DSNews.com, Esther Cho

Both the expectation for home prices and the percentage of those who think the U.S. economy is on the right path reached record highs in Fannie Mae’s April 2012 National Housing Survey.

Americans continue to expect home prices to go up, with the projection averaging 1.3 percent over the next 12 months, the highest value recorded.

At 71 percent, a high percentage of Americans still say it is a good time to buy while the percentage who said it is a good time to sell was 15 percent, a 1 point increase from March.

“Overall, consumer views of housing market conditions have become more supportive of home purchases, and sustained healthy hiring is required to help realize these improved expectations,” said Doug Duncan, Fannie Mae chief economist.

NAR’s 2012 Investment and Vacation Home Buyers Survey,  covering existing- and new-home transactions in 2011, shows investment-home sales   surged an extraordinary 64.5 percent to 1.23 million last year from 749,000 in  2010. Vacation-home sales rose 7.0 percent to 502,000 in 2011 from 469,000 in  2010. Owner-occupied purchases fell 15.5 percent to 2.78 million.

Vacation-home sales accounted for 11 percent of all  transactions last year, up from 10 percent in 2010, while the portion of  investment sales jumped to 27 percent in 2011 from 17 percent in 2010.

NAR Chief Economist Lawrence  Yun said investors  with cash took advantage of market conditions in 2011. “During the past year  investors have been swooping into the market to take advantage of bargain home  prices,” he said. “Rising rental income easily beat cash sitting in banks as an  added inducement. In addition, 41 percent of investment buyers purchased more  than one property.”

Yun said the shift in investment buyer patterns in 2011  shows the market, for the large part, is able to absorb foreclosures hitting  the market. “Small-time investors are helping the market heal since REO (bank  real estate owned) inventory is not lingering for an extended period. Any  government program to sell REO inventory in bulk to large institutional  companies should be limited to small geographic areas. Even where alternatives  are needed, it’s best to rely on the expertise of local businesses, nonprofit  organizations and government,” he said.

All-cash purchases have become fairly common in the  investment- and vacation-home market during recent years: 49 percent of  investment buyers paid cash in 2011, as did 42 percent of vacation-home buyers.  Half of all investment home purchases in 2011 were distressed homes, as were 39  percent of vacation homes.

“Clearly we’re looking at investors with financial  resources who see real estate as a good investment and who aren’t hesitant to  use cash,” Yun said. Of buyers who financed their purchase with a mortgage,  large downpayments were typical. The median downpayment for both investment- and vacation-home buyers in 2011 was 27 percent.

“Given the tight credit in recent years, many would-be  normal home buyers for owner occupancy declined,” Yun said.

The median investment-home price was $100,000 in 2011, up  6.4 percent from $94,000 in 2010, while the median vacation-home price was  $121,300, down 19.1 percent from $150,000 in 2010.

Investment-home buyers in 2011 had a median age of 50,  earned $86,100 and bought a home that was relatively close to their primary  residence – a median distance of 25 miles, although 30 percent were more than  100 miles away.

“The share of investment buyers who flipped property  remained low in 2011, and many of those homes likely were renovated before  reselling,” Yun said. Five percent of homes purchased by investment buyers last  year have already been resold, up from 2 percent in 2010. The typical investment  buyer plans to hold the property for a median of 5 years, down from 10 years  for buyers in 2010.

The typical vacation-home buyer was 50 years old, had a  median household income of $88,600 and purchased a property that was a median  distance of 305 miles from the primary residence; 35 percent of vacation homes  were within 100 miles and 37 percent were more than 500 miles. Buyers plan to  own their recreational property for a median of 10 years.

Lifestyle factors have consistently been the primary  motivation for vacation-home buyers, while the desire for rental income drives  investment purchases. Vacation homes purchased last year were more likely to be  in suburban or rural areas; investment homes were concentrated in suburban  locations.

Eighty-two percent of vacation-home buyers said the  primary reason for buying was to use the property themselves for vacations, or  as a family retreat. Thirty percent plan to use the property as a primary  residence in the future, and only 22 percent plan to rent to others.

Half of investment buyers said they purchased primarily  to generate rental income, and 34 percent wanted to diversify their investments  or saw a good investment opportunity.

Sixteen percent of vacation buyers and 14 percent of  investment buyers purchased the property for a family member, friend or  relative to use. In many cases the home is intended for a son or daughter to  use while attending school.

Forty-two percent of vacation homes purchased last year  were in the South, 30 percent in the West, 15 percent in the Northeast and 12  percent in the Midwest; 1 percent were located outside of the U.S.

Forty-four percent of investment properties were in the  South, 23 percent in the West, 17 percent in the Midwest and 15 percent in the  Northeast.

Eight out of 10 second-home buyers said it was a good  time to buy. Nearly half of investment buyers said they were likely to purchase  another property within two years, as did one-third of vacation-home buyers.

Currently, 42.1 million people in the U.S. are ages 50-59  – a group that has dominated second-home sales since the middle part of the  past decade and established records. An additional 43.5 million people are  40-49 years old, while another 40.2 million are 30-39.

“Given that the number of people who are in their 40s is  somewhat larger than the 50-somethings, the long-term demographic demand for  purchasing vacation homes is favorable because these younger households are  likely to enter the market as their desire for these kinds of properties grows,  and individual circumstances allow,” Yun said.

NAR’s analysis of U.S. Census Bureau data shows there are  8.0 million vacation homes and 42.8 million investment units in the U.S.,  compared with 75.3 million owner-occupied homes.

NAR’s 2012 Investment and Vacation Home Buyers Survey,  conducted in March 2012, includes answers from 2,241 usable responses about  home purchases during 2011. The survey controlled for age and income, based on  information from the larger 2011 NAR Profile of Home Buyers and Sellers, to  limit any biases in the characteristics of respondents.

The 2012 Investment and Vacation Home Buyers Survey can  be ordered by calling 800-874-6500 or online. The report costs  $19.95 for NAR members and $149.95 for non-members.

This news release was published by the National  Association of Realtors® (NAR) on March 29, 2012. “The Voice for Real Estate,” NAR  is America’s largest trade association, representing 1 million members involved  in all aspects of the residential and commercial real estate industries. Information  about NAR is available at www.realtor.org.   This and other news releases are posted in the News Media section. Statistical  data, tables and surveys also may be found by clicking on Research.

NAR’s pending home sales index, a forward-looking indicator based on contract signings, rose 4.1% to 101.4 in March from an upwardly revised 97.4 in February. It is 12.8% above March 2011 when it was 89.9. The data reflects contracts but not closings.

The index is now at the highest level since April 2010 when it reached 111.3.

Lawrence Yun, NAR chief economist, said 2012 is expected to be a year of recovery for housing. “First-quarter sales closings were the highest first-quarter sales in five years. The latest contract signing activity suggests the second quarter will be equally good,” he said.

“The housing market has clearly turned the corner,” Yun added. “Rising sales are bringing down inventory and creating much more balanced conditions … which means home prices will be rising in more areas as the year progresses.”

The index is based on a large national sample, typically representing about 20% of transactions for existing-home sales. An index of 100 is equal to the average level of contract activity during 2001, which was the first year of examination.

The overall focus of the conference was to restore certainty to the Real Estate Finance Industry.  Specifically, with implementation of the Dodd-Frank Wall Street Reform and the Consumer Protection Act, residential lending has been inhibited for residential, multifamily and commercial real estate.

Day number one was packed full of excellent information and dynamic speakers.  Our National MBA Representatives led us through the National Advocacy issues and discussed with us the MBA’s position on each issue.  Topics included the following:

• Qualified Mortgage/Ability to Repay Regulation
• QM Legislation
• QRM
• Repurchases
• GSE Reform
• FHA Strength and Viability
• Guarantee Fees
• Tax Reform

Day number two was spent on Capitol Hill Lobbying for the above issues.  As a group, we met with Rep. Ben Quayle, Rep. Jeff Flake’s Office, Rep. David Schweikert, Rep. Trent Frank’s Office and Rep. Paul Gosar’s Office, Rep. Ed Pastor’s Office and Sen. John Kyl’s Office.  All of the congressmen were very eager to hear our message and discuss the challenges that plague our industry and the ultimate effect on the consumer.

Our involvement at the Grassroots level is more important than ever.  We, as an organization need to understand the issues, the impact of the issues and get in front of our law makers to ensure they understand the impact that these issues will have on the consumer.

Jeannine Bielesch, U.S. Bank Home Mortgage

AMLA Vice President of Advocacy

Improving Economy and Low Resale Supply Helping Builders
(Phoenix, AZ – April 24, 2012) A fast recovering resale home market is starting to help the homebuilding industry, according to Metrostudy, a national housing data and consulting firm that maintains the most extensive primary database on residential construction in the US housing market.

New home starts in the Phoenix area numbered 7,409 during the year ending 1Q12, which represents a 24% increase over last year. Starts are based on Metrostudy’s lot-by-lot survey of all new construction subdivisions in Maricopa and Pinal Counties. “Supply on the resale side is very tight, yet there is demand for housing as the economy is picking up,” said Ben Sage, director of Metrostudy’s Phoenix division. “Builders are reporting increased sales traffic through their models and strong sales, and they are starting to raise prices in many of their communities.”

New-home supply is also down, which indicates that builders are constructing homes only to meet current demand rather than building on spec. Total new home inventory (single family), which includes all homes that have been started but are yet to exhibit any evidence of occupancy, fell to only 4,449 units at the end of 1Q12. The number of new inventory units that are finished but empty, many of which are sold, fell 26% from this time last year and now number only 1,740 units, which is the low point for this housing cycle. This represents a 2.9-month supply, “which is manageable,” said Sage. “The relatively low count of new homes in inventory is critical to an eventual recovery. It illustrates that the problem is not with new-home supply as much as with demand. With buyers starting to return, builders are having to start more homes because they cannot satisfy the demand from their current inventory.”

Published April 26, 2012

FOXBusiness

Mortgage lenders have launched at frenzied round of lobbying over one of the major issues confronting financial regulators in the wake of the 2008 financial crisis — the new legal definition of a “safe,” desirable mortgage.

The activity comes about two months before the Consumer Financial Protection Bureau is expected to issue its decision on the new standard, which is designed to prevent the kind of reckless mortgage practices that helped create the housing bubble, subsequent housing market collapse and  financial crisis.

While consumer advocates want tougher loan rules and continued rights for homeowners to sue lenders, industry officials are pushing for broad protections against lawsuits if they foreclose on borrowers. Without them, they say, they could quit underwriting an estimated one in five home loans — or more– which will hurt the fragile housing market.

Last Thursday, about 20 top executives from mortgage companies met with the director of the CFPB, Richard Cordray, and separately at the White House with President Obama’s top housing advisors, according to sources with knowledge of the sessions.

A legislative alert from the Mortgage Bankers Association (MBA) confirms the meetings and some participants, including White House Chief of Staff Jack Lew and Housing Secretary Shaun Donovan, but did not disclose details of the discussions. It said representatives of the association also met with “the entire Board of Governors of the Federal Reserve System, including Chairman Ben Bernanke” on April 16.

The alert, provided to FOX Business by an MBA spokesperson, said more than 400 MBA members visited Washington last week as part of its annual National Advocacy Conference.

Sources close to the discussions said that about three weeks ago, MBA President David Stevens and Michael Heid, president of Wells Fargo’s (WFC: 33.57, +0.22, +0.66%) mortgage division, the nation’s largest home loan underwriter, met with Cordray’s top deputy, Raj Date, and one of President Obama’s top housing advisors, James Parrott, and warned them that Wells Fargo could withdraw from portions of the mortgage market if the CFPB issues rules the bank considers too strict.

Stevens declined to confirm or comment on the meeting and declined to detail discussions with officials last week. Until last year, Stevens was the commission of the Federal Housing Administration, a position he was appointed to by the President.

But an April 12 letter sent to Cordray by the MBA and 32 other groups, including some community activists, said that certain loans are “unlikely to be made” if lenders face higher legal risks–and “in the unlikely event they are made, they will be far costlier, burdening families least likely to bear the expense.”

A Wells Fargo spokesperson did not immediately respond to request for comment on the meeting. A CFPB spokesperson did not return calls or emails from FOX Business.

The CFPB rulemaking, required under the 2010 Dodd-Frank financial reform law, focus on the definition of a “qualified mortgage” and would include new customer “ability to repay” standards that lenders must consider when making new mortgages. Among other things, a qualified mortgage could not include interest only payments, balloon payments or maturities of more than 30 years.

Homeowners who qualify for  loans that met these and other tests would be automatically assumed to be able to make payments on them — but then also might be unable to sue their lender later if they miss payments for any reason and lose their home in foreclosure.

Without that legal “safe harbor,” lenders could face costly government and homeowner legal proceedings, judgments and penalties.

“This is critical because these (standards) will set the terms of residential mortgages for at least the next generation,” said Diane Thompson of the National Consumer Law Center. “There’s a lot at stake.”

The qualified mortgage concept is found in Title XIV of the Dodd-Frank Act. Under this Act, a creditor may not make a mortgage loan without first determining that the borrower has a reasonable ability to repay the loan. Penalties for violating this test include fines, civil liability, and potentially class action liability.

Further, failure to comply with this standard can be raised as a defense to a foreclosure action brought by the original creditor or any assignee.

The legislation defines certain types of loans as being “qualified mortgages,” and creates a presumption that these loans satisfy the ability to repay standard. The bureau is authorized to issue regulations to modify the definition. According to reports, the bureau is currently grappling with whether it should narrow the scope of the QM, in order to create a pool of non-QM loans that would be sufficient to develop a market in these products.

The legislative history shows that as the legislation moved through the Congress, concerns were raised repeatedly that imposing liability on mortgage originators and the secondary market for failure to meet a subjective “ability to repay” standard would have a negative impact on mortgage availability. These concerns were voiced by federal and state regulators, industry representatives, and by members of Congress. It was argued that non-QM loans may not be made at all, and if one was made, it would be much more costly than a comparable QM loan. As a result, the statutory definition of the QM in the predecessor bills expanded to include new classes of loans, restrictions on interest rates and points and fees were raised, and interest rate caps were eliminated.

During the House Financial Service Committee mark-up, an amendment was offered by Representative Dennis Moore (D-Kan) to add the concept of “ensuring responsible and affordable mortgage credit availability” to the bill. The amendment was eventually adopted, but was added to the section on Congressional findings, rather than congressional purposes.

When it was pointed out to House Financial Services Committee Chairman Frank that the amendment might not be effective because of its placement in the bill text, the chairmanguaranteed that it would be fixed on the floor. Chairman Frank was emphatic: “Yes, it is a problem when people get mortgages they shouldn’t get. It has been a historically greater problem that some people couldn’t get mortgages they should get. I will guarantee … that doesn’t happen.”

Barney Frank kept his word. On the House floor, he amended the bill to state that the bureau can issue regulations modifying the QM “upon a finding that such regulations are necessary or proper to ensure that responsible, affordable mortgage credit remains available to consumers in a manner consistent with the purposes of this section.” This change is included in the final legislation. The history of this amendment is clear. It was added to the legislation to give the bureau flexibility to change the QM in order to ensure that it was not limiting responsible and affordable mortgage availability. The intent was to make the QM basket inclusive off all safe loans.

The legislative history demonstrates that Congress was concerned that the QM test could limit credit availability to creditworthy borrowers. The statutory definition of a QM loans was modified repeatedly to include more and more loans. The hearings were replete will warnings about the potential for cutting off mortgage credit for qualified borrowers, and warned that few, if any, non-QM mortgages would be made.

Chairman Frank was so concerned about the possibility of unduly constricting credit, that heguaranteed that the issue would be addressed in the final legislation. The final legislation includes as amendment authored by Congressman Frank that requires the bureau to consider mortgage credit availability as part of its rulemaking process

There is nothing in the legislative history or statutory language to indicate that the QM was intended to be a narrow standard, or that Congress wanted to establish a market in non-QM loans. The legislative history shows that the opposite is the case. The bureau should carefully consider this legislative history when issuing rules regarding the scope of the QM.

Raymond Natter is a partner at Barnett Sivon & Natter, which represents financial institutions and trade associations that are involved in mortgage lending. He is a former deputy chief counsel at the OCC and a former counsel to the Senate Banking Committee.

Every borrower has concerns when choosing a mortgage, especially if they are purchasing a home for the first time. Can they afford their monthly payment? Will their mortgage payments increase? Do they qualify for the best interest rate? All of these are good questions. An often overlooked question to consider is: can I safely reduce my fixed monthly mortgage payments over time?  Only private mortgage insurance (MI) provides a built-in mechanism that allows a borrower to cancel coverage, resulting in substantial savings on a monthly mortgage payment.

Private mortgage insurance has helped millions of creditworthy borrowers who could not afford a 20 percent down payment to qualify for mortgage financing and purchase a home sooner than they could otherwise. It plays an important role in the mortgage industry by protecting the lender against loss if a borrower defaults, but some private mortgage insurers also offer protection for borrowers facing financial difficulty, through job loss protection and homeowner assistance programs.

Many borrowers are unaware that private mortgage insurance is cancellable, unlike the mortgage insurance offered on most loans insured by the Federal Housing Administration (FHA). Borrowers are able to request cancellation of their private mortgage insurance when their timely mortgage payments (no payments missed in the past 12 months) reach the level of 20 percent equity in the home, resulting in a decrease in monthly payments going forward. Otherwise, the mortgage insurance will automatically cancel when the mortgage reaches 78% if its original value, again assuming the borrower is current on all monthly payments.

In fact, nine out of ten borrowers are able to cancel their mortgage insurance within five years of purchasing their home, according to the Mortgage Insurance Companies of America (MICA). By contrast, FHA-insured home loans do not generally offer the same feature because a large portion of FHA insurance is often financed into the life of the loan, leaving a smaller monthly premium that can be cancelled.

Borrowers can achieve 20 percent equity sooner by making regular payments, making smart improvements that increase the value of their home, and by making additional payments to loan principal when possible. By contacting their servicer, borrowers can determine their principal balance and whether they qualify for cancellation. Additionally, a servicer can arrange for an appraisal of the property to determine the value of a home. However, this appraisal is at a cost to the borrower.

Compared to FHA, borrowers do not have to pay for private MI longer than needed, and cancelling insurance upon proof of sufficient equity is often at no additional cost to them. All this takes is a few easy steps and a conversation with the loan servicer, who can verify the borrower’s requirements for cancelling MI. For more information on how borrowers can cancel their MI, visit http://www.privatemi.com/loanoptions/benefits/cancelable.cfm. There you will find an easy kit for borrowers to calculate how long it will take them to reach 20 percent equity, and learn the steps needed to cancel their mortgage insurance.

Below are keys points from the study reported by the Phoenix Business Journal.

• For the fourth quarter of 2011, Phoenix’s economy ranked as one of the best in the West as well as in the Top 20 of  all metro areas in the study, according to the report.
• Phoenixwas one  of five cities in the West that closed out 2011 with four consecutive months of job growth, albeit the growth slowed toward the end of the year.
• Manufacturing  also ticked up inPhoenix,  as the region landed in the Top 40 in terms of production, and was gathering steam toward the end of the year, according to the report.  Output, however, was weak, with growth of only 0.3 percent in Phoenixduring the last quarter of 2011.
• The report also highlights that Western cities such as Phoenix, Denver and Las Vegas all saw declines in their      unemployment rates in 2011.

http://www.bizjournals.com/phoenix/blog/business/2012/03/phoenix-economy-among-fastest-growing.html?ana=e_du_pub&s=article_du&ed=2012-03-28

For the full report go to the following link:

http://www.brookings.edu/~/media/Files/Programs/Metro/metro_monitor/2012_03_metro_monitor/0328_metro_monitor.pdf

Twitter@FletchWilcox

Fletcher Wilcox

V.P. Business Development, Real Estate Analyst

Grand Canyon Title Agency, Inc.

Arizona

On March 22, the Arizona Senate voted unanimously to pass HB 2079, a bill modifying mortgage broker’s license application requirements. The bill is now awaiting concurrence in amendments by the House. As amended, the bill would require that, in order to qualify for a mortgage banker license or a renewal of a license, an applicant must at all times have and maintain a net worth of not less than $25,000 (instead of $250,000) and that negative equity in a person’s primary residence would not impact their net worth for these purposes.