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5 Years Since the Crash; Fannie Freddie Takeover

September 9th, 2013 by Bill Collins Leave a reply »

Fifth Anniversary This Week of Government Takeover of Fannie Mae and Freddie Mac

Five years ago, the U.S. government took control over Fannie Mae and Freddie Mac during a period characterized by many as the greatest financial crisis since the Great Depression.

Much discussion has taken place since this time regarding the “unwinding” or “overhaul” of Fannie and Freddie.  Until recently, lawmakers of all political persuasions repeated the mantra that change of some kind would be forthcoming. 

This has changed somewhat during the past year as the Wall Street Journal’s Nick Timaraos reported Saturday in an article titled “In 2013, Fix for Mortgage Giants Remains Mired in 2008”:

“Fannie and Freddie remain the largest single piece of unfinished business from the financial crisis.  As record profits have replaced huge losses, some now question whether cosmetic changes could substitute for the more radical overhaul of the companies envisioned five years ago.

The profits are even giving Fannie, the bigger of the two, some of its old swagger.  In an online video touting the company’s profit streak, Fannie boasts that it will ‘change the way people experience housing for generations to come’.  Fannie had around 7,200 employees at the end of February, up from around 5,800 when it was bailed out”.

Mr. Timaraos notes the central importance of Fannie and Freddie in the mortgage market and the popularity of the 30 year fixed rate mortgage with Americans.  It remains to be seen whether substantive legislative changes will be forthcoming regarding these mortgage giants in our deeply divided nation.  Maybe the status quo, when all else is considered, is not so bad when viewed in comparison with many of the proposed changes.

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Mortgage Lender Layoffs

Various public reports yesterday indicated that the Bank of New York would be closing down 16 mortgage offices and eliminating 2,100 jobs as demand for mortgage loans weakens.  This follows previously announced reductions in staff by Wells Fargo (2,300) and JP Morgan Chase (15,000 positions reportedly in jeopardy).

Commensurate with the decline in mortgage refinance loans is a decline in the need for mortgage refinance appraisals.  Many appraisers are finally understanding the pressing need to diversify their appraisal practices and acting to build diversified private appraisal practices.  What about you?

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Recent Real Estate Reports

Last Thursday, RealtyTrac released its September “U.S. Home Equity & Underwater Report” which showed that 10.7 million residential homeowners nationally have mortgage obligations which are more than 25% higher than the estimated value of their property.  This figure is down from 11.3 million in May of this year and 12.5 million one year ago.  The 10.7 million homeowners who are currently deeply underwater represent 23% of all residential properties with a mortgage, down from 26% in May and 28% one year ago.  The states with the highest percentage of deeply underwater homeowners include Nevada (46%), Illinois (40%), Michigan (38%), Rhode Island (34%) and Ohio (31%).

Approximately 8.3 million others have mortgages that are either 10% higher or 10% lower than the value of their homes, meaning that they are moving to a point whereby they would have the option to sell their home without resorting to a short sale.

24% of homes in foreclosure are now reported by RealtyTrac to have some equity which offers a chance for these homeowners to avert foreclosure.  States with a high percentage of properties in the foreclosure process with equity include Oklahoma (54%), Hawaii (51%), New York (47%) and Texas (46%).

Lender Processing Services (LPS) released their July Mortgage Monitor last week which showed a decline of 30% in distressed sales (both REO and short sales) for the 12 month period ending in June 2013 from the same 12 month period ending in June 2012.  Of this, LPS found that short sales had declined 60% in this most recent 12 month period from the previous year.

LPS found that delinquency rates declined 3.96% from the previous month and that foreclosure presale inventory dropped 3.46%.  The states with the highest percentage of “non-current” loans were Florida, Missouri, New Jersey, New York and Maine.

CoreLogic also previously noted in their “National Foreclosure Report” that completed foreclosures were down by 25% in July this year from the figure for the same month last year.

In their Home Price Index, CoreLogic reported last week that prices rose nationally by 12.4% in July on a year over year basis compared with July of 2012. 

Mark Fleming, chief economist for CoreLogic, is quoted in their news release of September 3rd as saying :

 “Home prices continued to surge in July. Looking ahead to the second half of the year, price growth is expected to slow as seasonal demand wanes and higher mortgage rates have a marginal impact on home purchase demand.”

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Reader Comments on Our Last Newsletter

Virginia appraiser Barry Taylor emails:
“Broker Price Opinions are absurd. I would only trust and utilize a state licensed/certified appraiser. End of story.”

Rhode Island appraiser Leigh Besson had this to say: “I noted this statement in your lead article:
‘Hopefully other elected officials (are you listening, New York Governor Andrew Cuomo?) will follow the New Jersey governor’s lead. Please note that we are not advocating that the New York governor follow many of the other positions taken by his New Jersey counterpart.’

You have a good article and make very good relevant points. It would be better if you could keep your biased political positions to yourself. I know it may be hard for you to believe but it is possible that we are not interested in your personal bias. Perhaps you have never met anyone that is not a correct thinker for all the right reasons."

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Rates & Dates

Freddie Mac, the Mortgage Brokers Association (MBA) and HSH Market Trends reported mixed results in mortgage interest rates in their most recent surveys. 

On September 5th, Freddie Mac reported that 30-year fixed-rate mortgages increased to 4.57% from the previous week’s rate of 4.51%. They also noted that last year at this time the 30-year rate was at 3.55%. 

The MBA in its most recent Weekly Mortgage Applications Survey released September 4th for the week ending August 30th, reported that 30-year rates with conforming loan balances ($417,500 or less) dropped to 4.73% from 4.80% during the previous week.   The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) fell to 4.71% from last week’s 4.78%.  Rates for FHA backed mortgages declined to 4.48% from 4.52% the previous week. 

In their press release of September 5th, the MBA reported an increase of 1.3% in mortgage applications with refinance applications rising to 61% of all applications from 60% the previous week. 

The HARP (Home Affordable Refinance Program) share of refinance mortgages increased to 38% from 35% the previous week, the highest percentage since the MBA began tracking this in early 2012.

On September 6th, HSH Market Trends reported that 30-year mortgage rates rose to 4.75% from 4.68% the previous week, matching the rate of the week ending August 23rd which was the highest rate since the week ending July 29, 2011.  Rates for FHA-backed mortgages also rose to 4.36% from 4.26% the previous week.  In their news release, HSH projected that rates would be stable or slightly higher during this coming week.

Additional information from Freddie Mac can be found by going to: Primary Mortgage Market Survey PMMS – Freddie Mac

Additional information from the Mortgage Bankers Association can be found by going to their site at: Research and Forecasts – Mortgage Bankers Association

Additional information from HSH can be found by going to: HSH.Com

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Ask Angie

We would first like to congratulate our most recent winner: Northern California appraiser Carl Drake of Drake Appraisals.  Carl was the first to answer correctly that Jimi Hendrix was the author of the quote “Even Castles made of sand fall into the sea eventually”; Douglas Adams noted that “A beach house isn’t just real estate. It’s a state of mind”; and that the quote " The greatest discovery of all time is that a person can change his future by merely changing his attitude” is attributed to Oprah Winfrey.  Today’s Questions:

Today’s questions:

1. Who Said: "Fast is fine, but accuracy is everything."

a) Kevin Marshall, President of Clear Capital
b) Timothy Mayopolous, President of Fannie Mae
c) Wyatt Earp
d) Jamie Dimon, CEO of JP Morgan Chase
e) None of the above

2. Who said: “To lead the people, walk behind them."

a) President Barack Obama
b) Vladimir Putin, President of Russia
c) Lao-Tzu
d) Xi Jinping, President of China
e) None of the above

3. Who said: "Let us learn to appreciate there are times when the trees will be bare, and look forward to the time when we may pick the fruit."

a) John Del Monte
b) Johnny Appleseed
c) Anton Chekhov
d) Edward Lonergan, President of Chiquita Brands
e) None of the above

The first person to respond with the correct answers wins a choice of one of the following:

One Free Regular Listing on AppraiserHelp.com

A Free Copy of the Directory of Appraisal Management Companies (Available to Members of AppraiserHelp.com and FHAAppraisers.com FREE!)

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Tell us what you think!

We invite your responses to any of the issues raised in this newsletter. Please e-mail us at: bill@appraiserhelp.com with your thoughts!

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We really hope you find our newsletter to be informative!  If you have any input on future topics for discussion, please email me your questions and I will do my best to address them in the next issue.  If you want to look back at past issues you can see our archive at www.appraisernews.com

Regards,

Bill Collins, Appraiser Help Inc.

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