the Federal Reserve announced in December that it would begin tapering purchases of mortgage-backed securities, all the major housing forecasters said rates would jump this quarter. Economists didn’t foresee that investors would react to the Fed’s retreat by moving money from emerging markets into U.S. Treasuries, driving down home-loan rates.

“I was surprised by what happened in the bond market,” Duncan said. “Everyone was surprised. It was completely unexpected that mortgage rates would fall after the Fed began tapering.”

The average rate for a 30-year fixed mortgage in the U.S. fell to 4.23 percent last week, an almost three-month low. That’s 0.3 percentage point below the rate at the start of 2014.

The drop in borrowing costs means some buyers will purchase a home sooner than they had planned.

“People are getting a second chance, and that is bound to give a boost to the housing market,” said Sam Khater, deputy chief economist at CoreLogic Inc., anIrvine, California-based mortgage data and software firm. “It’s not a game changer unless the emerging markets situation worsens and rates get even cheaper.”

Second Chance

Government-owned mortgage companies Fannie Mae and Freddie Mac, the Mortgage Bankers Association and the National Association of Realtors all forecast in January that rates would increase by at least 0.3 percentage point in the first quarter. Instead, yields on 10-year Treasuries, which are used as a benchmark for mortgage rates, shrank as investors drove up bond prices.

“The sell-off in emerging markets wasn’t expected because it was hard to measure how much they’ve relied on the Fed’s monetary policy,” said Christopher Sebald, chief investment officer for Advantus Capital Management in St. Paul, Minnesota, which oversees $28 billion of assets, including about $4.5 billion in mortgage bonds.

The exodus of investors erased almost $6.4 billion from emerging markets equity funds during the week ended on Feb. 5, the largest outflow since August 2010, according to a Citigroup Inc. report. That has spurred a currency crisis in Argentina and Turkey while economic data points to slower economic growth in China and Russia.

Yellen’s Plan

“We’re seeing the results of a herd mentality as investors exited some of the riskier corners of the world and come back to the states,” CoreLogic’s Khater said.

Janet Yellen, who took over as chairman of the central bank on Feb. 3, said in Congressional testimony yesterday that the Fed has been “watching closely” the volatility in global financial markets. She said that “our sense is that at this stage these developments do not pose a substantial risk to the U.S. economic outlook.”

Only a “notable change in the outlook” for the economy would prompt policy makers to slow the pace of tapering, Yellen said. She repeated the Fed’s statement from the conclusion of its meeting last month that asset purchases aren’t on a “pre-set course.”

The impact of the market rout is felt in Indianapolis, where Underwood is hunting for a three-bedroom house costing about $125,000. The drop in mortgage rates could save her about $5,000 if she stays in the house for 10 years.

Temporary Reprieve

“I don’t know what’s behind the fall in rates,” said Underwood, who is now a renter. “I’m looking for something I plan to be in for a long time, so getting a lower rate is going to result in a big savings.”

Cheaper borrowing costs may not be enough to increase U.S. home purchases for the year. The pace of sales probably will slow in 2014, the third year of the real estate recovery, as the 28 percent increase in property prices since January 2012 puts homes out of reach of some Americans.

Sales of new and previously owned homes will gain about 3.1 percent to 5.7 million, a third of the increase seen in 2012 and 2013, Fannie Mae (FNMA)’s Duncan said.

“For someone in the market to buy, it’s an opportunity to turn back the clock on rates, but there’s no indication it’s anything but a temporary reprieve,” he said. “In the long-run, the Fed’s exit means sustained upward pressure on rates.”

5% Rate

By the end of 2014, the average U.S. rate for a 30-year fixed mortgage probably will be 5 percent, Duncan said, compared with 4.3 percent at the end of 2013. The average during the past two decades is 6.27 percent, according to Freddie Mac data compiled by Bloomberg.

Borrowing costs also defied conventional wisdom the last time the Fed pulled back on stimulus. More than three years ago, when the central bank concluded its first round of quantitative easing, housing forecasters said home-loan rates would rise on weaker demand for mortgage-backed securities.

Instead, as investors fled 2010’s European sovereign-debt turmoil, loan rates tumbled to then-record lows in November. That didn’t stem the year’s plunge in home sales, which was caused by the expiration of a federal tax credit that paid buyers $8,000.

The Fed began purchasing mortgage bonds guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae (BGNMX) in January 2009 to bolster the economy and the housing market by reducing financing costs. The strategy had never been tried before. In the first round of purchases, which ended in March 2010, the Fed acquired $1.25 trillion of mortgage bonds.

Fed Tapering

The central bank announced a second round of quantitative easing, known as QE2, in Nov. 2010. QE3 began in September 2012, with the Fed buying $40 billion of mortgage bonds and, in December, $45 billion of Treasuries a month. The central bank cut the purchases in December and again in January to $65 billion a month from $85 billion, citing an improving outlook for the labor market.

Khater, the economist, is also a home buyer who’s getting another break on rates. Even though he spends his days tracking the mortgage market, he missed 2013’s low of 3.35 percent in early May, the average rate as measured by Freddie Mac. That was close to the all-time low of 3.31 percent in November 2012.

“I’ve been thinking about buying, and I thought I had missed out on cheap rates,” Khater said.

The economist has intensified his search for a Washington-area single-family home, hoping to make an offer on a property in time to lock-in a mortgage rate near 4 percent.

“With the lower rates, it heightens the urgency,” he said.

 

HUD Changing Application Process…

BY ROB CHRISMAN

NMLS Updated; Compensation Survey; Appraisal News; HUD Changing Application Process

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Feb 10 2014, 8:01AM

Things can be misleading out there, and occasionally non-depository mortgage bankers wonder about becoming licensed in other states. The best source that I have found for figuring out requirements is this. As of January 18 the SAFE MLO National Test with Uniform State Content reflected the recent CFPB mortgage rules.  For candidates taking the test on or after January 18 they will need to prepare using the new version of the outline with the Effective Date of January 18, 2014. The Testing Page of the NMLS Resource Center includes both versions, and can be accessed here. And they have updated the NMLS Reference Guide: Citing Sources and Regulations in Course Materials and included a one page Quick Reference Guide.

 

The U.S. Post Office could offer banking. Huh? Would it be a great idea, and make life easier for consumers, or is it only an effort to "save the struggling government agency from bankruptcy and taxpayer-funded bailouts"?Read all about it.

For anyone whose livelihood depends on residential real estate, the bad news is that there is not much inventory out there, impacting lenders and Realtors alike. The good news is that it may be changing.

"Rob, what's the scoop on the Wells-Ocwen deal that was blocked by a bank regulator in New York?" I think that many agree that if the regulators continue to shoot down these deals, the banks won't be in a hurry to expand their mortgage lending capabilities. And when you combine that with QM, Basel III constraints, and the cost of compliance, at some point borrowers (and thus the housing market) are impacted. Sure, $39 billion represents less than 2% of Wells' portfolio, and the loans had not been originated by Wells, but still, the industry wonders if it will put a crimp in servicing values for everyone.

Speaking of large servicing deals, it is industry scuttlebutt that some servicers & sub-servicers have a problem in "capturing" large pools of loans at once, indexing them, reviewing for missing or required documents in a timely manner. Does it really take 2-6 weeks to go through 1000+ loans? An entire cottage business has sprung up around these transfers, with companies such as Capsilon streamlining the process. And others assist with other functions – fascinating.

According to STRATMOR Group's annual compensation survey, STRATMOR Compensation Connection, underwriter compensation increased 15% from 2011 to 2012 and we expect that 2013 will have seen even bigger increases.  In this market it is critical to pay the right amount to the right employee at the right time, and the STRATMOR Compensation Connection is "your company's link to gain valuable insights on the market as well as provide insight into what your competitors are paying for critical positions and how their compensation is structured. Its unique approach to gathering and separating data into useful profiles and relevant categories enables STRATMOR to offer surveys based on the following modules – Executive Management, Retail Sales Retail Fulfillment, Consumer Direct Sales, Consumer Direct Fulfillment, TPO Sales, TPO Fulfillment – thereby allowing you to choose your level of participation. By participating in the survey, you will receive a comprehensive report detailing your responses versus the survey averages as well as segmented analysis based on key company differences and characteristics." For more information about participating in the compensation survey, visit the program website or contact Nicole Yung at nicole.yung@stratmorgroup.com.

Appraisals are still a sticky point for some. And when the acronym "AMC" makes it to the mainstream newspapers, you know something is up.

But the overseer of Freddie & Fannie (the FHFA) shed some light on things with the release of the "FHFA's Oversight of the Enterprises' Use of Appraisal Data Before They Buy Single-Family Mortgages." 

(Read More:OIG Finds GSEs Ignored Warnings about Appraisal Deficiencies)

Peter Gallo, VP of the National Association of Independent Housing Professionals, writes, "Rob, I noticed that you have quoted many AMCs on the appraisal issue. The bottom line is that they are trying to do what appraisers and lenders can already do on their own. Lenders can already figure out who the good appraisers are and include them on an in-house rotation. Appraisers understand appraisal issues and can advise their clients on these issues in ways that do not violate Appraisal Independence Guidelines. Appraisers are certified experts. They understand what the CFPB is, what the guidelines are and have the education and the license to prove it.  AMCs serve a purpose for some and many do it very well. The bottom line is that if you want a good appraiser, go out and find one and pay him/her their fee.  An AMC is not REQUIRED to comply with any rules that are out there."

(It was nearly a month ago that the officers of three contiguous, grass root appraisal organizations met to discuss the common goals and concerns facing the profession. Representatives of The Virginia Coalition of Appraisal Professionals (VACAP), The South Carolina Professional Appraisal Coalition (SCPAC) and The North Carolina Real Estate Appraiser Association (NCREAA) met in Greensboro, North Carolina and discussed topics ranging from Fannie Mae's activities regarding appraisers to the focus of The Appraisal Foundation on the profession and the day to day business of appraising.)

On Friday the MBA's Dave Stevens let the troops know that, "Some of you have been asking about the HMDA data announcement from CFPB… today's announcement was a stage before a proposed rule. The CFPB is convening a small business review panel to review aspects/issues they are considering for a proposed rule. (CFPB went through a similar exercise for the LO Compensation rule.) We have three MBA members who will be participating in the panel sessions. Pete Mills and Steve O'Connor will be working with other MBA staff on a plan to get our MBA participants prepared and briefed for the panels, and Ken Markison at MBA is our lead subject matter expert on this issue."

What Mr. Stevens is discussing is the story "CFPB Begins HMDA Revision and Expansion Process Today," and the CFPB announced the beginning of the rulemaking process to revise the required reporting elements, and possibly the accompanying rules, under the Home Mortgage Disclosure Act (HMDA). Accordingly, the Bureau announced it will convene a panel in early March under the Small Business Regulatory Enforcement Fairness Act (SBREFA) to discuss the proposed changes and obtain their views on the impact from small business representatives. The fact sheet found here which provides greater detail on what the CFPB is considering.

Switching over to some investor, agency, and vendor news, first a correction. Friday I noted some information about CMG's Correspondent Lending VA IRRRL Program. The appraisal information is not accurate and it should have been, "…the alternative to the AVM is the 2055 appraisal form." (Not the 2075)

Donna Beinfeld writes, "I'm not sure if you've covered this issue or not, but HUD is basically shutting down their application submission process as of March 1, 2014. This is because they are transitioning from the paper to an on-line (electronic) application process. Their cut-off date is 3/1 for receiving applications. Because they will be working on their system, they will not accept or process any applications received in the mail until their new system is in place. The date for accepting online Applications is May 1. This means no one can submit, be approved or have an application processed for 60 days: . On HUD's site page above, the following statement appears: 'Lenders currently preparing or planning to apply for FHA approval in the near future may contact the FHA Resource Center with questions at answers@hud.gov or 1-800-225-5342. Please include the words "New Applicant" in the subject line and include a contact person and phone number in the email body so that a Lender Approval representative may contact you on how to become an FHA-Approved Lender.'" Thank you Donna!

MGIC told clients, "You may have heard about or read Fannie Mae's recent lender letter, but we wanted to take the opportunity to highlight the good news from MGIC's point of view. Because of MGIC's improved financial strength, we stopped issuing insurance through MGIC Indemnity Corporation (MIC) in September of last year. MIC is a wholly owned subsidiary of MGIC, formed to provide uninterrupted customer service if our risk-to-capital ratio exceeded any state requirements. The good news is that, since the first quarter of last year, MGIC has been in compliance with all required state capital standards. We expect to maintain compliance going forward.   To be clear, MIC is no longer listed as an eligible insurer because it is no longer needed – not because Fannie Mae has concerns about our claim-paying ability. As of December 31, 2013 MGIC's preliminary risk-to-capital was 15.8:1…well below the current state requirements. MGIC remains an eligible insurer for both Fannie Mae and Freddie Mac."

Overland Park-based CapWest Mortgage, a division of Farmers Bank & Trust, announced it is adding fixed second mortgages and home equity lines of credit (HELOC) to its loan product offering for all third party origination (TPO) clients. "People need access to cash for a variety of reasons and most would prefer not to disturb the low fixed rate on their first mortgage," said Monte Robbins, President & CEO of CapWest Mortgage. "That is why it's so important for our third party origination partners to be able to offer equity to their customers through a home equity product offering." In addition to stand-alone fixed second mortgages, CapWest will also offer a simultaneous fixed second up to 90 percent CLTV in conjunction with a purchase transaction as long as the TPO client delivers the first mortgage to CapWest. A piggyback HELOC and first mortgage product will also be available to CapWest's TPO clients. CapWest reminded clients that it offers bank referral, wholesale and correspondent services, which include on-site sales and operations training in addition to marketing consultation. To inquire about any of these programs, please visit http://www.capwestmortgage.com/tpoinquiries or contact Jake Stadler, Account Executive for CapWest Mortgage, at jake@capwestmortgage.com.

Up a little, down a little, so go rates. If the employment data from Friday is any indication of the strength of the U.S. economy, maybe rates won't be in a big hurry to head higher. Employers added far fewer jobs (113k) than expected in January with the prior month barely revised up. In an interesting twist, construction added the largest increase in jobs in almost seven years indicating the recent storm may not be as impactful as previously thought, and the private sector accounted for all the hiring as government payrolls fell 20,000. The unemployment rate (6.6%) is now at a five-year low as market participation increased to 63 percent. Additionally, policy makers have made it clear that they will not be raising rates anytime soon even if the unemployment benchmark is met.

But it is a new and exciting week! Janet Yellen, the new Fed chair, will testify before Congress on Tuesday and Thursday. Thursday we'll also have Retail Sales & Jobless Claims, and on Friday is the Industrial Production and Capacity Utilization duo, along with Import Prices, and Consumer Sentiment. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday. Our beloved benchmark 10-yr T-note closed Friday with a yield of 2.67%; this morning it is sitting around 2.67% and MBS prices are roughly unchanged.

Best Regards, Chris Mesunas

 

Traders Waiting for Job Reports…Market may shift…

Markets could drift as traders await jobs report

By: Patti Domm | CNBC Executive News Editor

 

Markets are in wait-and-see mode ahead of Friday's jobs report, but there are a few events Thursday that could sway the market's direction.

One is the European Central Bank's policy meeting Thursday morning; traders expect markets to be volatile around it. A fresh batch of earnings reports is also due, including General Motors, while continued spillover from Wednesday's reports will also be a factor after concerns about Twitter's growth slammed its stock and weighed on its social media rivals. Disney, however, had positive results which saw the Dow component's stock up over 3.5 percent after the bell.

There will also be continued fallout from Coca-Cola's surprise acquisition of a 10 percent stake in Green Mountain Coffee Roasters and 10-year agreement to develop a Keurig Cold at home beverage system. That triggered a 43 percent jump in Green Mountain, squeezing some high-profile shorts and is likely to result in more collateral damage. At the same time, shares of Soda Stream plunged on concerns the Coke venture will threaten sales of its at–home soda system.

 

Jin Lee | Bloomberg | Getty Images

Snow from winter storm on Wall Street, New York.

Traders are also watching for continued action in hot sectors – biotech and 3-D printing in particular. 3-D printer stocks slumped on Wednesday after 3D Systems cut its 2014 outlook. The biotech iShares Nasdaq Biotech ETF IBB fell 1.7 percent, and two newly listed biotech companies, Genocea Bioscenieces and UniQure both fell in their market debuts.

There is also some important data, including weekly jobless claims, international trade, and productivity and costs, all at 8:30 a.m. ET. Chain stores also report monthly sales.

Jobless claims are key because they have risen slightly, which is a concern for economists. They are expected to come in at 338,000 after rising to 348,000 last week.

(Read more: Here's how badweather is hurting the economy)

Markets are hinging on Friday's jobs report because traders see it as being very closely tied to the Federal Reserve's future action on its quantitative easing program. There has been anxiety that the Fed is moving ahead to slow easing, just as some disappointing data, like Monday's ISM manufacturing survey, is signaling a slowing economy. Economists are watching each report to see how much impact harsher-than-normal winter weather is having on the economy, a temporary trend that should reverse in spring.

So far, the Fed has pared back its QE program by $20 billion and expectations are that it will continue to wind down the $65 billion in monthly purchases until they are ended later this year.

According to Thomson Reuters, 185,000 jobs are expected to be created in January, well above the disappointing 74,000 reported for December.

"I think the market is expecting a decent (jobs) number, but they're worried with the weather, they will get a bad number. The question is not whether it's good or bad. The question is whether it's as bad as everyone thinks," said Gary Thayer, chief macro strategist at Wells Fargo Advisors.

Thayer said it was encouraging to hear Fed speakers Wednesday make positive comments about the economy and say that tapering the quantitative easing bond purchases should continue. Philadelphia Fed President Charles Plosser, a hawkish voting member, said the Fed should wind down the bond-buying program even faster than expected and end it by mid-year.

Atlanta Fed President Dennis Lockhart, a non-voter, said he expects tapering to be completed in the fourth quarter. He said the economy is likely to be stronger this year than last year, and he does not expect the recent selloff in markets to impact the economy.

Best Regards, Chris Mesunas