MORTGAGE & FINANCE Mortgage applications leap as rates fall

The number of mortgage applications for the week ending March 6, 2013  increased 14.8 percent on a seasonally adjusted basis from one week earlier, the Mortgage Bankers Association announced today. On an unadjusted basis, the Index increased 15 percent compared with the previous week.

The Refinance Index increased 15 percent from the previous week to its highest level since mid-January. The seasonally adjusted Purchase Index increased 15 percent from one week earlier.  And unadjusted, the Purchase Index increased 18 percent compared with the previous week and was 17 percent higher than the same week one year ago.

The refinance share of mortgage activity held at 77 percent of total applications. The adjustable-rate mortgage share of activity also held at 4 percent of total applications.

Interest rates for 30-year fixed-rate loans with conforming balances, decreased to 3.70 percent from 3.77 percent. Interest rates for jumbo loans also decreased to 3.80 percent from 3.93 percent. Rates for Federal Housing Administration-backed 30-year fixed-rate loans decreased to 3.47 percent from 3.54 percent and 15-year fixed-rate mortgages decreased to 2.96 percent from 3.03 percent, the lowest contract rate since the week ending January 25, 2013.

http://therealdeal.com/blog/2013/03/06/mortgage-applications-leap-as-rates-fall/

MORTGAGE & FINANCE: Four easy ways to get a low mortgage rate

Are you ready and eager to buy your first home, but not sure if you'll qualify for those historically low mortgage interest rates that are splashed across every real estate section?

Well, you are right to be excited, since rates really are extremely low by historical standards. In fact, the average interest rate on a 30-year fixed-rate mortgage was just 3.57 percent as of February 5, 2012 - down from 4.85 percent just two years ago - according to Mortgage News Daily, an organization that provides housing news and analysis.

These low rates, combined with the relatively low prices of homes, make now an attractive time to buy, says Jim Duffy, a mortgage banker with Cole Taylor Mortgage. "It's a great time to buy because it's a perfect storm: rates are at their lowest point ever and housing prices are depressed," he says.

So keep reading to find out what some mortgage experts say about how to take your best shot at a record-low interest rate.

Tip #1: Improve Your Credit

Do you know what your credit score is? You probably should, because for any lender considering you for a mortgage, it's the first thing they're going to check, says Chris L. Boulter, president of Val-Chris Investments, Inc., a California company specializing in residential and commercial loans.

So what does your credit score have to do with your mortgage rate? Basically, the higher your credit score, the more likely you are to get a better interest rate.

FICO scores, which Boulter says is the scale most banks use, run from a low of 300 to a high of 850. At a minimum, Boulter says you'll want a score of at least 720 to 740 to qualify for today's historically low rates.

But don't fret too much if your score isn't quite at the gold standard. Duffy says you can still qualify for a mortgage with a score as low as 620, but you'll likely have to pay up to a half a percent higher on the interest rate.

[Got a good credit score? Click to compare mortgage rates now.]

Wondering how you can improve your credit score in the short term? Duffy says you can get an immediate 10 to 15 point jump in your credit score just by paying your credit cards down to approximately 30 percent of their limit.

For instance, if you have a credit card with a $3,000 limit and a $2,000 balance, your credit score is negatively affected. Paying the balance down to $1,000 might make the difference in qualifying for a mortgage or getting a better rate, he says.

Tip #2: Decrease Your Liabilities

No, we're not saying get rid of your teenager - no matter how attractive that idea may be. We're talking about liabilities that lenders worry about: things like car loan payments, credit card payments, school loans, etc. That's because these liabilities determine your debt-to-income ratio, or how much your total debt is as a percentage of your gross monthly income.

Liabilities impact your ability to qualify for a mortgage because the lenders measure your liabilities against your monthly income to determine how big a mortgage you can afford.

So what should your debt-to-income ratio be to qualify for the lowest mortgage rates? Duffy and Boulter both say that this ratio needs to be 40 percent or lower - and that includes your prospective new mortgage payment - along with property taxes and any private mortgage insurance (PMI).

By decreasing your liabilities and ensuring you have a low debt-to-income ratio, you'll hopefully be putting yourself into a smart financial situation and only borrowing what you can afford.

Tip #3: Put at Least 20 Percent Down

We're not sure if you noticed, but banks aren't exactly risk-takers, at least when it comes to

THE ECONOMY: Krugman Says Fed Low Rates Key to Housing Rebound: Tom Keene

Nobel Prize-winning economist Paul Krugman said the Federal Reserve must keep interest rates low to sustain the U.S. housing recovery.

“We have the beginnings of a housing recovery, it’s just starting to kick in,” the Princeton University economics professor said in an interview today on “Bloomberg Surveillance” with Tom Keene and Sara Eisen. “If the Fed were to raise rates, they would kill that.”

Central bank policy makers have said they will keep their benchmark lending rate near zero as long as unemployment remains above 6.5 percent and inflation is projected to be no more than 2.5 percent. U.S. unemployment rose to 7.9 percent in January, even as the economy added 157,000 jobs.

The housing market has been a bright spot in the economy, with housing starts rising 12.1 percent in December to cap the industry’s best year since 2008.

Krugman called the housing recovery the “best chance” the U.S. economy has to expand. The U.S. should have learned from Japan, which “repeatedly aborted its recovery by tightening too soon” during that nation’s own crisis.

The U.S. is already five years into a crisis that mirrors the Asian nation’s so-called “lost decade,” Krugman said. The period in the 1990s saw Japan’s economy slip in and out of recession and grow at an average rate of about 1 percent a year after the collapse of a real-estate bubble.

Like Japan
“We already are Japan-like, we’re worse than Japan ever was,” he said. “The human misery here is much worse than Japan has ever suffered.”

He said the U.S. needs to build infrastructure and that it is acceptable to pump money into the

MORTGAGE: 30-Year Fixed Mortgage Rates Continue to Rise

SEATTLE-Those who follow @GlobeStcom on Twitterand @GlobeStLIVE may have seen a post teasing the announcement, but GlobeSt.com has learned that the 30-year fixed mortgage rate on Zillow Mortgage Marketplace is currently 3.44%, up two basis points from 3.42% at this same time last week. The 30-year fixed mortgage rate hovered between 3.43% and 3.48% for the majority of the week, according to a statement from the company.

Zillow's real-time mortgage rates are based on thousands of custom mortgage quotes submitted daily to anonymous borrowers on the Zillow Mortgage Marketplace site. The rate for a 15-year fixed home loan is currently 2.7%, while the rate for a 5-1 adjustable-rate mortgage is 2.35%.

According to Erin Lantz, director of Zillow Mortgage Marketplace, “Despite an unexpected increase in the unemployment rate, rates ended the week essentially unchanged.”

Lantz expects that rates will remain fairly flat in the coming week “with limited economic news that might change the consensus that the economy is recovering, but at a slow and cautious pace.”

Check out the below chart for 30-year fixed mortgages by state.

And in other Zillow news, the company just launched an app to help with home improvement called Zillow Digs, where home shoppers and homeowners can find visual inspiration and understand the real cost of remodeling projects. According to Zillow, users can browse tens of thousands of photos and see Zillow's proprietary Digs Estimates for the estimated cost, based

MORTGAGE & FINANCE: Fee increases are making FHA mortgages more expensive

WASHINGTON — If you want to buy a house with minimal cash by using an FHA-insured mortgage, here's some sobering news: Because of an ongoing series of fee increases and underwriting tweaks, those mortgages are getting steadily more expensive and may not work for you.

The Federal Housing Administration is the largest source of low-down-payment mortgage money in the country. Its minimum down is just 3.5%, compared with 5% to 20% or more from conventional, non-government sources. For decades, FHA financing has made homeownership possible for first-time buyers with modest incomes and credit history blemishes.

But in the wake of losses tied to bad loans insured during the housing bust years, the FHA has been raising its loan insurance fees and backing more loans to applicants with higher credit scores. With the latest increases, things have gotten to the point where some lenders wonder whether the agency is trying to move away from its traditional customers.

Dennis C. Smith, broker and co-owner of Stratis Financial Corp. in Huntington Beach, is blunt: "I think FHA is putting itself out of business with the moves they've made in the past couple of years."

Although they wouldn't agree with that assessment, the FHA's top officials readily admit that their priority is not increasing market share but protecting the agency's multibillion-dollar insurance fund reserves and cutting losses.

Starting April 1, the FHA's annual mortgage insurance premiums for most new loans will jump

FINANCE: Lenders react to FHA mortgage insurance changes

Not only will FHA Mortgage Insurance Premiums be increasing 10 to 15 basis points, but they will also become permanent, creating room for alarm among lenders who fear lower-income homeowners will be squeezed out of the market.

U.S. Federal Housing Commissioner Carol Galante announced the changes in late January.

Many are arguing that, for a loan designed to help lower-income families and first time homebuyers, this increase in premiums is unjust, according to a recent press release.

"If Commissioner Galante follows through with other items, such as permanent mortgage insurance, low income households will qualify for less," said Chris Apodaca, a California mortgage banker.

And reducing market share is partially a goal of the increases, according to the FHA. It's role, post-crisis, is huge. Accoring toan article in The Wall Street Journal, economists at Moody's Analytics estimate that home prices, already down around 30% from their peak, would have fallen by an additional 25% without this government backing.

Therefore, it will be difficult to claw-back from the role the government plays in today's housing finance.

"FHA was never meant to be as mainstream as it is today," Apodaca added.

Seattle’s inventory of homes for sale has been dwindling for the past year. However, it seems that sellers are still in hibernation, despite the lack of competition from other sellers. This lack of inventory continues to leave buyers frustrated.

Last month, a 1.39-month supply of housing was reported in Seattle's King County. Analysts suggest a 5-to-6 month supply indicates a "balanced market."

"60% of homes being listed in the major job centers of the greater Seattle area are selling in one month or less," reported Seattle Pi.

While some sellers may be waiting for the market to come back, the Seattle Pi article points out, "the market is back."

Economists are saying that housing will become a positive contributor to the U.S. economy in 2013, instead of weighing against economic growth.

According to an article in The Columbian, this statement is backed up by most measurements of the housing sector, including home starts, sales and rising home prices. 

"The current forecast is for 5 million existing homes and 500,000 new single-family (housing starts). That's a pretty healthy growth in existing sales of about 8.5 percent," said Danielle Hale,

THE ECONOMY: Big money betting big on housing

Hedge funds and private equity firms have been rushing in to buy up companies and assets in every part of the housing supply chain, including undeveloped land, homebuilders, foreclosed homes, and building parts manufacturers.

One of the most notable moves is coming from hedge fund manager John Paulson, best known for his big (and lucrative) bets against subprime mortgages in 2006 and 2007.

Now, he's turned his attention to snapping up undeveloped land in areas hardest hit by the housing crisis. "Land is the accordion in the home building equation," said Michael Barr, who runs Paulson's real estate investments. "It falls the most in a downturn, but also rises the most in an upturn."

Over the past two years, Paulson & Co has bought up enough land in California, Arizona and Nevada to build up to 25,000 homes and is aggressively scouting for more, according to Barr.

Private equity firms are also getting in on the game.
Blackstone Group (BX) spent $2.7 billion last year to buy 17,000 single family homes, post-foreclosure, around the United States and plans to continue ramping up those efforts in 2013.
Pine River Capital Management took real estate investment trust Silver Bay Realty Trust (SBY) public in December. Silver Bay, which acquires, renovates, leases and manages single family homes, has already purchased more than 2,500 homes in areas hard hit by the housing crisis. In a recent SEC filing, Silver Bay said that it plans to purchase 3,100 more homes.

And in a sign of investors' growing appetite for a piece of the housing market, shares of publicly traded homebuilders have been soaring. PulteGroup (PHM), KB Home (KBH), and Lennar (LEN) are all trading near 52-week highs. Pulte's shares have more than doubled over the past year, while the KB Home and Lennar's shares have nearly doubled.

And for the first time since 2004, homebuilders are testing the IPO waters.

Tri Pointe Homes (TPH), which builds single family homes in California and Colorado raised

FINANCE: MORTGAGE INTEREST RATES START THE NEW YEAR AT NEAR RECORD LOWS

Mortgage interest rates continued to stay historically low at the start of the New Year based on Freddie Mac’s Primary Mortgage Market Survey (PMMS) for the week ending January 3rd, 2013. The average 30-year fixed rate mortgage interest rate started 2013 at 3.34%, slightly down from the end of 2012 when it was 3.35%, and even lower than the same time last year when it was 3.91%.

The 15-year fixed rate mortgage interest rate started 2013 at 2.64%, down from 2.65% at the end of 2012. In comparison to the same time last year, the 15-year fixed rate mortgage interest rate was 3.23%.

Freddie Mac’s Vice President and Chief Economist, Frank Nothaft, expressed optimism about the 2013 housing market in this week’s PMMS report:  “Mortgage rates started the year near record lows which should continue to aid the ongoing housing recovery. New home sales rose in November to a two-year high and were up 15.3 percent from the previous November. Similarly, pending sales on existing homes increased for the third month in November to the strongest pace since April 2010.”

FINANCE & MORTGAGE: To Givers of Down Payments

HOME buyers trying to scrape together enough money to cover the typical 20 percent down payment frequently look to relatives for help.

In a National Association of Realtorssurvey of people who bought homes from July 2011 to June 2012, about a quarter of first-time buyers relied in part on gifts from relatives. “Typically, that’s the Bank of Mom and Dad,” said Walter Molony, a spokesman for the association.

But mortgage lenders closely scrutinize cash gifts. That critical check from the parents may not count toward your home purchase if you can’t thoroughly document its source and intention.

“Basically, the banks want to make sure that you’re not getting a second loan,” said Ray Mignone of the New York financial planning firm Ray Mignone & Associates. “If all of a sudden $50,000 pops into your account, they want to make sure it’s not a loan against the property that they’re going to put a mortgage on.”

How to pass muster with the lender? First, it’s best if the gift comes from a close relative.

“It can’t be a friend or colleague, “ said Ace Watanasuparp, the president of DE Capital Mortgage, in New York. “And it can’t be your second cousin or something like that.”

Next, make sure that the gift comes in the form of a check or wire transfer — something traceable. Lenders are typically wary of gifts made in cash, Mr. Watanasuparp said.

The donor will also have to provide the lender with what is known as a gift letter.

Melissa L. Cohn, the chief executive of Manhattan Mortgage, said the gift letter should affirm that the money involved is indeed a gift from the donor and, more important, that repayment is not required. The donor should also specify the precise amount of the gift, and state his or her relationship to the borrower.

For good measure, Ms. Cohn added, donors should provide proof of their ability to give the gift — for instance, evidence of a stock sale, or a statement showing the withdrawal. Once the money is in the borrower’s account, the lender may also want to see proof of a deposit in the exact amount stated in the gift letter.

Just how heavily a borrower may rely on family largess to cover a down payment depends on the type of mortgage involved and the size of the gift. With a conventional loan, lenders require

MORTGAGE & FINANCE: 16 Things NOT TO DO While in the Process of Obtaining Home Financing

You can unknowingly sabotage your home financing goals by making some obvious and not-so-obvious moves with your finances. Check out the list below to see if you know the top 16 things not to do when you are in the process of buying or refinancing. Do not: 

1. Leave an existing job for any reason 
2. Open new bank accounts 
3. Close existing bank accounts 
4. Deposit funds over $300 into a bank account* 
5. Transfer money between accounts, unless receiving complete documentation from your bank, itemizing all transfers 
6. Allow your bank statements to go into a negative balance, even if you have overdraft protection 
7. Buy new furniture, a car, or make any other major purchase* 
 8. Shop for furniture, a new car, or any major items, which may result in your credit being run 
9. Apply for any new credit 
10. Inquire about new credit or better rates on existing credit 
11. Co-sign on any debt with a family member or anyone else 
12. Ask a tenant to move out, or give your landlord notice that you are moving out* 
13. Stop paying credit card debt 
14. Stop paying any bills 
15. Pay a bill in collections. If about to pay a bill in collections from a collection agency, try to pay it at closing** 
16. Have a friend or family member pay for anything related to the purchase of the home (appraisal, earnest money, down payment, etc), since gifts are only allowed under certain

MORTGAGE & FINANCE: New Report Raises Concerns Over FHA Loans

A new analysis of loans insured in recent years by the Federal Housing Administration is warning that the agency isn’t helping the low- and moderate-income homeowners it is designed to serve.

The study by Ed Pinto, a fellow at the conservative American Enterprise Institute, analyzed 2.4 million mortgages that the agency had backed in 40,000 ZIP Codes. It found that in 9,000 ZIP Codes with median incomes below the area median income, loans have a projected foreclosure rate of at least 10%.

“Once the expected failure rate exceeds 10%, the resulting direct and indirect costs to low- and moderate-income families and communities are a disservice to the very families and communities it is the FHA’s mission to help,” the paper said.

The New Deal-era agency, which doesn’t actually make loans but instead insures lenders against losses, has played a critical role in the housing market by backing mortgages of borrowers who make down payments of as little as 3.5%—loans that most private lenders won’t originate without a government guarantee. The FHA accounted for one third of loans used to purchase homes last year among owner occupants.

Last month, the FHA said that it had a net worth deficit of $16.3 billion, meaning that if it were to stop writing new business, under its current economic forecast, it wouldn’t have enough money in reserve to pay for expected losses. The FHA has maintained that the bulk of its losses are confined to loans insured before 2010.

At the heart of Mr. Pinto’s critique is a particularly relevant public policy question: What is the acceptable level of default for loans under such a government program?

In recent years, the FHA has taken several steps to raise the insurance premiums that it charges borrowers, but it has taken comparatively fewer steps to tighten credit. Higher

MORTGAGE: Paying Extra on Your Mortgage Can Go a Long Way

Mortgages can be viewed very differently.

Some see them as a positive financial instrument, a way to free up their money so it can be invested elsewhere, ideally for a better return.

Then there are those who view mortgages as the root of all evil, as a debt overhang that must be terminated as quickly as possible.

Whatever your stance, you've probably entertained the idea of making "extra mortgage payments," though you may not know the exact impact, due to the complexity of mortgage amortization.

Fortunately, there are calculators available -- like AOL Real Estate's mortgage calculator -- that take the guesswork out of the process and make it easy to see how much you can save in a number of different scenarios.

Adding $10 a Month

Let's start with a simple scenario where you add just $10 a month in extra payment to principal.

Assuming you've got a $100,000 loan amount set at 4 percent on a 30-year fixed mortgage, that extra $10 payment would save you $3,191.78 over the full loan term.

It would also shorten your mortgage by 13 months, meaning your 30-year mortgage would be a 28-year-ish mortgage.

So that's good news, right? You save thousands and you only have to pay a measly $10 extra per month. You probably wouldn't even notice the difference.

What if you bumped up that extra payment to $25? Well, you would shave 32 months off your mortgage, nearly three years, and reduce total interest by $7,450.01.

Feeling ambitious? Add $100 a month and you reduce your term by 101 months, or nearly 8.5 years, while saving $22,463.76 in interest.

Extra Payments More Valuable Early On

As you can see, it's not that hard to save a ton of money via extra payments, but it also matters when you start making those additional payments.

Using our $100 example, if you started making extra payments in year six of your 30-year

TAXES: Loss of mortgage deduction would be hard hit in Mass.

The generous mortgage-interest tax deduction that homeowners have long enjoyed could be diminished or eliminated as part of efforts to reduce the federal deficit, disproportionately hurting Massachusetts and other regions where real estate is especially costly.

Proposals to change the deduction include limiting it to the 28 percent tax bracket and lower; converting the deduction to a less generous tax credit; reducing the maximum allowed mortgage balance from $1.1 million to $500,000; and eliminating the benefit for second homes and equity loans, according to the Brookings Institution, a Washington, D.C., nonpartisan think tank.

More broadly, there is talk of placing a cap of between $25,000 and $50,000 on all annual deductions, which would force higher-earning taxpayers to prioritize what to itemize on federal returns.

Mark Muro, policy director of Brookings’ Metropolitan Policy Program, said changes to the century-old tax break are probably on the way — either as part of ongoing talks in Washington, D.C., between congressional leaders and President Obama to avoid the so-called fiscal cliff, or sometime next year.

“This is moving rapidly from the unthinkable to the inevitable,” Muro said.

But he does not believe it will have a devastating effect on most homeowners. The costs of minimizing or dropping the deduction, he said, “are largely going to be borne by those who can afford it.”

Taxpayers in expensive areas such as Boston and San Francisco reap the greatest benefit because they tend to carry higher mortgage debt and are more likely to file itemized returns.

Only about 25 percent of US taxpayers claim the deduction, which is projected to cost the federal government $100.9 billion in uncollected revenue for fiscal year 2013, according to the Brookings Institution.

About 31.4 percent of Massachusetts taxpayers write off mortgage interest, according to the Tax Foundation, a Washington, D.C, nonprofit. On average, Massachusetts homeowners are able to lop $11,366 from their income, compared with $10,640 nationwide, according to the

MORTGAGE & FINANCE: Things to Consider In Applying for a Mortgage

If you are hoping for a positive outcome from your mortgage experience then carefully consider all your options and buy within your means so that you can sustain your payments. Borrowers unsure of which approach is best can fall back on certain time-tested strategies for ensuring they don’t overextend.

Here are a few tips to boost affordability when arranging your mortgage:

1. Know what you can afford.  A mortgage pre-approval helps you establish a price range and the maximum mortgage you can reasonably afford.  Most lenders will lock-in a rate for up to 120 days when pre-approving potential borrowers for a mortgage.

2. Look at your current debts.  When applying for a mortgage, besides looking at your (GDS) a lender will also look at your total debt service ratio (TDS). How much of your total income is going towards various types of debts, including car loans, credit cards, and other consumer loans?  A mortgage agent can advise on restructuring your current debt (by increasing the amortization and lowering payments on your car loan, for example), to ensure that your TDS ratio is acceptable to prospective lenders.

3. Look into a longer amortization.  Some lenders will offer mortgages with amortizations longer than the traditional 25-year amortization which result in a lower monthly payment. But our new mortgage rules is capped at 25 years. Those opting for a longer amortization should plan to make lump sum payments down the road or increase their monthly payments (say, after receiving a salary increase), to lessen the amount of interest they pay throughout the life of their mortgage.

4. Increase the size of your down payment.  Increasing the size of your down payment means a lower monthly payment.  A common way for first-time buyers to come up with more cash for a down payment is to make use of the federal Home Buyers’ Plan to withdraw up to $20,000 each from a registered retirement savings plan (RRSP) without tax penalty to buy or build a qualifying home.  Also, many lenders allow the down payment to come from a properly documented gift, and a borrowed down payment may be possible for some borrowers.

5. Consider locking in your rate for a longer period of time. If you’re uneasy about fluctuating interest rates and your ability to meet any increases, then a fixed-rate mortgage

MARKET TREDS: Freddie Mac: Mortgage Rates to Stay Low, Property Values to Rise in 2013

Mortgage rates are likely to remain near record lows for the first half of 2013, while property values are expected to strengthen, said mortgage-finance company Freddie Mac.

The company expects long-term mortgage rates to rise gradually in the second half of 2013, but to remain below 4%, according to its U.S. Economic and Housing Market Outlook.

Freddie Mac sees house prices continuing to rise next year, with most U.S. house price indexes increasing by 2% to 3%. The company expects household formation to increase households by 1.2 million to 1.25 million in 2013, with housing starts reaching an annualized pace of roughly one million by the fourth quarter.

MORTGAGE & FINANCE: Mortgage Rates Fall to Record Lows With 30-Year at 3.34%

U.S. mortgage rates declined to record lows, dropping borrowing costs after applications for refinancing rose for the first time in six weeks.

The average rate for a 30-year fixed mortgage dropped to an all-time low of 3.34 percent in the week ended today from 3.4 percent, McLean, Virginia-based Freddie Mac said in a statement. The average 15-year rate slipped to 2.65 percent, also a record, from 2.69 percent.


Mortgage rates at record lows have made refinancing more appealing and have helped the housing market recover by making purchases more affordable. Home prices are rising, in part because reduced interest rates help buyers afford more expensive properties, said Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts.

Low rates “are playing an important role in stabilizing prices,” Newport said in a telephone interview yesterday. “They also help refinancing and it means you can manage to cut down on your mortgage payments, and one thing you can do is spend money. You can use that money to buy Christmas gifts.”

The Mortgage Bankers Association’s index of home-loan applications climbed 12.6 percent in the week ended Nov. 9. The refinancing gauge jumped 13.1 percent, while the purchase gauge rose 11 percent. Applications rebounded in East Coast states after dropping two

CREDIT: Credit Scores of Potential Homebuyers Are Improving

There have been numerous improvements in the economy and the housing market, specifically in the last few years, and that isreflected in the type of credit ratings carried by potential homebuyers nationwide through the end of last year.

With the slowly improving economy and jobs numbers, many consumers are now finding themselves in better financial shape than they were just a few years ago, and as a consequence, some are now mulling big financial decisions such as a return to the housing market, according to a report from the Federal Reserve Bank of Atlanta based on information in the Home Mortgage Disclosure Act database. In fact, through the end of 2011, the median credit score of a potential borrower who filed a home loan application was up 40 points from the end of 2006, more or less when the housing bubble burst. Further, that was the highest point observed in the past 12 years.

Interestingly, this comes at the same time as borrowers seemed to be more honest about their financial standing, the report said. Prior to the housing meltdown, it was not uncommon for borrowers to intentionally inflate and misrepresent their actual incomes -- and for banks to sign off on loan applications nonetheless. This was a major reason for the real estate crisis in the first place, as borrowers were granted home loans they couldn't afford (often with banks knowing full well that this was the case), then eventually defaulted and were foreclosed upon.

"Comparing home-purchase borrower incomes reported in the HDMA data with income reported by homebuyers in household surveys suggests that incomes on mortgage applications were likely significantly overstated during the peak of the housing boom," the Fed researchers said. "In more recent years, there is no evidence of overstated incomes."

However, despite the improvements, many consumers also faced a continued problem obtaining approval for their loan applications, the report said. Though consumers' median rating improved, the rate at which they were turned down for mortgages did not, holding steady from the 23 percent observed in 2010. Altogether, there were only 7.1 million mortgages approved last year, down 10 percent from 2010 and the lowest since 1995′s 6.2 million.

Consumers who are interested in buying a home may want to make sure their credit standing is as good as it possibly can be before applying, as many lenders say they will keep restrictions tight for some time.
http://realestate.aol.com/blog/2012/11/09/credit-scores-for-homebuyers-are-improving/

MARKET TRENDS: Real Estate Forecast 2013: The Housing Market

The housing market will improve moderately in 2013, but nobody will mistake this for a boom. The gains in activity and prices will be a welcome relief, but will leave many homeowners still underwater.

The usual way of discussing housing problems is misleading. Foreclosures, short sales, shadow inventory, upside-down mortgages are all symptoms. The fundamental problem that we have is an excess supply of housing units.
The normal housing vacancy rate for owned property (single family houses and condos not in the rental market) is around 1.5 percent nationally. Our high was three percent, but we are now down to 2.1 percent.  Rental properties are normally about seven to eight percent vacant. (Local norms may be higher or lower.) We reached a peak of 11 percent rental vacancy a few years ago, but have improved to 8.6 percent in the latest observation.  Despite recent gains, we still have too many houses for the current level of demand.

(Data note: these data are a little soft. They do not exactly match vacancy information from other sources, such as the decennial census. They should be taken as a general magnitude, not high fidelity information.)

The improvement we’ve seen recently results from a simple phenomenon: construction of new fewer housing units has been less than the growth of demand. Last year total units (single family houses plus the number of apartment units) ran just over 600,000. This year we’ll probably build about 750,000 units. At the peak of construction in 2005 there were 2.5 million units built. We need about 1.5 million new units per year to accommodate population growth, the desire for vacation homes as well as demolition of old units. That, too, is a soft number. The true annual need may be 1.4 million or 1.6 million, but it was never 2.5 million nor 0.6 million.

Our recent underbuilding has been the greatest aid to housing recovery. It did not act as fast

MORTGAGE & FINANCE: Mortgage giants predicting growth in 2013 home sales

Economists at the Mortgage Bankers Association and mortgage giants Fannie Mae and Freddie Mac are predicting that growth in housing sales and price stability will boost demand for purchase mortgages next year.

Because real estate agents' commissions are tied to the selling price of homes in which they represent buyers and sellers, trends in purchase loan originations correlate well with commissions, although many sales during the downturn have been all-cash deals to investors who also pay agent commissions.

The Mortgage Bankers Association expects purchase loan originations to grow by 16 percent next year, to $585 billion from an estimated $503 billion in 2012.

Growth in new-home sales, modest home price increases, and more financed, owner-occupied sales rather than cash investor sales will drive 2013 purchase originations, said Jay Brinkmann, MBA's chief economist, in a statement.

In their latest forecast, Fannie Mae economists predict sales of new and existing homes will climb by 4.2 percent next year, to 5.19 million homes, with even more dramatic 11 percent growth in purchase loan originations, to $567 billion. That growth would come on top of projected 9 percent growth in 2012 home sales.

"The strength in the recent home price trend reflects both improving fundamentals as well as seasonality, which causes the share of distressed sales to decline in the spring and summer months," Fannie Mae economists Doug Duncan, Orawin Velz and Richard Koss said in their latest economic outlook. "We expect to see some deterioration in home prices as we move into the winter months, but we continue to believe that prices reached bottom in the first of quarter of this year."

Economists at Freddie Mac expect sales of new and existing homes to climb 7.2 percent from this year to next, to 5.35 million, and to build on that momentum in 2014 with an additional 8.4 percent increase to 5.8 million sales.

While Freddie Mac sees total loan originations falling from $2 trillion this year to $1.65 trillion in

FORECLOSURES: Foreclosures Continue Decline but Inventory Clearing Slowly

CoreLogic reported this morning that completed foreclosures in August were 24 percent lower than one year earlier and also down from July. There were 57,000 foreclosures completed during August compared to 75,000 in August, 2011 and 58,000 the previous month.  August is the fourth consecutive month that completed foreclosures declined but there have now been approximately 3.8 million homes lost to the process since September 2008.

The national foreclosure inventory stands at approximately 1.3 million homes according o CoreLogic's National Foreclosure Report.  This is 3.2 percent of all mortgaged homes in the country.  These numbers are essentially unchanged from July.  In August 2011 there were 1.4 million or 3.4 percent of mortgaged homes in the inventory which indicates the number and share of homes in any stage of the foreclosure process.  

"The continuing downward trend in foreclosures and a gradual clearing of the shadow inventory are important signals that the recovery in housing is gaining traction," said Anand Nallathambi, president and CEO of CoreLogic. "The reduction in foreclosure volumes is to