Origination

At least seven in 10 potential first-time homebuyers said an extension of the $8,000 tax credit would have at least some influence on their decision to purchase a home next year. According to Zillow.com, which conducted the survey, an extension of the credit would add approximately 1.86 million first-time homebuyers to the market between Dec. 1, 2009 and Nov. 30, 2010. Approximately 18% said an extension would be the primary factor in their decision to purchase a home. This equates to 334,000 buyers, Zillow said. In addition, 25% of respondents said the credit would be a significant influence and 27% said it would have some influence. "Although nearly two million first-time homebuyers may receive the tax credit if it is extended for another year, the incremental impact of the credit is far smaller," said Zillow Chief Economist Stan Humphries. "While 334,000 may seem like a small number relative to the total number of homebuyers who would claim the credit, their addition to the market next year could make the difference between a robust annual increase in home sales next year and a flat or negative change in home sales relative to this year." He added while the credit would help to bring down inventory, it comes at a cost of an additional $14.86 billion in government spending. "For every five homebuyers who receive the credit, four would have bought their home even without the credit," he said.

After five straight months of increases, existing home sales took a breather in August — along with rising values. According to figures compiled by the National Association of Realtors, existing homes sales of one-to four-family units fell 2.8% in August (compared to the previous month) to a seasonally adjusted rate of 4.48 million units. Compared to the same month last year sales were down 2.5%. After several months of increases, the median sale price of a home fell to $177,500, NAR reported. But the trade group had some good news: the monthly supply of homes for sale continued to decline. In August there was an 8.2 months supply of homes for sale compared to 10.6 months back in November of last year, the nadir of the housing crisis. NAR and other trade groups are lobbying hard to have Congress extend the $8,000 first-time homebuyer tax credit which is set to expire on Nov. 30.

After five straight months of increases, existing home sales took a breather in August — along with rising values. According to figures compiled by the National Association of Realtors, existing homes sales of one- to four-family units fell 2.8% in August (compared to the previous month) to a seasonally adjusted rate of 4.48 million units. Compared to the same month last year sales were down 2.5%. After several months of increases, the median sale price of a home fell to $177,500, NAR reported. But the trade group had some good news: the monthly supply of homes for sale continued to decline. In August there was a 8.2 months supply of homes for sale compared to 10.6 months back in November of last year, the nadir of the housing crisis. NAR and other trade groups are lobbying hard to have Congress extend the $8,000 first-time homebuyer tax credit which expires November 30.

Nonbank mortgage lenders would be required to register with the Consumer Financial Protection Agency, which would be given the power to conduct financial exams and take enforcement actions, according to a new draft of the House CFPA bill. "Nonbanks will be subject to a level of supervision and scrutiny that is no less burdensome or comprehensive than that governing traditional banks and thrifts and will fully reflect the risks posed by these previously unregulated entities," according to an outline of the CFPA bill. House Financial Services Committee chairman Barney Frank, D-Mass., made several changes to the CFPA bill (HR 3126) he introduced in July, reducing the burden on banks and to ensure critics that nonbank lenders will be a main focus of the new agency. The American Bankers Association said the new draft "provides a more explicit and stronger mandate to focus on nonbanks that were the primary cause of the financial crisis." However, the bill removes federal pre-emption of state and local laws, ABA said, and creates a new agency with extensive new powers that could conflict with bank safety and soundness regulators. "ABA looks forward to working with Congress to improve consumer protections, while avoiding undermining the availability of credit or imposing conflicting and costly regulations," ABA president and chief executive Edward Yingling said.

The Federal Housing Administration is playing a larger role in the origination market and could end the year with a 30% market share, according to FHA commissioner David Stevens. FHA currently has a 23% market share, he said, and is no longer just a "countercyclical agency." FHA has become a "significant source of primary capital to fund the needs of homeownership," Mr. Stevens told a National Association of Federal Credit Unions conference. Meanwhile, the origination of mortgages has become very concentrated among several large banks, he said. He encouraged credit union executives to become more involved in mortgage lending to serve their members. He noted that FHA is increasing its net worth requirements, tightening credit standards, and taking other steps to control risks, such as hiring FHA's first credit risk officer. "FHA will never be able to fulfill its mission long-term or short-term if it is under scrutiny for not being well managed from a risk management standpoint," he said. The CRO candidate has already been picked and should be on board by year-end, he added.

The net worth requirement changes proposed to the Federal Housing Administration program could end up hurting small mortgage bankers, said National Association of Mortgage Brokers president Jim Pair. The higher requirement could force small mortgage banking firms to leave the FHA program, which in turn will limit consumer choice, said the trade group chief. As a result, only large lenders — more than anybody else — will benefit from this change, he said. As for removing the need for mortgage brokers to receive FHA approval, Mr. Pair said, "This is good and this is bad in some cases. The devil is in the details." He said NAMB is concerned about FHA adopting a similar policy regarding the ordering of appraisals as mandated by the Home Valuation Code of Conduct. NAMB is trying to set up a meeting with FHA to see if the agency will revise its stance. Mr. Pair spoke at the annual convention of the New York Association of Mortgage Brokers in Melville, N.Y.

Reverse mortgage lenders are learning that the Federal Housing Administration is moving quickly to implement a reduction in the loan proceeds that seniors can receive from a FHA-insured Home Equity Conversion Mortgage. National Reverse Mortgage Lenders Association president Peter Bell said FHA is expected to issue a mortgagee letter soon — possibly this week — on the HECM cut that could go into effect Oct. 1, the beginning of FHA's fiscal year. The reverse mortgage program faces an estimated $800 million shortfall due to declining house prices and it appears that congressional appropriators are not going to cover this credit subsidy shortfall. As an alternative (suggested by Congress), FHA is moving to cut HECM loan proceeds by 10%, according to sources. An analysis by NRMLA of the loan production by three large HECM lenders shows 21% of seniors would not be able to pay off their existing mortgage if their loans proceeds were cut by 10%. For seniors that need a HECM to remain in their home, the reduction in loan proceeds means they might have to sell or face possible foreclosure. "This is highly disruptive for the reverse mortgage industry, but more importantly to seniors' ability to access the equity in their homes to pay off their current mortgage," Mr. Bell said. FHA declined to comment.

There were so many good questions that resulted from last week's article (see just a few of them at the end of last week's post) that I decided to follow up and continue the discussion.

Just over one in four existing homes sold in Orange County last month had been through foreclosure some time in the past year, according to MDA DataQuick. According to a report in The Orange County Register, it's the smallest percentage of total home resales in 18 months. It's believed that most of the homes (685) were repossessed houses and condos being resold as real estate-owned (REO) by banks and other lenders. Others may be homes being resold by investors who picked up the homes at foreclosure auctions. Previously foreclosed homes have accounted for a dwindling share of Orange County home sales since January, when almost one out of every two homes sold had been through foreclosure, DataQuick figures show.

Home prices rose 0.3% in July from the previous month, according to a Federal Housing Finance Agency price index that has registered three straight monthly increases in values. The home price index rose 0.1% on a seasonally adjusted basis in June and 0.6% in May. FHFA previously reported a 0.5% increase in June and revised it downward. The index is based on the purchase price of homes backed by mortgages sold to or guaranteed by Fannie Mae and Freddie Mac. Overall, the July HPI is roughly at the same level as the March 2005 index.