Search
  • Louis Baca

December Market Update

Updated: Dec 3, 2019


U.S. DEBT HITS NEW RECORD


Consumer debt also hits all-time high of $4.1 Trillion as did mortgage debt, surging to a new high of $9.5 Trillion.  


As with most industries, the mortgage industry will spend tens of millions of dollars convincing the consumer that being able to obtain a mortgage while in your pajamas on your phone, with no human interaction, is in the consumers' best interest. Sadly, businesses are very effective at achieving this perception. Buying or refinancing, what is likely a family’s single biggest financial investment, should require more than just a push of a button on your phone.hird parties. – Forbes


In an interview with the Washington Post in 2016, Mr. Trump vowed to eliminate the national debt "over a period of eight years." Top White House economic adviser Larry Kudlow, who joined the White House after the president said he would eliminate the debt, told CBS News last month Mr. Trump probably didn't mean he would eliminate the debt entirely. "


I don't know, you know, I wasn't there, I read about some of this — I think what he was really referring to was he would stop the upward rise as a burden on the economy," Kudlow said in January. "In other words, to me, the measure is not, what is the deficit or this or that. It's as a share of GDP. That's your burden on the economy. And I would argue that it is and will continue to come down as a burden on the economy." – CBSnews.com

U.S. debt now surpasses all U.S. production in one year.

Consumer debt also hits all time high of $4.1 Trillion as did mortgage debt, surging to a new high of $9.5 Trillion.  


Find out if you are eligible to refinance your mortgage to pay off your debt here.


As with most industries, the mortgage industry will spend tens of millions of dollars convincing the consumer that being able to obtain a mortgage while in your pajamas on your phone, with no human interaction, is in the consumers' best interest. Sadly, businesses are very effective at achieving this perception. Buying or refinancing, what is likely a family’s single biggest financial investment, should require more than just a push of a button on your phone.hird parties. – Forbes


Geneva Financial, LLC is in opposition to automating humans out of the most important financial decision of one’s life. Our tech runs in the background, never taking away from the Human aspect of this vitally important transaction. A phone will never be able to provide the customer service or professional expertise of a licensed mortgage professional. Home Loans Powered by Humans is our commitment to you; despite running counter to the entire industry.hone.hird parties. – Forbes


The mortgage industry has been pouring millions of dollars into technology and automation over the last few years. Automating people out of the transaction to reduce costs and increase efficiencies. The surge in business appears to have caught many that are moving to automation and tech, off guard. A recent study from J.D. Powers shows that borrower satisfaction fell 16 points from Q1 to Q2, siting an increased use in tech, reduced staffing, and the use of third parties. – Forbes


As with most industries, the mortgage industry will spend tens of millions of dollars convincing the consumer that being able to obtain a mortgage while in your pajamas on your phone, with no human interaction, is in the consumers best interest. Sadly, businesses are very effective at achieving this perception. Buying or refinancing, what is likely a family’s single biggest financial investment, should require more than just a push of a button on your phone.


Rising rates reduced the pool of those that could benefit from an interest rate deduction refinance by 42% over the course of just 30 days. Interest rates slightly reversed course in November as recession fears linger. There are still millions of homeowners that have yet to take advantage of exceptionally low interest rates, especially those that can benefit from a cash-out transaction, due to record high equity.e running counter to the entire industry.


LONG TERM RATES SPIKE IN Q4


Mortgages held by current homeowners that are 0.75% or higher than the current 30-year fixed rate, fell by nearly 5 million, down to 6.8 million in late October over the 11.7 million in September due to rising rates. – Black Knight

Rising rates reduced the pool of those that could benefit from an interest rate deduction refinance by 42% over the course of just 30 days. Interest rates slightly reversed course in November as recession fears linger. There are still millions of homeowners that have yet to take advantage of exceptionally low interest rates, especially those that can benefit from a cash-out transaction, due to record high equity.


MORTGAGE PERFORMANCE WEAKENS


Mortgage delinquency and defaults have been on a steady rise over the last two years, with nearly 1% of all originated mortgages falling into delinquency within 6 months of the closing of the loan.


“We’ve seen early-stage delinquencies rise over the last several years, with the increase being driven primarily by purchase loans,” said Ben Graboske, Black Knight’s president.


“About 1% of loans originated in Q1 2019 were delinquent six months after origination. While that’s less than one-third of the 2000-2005 average of 2.95%, it represents a more than 60% increase over the last two years and is the highest it’s been since late 2010.”


Black Knight says the increases in early-stage purchase loan delinquencies are more pronounced among first-time homebuyers, as they make up more than 70% of recent GNMA purchase loans.


“Early-stage GSE delinquencies currently stand at 0.6%, up two-tenths of a percentage point over the past 24 months, but still 40% below the market average and 60% below their own 2000-2005 average of 1.3%,” Graboske said. “Though there has been some softening in GSE purchase loan performance, it hasn’t been to the extent seen among entry-level buyers.”


“All in all, first-time homebuyer originations combined between the GSEs and GNMA increased by nearly 50% between 2014 and 2018,” Graboske continued. “However, whereas first-time homebuyers represent just over 40% of GSE purchase loans, they make up 70% of the GNMA purchase market.”


Graboske said this concentration has led to the sharpest increase in early-stage delinquencies seen within the last few years.


“That concentration is contributing to a more significant increase in early-stage delinquencies among GNMA loans, which saw 3.3% of loans delinquent six months after origination,” Graboske said.  “That’s up 1.2 percentage points from two years ago, and though still roughly half the 2000-2005 pre-crisis average, it represents the sharpest increase we’ve seen in the market in recent years.” – Black Knight


Mortgage delinquencies have remained low since the Great Recession, due mostly to regulation implemented to avoid another mortgage meltdown, and a strong U.S. economy. Regulation and a robust economy over the last 10 years have paved way to strong performing home loans. But recently, due to an unwinding of regulation, and slowing economy, mortgage debt may now just begin to be tested. The true test could come in 2020 if the U.S. falls into recession, as many predict.


HOMEBUILDER CONFIDENCE SLIDES


In a recent study by the National Association of Home Builders and Wells Fargo shows that homebuilder confidence fell slightly in November, but still remains strong.

“Single-family builders are currently reporting ongoing positive conditions, spurred in part by low mortgage rates and continued job growth,” NAHB Chairman Greg Ugalde said.  “In a further sign of solid demand, this is the fourth consecutive month where at least half of all builders surveyed have reported positive buyer traffic conditions.”– housingwire.com

Low interest rates, low housing inventory, and strong employment should keep confidence high for the foreseeable future.


FATE OF THE QM PATCH


H.R. 2445, a bill that would fix the QM Patch, which is set to expire in January of 2021, dies on the vine.Cowen Washington Research Group said

The Ability to Repay Rule, created by Dodd-Frank regulation, stated that to be considered a Qualified Mortgage, one in which could be purchased by government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, borrowers would have to have a debt to income ratio no greater than 43% (based on gross income). Appendix Q in the Qualified Mortgage rule determine a borrower’s debt-to-income ratio or ratio on standards set by the Federal Housing Finance Agency.


“This did not get a vote though we believe it is still likely to come up for consideration later this year or early next year,” Cowen said in the note. “There is simply no reason why this bill should run into partisan opposition and every reason why consumer groups and business groups should support it.”


“Our view has long been that if forced to rely solely on Appendix Q that lenders would shrink the credit box for fear that small errors could result in mortgages losing QM status,” Cowen said. “This is why we described the bill as a de facto extension of the QM Patch.”

“We continue to believe that giving originators the ability to rely on the automated underwriting systems rather than having to interpret Appendix Q is critical for credit availability,” Cowen said. “Appendix Q is complex with many pages on when income counts and when it does not count. – housingwire.com


The Ability to Repay Rule, created by Dodd-Frank regulation, stated that to be considered a Qualified Mortgage, one in which could be purchased by government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, borrowers would have to have a debt to income ratio no greater than 43% (based on gross income).


The expiration of the QM Patch will have a profound impact on the housing market. Nearly 50% of mortgage transactions have a debt to income ratio in excess of 43%. Consequentially, those mortgages would be originated at a considerably higher cost as well as higher down payments due to the lack of the “implied” government guarantee afforded by mortgages purchased by Fannie, Freddie and the U.S. government. This would prevent many borrowers from qualifying due to the increased cost to purchase a home, especially when homes are already pressing the limits of affordability.


All indications are that with a Trump re-election, the QM Patch will expire. Currently, the White House, FHFA (Federal Housing Finance Agency), HUD and the CFPB are proponents of the expiration of the QM Patch.


If mortgage delinquencies continue to climb, and there is a correlation to high debt to income ratios, there could be additional motivation to allow the QM patch to expire.


THE FUTURE OF TRID IN QUESTION


TRID, or the TILA-RESPA Integrated Disclosure rule took effect in October of 2015. The rule revised mortgage disclosures, making them more consumer-friendly, and was designed to protect the homeown speech tor wiEconomic Club of New York onpecific timelines on the mortgage disclosure process. Although at times cumbersome for consumers and lenders, TRID has likely provided greater consumer protection.


The Consumer Financial Protection Bureau (CFPB), under the Trump administration, has been dedicating a lot of time into the review of TRID, with the possibility of eliminating it altogether due to the perceived burdens it places on mortgage lenders.


MONEY IN MORTGAGES ONCE AGAIN


In the fourth quarter of 2018, mortgage lenders lost an average of $200 on every mortgage funded in the U.S.; going down as the hardest year on the industry in ten years. What a difference one year makes, as 2019 is looking to be one of the best years for the mortgage industry.


The Mortgage Bankers Association just published a new report show that the mortgage industry on average saw a net profit of $1,924 per loan in Q3 of 2019. Profits are up. Way up. Surging originations due to falling interest rates, have created the highest amount of profit in nearly seven years.


“A surge in refinance activity and a healthy purchase market led to robust mortgage volume in the third quarter, pushing up production profits to a high not seen since the fourth quarter of 2012 ($2,256 per loan),” said Marina Walsh, MBA’s vice president of industry analysis. “The increase in profits was primarily driven by declining production expenses and higher loan balances, which mitigated the effects of lower basis-point revenue.” – housingwire.com


Costs to originate a loan fell from $7,217 per loan in the third quarter, down from $7,725 per loan in the second quarter.

Find out if you are eligible to refinance your mortgage to lower your payment here.


NO TO NEGATIVE RATES


Despite pressure from the White House for the Fed to drop the Fed Funds Rate into negative rates, the Federal Reserve ignores the harassment of the President, cutting rates 25 BPS in late October to a range of 1.50% to 1.75%.; further stating that it was likely done cutting rates for the foreseeable future.


“All participants judged that negative interest rates currently did not appear to be an attractive monetary policy tool in the United States,” the minutes said. “It was unclear what effects negative rates might have on the willingness of financial intermediaries to lend and on the spending plans of households and businesses.”


“Differences between the U.S. financial system and the financial systems of those jurisdictions suggested that the foreign experience may not provide a useful guide in assessing whether negative rates would be effective in the United States,” the Fed minutes said. “Negative rates could have more significant adverse effects on market functioning and financial stability here than abroad.” – housingwire.com


President Trump, undeterred by the Fed’s statements continues to attack the current policy of the Fed.

“Remember we are actively competing with nations who openly cut interest rates so that now many are actually getting paid when they pay off their loan – known as negative interest,” Trump said in a speechto the Economic Club of New Yorkon Nov. 12. “Whoever heard of such a thing? Give me some of that. Give me some of that money. I want some of that money. Our Federal Reserve doesn’t let us do it.” – President Trump

Per the minutes from the Feds meeting, they were unanimous in their rejection of the idea of negative interest rates.


CONFORMING LOAN LIMITS ANNOUNCED FOR 2020


The Federal Housing Finance Agency (FHFA) announced in November the conforming loan limits, those loans approved by Fannie Mae and Freddie Mac would increase from $484,350 to $510,400 in 2020. Those homes in high-cost areas would increase to $765,600 (150% of $510,400).


As national home prices appreciate, raising the loan limits allows more borrowers to qualify for preferred terms typically offered by the GSEs (conforming), verses jumbo financing which tends to carry a premium.


Find out if you are eligible to refinance your mortgage to lower your payment here.


PENDING HOME SALES SLIDE


In October, pending home sales dropped by 1.7%. Lack of affordable home inventory is credited for the decline.


I am licensed in these states: Alabama, Arkansas, Arizona, California, Colorado, Delaware, Florida, Illinois, Indiana, Iowa, Kansas, Louisiana, Minnesota, Montana, Nebraska, New Hampshire, New Mexico, Ohio, Oklahoma, Oregon, South Carolina, Tennessee, Texas, Virginia, Washington

RATE WATCH – FLAT (treading lower)


Interest rates as of 12/02/2019. Conforming interest rates. Interest rates and APR based on loan amounts not to exceed $484,350 (January 1st, 2020: $510,400). Loan to value not to exceed 80%. 740+ credit score. Owner occupied only. Purchase and rate in term refinances. Not all applicants will qualify. Call today for your individual scenario rate quote.

0 views

(214)395-7630

Licenses

NMLS 196378 NMLS 42056 AL - 60921 AZ - 0930410 AR - 107472 CO - 100501080

FL - LO2896 GA - 45735 IL - 031.0040348 IN - 26882 IA - 23898 MO - 11138-MLO

OH -  MLO.047518.000 OK - MLO10266 SD - MLO.03697 TN - 124627 VA - MLO-24468VA

 

318 FM 544 Bldg. D Ste. 4
Murphy, TX 75094
USA

©2018 by www.LouisBaca.com.