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Economics

Delinquency for loans in foreclosure averages 966 days, and this a positive sign for housing?

If mortgage delinquency stats are at an all time high, how can Black Knight (formerly LPS) say this is a positive sign for housing? They can explain.

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Although the average delinquency time for loans in foreclosure is 966 days as of March, according to Black Knight (formerly LPS), home prices have risen over the past two years, and many distressed loans have worked their way through the system. The company states that the percentage of Americans in negative equity positions has “declined considerably,” and loans already in the foreclosure process have been aging substantially, all of which Kostya Gradushy, Black Knight’s manager of Loan Data and Customer Analytics, say points to a healthier housing market.

Additionally, Black Knight notes that only one in 10 borrowers are underwater in America, which continues to improve. Negative equity in judicial states is now higher (13.4 percent) than in non-judicial states (7.9 percent). Fully 55 percent of loans in foreclosure have been delinquent for over two years.

“Two years of relatively consecutive home price increases and a general decline in the number of distressed loans have contributed to a decreasing number of underwater borrowers,” Gradushy said in a statement. “Looking at current combined loan-to-value (CLTV), we see that while four years ago 34 percent of borrowers were in negative equity positions, today that number has dropped to just about 10 percent of active mortgage loans.”

Gradushy added, “While negative equity levels have declined for both judicial vs. non-judicial foreclosure states from the peak of the crisis, non-judicial states are now at just under eight percent, as compared to 13.4 percent in their judicial counterparts. Overall, nearly half of all borrowers today are both in positive equity positions and of strong credit quality – credit scores of 700 or above. Four years ago, that category of borrowers represented over a third of active mortgages.”

Explaining the counter-intuitive nature of this data

“Black Knight has also observed the timelines associated with loans in foreclosure continuing to expand over time,” said Gradushy, “reaching an average of 966 days delinquent for those in the foreclosure process. In fact, 55 percent of all loans in foreclosure are now more than two years delinquent — an all-time high. The average length of delinquency for completed foreclosures is quite comparable at 955 days. However, as a share of total aged inventory, fewer of these loans are completing the foreclosure process.”

Noting that it may seem counter-intuitive, Gradushy says this is also indicative of an improving market. “As there are fewer new foreclosure starts, not as many new problem loans, declining delinquencies and improving indicators all around, what’s left are these loans lingering — for years — in the foreclosure pipeline.”

National stats, stat

As of March, the total loan delinquency rate is 5.5 percent, down 7.57 percent from February, and the total foreclosure pre-sale inventory rate fell 4.23 percent for the month to 2.13 percent.

Mississippi, New Jersey, Florida, New York, and Maine have the highest percentage of non-current loans, and the states with the highest percentage of seriously delinquent loans include Mississippi, New York, Rhode Island, Alabama, and Massachusetts.

Montana, Colorado, Alaska, South Dakota and North Dakota continue to have the lowest percentage of non-current loans.

Affordability in America

Black Knight reports that Michigan, Missouri, Indiana, and Iowa are the most affordable states to own a home, and not surprisingly, California and New York are the least affordable.

Affordability is calculated as a ratio of mortgage payment to income, and while affordability varies by state, overall, Black Knight says it’s better now than it was in the years leading up to the housing crisis.

Nationally, the mortgage-to-income ratio now stands at 22 percent, whereas in 2006, only four states were below this level. As of March, nearly two out of every three states fell below this line.

Economics

Why it’s about to get more expensive to get a mortgage

(FINANCE) Borrowing money is getting more expensive, especially for those looking to get a mortgage. But why?

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Although there have been some blips, bonds have grown substantially in value since the 1980s. They’ve performed extremely well for a number of reasons, not least of which is the big slowdown in inflation over that time period.

The result, for investors, has been that anything “bond-lik,e” i.e. capable of paying a regular income – like a high-dividend stock or even a property like your home – has shot up in value. A reversal of bond prices would mean less support for such investments.

That’s what the economy is currently experiencing. According to Financial Times, American worker wage growth is hastening the sell-off of bonds by the US government, which is decreasing the overall price of bonds. As bond prices go down, the interest rates that they offer new investors go up. That rate jumped to 2.85 percent last Friday, the highest level since 2014.

Since the rates at which banks lend their money are largely based on the interest rates offered by bonds, regular folks looking to take out a mortgage or a loan are facing higher costs.

How does this work?

If we’re talkin’ bond prices, we’re talkin’ yield. When the price of a bond goes up, the yield of that bond goes down! Let’s say you’re getting paid $5 each year. If you pay $50 for that right, then you’re making a 10% “yield” (5/50 = 10%). But if you pay $100 for that right, then you’re making a 5% “yield” (5/100 = 5%).

It’s the same thing with the price of a bond because the amount a bond investor gets paid (usually) is fixed. And so, when the bond goes up in value, the “yield” goes down – and vice versa.

For realtors, its important to help clients shop for the best rates to improve their confidence in this market. Leveraging the right online and local financing resources can help potential buyers get the best deal. Explaining broader market context is also critical. Historically, a three percent interest rate is still very low.

According to Investopedia, mortgage rates averaged 7.81% in 1996 and 10.19% in 1986. Instilling confidence with information will put buyers and sellers in the right place to make moves.

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Economics

How does this soft jobs report impact the housing market?

(REAL ESTATE NEWS) When we see a soft jobs report, does that hurt or help the housing market? We talk to two economists about it.

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In a year of political uncertainty, the release of any jobs report is polarizing. Political figures and armchair policy wonks will read into the data as they wish, but not housing economists.

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That’s who we look to in these times, because we all know that jobs is the cure-all for a recovering economy, but payroll growth slumped in September as the U.S. Labor Department reports that employers added only 156,000 jobs.

This fell short of the 172,000 originally projected by economists surveyed by Bloomberg.

Hidden positives in the report

Dr. Ralph McLaughlin, Chief Economist at Trulia said, “While the September jobs report came in below expectations, the continued addition of jobs to the US economy will help buoy demand for homes, both on the for-sale and rental side of the market.”

He observed another positive hidden in the Labor Department result. “In addition, wage growth kicked up again, which will help bolster the savings of first-time homebuyers trying to scrape together a downpayment.”

Real estate remains unchanged

“Given no major surprise in the data, the national outlook for real estate market remains essentially unchanged, with home sales expected to squeak out slight gains in 2016 and 2017 while commercial building vacancy rates should continue to fall,” said NAR Chief Economist, Dr. Lawrence Yun.

Yun adds that “we should note that men have been underperforming as 68.4% of adults have jobs, down from historic norm of around 75%. Meanwhile, 55.8% of women have jobs, roughly matching the historic norms.”

Pointing out that the data is being “digested” through the perspective of the upcoming election, Dr. Yun notes that, “among men, those with a college degree 72% of adults are working while only 54% of those with only a high school degree are working.”

Dr. Yun observes, “There will surely be a big divergent voting patterns among men versus women and among those with college education and those without in November.”

#jobsVhousing

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Economics

Mortgage companies hiring time travelers to uncover missing documents?

(MORTGAGE NEWS) – Mortgage companies are hiring for an interesting new position that may speak to their role in the economic crash of 2008.

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During the Great Recession of 2008, it’s been estimated that around seven million Americans lost their home. Many of the homes that went into foreclosure did so because people lost their jobs, and just gave up on their home. In some, people got kicked out based on false documentation, faulty paperwork or just downright illegal mortgage servicing. Numerous lawsuits have been filed and won by homeowners who were wrongfully evicted.

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In California, in Yvanova v. New Century Mortgage Corporation, the California Supreme Court ruled that plaintiffs held the right to contest foreclosures when documentation (in this case, a mortgage transfer that was allegedly void) was not handled correctly. The Court didn’t determine validity of the document in Yvanova’s case, just that she had the right to contest the foreclosure.

New jobs in mortgage documentation

According to David Dayen, who wrote Chain of Title, this phenomenon has brought new jobs to the market. Career Builder lists a job for a “Default Breach Specialist” posted by a recruiting firm in Jacksonville, Florida. The primary characteristics for this position:

“The Default Breach Specialist responsibilities include ensuring all breach letters are issued as required by investors, insurers and/or State Law.  Responsible for ordering title, reviewing title and all security documents to identify missing assignments needed to complete the chain of title prior to foreclosure referral.”

Seeking time travelers

According to Dayen, all the assignments of mortgage should have been prepared and recorded at the time of the sale or transfer. He questions why any mortgage company would need to order these documents.

In Yvanova’s case, it’s alleged that the mortgage was not converted into the trust in a legal fashion. In many of the cases involving foreclosure, third parties were hired to produce the paperwork that conveyed a mortgage into the trust. Dayen alleges that many of these companies “mocked up” documentation.

Although it is possible that the mortgage company is simply looking for someone to make sure everything is in the case file, it’s also possible (some would say highly likely) that some documents may never be found because they don’t exist.

The failure to follow the law as it pertains to property records is so bad that companies are now hiring chain of title specialists to manage the problem. This does not put the real estate industry in the best light.

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