Mortgage Purchase Applications Plummet an Astounding 2%

Mortgage applications increased 1.3% from the previous week, continuing their upward trajectory for the fourth week, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending January 30, 2015.

The Market Composite Index, a measure of mortgage loan application volume, increased 1.3% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 15% compared with the previous week. The Refinance Index increased 3% from the previous week. The seasonally adjusted Purchase Index decreased 2% from one week earlier. The unadjusted Purchase Index increased 16% compared with the previous week and was 3% higher than the same week one year ago.

“Following several weeks of already elevated refinance activity due to falling interest rates, FHA refinance applications increased 76.5% in response to a reduction in annual mortgage insurance premiums which took effect January 26,” said Lynn Fisher, MBA’s Vice President of Research and Economics. “Conventional refinance volume was up only 0.5% for the week while VA refinance volume was down 24.3%. FHA purchase applications were also up 12.4% over the week prior, despite a decrease in purchase applications in the rest of the market.”

Google launching built-in mortgage calculator

Lenders who were unhappy with the Consumer Financial Protection Bureau’s new mortgage payment calculator will soon have a new target for their ire, Google (GOOG).

That’s because the internet search monolith began very quietly rolling out a mortgage payment calculator of its own on Tuesday. The built-in mortgage calculator will apparently appear when a user searches for terms like, “mortgage calculator,” “loan interest calculator,” and “interest calculator.”

The native mortgage calculator was first spotted by Searchengineland.com, which captured a screenshot of the tool. Subsequent searches by HousingWire were unable to locate Google’s mortgage calculator within several Google searches.

While the roll-out of the Google mortgage calculator seems to be limited thus far, Google did share some news on the mortgage calculator on its Google+ page.

“Preparing for homeownership just got a bit easier,” Google’s post states. “Starting today you can ask Google things like ‘How much can I borrow at $200 a month?’ or ‘At 5% APR how much can I borrow over 10 years?’ You can even adjust the mortgage amount, interest rate, mortgage period and more to see which financial options fit your needs.?”

87% of properties qualify for down payment assistance

The biggest obstacle for first-time homebuyers?

A joint analysis by RealtyTrac and Down Payment Resource shows that 87% of homes and condos would qualify for down payment assistance.

For the report, RealtyTrac looked at 2,290 down payment programs from Down Payment Resource’s Homeownership Program Index and found out of more than 78 million U.S. single family homes and condos, more than 68 million would qualify for a down payment program available in the county where they are located based on the maximum price requirements for those programs and the estimated value of the properties.

The average amount of down payment assistance across all counties is $11,565.

“Many homebuyers, especially millennials, haven’t fully investigated their home financing options because are pessimistic about qualifying for a mortgage. Our Homeownership Program Index highlights the wide range and availability of down payment programs available to today’s homebuyers. In fact, 91 percent of the 2,290 programs in our registry have funds available to lend to eligible buyers. Plus, income limits vary depending on the market and programs extend beyond just first-time homebuyers,” said Rob Chrane, president and CEO of Down Payment Resource. “It’s important for buyers to research down payment programs as part of their loan shopping process.”

Mortgage Demand Fades Despite Easing Standards

Loosening mortgage standards in the last few months failed to spur demand from borrowers, according to responses in the Federal Reserve’s latest Senior Loan Officer Opinion Survey.

Bank respondents reported less stringent lending criteria across most mortgage categories in January, with credit loosening most on GSE-eligible loans and jumbo loans falling under the Consumer Financial Protection Bureau’s qualified mortgage (QM) standards.

On net, standards were also slightly looser for government-backed mortgages; non-jumbo, non-agency QM loans; and non-QM jumbo loans; though those changes were offset by the number of banks reporting tightening criteria.

For non-QM, non-jumbo loans, the same shares of banks (7 percent) reported tightening and easing. None of the handful of banks dealing in subprime mortgages reported any changes in credit standards.

Jibing with another recent survey from Fannie Mae, larger banks were about twice as likely to report easier standards in any given category as smaller institutions.

Despite the net easing in standards, banks reported that demand for mortgages was weaker overall in every category. Declines were most evident for GSE-eligible mortgages, with 32.8 percent of officers reporting “moderately weaker” demand, and subprime mortgages, with 37.5 percent of officers saying demand was weaker.

Gauging Housing Demand for the Spring of 2015 – Caution in the Wind

2014 was unique but predictable in regard to mortgage demand for purchase applications. Looking back on the data now, it was down every single week of the year, year over year, and negative by double digits every week except for four weeks. The good news ( cough cough) is we have pulled ourselves out of the morass that was 2014 and the New Year is upon us.

Comparatively speaking, my outlook for purchase applications is not as negative this year. My 2015 housing predictions include at least 5%-10% growth, year over year, in purchase applications. This is primarily due to having such a low bar in 2014.

Because we experienced 21st century lows in mortgage purchase applications in 2014 and we are now in the 7th year of this economic cycle with employment to population rising, it is not a stretch to expect at least 5%-10% year growth in this purchase applications in 2015. Of course, year over year growth in purchase applications doesn’t mean a recovery when we experienced such low numbers in 2014. Expect housing bulls to highlight the year over year growth without adding the appropriate context.

With regards to interest rates, the ten-year note is near my predicted low-level range of 1.60% , keeping mortgage rates near the lowest rates of this economic cycle. If the 1.60% level breaks lower, expect a new low print of 1.34%.

However, if I am wrong and we don’t see any growth in 2015 purchase applications and existing home sales stay flat or even go negative, then we will need to admit that home prices have surpassed peak affordability in relation to income capacity. We know this is true for some areas of the country already. The rich can only buy so many homes and there hasn’t been strong household formation to drive first time home-buyer demand. No matter how low rates go, no matter how many jobs are created, no matter what all the king’s horses and all the king’s men try to do… if we don’t have and uptick in household formation and see wage growth, we will not have a true housing recovery.

Ability-to-Leverage Drives Foreclosure Risk

a study that reveals the obvious: excessive debt leads to foreclosure

Leverage is known to play an important role in loan default, but while theoretical research on leverage exists; to our knowledge there has been virtually no long-term data driven empirical analysis on the impact of leverage on residential foreclosure.

CoreLogic research highlights four key findings.

First, while homeownership rates today are the same level as five decades ago, foreclosure risk is two to three times higher.

Second, the primary driver of default risk over this period has been leverage. Leverage has played such a strong role that has rendered changes in income and savings as insignificant drivers of default from a long-term macro perspective.

Third, the stabilization in foreclosure rates in the 1970s and 1980s was driven by high inflation rates, which propelled nominal home prices and reduced aggregate LTV, thus lowering default risk – a reminder of real estate’s role as a hedge against inflation.

Fourth, the centerpiece of government regulations to help make the mortgage market safer for consumers was an income based ability-to-pay rule manages delinquency risk, but is less aimed at the market’s foreclosure risk.

Therefore, leverage as the most important driver of foreclosure performance over the last five decades remains unaddressed for the market. In the future, policy makers may need to consider exploring their ability to manage the leverage cycle to promote residential financial stability.

CoreLogic findings illustrate how important leverage has been both historically and in today’s recovery. While leverage is the dominant driver of foreclosure trends, the unemployment rate captures the impact of short-term economic cyclical fluctuations. A less important but still influential factor has been periods of accelerating inflation, which ease the burden of the monthly mortgage payment and masked the rise in leverage via higher nominal home prices. Interestingly, the savings rate and household income were not at all important, which was a surprise given that traditional underwriting focuses on affordability. Over the next year the continuing improvement in prices should help further reduce leverage, but the renewed emphasis on low down payment lending may in the future beyond 2015 lead to an increase in leverage.

Why Warren will run against Clinton in 2016

The Democratic race: Why Sen. Elizabeth Warren (D-Mass.) will run in 2016 against former Secretary of State Hillary Clinton.

1. Warren is the only national politician today from either party who conveys a sense of outrage over our current — deteriorating — national situation. Her passion is her signature calling card in a time when all the other candidates for president seem to have passion only for themselves and their candidacies.

2. At a recent 12-person in-depth focus group in Denver conducted by Peter Hart and reported in The Washington Post by Dan Balz, the only national politician who was viewed favorably was Warren — even by some of the Republican voters in the focus group.

3. Why? Because she is the only politician who is even talking about the powerlessness of the average person — and the seemingly too powerful corporate and Wall Street entities.

4. This issue cuts across all political lines. It is the issue that catapulted President Teddy Roosevelt into the political hall of fame. His trust busting led to today’s anti-trust regulations and the belief that the federal government’s role is to act as a neutral referee to ensure a fair playing field. But no one today believes the feds are neutral — or fair. Instead, big government is seen as corrupt and as “rigged” as big business.

5. Indeed, there isn’t that much that separates Occupy Wall Street from the Tea Party. One blames big business while the other blames big government for our problems. But more and more, people see the two as in bed with each other in a cynical game to line their own pockets and to preserve their power — all at the expense of the average American.

6. This underlying fear is the hidden issue in the 2016 race — and so far, only Warren is even talking about it.

7. Her solution is murky — and probably will be more government regulation — but so far, she isnt being asked to provide specifics. Instead, she has a current monopoly on this topic while all the other candidates — including Clinton — seem basically oblivious to it.

8. Speaking of Clinton, as someone put it: “Hillary and her campaign are a large balloon floating around in search of a pin.”

9. That pin will be Warren, who in 2016 will be 67 years old. It is now-or-never time for her to run. If she defers, as she now claims to be doing, it is unlikely she gets another shot at the White House. Her moment — and the stars — align now for her to puncture that Clinton balloon with precisely the issue that Warren understands: Hillary and Bill Clinton have sold their money-grubbing souls to Wall Street. The left wing of the Democratic Party — those who attend the Iowa caucus and vote in snowy New Hampshire in February — will choose Warren over Hillary Clinton.

10. Former Bill Clinton pollster Doug Schoen last week published two specific polls of 400 likely Democratic Iowa caucus-goers and 400 likely New Hampshire primary voters. The results prove that Warren could knock off Hillary Clinton in these two states. Indeed, Clinton is much more vulnerable than these useless national polls — like the recent CNN/ORC poll that showed her ahead 66 percent to 9 percent — that only measure name ID.

11. In Iowa, Clinton – who has already run a statewide campaign there in 2008 — led Warren 51 percent to 36 percent. That 51 percent is not very impressive for a national celebrity figure like Clinton. On issues and message, Clinton only led 35 percent to 31 percent.

12. In New Hampshire, Clinton — who won the Granite State’s 2008 primary — only leads Warren by 9 percentage points, 51 percent to 42 percent, but when the message about Wall Street is factored in, Warren actually leads 47 percent to 42 percent.

13. In other words, Warren conceivably could beat Clinton in both Iowa and New Hampshire — a feat that does not take that much money as they are small states — which would indeed be a death knell to Clinton’s campaign.

14. So here is the big question: Will Elizabeth Warren run — after repeatedly saying she is not running?

15. The answer is simple: Everyone in politics — despite denials — actually wants to be the president of the United States. But few have the opportunity. Warren is now uniquely positioned — as Barack Obama was in 2007 and 2008 — to take on the presumptive frontrunner on a specific issue (Obama’s was Clinton’s support of the war in Iraq) that plays to her strength and exploits Clinton’s weakness.

16. Thus, despite all the denials, it is inevitable that at some point this year, Warren will come to the conclusion that she must run against Clinton in 2016.

17. She has nothing to lose. The worst that happens to her if she runs and loses to Clinton is that she becomes the “black sheep” of the Clinton Democratic Party; Bill Clinton could treat her the way he has treated former Gov. Bill Richardson (D-N.M.) for the past six years. But so what? She’ll still be a U.S. senator.

18. Because she is sincere in her passion, she will decide to run — no matter the potential political downside.

19. Whether she succeeds is a different story. But we know — from Schoen’s polls — that she could defeat Clinton in Iowa and New Hampshire. After that, who knows?

20. Right now — today — Elizabeth Warren is repeatedly considering this possibility. She is being dragged by political reality and her own inner passion to do something she may not at first really want to do. But she knows that she must do it — and that is why, at some point in the next six months or so, she will announce that she is challenging Hillary Clinton in 2016.