news flash
53 basis points for FHA loans, and 16 basis points for VA loans. continued from page 15
points from last quarter to 9.53 percent. Sub-prime fixed loans saw an increase of 67 basis points to 10.53 percent, which is a new record high in the survey. The rate for sub-prime ARM loans increased 26 basis points to 22.26 percent, while the rate for FHA loans increased five basis points to 3.35 percent and the rate for VA loans increased four basis points to 2.39 percent. “National statistics, however, are somewhat meaningless in real estate because local market conditions determine values and peoples’ perception of values of conditions,” said Brinkmann. “Florida remains a problem. Twentyfour percent of all mortgages in the country that are in foreclosure are in Florida and 23 percent of the loans in Florida are anywhere from one payment past due to in foreclosure. In Nevada, foreclosure actions are still being initiated at an annualized rate of over nine percent. In Arizona, the annualized rate of foreclosures started is over seven percent and more than half of all of the loans in foreclosure in this country are in just five states. Yet 38 states have foreclosure rates that are below the national average. We have areas of recovery but those numbers are often overwhelmed by the bad numbers still coming out of a few large states.”
The foreclosure starts rate decreased 16 basis points for prime fixed loans to 0.68 percent, 42 basis points for prime ARM loans to 2.38 percent, 19 basis points for subprime fixed to 2.56 percent and 57 basis points for sub-prime ARMs to 3.67 percent. The foreclosure starts rate also decreased nine basis points for FHA loans to 0.93 percent and 15 basis points for VA loans to 1.02 percent. Given the challenges in interpreting the true seasonal effects in these data when comparing quarter to quarter changes, it is important to highlight the year-over-year changes of the non-seasonally adjusted results. The non-seasonally adjusted delinquency rate decreased for all loan types since the first quarter of 2010. The delinquency rate decreased 146 basis points for prime fixed loans, 205 basis points for prime ARM loans, 330 basis points for sub-prime fixed loans, 245 basis points for sub-prime ARM loans, 103 basis points for FHA loans, and 88 basis points for VA loans. The non-seasonally adjusted foreclosure starts rate decreased one basis point for prime fixed loans, 33 basis points for prime ARM loans, eight basis points for sub-prime fixed loans, 65 basis points for sub-prime ARM loans,
Seventy-Five Percent of Refinancing Homeowners Maintain or Reduce Debt in Q1 Freddie Mac has released the results of its Q1 CashOut Refinance Report, showing that homeowners who refinance continue to strengthen their fiscal house. In the first quarter of 2011, 75 percent of homeowners who refinanced their first-lien home mortgage either maintained about the same loan amount or lowered their principal balance by paying-in additional money at the closing table. Fifty-four percent maintained about the same loan amount, the highest share since 1985, when Freddie Mac began keeping records on refinancing patterns. In addition, 21 percent of refinancing homeowners reduced their principal balance. Borrowers who took “cash-out,” those that increased their loan balance by at least five percent, represented 25 percent of all refis; the average cash-out share over the past 25 years was 62 percent. “The average interest rate on singlefamily mortgages outstanding at the end of 2010 was about six percent, so there are still plenty of homeowners that can benefit from refinancing,” said Frank Nothaft, Freddie Mac vice president and chief economist. “We found the typical borrower reduced their interest rate about 1.2 percentage points by refinanc-
ing during the first quarter. For a 30-year fixed-rate mortgage with a $200,000 loan balance, that’s a monthly payment savings of about $150.” The net dollars of home equity converted to cash as part of a refinance, adjusted for inflation, was at the lowest level in 15 years (third quarter of 1996). In the first quarter, an estimated $6 billion in net home equity was cashed out during the refinance of conventional primecredit home mortgages, down from $9.1 billion in the fourth quarter and substantially less than during the peak cash-out refinance volume of $83.7 billion during the second quarter of 2006. Among the refinanced loans in Freddie Mac’s analysis, the median appreciation of the collateral property was a negative six percent over the median prior loan life of five years. In comparison, the Freddie Mac House Price Index shows a 21 percent decline in its U.S. series between the end of 2005 and end of 2010. Thus, borrowers who refinanced in the first quarter owned homes that had held their value better than the average home, or may reflect value-enhancing improvements that owners had made to their homes during the intervening years. “Consumers continue to reduce their debt, either by paying down or paying off their mortgage loan, or reducing the interest cost,” said Nothaft. “Homeowners’ aggregate financial-obligation ratio, which peaked during the third quarter of 2007, continued on page 22
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NationalMortgageProfessional.com
PENNSYLVANIA MORTGAGE PROFESSIONAL MAGAZINE
www.GSFprobranch.com
JUNE 2011