September 2, 2016
Friday’s Government Report Roundup
- Housing prices are rising across the U.S. In 49 states housing prices rose in throughout the U.S. The U.S. Housing Price index report also analyzes specific metropolitan cities where housing prices fell.
- The amount of loans approved throughout the U.S. has drastically decreased. In a report by the Urban Institute, they found that the decrease in loan distribution is negatively affecting the United States.
- The Federal Housing Finance Agency is continuing to study and alleviate foreclosures throughout the United States. They recently released a report detailing their efforts. In May of 2016, the agency prevented over 15,000 foreclosures throughout the U.S.
September 2, 2016 | Permalink | No Comments
September 1, 2016
Low, Low, Low Mortgage Rates
TheStreet.com quoted me in Top 5 Lowest 15-Year Mortgage Rates. It opens,
U.S. mortgage rates have continued to decline in the aftermath of the Brexit vote, low Treasury rates and the stagnant economy, giving potential homeowners an opportunity to save money because of the dip.
The current market conditions give homeowners in the U.S. an opportunity to take advantage of the continuation of low mortgage rates since the Federal Reserve has not increased interest rates.
But, how do you snag the absolute lowest rates?
How to Get a Low Rate
Low mortgage rates can play a large factor in homeowners’ ability to save tens of thousands of dollars in interest. Even a 1% difference in the mortgage rate can save a homeowner $40,000 over 30 years for a mortgage valued at $200,000. Having a top notch credit score plays a critical factor in determining what interest rate lenders will offer consumers, but other issues such as the amount of your down payment also impact it.
A high credit score is the key to ensuring that borrowers receive a low mortgage rate. Here’s a quick rundown of what the numbers mean – a score of anything below 620 ranks as poor, 620 to 699 is fair, 700 to 749 is good and anything over 750 is excellent. Think carefully before canceling a credit card with a long, positive history, but decrease your debt. One of the biggest factors which impact your credit score is your credit utilization rate.
Many potential homeowners focus only on the interest rate or the monthly payment. The APR or annual percentage rate gives you a better idea of the true cost of borrowing money, which includes all the fees and points for the loan.
The origination fee or points is charged by a lender to process a loan. This fee shows up on your good faith estimate (GFE) as one item called the origination charge. However, the origination fee can be made up of a few different fees such as: processing fees, underwriting fees and an origination charge.
Homeowners who are able to afford a 20% down payment do not have to pay private mortgage insurance (PMI), which costs another 0.5% to 1.0% and can tack on more money each month. Having at least 20% in equity shows lenders that there is a lower chance of the individual defaulting on the loan.
Choosing Between 15-year and 30-year Mortgages
Obtaining a 15-year fixed rate mortgage instead of a traditional 30-year mortgage means homeowners can save thousands of dollars in interest. One drawback of a 15-year mortgage is that consumers will be locked into higher monthly compared to a traditional 30-year mortgage or a 5-year or 7-year adjustable rate mortgage, “which could put the squeeze on homeowners when times are tight,” said Bruce McClary, spokesperson for the National Foundation for Credit Counseling, a Washington, D.C.-based non-profit organization.
Many households would not benefit from a 15-year mortgage because it “does more to limit their financial flexibility than to enhance it,” said Greg McBride, chief financial analyst of Bankrate, a North Palm Beach, Fla.-based financial content company.
“Locking into higher monthly payments makes the household budget tighter and for what?,” he said “So you can pay down a low, fixed rate loan? On an after tax, after-inflation basis you’re essentially borrowing for free.”
McBride suggests that this strategy does not bode well for homeowners, especially if they are not paying down their higher interest rate debts and maximizing their tax-advantaged retirement savings options such as IRAs and 401(k)s.
“Even then, you might be better off investing your money elsewhere than tying up more of your wealth in the most illiquid asset you have – your home,” he said. “Just 28% of American households have a sufficient emergency savings cushion, so why the hurry to pay off a low, fixed rate, tax deductible debt. Money in the bank will pay the bills, home equity will not.”
The current economic situation has pushed down rates with 15-year mortgages becoming “relatively more attractive” than even 5-year adjustable rate mortgages (ARMs) over the last year, said David Reiss, a law professor at the Brooklyn Law School in New York. Last week Freddie Mac announced the average 15-year mortgage rate was 2.74% and the average for the 5-year ARM was 2.75%.
“These rates are virtually the same,” he said. “A year ago, the 15-year was relatively more expensive than the 5-year by about 0.16%. If you can swing the higher principal payments for the 15-year mortgage you will be getting about as good an interest rate as you could hope for.”
September 1, 2016 | Permalink | No Comments
Thursday’s Advocacy & Think Tank
- The Center on Budget and Policy Priorities completed a study on years 1995-2005. They found that the average income for the children in low income families has decreased throughout those years.
- The Government Accountability Office generated a report about federal and state agencies relinquishing unneeded property.
September 1, 2016 | Permalink | No Comments
August 31, 2016
Millennial Homeowners Following ‘Rents
TheStreet.com quoted me in Potential Homeowners Follow in Footsteps of Parents. It opens,
Consumers tend to follow the strategies of their parents when they are faced with whether they should stick with renting or buying their first home.
Consumers are nearly three times as likely to purchase a house if their parents were homeowners compared to parents who rented, said Felipe Chacon, a housing data analyst at Trulia, a San Francisco-based real estate website, which analyzed over four decades of data from the University of Michigan in Ann Arbor.
August 31, 2016 | Permalink | No Comments
Wednesday’s Academic Roundup
- Responsible Localism, Reactionary Localism: Lessons on Land Use Controls and Sustainability from the Global South for the Global North, James Krueger & Harvey Jacobs
- Poverty, Dignity, and Public Housing, Jaime Lee, Columbia Human Rights Law Review Vol. 47, No. 2, 8, 2016
- The Transformation of American Public Housing, Pavia Vobornikova, Scientific Journal of Humanistic Studies Vol. 8, 8, 2016
- Housing Prices in Urban Areas, Koen Smet
- A Public Health Perspective to Environmental Barriers and Accessibility Problems for Senior Citizen Living in Ordinary Housing, Marianne Granbom, Susanne Iwarsson, Marianne Kylberg, Cecilia Pettersson, & Bjorn Slaug
August 31, 2016 | Permalink | No Comments
August 30, 2016
Protecting Fannie and Freddie’s Golden Future
The Federal Housing Finance Agency had requested input on its Update on Implementation of the Single Security and the Common Securitization Platform. By way of background,
The Federal Housing Finance Agency’s (FHFA) 2014 Strategic Plan for the Conservatorships of Fannie Mae and Freddie Mac includes the strategic goal of developing a new securitization infrastructure for Fannie Mae and Freddie Mac (the Enterprises) for mortgage loans backed by 1- 4 unit (single-family) properties. To achieve that strategic goal, the Enterprises, under FHFA’s direction and guidance, have formed a joint venture, Common Securitization Solutions (CSS). CSS’s mandate is to develop and operate a Common Securitization Platform (CSP or platform) that will support the Enterprises’ single-family mortgage securitization activities, including the issuance by both Enterprises of a single mortgage-backed security (Single Security) and to develop it in a way that allows for the integration of additional market participants in the future. (1)
This is obviously very technical stuff. My own brief comment focused on the need to model and contextualize this development:
FHFA has requested public input on its Update on Implementation of the Single Security and the Common Securitization Platform. The FHFA has made significant progress on the Single Security and the Common Securitization Platform (SS/CSP). In doing so, FHFA has proceeded apace on the technical goals set forth in both the 2014 Strategic Plan for the Conservatorships of Fannie Mae and Freddie Mac and the 2016 Conservatorship Scorecard for Fannie Mae, Freddie Mac, and Common Securitization Solutions.
Congress’ failure to act on housing finance reform has left it to FHFA to determine the future of the residential mortgage market for the foreseeable future. It is therefore incumbent upon FHFA policymakers to provide further context on how the SS/CSP will operate when fully implemented in 2018.
Thus, FHFA should provide further updates that provide (1) scenarios of how the secondary market may look in 2018 and beyond; and (2) it should also evaluate how SS/CSP would be integrated with the major reform plans that have been proposed by lawmakers and policy analysts, in case Congress were to adopt one of them.
- FHFA should model how SS/CSP might impact market share of various mortgage originators such as large and small financial institutions as well as how it might impact the credit box for residential borrowers.
- FHFA should consider how SS/CSP would work with theCorker/Warner bill; the Parrott et proposal; the Bright & DeMarco proposal, among others. FHFA should explain how SS/CSP path dependency might impact each of these proposals. In particular, it should evaluate transition costs that are likely to arise with each option.
FHFA has approached SS/CSP as a technical challenge. But when implemented, SS/CSP may be setting up a housing finance system that lasts for decades. While Congress has failed to act, FHFA must do its best to evaluate how SS/CSP will affect the housing finance ecosystem. The stakes for market actors and homeowners are too high not to. (1-2)
The American housing finance system has been the goose that has laid golden eggs decade after decade. We want to be certain that FHFA doesn’t kill it, or even weaken it, unintentionally.
August 30, 2016 | Permalink | No Comments
Tuesday’s Regulatory and Legislative Roundup
- The Environmental Protection Agency spent $500,000 to help the residents of New Jersey and prevent a local environmental disaster. A nearby facility refrigeration practices led to a leak of ammonia which could cause a number of health issues throughout that local community.
August 30, 2016 | Permalink | No Comments
