Mortgages Drop Below 6%

September 12, 2008

Rates are down substantially, and mortgage applications are up. Full article here.

Rates on 30-year fixed-rate home mortgages dropped substantially this week, falling under 6% for the first time since May in the wake of the government takeover of Fannie Mae and Freddie Mac, according to Freddie Mac’s weekly rate survey.

The national average for the 30-year fixed-rate mortgage was 5.93% for the week ended Sept. 11, down from 6.35% last week and 6.31% a year ago, according to Freddie Mac’s weekly survey. The rate is down nearly 0.6 percentage point over the past four weeks.

“This means that the monthly principal and interest payment on a new $200,000 loan is over $76 lower than a month ago,” said Frank Nothaft, Freddie Mac chief economist, in a news release. He expects the movement to help spur home purchases and loan refinancing in coming weeks.




The MBA reported on Wednesday that mortgage applications filed last week rose 9.5% from the week before.


Nevada "Not a Hotspot" for Mortgage Fraud

June 20, 2008

Law enforcement officials said their stepped-up focus on mortgage cases aims to combat problems that have grown out of the risky lending practices prevalent until the mortgage market collapse started last year. Officials have identified 10 “mortgage fraud hotspots” nationwide in California, Colorado, Texas, Minnesota, Michigan, Illinois, Ohio, New York, Georgia and Florida.

I’m not trying to claim that Las Vegas doesn’t have its share of fraud, but it’s nice not to be a hotspot.

Debt Markets Continue To Loosen

May 30, 2008

WSJ reports “investors return to riskier assets”.

Investors have shifted into sectors such as mortgage bonds and corporate debt. Investment-grade firms have capitalized on the demand by borrowing a record $123 billion this month, says Dealogic.

RJ’s Spin on Mortgage Insurance Ignores Key Facts

May 23, 2008

A recent article in the LVRJ starts off promising:

You can’t take one more story about falling home prices in Las Vegas.

You’ve heard it all, from the forecasters at Forbes and Money magazines to those economists at UCLA and National City Corp. The Standard & Poor’s/Case-Shiller Home Price Indices, numbers from the Office of Federal Housing Enterprise Oversight, the parade of bleak stats from local firms such as SalesTraq and Home Builders Research — what else can anyone possibly say about the local real estate market? Prices fell a lot… Yada, yada, yada.

But just before you think that the RJ has turned over a new leaf and written something worthy of a a guest post here at FrothingDeveloper, they hit you with the hook:

…But try to sit still for just one more report. This one’s especially important because it comes from a major national mortgage insurer, a company that protects banks from default losses. Keying in on what mortgage insurers think of the local market can reveal just how hard a time consumers might face in obtaining home loans, and it can help predict whether a cold borrowing climate might heat up anytime soon.

The article jumps quickly to the dark side, and makes an argument that stricter guidelines for private mortgage insurance, which lower maximum loan-to-value ratios from 97% to 90%, mean that housing conditions are worsening. Private mortgage insurance (PMI) is required for most loans when a borrower puts down less than 20%.

Before diving into the details, the argument is flawed on it’s face. The requirements for private mortgage insurance have historically followed the lead of the mortgage industry, and have typically lagged credit trends by several months. According to the RJ, underwriters PMI and MGIC didn’t start to deny protection on riskier loans until 2007, when they had already taken a significant hit. The argument that the market must now worsen because PMI requirements are currently strict is no more valid than an argument that the market was in good shape at the top when PMI requirements were looser.

Those of you following the markets or this site closely known that Fannie Mae is removing their declining markets requirements for LTV ratios effective June 1, taking minimum down payments back to 3-5% across the country, including Las Vegas. Yes, these loans will still require insurance, but private mortgage insurers will feel significant pressure to follow Fannie Mae by lowering their restrictions, and the smart money is betting that they will do so within the next few months.

But let’s take a worst case scenario, and assume that PMI underwriters don’t follow Fannie Mae’s lead. Are we in for another wave of housing doom spurred by the inability of people putting down less than 10% to get loans? The answer, fortunately, is a resounding no.

One key reason, which the RJ piece completely ignores, is the ready availability of FHA loans. These loans allow as little as 3% down, have increased limits to $417,000, and don’t even require private mortgage insurance. Buyers who aren’t able to put down the 10% required for PMI have an excellent option in FHA loans. Those who need a lower down payment option or have less than perfect credit are turning to FHA loans for their borrowing needs, not just walking away from the housing market as the article suggests.

The article goes on to say:

Las Vegas, with its nation-leading foreclosure rate, its 20.2 percents decline in home prices in the first quarter, and a 22,000 home stockpile of resales on the market is raising more red flags than the Gulf Coast in hurricane season.

Let’s start with foreclosures. It’s no secret that Las Vegas has a high number of foreclosures. But what is a secret if you aren’t watching the trends carefully is that homes going into foreclosure and being put on the market at “foreclosure” prices are garnering multiple offers, sometimes as many as 12-15 for one property.

So while housing prices may have declined 20.2%, there is ample evidence that prices, at least those set by an efficient market, are stabilizing.

Inventory is the final piece of the puzzle, and the RJ cites Las Vegas’ 22,000 available homes as an indicator that the market still has a long way to go towards recovery. Yet the piece fails to mention that inventory is down by 7,000 units — more than 20% from its high of 29,051 in September, 2007. That’s the largest drop in inventory Las Vegas has ever experienced. It speaks volumes about the speed with which prices have adjusted to market levels, and the pent-up demand from buyers waiting to purchase until prices reached those levels.

So while the tougher requirements for PMI aren’t necessarily positive, they’re already old news and certainly won’t have anywhere the impact the RJ thinks they will.

Read the full RJ story here.

Perspective: Most Most Mortgages Current and Up To Date

May 13, 2008

Irwin Stelzer, Director of economic policy studies at the Hudson Institute, writes in The Weekly Standard that some perspective is needed on delinquent mortgages:

There are 80 million houses in America. Twenty-five million are owned mortgage-free. Of the 55 million homeowners with mortgages, about 50 million are up-to-date on their payments. So some 75 million of the 80 million homeowners either have no mortgages to add to their worries or are meeting their mortgage payments on time.

He goes on to write:

Less prominently displayed is the fact that exports are up, the unemployment rate remains low, job losses are diminishing, non-financial corporations are once again issuing bonds to fund investment, and earnings of non-financial companies were up more than 10 percent in the first quarter.

Read the article here.

Luskin Fights the “Perma-Bears”

May 11, 2008

A foretaste of what we optimists here at Frothing Developer can expect from the Perma-bears is intelligently discussed here:

The perma-bears want to burn me at the stake just because I noted that the sharp decline in house prices, in relation to per capita disposable income and prevailing mortgage interest rates, makes housing very affordable right now. So maybe we’re somewhere near a bottom, I said. Is that so bad?…

Bottom line? I stand by my affordability argument. I still firmly believe that home prices today, given incomes and mortgage rates, are as cheap as they’ve been in over 35 years. We may not be right at a bottom yet, but there’s one somewhere nearby. I now believe that all the more having had a taste of the backlash from the cult of bearishness. When so many people believe something with so much conviction, well, it just has to be wrong