Fannie, Freddie CEOs hit back at criticism over refi fee

The CEOs of Fannie Mae and Freddie Mac are hitting back against almost universal condemnation of the GSEs’ decision to add a 50-basis-point fee to most refinances.

The “Adverse Market Refinance Fee” (AMRF) will be applied by Fannie Mae and Freddie Mac to cash-out and no-cash-out refinances, effective Sept. 1. In a letter to lenders, Fannie cited “market and economic uncertainty resulting in higher risks and costs” as justification for the fees. Industry groups, however, have almost universally decried the fee, which they say will result in higher costs for borrowers. In a recent letter to Federal Housing Finance Agency Director Mark Calabria, the bankers’ associations of every single state, plus Puerto Rico, called on the FHFA to rescind the fee.

The heads of the GSEs, however, defended the fee. In a letter to lenders, Freddie Mac CEO David Brickman and Fannie Mae CEO Hugh R. Frater said the condemnation was unwarranted.

“Contrary to much of the criticism we have received since making this announcement, this will generally not cause mortgage payments to ‘go up,’” Brickman and Frater wrote.

“The fee applies only to refinancing borrowers, who almost always use a refinancing to lower their monthly rate.”

The Mortgage Bankers Association estimated that the fee would make it up to $1,400 more expensive to refinance a loan. While Brickman and Frater did not deny that, they said the estimation was a “misrepresentation” of how the cost would be applied.

“For an average refinanced mortgage we estimate a reduction in savings of about $15 per month, meaning refinancing homeowners who were previously saving $133 on their monthly payments will now save $118 per month, on average,” they wrote.

“For borrowers in this scenario, this estimate also assumes lenders pass on the entire fee. That is up to the lenders. If they do not, the $15-per-month figure would go down, potentially to zero.”

Brickman and Frater wrote that purchase loans were not included in the fee to ensure that

“we do not impact homebuyers in any way”

However, a recent analysis by Mortgage Capital Trading predicted that lenders would raise margins across the board in response to the fee – potentially costing the average homebuyer up to $21,000 extra over the life of a 30-year loan.

Other industry groups and lawmakers have accused the GSEs of expressly countering the administration’s stated goal of keeping homeownership as affordable as possible during the COVID-19 pandemic. Brickman and Frater, however, defended the GSEs’ pandemic response, which has included mortgage forbearance programs and foreclosure suspensions.

“We are proud of this effort. But it has not been costless,” they wrote.

“Nor is it complete. While the refinancing market remains strong, there will be delinquencies and defaults that hit companies because of COVID-19. This modest fee will help us continue helping those who are really hurting because of the pandemic.”

Source: Mortgage Professional America 8/24/20 Author: Ryan Smith

Pending Sales Up With ‘No Sign of Slowing’

Consistency reportedly is a running theme. Pending home sales in July reflected the third consecutive month of upward contract activity, according to the National Association of Realtors. Each of the four major regions saw gains in both month-over-month and year-over-year pending home sales transactions.

There was an escalation of 5.9% to 122.1 in July in the Pending Home Sales Index which, of course, is a forward looking indicator of homes sales based on contract signings. Additionally, year-over-year contract signings spiked 15.5%. An index of 100 is equal to the level of contract activity in 2001.

Broken down regionally, July pending home sales looked like this: All four regional indices recorded increases in contract activity on a month-over-month basis during the month, during which the Northeast PHSI swelled 25.2% to 112.3. From a year ago, a leap of 20.6%. Meantime, the Index parachuted 3.3% to 114.6 last month in the Midwest; up 15.4% from last July.

In the South, pending home sales leapfrogged 0.9% to an index of 142.0 in July—rising 14.9% from last July. In the West, the index burgeoned 6.8% in July to 106.4. That’s a climb of 13.2% from a year ago.

“We are witnessing a true V-shaped sales recovery as homebuyers continue their strong return to the housing market,” said Lawrence Yun, NAR’s chief economist.

“Home sellers are seeing their homes go under contract in record time, with nine new contracts for every 10 new listings.”

Prompted by lockdown measures stemming from COVID-19, prospective buyers were unable to participate in the spring buying season. As a result of pent-up demand, the market is enjoying hearty activity, with almost all states at least partially reopened. In the immediate future—in the suburbs, particularly--there are no signs that contract activity will dissipate, said Yun.

In the second half, existing-home sales will leap to 5.8 million, Yun predicted. Abetted by an economy that he anticipates will grow by 4% and a low-interest-rate environment, with the 30-year mortgage rate average of 3.2%, he believes existing-home sales will hit 5.86 million in 2021.

Newly pending sales were up again, with home properties rapidly changing hands, according to Zillow’s Weekly Market Report, which included the housing market data ending June 26 .

Meantime, there was a steady climb in the list prices for homes nationwide. Specifically, the Zillow report revealed that the median list price in the United States experiences an uptick of 0.7% from just one week prior, raising the average median price to $335,160—a price tag that is 3.2% greater than the median home price in America seen just one year ago.

Source: MReport 8/27/20 Author: Chuck Green

Housing Prices ‘Defy Logic’: Is Market ‘Too Hot’?

Even in the face of a pandemic, elevated unemployment, and a general nationwide recession, home prices have surged, researchers recently reported.

“Prices are defying logic, expectations, and even belief, as they shoot up to record highs amid an unprecedented health and economic crisis,” reports Realtor.com,

which goes on to weigh the questions:

“Are some markets getting too hot? Could a significant correction be around the corner?”

Markets in possible peril include “some high-priced California and less expensive Rust Belt, Midwestern, and Southern markets,” Realtor.com reported.

Prices have shot up by more than 20% in the past year in some of these regions. Experts who spoke with Realtor.com discussed the sustainability of this “seemingly irrational home price exuberance” and speculated that “bubble territory” could be looming. They also speculated that a Great Recession-type bust is unlikely.

Nationally, the median home list price rose 10.1% year over year in the week ending August 15, according to the most recent Realtor.com figures.

This year's high prices are driven by many buyers competing for a very limited inventory. More demand than supply means higher prices.

“Some markets are overvalued," said Javier Vivas, Realtor.com's Director of Economic Research. "Growth of prices in a recession is pointing in that direction. Some markets are seeing increased risks of price corrections."

More likely than a bubble pop is the chance that home prices would come back to reality, Vivas said.

“Typically, market corrections happen fairly quickly, within two or three months, as priced-out buyers make a beeline for the sidelines," Vivas said.

“This year, record-low mortgage interest rates are muddying the picture.”

Rates at an unprecedented sub 3% are driving more buyers into the market and allowing them to stretch higher on what they're willing to pay. Lower rates mean lower monthly mortgage payments. That's allowing sellers to ask—and receive—more for their properties.

Those unable to buy in the spring because of the pandemic—along with buyers desperate for larger, single-family homes with big backyards after sheltering in place for months—are adding to the rising demand.

However, worries about the pandemic have led to a record-low number of homes for sale, as sellers decided to wait out the health crisis. Meanwhile, many builders were forced to pause projects in some parts of the country. That has led competing buyers to bid up prices hoping to secure a property.

The 2020 home price ramp-up is happening in some of the nation's most expensive and inexpensive markets alike.

“In the inexpensive markets, you have a ton of space for prices to grow. You can see them overheat and absorb that overheating better," says Vivas.

That's unlike the already high-priced coastal areas.

"The outlook for them is a faster and broader correction, [with] slight declines in home prices.”

Realtor.com explained why America likely will not see the housing-bubble pop it saw in 2008.

Until more properties come online, the low-inventory-high-demand dynamic is unlikely to change. The Great Recession had the opposite problem: There were many more homes available than qualified buyers.

“In the aftermath of the housing bust, it's become harder for buyers without good jobs and strong credit to score mortgages. This weeds out riskier borrowers. And unlike the last go-around, when builders were erecting residences at what seemed like a break-neck pace, the under-building of the last few years has exacerbated the housing shortage,” according to Realtor.com.

“Even if the economy doesn't improve by next year and a vast swath of Americans remain unemployed, we are not likely to see the flood of foreclosures that characterized the housing crash, partly because government protections could be extended.”

The report goes on to evaluate the potential future of over overvalued markets as well as potential increases in cheaper markets.

Source: MReport 8/24/20 Author: Christine Hughes Babb