September 14, 2016
Wednesday’s Academic Roundup
- Hee-Jung Jun studied spatial shifts “in the largest 100 metropolitan areas in the U.S.” between 1990 and 2010. The study determined the presence of a spatial disparity between city neighborhoods and suburb neighborhoods.
- Authors Diao, Fan, and Sing expose the Singapore government for their home transition policies. The study determined that in the years 2010 and 2013, the government prevented private home owners from purchasing public housing at a flat rate; however, the practice was not reciprocated when public housing occupants wanted to upgrade to private homes.
September 14, 2016 | Permalink | No Comments
Tuesday’s Regulatory & Legislative Roundup
- New York’s governor requested a proposal to ready a new development in Manhattan which is expected to create over 6,000 permanent jobs and produce over 300 million of annual economic income.
- A Native American tribe was awarded 36 million by California’s governor due to the state misrepresenting the number of available slot machine licenses in the state.
- Children across the state of New York will enjoy better playgrounds because Governor Cuomo approved a 2.5 million dollar bill to make 13 parks a better and safer place for children.
September 13, 2016 | Permalink | No Comments
September 12, 2016
Women Are Better Than Men,
Greeks vs Amazons, Mausoleum of Halicarnassus, British Museum
at least at paying their mortgages. This is according to an Urban Institute research report that found that
It’s a fact: women on average pay more for mortgages. We are not the first people to have noticed this; a small number of other studies have also pointed it out (e.g., Cheng, Lin, and Liu 2011). One possible explanation is that women, particularly minority women, experience higher rates of subprime lending than their male peers (Fishbein and Woodall 2006; Phillips 2012; Wyly and Ponder 2011). Another explanation is that women tend to have weaker credit profiles (Van Rensselaer et al. 2013). We find that both these explanations are true and largely account for the higher rates.
Looking at loan performance for the first time by gender, however, we find that these weaker credit profiles do not translate neatly into weaker performance. In fact, when credit characteristics are held constant, women actually perform better than men. Nonetheless, since pricing is tied to credit characteristics not performance, women actually pay more relative to their actual risk than do men. Ironically, despite their better performance, women are more likely to be denied a mortgage than men. Given that more than one-third of female only borrowers are minorities and almost half of them live in low-income communities, we need to develop more robust and accurate measures of risk to ensure that we aren’t denying mortgages to women who are fully able to make good on their payments. (1)
This second paragraph undercuts the catchy title of the report, Women Are Better than Men at Paying Their Mortgage, because it is only true when comparing single women to single men and when credit characteristics are held constant.
The report confines its analysis to sole female and sole male borrowers, excluding two-borrower households. This limitation is compounded by the fact that the credit characteristics of men and women are not the same (as men have better credit characteristics as a group). As a result of these limitations, I think the title of the report goes too far. The authors also acknowledge that the stakes are not that high because the “inequality does not translate into a significant amount that single women overpay for their mortgages: less than $150 per female-only borrower per loan.” (15)
That point aside, the report does raise an important issue about whether credit characteristics metrics are biased against women: “the dimensions we rely on to assess credit risk today do not adequately capture all the differences. This omission has real consequences.” (15) This is certainly true, but lenders will have to carefully navigate fair lending laws as they seek to capture all of those differences.
September 12, 2016 | Permalink | No Comments
Monday’s Adjudication Roundup
- The New York City Condo Association sued Ira Glass, a radio personality, for refusing to allow exterminators to treat their bedbug infestation.
- The Fare Share Housing Center was handed a small victory when the New Jersey Supreme Court determined that the affordable housing disagreement would be best settled in a public forum.
- Mortgagers in the 2nd Circuit were awarded 55 million dollars against Wells Fargo; however, their win was short live when the appellate court decertified their status as a class.
September 12, 2016 | Permalink | No Comments
September 9, 2016
Friday’s Government Reports Roundup
- According to the latest Weekly Mortgage Applications Survey from the Mortgage Bankers Association, released Wednesday morning and based on data for the week that ended Sept. 2, 2016, mortgage applications rose by 0.9% over last week’s total.
- The Fed’s latest beige book report said that commercial real estate contacts “in several districts” cited only modest expectations for sales and construction activity moving forward, “due in part to economic uncertainty surrounding the November elections.”
- Home loan rates fell again, keeping the latest wave of refinancing activity alive, mortgage giant Freddie Mac said Thursday.
September 9, 2016 | Permalink | No Comments
Free or Treed?
Realtor.com quoted me in Woman Can’t Live in Her Treehouse Even Though It’s Quite Posh (Take a Look!). It opens,
Most people live in houses, but Shawnee Chasser prefers her tree. In fact, the 65-year-old has been living in her custom-made abode between the forked trunks of an oak and fig tree on her late son’s half-acre property in Biscayne Gardens, FL, for the past 24 years. Hey, if it makes her happy, who cares, right?
Well, it turns out county officials do care, since they’ve deemed the treehouse to be unsafe. They’ve told Chasser to tear the structure down, but she’s flat-out refused—sparking a flurry of commentary nationwide about a controversial topic: How much control do we really have over where and how we live, anyway?
Chasser, at least, believes she has a right to stay put in her treetop chateau—a surprisingly spacious two-story place with a double bed and kitchenette complete with a tiny oven and sink. There’s even a small couch often occupied by Coonie, her pet raccoon.
“I’m not taking anything down,” Chasser told the Miami Herald. “I’ll chain myself to that tree house.” (But what about Coonie?)
Part of a land trust run by Chasser’s daughter, the property also has a cottage and minicamper, but Chasser prefers to rent those out. She also lets people pitch tents on the land to make extra cash to supplement her organic popcorn business.
About a year ago, someone called 311 to complain that Chasser was running the property like a hippie apartment complex. That’s when county code enforcement swung by and issued her a citation for illegally renting out the land, as well as living in a treehouse.
County officials concede that if the treehouse had been built with the proper permits and safety standards, there would be no problem. But, well, it wasn’t. And in an area prone to hurricanes, Chasser is endangering her own life, as well as her guests, officials claim.
As a result, Chasser has paid $3,000 in fines and could face an additional $7,000 in liens. She says she doesn’t have the money to hire engineers to rebuild or retrofit her treehouse to get it up to code, and has filed an appeal.
Although she has plenty of sympathizers, real estate experts are split over the treehouse tumult.
“The government has broad authority to regulate our daily lives in order to protect the health and safety of the people living under it,” insists David Reiss, research director at the Center for Urban Business Entrepreneurship at Brooklyn Law School. “The fact that someone has been able to operate under the radar does not give them a pass once the government has identified a violation of zoning and building codes.”
September 9, 2016 | Permalink | No Comments
September 13, 2016
Mortgage Market Forecast
By David Reiss
OnCourseLearning.com’s new financial services blog quoted me in Mortgage Rates Likely to Remain Low for Foreseeable Future. It opens,
In the weeks since the United Kingdom voted to leave the European Union, previously low interest rates have fallen to near historically low levels.
For the week ending Aug. 25, a 30-year fixed rate mortgage averaged 3.43%, just slightly above the record low of 3.31% established in 2012. At the same time a year ago, the average mortgage rate for a 30-year fixed rate mortgage was 3.84%, according to Freddie Mac.
The drop in interest rates appears to be drawing more homeowners into the mortgage market. Freddie Mac now expects 2016 loan originations to reach $2 trillion, the highest level since 2012.
Market Uncertainty
While markets have calmed since the Brexit vote in late June, the Mortgage Bankers Association cautioned in a July 14 Economic and Mortgage Finance commentary that the actual “terms and conditions of the exit will continue to destabilize markets.”
Global economic uncertainty, oil price fluctuations, slow economic growth and the potential for interest rate hikes suggest market instability will likely continue for some time, experts said. As a result, most analysts expect interest rates will remain low, at least in the short term.
“Those who have been betting on increasing interest rates have been wrong for a long time now,” said David Reiss, professor of law at Brooklyn Law School and research director of its Center for Urban Business Entrepreneurship. He believes rates likely will remain low “over the next six to 12 months, partially driven by a further reduction in spreads between Treasury yields and mortgage rates.”
Greg McBride, chief financial analyst for Bankrate.com, a personal finance website, expects “the backdrop of slow global economic growth, low inflation, and negative interest rates elsewhere will keep demand for U.S. bonds high, and mortgage rates [below] 4% in the foreseeable future.”
In July, Freddie Mac predicted the 30-year rate won’t top 3.6% in 2016, or 4% in 2017.
Lending Opportunities
The low-interest rates have created new opportunities for lenders. Refinance bids recently reached their highest level in three years.
“With mortgage rates having been range-bound for so long, this breakout to the low side has opened the door to refinancing for homeowners who had previously refinanced around 4% or even just below,” McBride said. He expects refinancing demand to continue as long as mortgage rates stay close to 3.5%, but predicts rates may need to drop a bit more to prolong the boom.
Meanwhile, rising home prices are creating more equity, and the MBA expects homeowners to want more cash-out refinancing. In its July 14 report, the MBA raised its 2016 refinance origination forecasts by 10% to $760 billion, replacing its pre-Brexit projection of a decrease.
As rates fall, refinancing becomes attractive earlier for those with outsize mortgages. These jumbo loans are those that exceed $417,000 in most of the country, or $625,000 in high-priced markets like New York and San Francisco, according to a July 7 online article in the Wall Street Journal. With these big loans, lower rates can mean substantial savings.
“Borrowers with larger loans stand to gain more by refinancing, and may not need as large of a rate incentive than borrowers with lower loan balances,” according to the July 14 MBA report. Because more affluent borrowers take out these loans, they generally have fewer delinquencies or foreclosures, and lenders can steer big borrowers to a bank’s other accounts and services. They’re also becoming cheaper: Rates on jumbo loans were at record lows in July, according to the MBA.
Reiss thinks lenders have been somewhat “slow to expand in the jumbo market, and may now gain a leg up over their competitors by doing so.”
Potential Risks
Still, lenders face some risks to profitability, including increased regulatory expenses such as the impact of the Consumer Financial Protection Bureau’s new TRID rule. Most of the pain from the TRID regulations, Reiss said, involve “transition costs for implementing the new regulation, and those costs will decrease over time.”
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September 13, 2016 | Permalink | No Comments