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2014: issue 3
Pending home sales down 10.5% from February 2013 Down 0.8% from January as investor sales dry up Pending home sales fell for the eighth straight month, down 0.8% from the downwardly revised January report and down 10.5% from February 2013, according to the index from the National Association of Realtors. NAR’s pending sales index is an indicator of closings that usually happen within three months. "Contract signings for the past three months have been little changed, implying the market appears to be stabilizing," said Lawrence Yun, chief economist for NAR. "Moreover, buyer traffic information from our monthly Realtor survey shows a modest turnaround, and some weather delayed transactions should close in the spring." Existing home sales have been down since September 2013, with buyers facing the challenges of an increasing affordability gap as investors have driven up prices and lending requirements have tightened. “Upon first glance, it may seem high that a quarter of all ZipRealty home sales closed without financing in 2012 and
2013,” said ZipRealty CEO and president Lanny Baker. “But based on our own internal analysis and data from the National Association of Realtors, the percentage of all-cash real estate transactions may actually be moderating. Nationwide, the percentage of all-cash real estate transactions reached a fiveyear high in 2010 at 27%, and the percentage of all-cash property sales has slowly declined or flattened every subsequent year.” All-cash transactions accounted for 20% of the residential real estate market in 2009, and 25.6% of the market in 2011, NAR reports. According to ZipRealty’s analysis, in 2013 26% of all the real estate transactions closed by ZipRealty agents were purchased with cash, while 25% of the homes purchased through ZipRealty agents were acquired with cash. Mortgage applications dropped 3.5% from one week earlier, according to data from the Mortgage Bankers Association’s weekly applications survey for the week ending March 21, 2014. Refinance
applications dropped 8%. This is the second week in a row for declines after a spike of almost 10%. Apps fell last week 1.2% but were revised upward to 0.2%. Regionally, the pending home sales index fell 2.4% in the Northeast monthto-month and is 7.4% below a year ago.
In the Midwest the index rose 2.8%, but is 8.5% lower than February 2013. Pending home sales in the South fell 4%, and are 9.3% below a year ago – in this the largest housing market. The index in the West increased 2.3%, but is 16.5% below February 2013.
The cost of closing mortgages officially astronomical
Fannie, Freddie, FHFA settle MBS lawsuit with BofA
First, the Federal Reserve finds investors prefer to do business with toobig-to-fails, in favor of smaller financial institutions, leaving a higher cost of doing business for the little guys. Now, the Mortgage Bankers Association is reporting that, per loan, mortgage-banking profits took a huge hit in the fourth quarter. What's more, loan production expenses are going through the roof. And this doesn't even include the qualified mortgage rule numbers yet. Will the MBA first quarter 2014 report show an even bigger increase? Expect it. Why? It seems it's quickly becoming a market where it doesn't pay to be a mortgage banker. Independent mortgage banks and mortgage subsidiaries of chartered banks made an average profit of $150
on each loan they originated in the fourth quarter of 2013, down from $743 per loan in the third quarter, the MBA reports in its latest Mortgage Bankers Performance Report. The level of profit is at its lowest point since the MBA started counting in 2008. The opposite is true for mortgage servicing, where MSRs are huge right now. In that space the financial situation improved on a quarterly basis. Net servicing income per loan increased to $355 per loan in the fourth quarter from $224 per loan in the third quarter. In basis points, the MBA reports the average servicing profit was 19 basis points in the fourth quarter of 2013, compared to 12 basis points in the third quarter. "However, not all mortgage companies retained mortgage servicing rights or
generated margins large enough to offset production losses," Marina Walsh, MBA’s Vice President of Industry Analysis. "It is perhaps not surprising that only 58% of participating companies had overall positive pre-tax profits in the quarter." That 58% profit statistic used by Walsh is down from 74% in third quarter, and 92% in second quarter. Total loan production expenses increased to $6,959 per loan in the fourth quarter, up from $6,368 in the third quarter. Fourth quarter 2013 production expenses were the highest recorded in any quarter since the Performance Report was created in the third quarter of 2008. The "net cost to originate" was $5,171 per loan in the fourth quarter, up from $4,573 in the third quarter.
Fannie Mae, Freddie Mac and the Federal Housing Finance Agency reached an agreement with Bank of America (BAC) to settle claims associated with non-agency mortgage-related securities from 2005 to 2007. Under the agreement, Bank of America will pay Fannie $4.4 billion to satisfy all claims and buyback private label securities from Fannie with an unpaid principal balance of approximately $1.9 billion. Meanwhile, Bank of America will pay Freddie $5.1 billion.
According to the FHFA, the agreement provides for an aggregate payment of approximately $9.33 billion by Bank of America that includes the litigation resolution as well as a purchase of securities by Bank of America from Fannie Mae and Freddie Mac. “FHFA has acted under its statutory mandate to recover losses incurred by the companies and American taxpayers and has concluded that this resolution represents a reasonable and prudent settlement of these cases,” said FHFA Director Mel Watt said.
“This settlement also represents an important step in helping restore stability to our broader mortgage market and moving to bring back the role of private firms in providing mortgage credit. Many potential homeowners will benefit from increasing certainty in the marketplace and that is very much the direction we should be taking,” Watt added. The FHFA now has only seven out of 18 PLS suits filed in 2011 against various institutions.