Mortgage Apps Pull Back From Multi-Year Highs

Mortgage
application volume
as measured by the Mortgage Bankers Association’s (MBA) Market
Composite Index fell 7.1 percent during the week ended June 22. The change was
the same for both seasonally adjusted and unadjusted data.  Responses to MBA’s Weekly Mortgage
Applications Survey send the Refinance Index down 8 percent from the week ended
June 15 and the refinancing share of mortgage activity decreased from 80 percent of total applications
to 79 percent.  The seasonally
adjusted Purchase Index was down 1 percent from a week earlier while the
unadjusted index decreased 2 percent week-over-week and 3 percent from a year
earlier.

“Refinance volume fell
last week due largely to a fall-off in refinance applications for government
loans, which had more than doubled the prior week,” said Michael Fratantoni,
MBA’s Vice President of Research and Economics.  “The large swings in
activity were due to the implementation of FHA’s new premiums on streamline
refinances, and borrowers timing their applications to lower their premiums.”

“The decline in the refi index isn’t particularly troubling considering
the past two weeks saw the highest levels since early 2009,” says
Mortgage News Daily’s Matthew Graham.  “The pop higher in apps was fueled not only by the drop in FHA MIPs
on June 11th, but also by fresh record low rates, as well as the
announcements by several big box lenders that they’d no longer be
accepting open access (or “different servicer”) streamline
applications.  These factors not only helped concentrate application
volume in the previous two cycles, but the pull-back in open access availability
likely weighs on the current cycle as it raised new hurdles for some
borrowers, or at the very least, decreased the market’s overall capacity
to churn out streamlines.  Bottom line: this week’s drop makes sense.”

Purchase Index vs 30 Yr Fixed

Click Here to View the Purchase Applications Chart

Refinance Index vs 30 Yr Fixed

Click Here to View the Refinance Applications Chart

Interest rates were
mixed.  The contract rate for the most
popular product, the conforming (loan balance of $417,500 or less) 30-year
fixed-rate mortgage (FRM)   Jumbo 30-year FRM, (balances over $417,500)
increased to 4.12 percent with 0.35 point from 4.06 percent with 0.38 point and
the effective rate increased as well.   

The average contract
interest rate for 15-year fixed-rate mortgages decreased to 3.24 percent from
3.25 percent, with points decreasing to 0.44 from
0.45. The effective rate decreased from the previous week.

The average contract
interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to
3.71 percent from 3.72 percent, with points decreasing to 0.46 from 0.47. The
affective rate decreased.

Adjustable rate
mortgages (ARMs) had a 4 percent share of mortgage applications filed during
the week.  The average contract interest
rate for 5/1 ARMs increased to 2.81 percent from 2.75 percent, with
points increasing to 0.41 from 0.33. The
effective rate increased from last week.

All interest rates
quoted are for loans with an 80 percent loan-to-value ratio and points include the
origination fee. 

 MBA’s survey covers over 75 percent of all U.S. retail residential
mortgage applications, and has been conducted weekly since 1990. 
Respondents include mortgage bankers, commercial banks and thrifts.  The base period and value for all indexes is
March 16, 1990+100.

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Case-Shiller: Seven Months of Price Declines Comes to an End

For the first time in eight months the S&P/Case-Shiller
Home Price Indices rose over levels of the previous month.  Data through April 2012 showed that on
average home prices increased 1.3 percent during the month for both the 10- and
20-City Composites.

Prices are still down 2.2 percent for
the 10-City and 1.9 percent for the 20-City over figures for one year earlier
but this is an improvement over the year-over-year losses of 2.9 and 2.6
percent recorded in March.  Improvements
in the annual figures were also recorded by 18 of the 20 cities when compared
to March with only Detroit and New York faring worse.  The 10-City Composite now has an index of
148.40 and the 20-City 135.80; the base of 100 was set in January 2000.

Nineteen of the 20 cities and both
Composites posted positive monthly returns, with Detroit being the only
exception.  Phoenix continues to lead
cities with improving trends and had a 2.5 percent increase in April and the
highest annual rate of return among all 20 cities.  Atlanta, Cleveland, Detroit, and Ls Vegas
continue to have average home prices below their January 2000 levels while both
Composites have returned to levels in the early and mid 2003 period.

David M. Blitzer, Chairman of the Index
Committee at S&P Indices said, “With April 2012 data we finally saw some
rising home prices.  While one month does
not make a trend, particularly during seasonally strong buying months, the combination
of rising positive monthly index levels and improving annual returns is a good
sign.”

 “We
were hoping to see some improvement in April,” Blitzer said.  “First, changes in home prices are very
seasonal, with the spring and early summer being the most active buying months.  Second, while not as strong, and we believe
less reliable, the seasonally adjusted data were also largely positive, a
possible sign that the increase in prices may be due to more than just the
expected surge in spring sales. 
Additionally, the last few months have seen increased sales and housing
starts amidst a lot of talk of better housing markets, so some price gains were
anticipated.”

Atlanta posted the only double-digit
negative annual return at -17.0 percent, its 22nd consecutive month
of negative annuals returns.  Ten of the
20 cities saw positive annual returns – Boston, Charlotte, Dallas, Denver,
Detroit, Miami, Minneapolis, Phoenix, Tampa, and Washington, DC.  There were no new city lows in April.”

Atlanta and Phoenix, two markets we
have followed closely in 2012 for their contrasting trends, have continued
along their opposite paths,” Blitzer said. 
“Atlanta continues to be the only city with double-digit negative annual
returns – 17.0 percent, whereas Phoenix fared the best in terms of annual
returns at +8.6 percent in April.”

Case-Shiller Home Prices

Click Here to View the Case Shiller Chart

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Think Tank Measures FHA Progress

The American Enterprise Institute’s
(AEI) FHA Watch, a monthly on-line
publication tracking operations of the housing agency, just released its sixth
edition which makes clear the agenda of the conservative think tank.

Watch starts out by
quoting a Federal Reserve estimate that about one-third of the 11.1 million
underwater mortgages in the U.S. are FHA insured, a number which would account
for nearly half of FHA’s 7.4 million outstanding loans.  The Institute concludes that, since about 72
percent of outstanding FHA loans are of post 2009 vintage, about 1.5 million
recent loans must be underwater. 

“This comes as no surprise,” Watch
says, “since the FHA continues to combine minimal down payments (average of 4
percent) with slowly amortizing thirty-year loan terms. As a result, earned
homeowner equity (the combination of down payment and scheduled loan amortization)
amounts to less than 10 percent after four years, or about enough to sell a
home at the break-even point if home prices stay steady. However, prices have
declined nationally about 7 percent since mid-2009, with lower-priced homes
declining even more. When combined with borrowers’ low FICO scores and high
debt-to-income (DTI) ratios, the result is a continuation of the FHA’s
destructive lending-lending that has resulted in 20-25 percent of recent
borrowers facing a 10 percent or greater likelihood of foreclosure.”

In addition to the opening statement, Watch spotlights the following topics:

  • Insolvency: FHA’s Position Worsened in May, with an
    Estimated Current Net Worth of $22.11 Billion and a Capital Shortfall of $41-61
    Billion.
  • Delinquency: Total Delinquency Rate Increased in May to
    16.23 Percent Because of Increase in Both Thirty- and Sixty-Day Delinquencies;
    Serious Delinquency Rate Ticked Up to 9.43 Percent.
  • Underwater
    Loans: FHA Is Responsible for 1.5
    Million New Underwater Loans.
  • Best Price Execution:
    The Government Mortgage Complex’s Ginnie Brands Demonstrate Continued
    Pricing Dominance over Fannie Mae.
  • The Road Map to FHA Reform: Specific Steps to Reform and the Status
    of Each

The last category sets forth AEI’s goals
for program reform and fiscal reform, steps for accomplishing each, and a
report card on the progress made by FHA and Congress toward the goals.  AEI’s goals for Program Reform are:

  1. Stepping back from markets that the private
    sector can serve to gradually return to a “traditional”10 percent home purchase
    market share.
  2. Stop
    knowingly lending to people who cannot repay their loans.
  3. Help
    homeowners establish meaningful equity.
  4. Concentrate
    on homebuyers who truly need help purchasing their first home.

The only recent improvement acknowledged
by AEI in this area occurred in February with a proposed rule that limits
seller concessions to the greater of 3 percent of the loan or $6,000.  More than a dozen other steps have not been
acted on by the agency.

The Institute has set the following
goals for FHA to achieve in the area of fiscal reform:

  1. Utilize generally accepted accounting
    principles and set rigorous disclosure standards;
  2. Establish and maintain loan loss and unearned
    premium reserves;
  3. Establish and maintain a minimum capital
    requirement of 4 percent of amortized risk in force;
  4. Fund a countercyclical premium reserve.

AEI found that FHA had made a small
amount of progress in this area by requiring application of SEC disclosure
standards to the FHA’s insurance programs and funds and by taking steps toward
retaining an independent third party to conduct a safety and soundness review
under generally accepted accounting standards. 
There was no acceptable progress on the six remaining steps.

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New Home Sales at Highest Point in Two Years

Sales of new single-family homes increased to a seasonally
adjusted annual rate of 369,000 in May from a rate of 343,000 in April
according to figures released this morning by the U.S. Census Bureau and the
U.S. Department of Housing and Urban Development.  The month-over-month increase from the
slightly revised April number was 7.6 percent and May’s figure was 19.8 percent
higher than the new home sales estimate of 308,000 in May 2011.

The median price of a newly constructed single family home
was $234,500 and the average was $273,900. 
In May 2011 the median and average prices were $222,000 and $262,700
respectively.

Sales in the Northeast region were at a seasonally adjusted
rate of 41,000, a 36.7 percent increase from April and up 127.8 percent from a
year earlier.  In the Midwest sales were
down 10.6 percent to 42,000 an increase of 2.4 percent compared to May
2011.  Sales in the South increased 12.7
percent to a 204,000 unit rate, a 16.6 percent year-over-year change and in the
West there were 82,000 sales, down 3.5 percent month-over-month but up 10.8
percent on an annual basis.

Sales on a non-seasonally adjusted basis totaled 35,000 nationally
in May compared to 33,000 in April.  More
than half (19,000) of the sales were in the Southern region.

At the end of May there were an estimated 145,000 new homes
for sale which represents a supply of 4.7 months at the current sales
rate.  One year earlier there were
169,000 homes available, representing a 6.6 month supply.  The average house for sale has been on the
market for 7.9 months
since construction was completed.

New Home Sales

Click Here to View the New Homes Sales Chart

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