Archives for June 2013

Bank of America moves mortgage work overseas to cut costs

Bank of America Corp. opened a unit in India to review home-valuation reports as it seeks to rebuild share in U.S. mortgages at a lower cost, said four people with knowledge of the move.

Bank of America moves mortgage related jobs from US to Bangalore IndiaWorkers in the new Bangalore office follow checklists to determine if appraisals are complete, said the people, who requested anonymity because they weren’t authorized to comment. The firm also eliminated jobs of licensed U.S. workers in its LandSafe business, the appraisal division of the Charlotte, North Carolina-based company, which made $78.7 billion in loans last year, the people said.

“One of the biggest problems in the mortgage business is all the paperwork involved, and how do you engineer it to reduce the bottlenecks,” said Bert Ely, an independent banking consultant in Alexandria, Virginia. “With offshoring, the potential for problems is always there, but it’s hard to be critical for trying to minimize costs.”

U.S.-based reviewers, who typically had at least five years of experience as appraisers were required to confirm accuracy by doing independent assessments that conform to industry standards

Lenders around the world have vowed to boost revenue and curb spending to make up for sluggish loan growth and new regulations. Bank of America, which spent more than $45 billion to settle disputes tied to defective mortgages and foreclosures, is among the most aggressive cost-cutters with Chief Executive Officer Brian T. Moynihan planning to save $8 billion a year. The firm slipped from being the biggest U.S. mortgage lender in 2008 to fourth last year.

Other firms have added staff in lower-cost cities. Goldman Sachs Group Inc., the New York-based investment bank, sawheadcount in places including Bangalore and Salt Lake Cityalmost double since 2007 to 22 percent of employees, CEOLloyd Blankfein said in November. Barclays Plc (BARC) said today it planned to move 4,000 more jobs overseas and to lower cost locations by 2015 to save as much as 250 million pounds ($381 million).

Staff Cuts

LandSafe has more than 2,000 associates in the U.S., according to the Plano, Texas-based firm’s website. In addition to appraisals tied to new home loans, it also conducts valuations on Bank of America’s portfolio of delinquent loans, of which the company had 667,000 on March 31. In February, the lender cut about 5 percent of LandSafe employees, saying they weren’t needed as overdue loans fell.

Licensed reviewers, who check the accuracy of appraisal valuations and can earn more than $100,000 a year, were among those who lost their jobs, the people said.

BofA_India_Taxi

Bank of America’s program prevents paperwork errors from delaying loan applications, saidTerry Francisco, a spokesman for the second-biggest lender by assets. The overseas completeness checks, begun in August, don’t replace in-depth reviews done by licensed U.S. staff, he said.

Overall Consideration

“The overall consideration isn’t necessarily cost, although cost can be an element,” Francisco said. “What we’re looking for is if there are patterns in certain areas where it looks like the reviews aren’t necessarily needed anymore.”

The U.S.-based reviewers, who typically had at least five years of experience as appraisers, are required to confirm accuracy by doing independent assessments that conform to industrystandards, the people said. The checklists in India cover 17 items such as whether the appraiser remembered to sign the report and include photographs of rooms, according to a copy obtained by Bloomberg.

Relying more on checklists may increase the odds of defective reports going undetected, said Karen Mann, a Discovery Bay, California-based appraiser who testified for the Financial Crisis Inquiry Commission’s 2011 report. The FCIC examined the causes of the housing bubble and subsequent 2008 credit crunch.

Knowing Shortcuts

“Experienced, licensed appraisers know the shortcuts people take, so those reviewers can be invaluable,” Mann said. “With the checkboxes, they’re looking for things that don’t really have anything to do with values.”

LandSafe workers complained last year about the decline in review work and its impact on their pay and job security, said a person with direct knowledge of the internal discussions. In response, LandSafe executive Tracy Sanderson said management couldn’t increase the number of reviews because of the expense, the person said. Sanderson didn’t return calls seeking comment.

Bank of America was forced to pay the most of any U.S. lender to put the housing mess behind it after Moynihan’s processor Kenneth D. Lewis bought Countrywide Financial Corp. in 2008. The firm has finished paying the “lion’s share” of costs tied to faulty mortgages, Moynihan said in March.

Under Moynihan, 53, the firm pulled back as it struggled to fend off regulators and lawsuits. The company made $78.7 billion in home loans last year, or about 4 percent of the market, compared with $315 billion in 2008, when it had more than 20 percent, according to newsletter Inside Mortgage Finance.

SOURCE: Bloomberg

Realtor® Association Warns About ‘Pocket Listings’

It's A Secret - A Pocket Listing In IdahoPocket listing are nothing new, but before putting your home on the market with just an individual agent or company, i.e. not listed in the MLS,  you should be aware of the pitfalls as it may reduce your final sales price. It doesn’t matter if your in Sun Valley Idaho or New York, the sames issues apply.

Below is an article about how the California Association of Realtors is dealing with this issue in an attempt to make sure these potential problems are disclosed to sellers prior to putting their properties on the market for sale. Many times the only person that gains from a “Pocket Listing” is the listing broker.  Now to the article, plus a link to the disclosure publication CAR created.

Pocket listings can adversely affect a seller’s goal of getting the best price reasonably for a home

About 1-in-4 home sales are reportedly pocket listings in some Northern California markets, and the California Association of REALTORS® is warning agents to tread carefully.

Sun Valley Idaho Pocket ListingsCAR says that pocket listings or off-MLS listings are not illegal if the listing agent fully discloses the pros and cons to the home seller and follows the rules, but CAR says pocket listings “may not be in the best interest of the property owner — particularly if a client does not know about the benefits of marketing his or her property through the MLS.”

CAR warns that “pocket listings” can adversely affect a seller’s goal of getting the best price reasonably for a home.

The increase in pocket listings has alarmed many in the industry, particularly at a time with inventory shortages in many markets. For example, 26 percent of home sales were pocket listings in the first quarter of 2013 in some Northern California markets, according to a recent study by MLSListings Inc. That’s an increase from 15 percent in 2012

CAR has published a booklet on pocket listings for agents to provide to their clients, “The Pros and Cons of Off-MLS Listings: What Consumers and Real Estate Agents Should Know.” CLICK TO READ

HUGE PRICE DROP! Seller says sell.

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Mortgage Rates Jump to 2 Year High

Mortgage rates spiked to their highest levels this week since July 2011, causing frustration among homebuyers and refinancers who were caught by surprise.

The benchmark 30-year fixed-rate mortgage rose to 4.61 percent, compared with 4.12 percent last week, according to the Bankrate.com national survey of large lenders. The mortgages in this week’s survey had an average total of 0.29 discount and origination points. One year ago, that rate stood at 3.89 percent. Four weeks ago, it was 3.99 percent.

The 30-year fixed hasn’t been this high since Bankrate’s survey on July 27, 2011, when the mortgage rate averaged 4.74%. This is the largest one-week rise since the financial crisis of October 2008.

By historical standards, rates are still extremely low

On top of that, the benchmark rate on the 30-year fixed was 3.6% May 8 — so it has climbed more than a percentage point in seven weeks.

The benchmark 15-year fixed-rate mortgage rose to 3.73% this week, compared with 3.3% last week. The benchmark 5/1 adjustable-rate mortgage rose to 3.45% from 2.99%. The benchmark 30-year fixed-rate jumbo mortgage rose to 4.75% from 4.29%.

Weekly national mortgage survey

Results of Bankrate.com’s June 26, 2013, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
30-year fixed 15-year fixed 5-year ARM
This week’s rate: 4.61% 3.73% 3.45%
Change from last week: +0.49 +0.43 +0.46
Monthly payment: $846.85 $1,198.28 $736.33
Change from last week: +$47.66 +$34.86 +$41.57

How did this happen?

Rates started climbing slowly in mid-May on speculation that the Federal Reserve was preparing to trim the $85 billion-per-month bond purchase program that has long kept a lid on rates. When the Federal Open Market Committee wrapped up its meeting last week, many observers expected the Fed to calm the markets. Instead, the Fed did the opposite.

Mortgage rates shot up once Federal Reserve Chairman Ben Bernanke told reporters that the Fed plans to slow the bond purchases this year and end the program in mid-2014, as long as the economy continues to improve. Even analysts who follow rates closely were shocked at how quickly rates have jumped since then.

“We saw a full percentage increase in less than a month,” says Bob Moulton, president of Americana Mortgage Group in Manhasset, N.Y., adding that half the increase happened since the Fed’s press conference. “My customers are dismayed and disappointed.”

The stock market sank on Bernanke’s comments, and a wave of investors immediately pulled money out of the bond market. When there’s less demand for mortgage and Treasury bonds, mortgage rates tend to rise.
Should borrowers lock or wait?

The financial markets are extremely volatile right now, says Cameron Findlay, chief economist for Discover Home Loans.

Homeowners who missed the opportunity to refinance should wait for the markets to calm if they think refinancing now wouldn’t save them much, he says. But he adds that homebuyers and those who are still paying 6 percent or higher on their loans shouldn’t take the chance.

“By historical standards, rates are still extremely low,” he says.

Donna Angeloni, vice president of lending for the Philadelphia Federal Credit Union, says the lender has been receiving an increased volume of calls from borrowers who want to lock a rate. She says rates may drop a little in the next few days, but, as usual, there’s no guarantee.

“I’d wait a few days and then lock if they drop back down,” she says. “If they hold steady, then I wouldn’t wait too long.”

Another strategy would be to ask if your lender offers a float-down option, Moulton says. With a float-down, the borrower has the right to have the rate reduced if rates fall. Not all lenders offer this option, but it’s worth asking the lender, he says.
Some borrowers opting for adjustable-rate loans

Many homebuyers who were expecting to pay 3.5% in interest on their 30-year mortgages and are now faced with higher rates, have chosen a 10-year ARM loan to keep the monthly payments close to their expectations.

With a 10-year adjustable-rate mortgage, the rate is fixed for the first 10 years and resets after that. The average rate for a 10/1 ARM was 4% in Bankrate’s weekly survey.

“We are giving borrowers the menu and saying, ‘These are your options now,'” Moulton says. “Some people are staying with a 30-year because they like the security. But some took a little harder look in terms of how long they are going to stay in the house, and they have chosen to go with the 10-year.”

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Senators push bill to scrap mortgage firms Fannie, Freddie

A bipartisan group of senators on Tuesday introduced a bill to abolish Fannie Mae and Freddie Mac and replace them with a government reinsurer of mortgage securities that would backstop private capital in a crisis.

The U.S. government seized the mortgage finance firms in 2008 to rescue them from insolvency, spending a total of $187.5 billion to keep them afloat. Fannie Mae and Freddie Mac, which charge lenders a fee in return for guaranteeing principal and interest on mortgages, are now posting record profits.

Under the bill, which is being led by Tennessee Republican Bob Corker and Virginia Democrat Mark Warner, the two companies would be liquidated within five years. The legislation would provide for government reinsurance that would kick in only once private creditors had shouldered large losses.

“It lessens the footprint of the federal government in housing and winds down Fannie and Freddie,” Corker said at a news conference. “But at the same time it keeps the housing finance industry in a liquid state.”

The two firms back nearly half of all new U.S. home loan

The measure seeks to jumpstart the stalled debate over how to remake the U.S. mortgage finance system, whose flaws were exposed by the bursting of the housing bubble and subsequent deep financial crisis.

Corker said the leaders of the Senate Banking Committee “indicated a willingness” to move forward on the bill once they pass separate legislation on the Federal Housing Administration, which they hope to do prior to an August recess.

Analysts cautioned, however, that the legislation was simply a first step of an uphill climb in Congress. Any proposal that clears the Democrat-led Senate would have to win approval in the Republican-controlled House of Representatives, where some lawmakers want a fully private system.

A mortgage system overhaul, as a result, is likely to take years.

“Corker-Warner represents a milestone in the government’s response to the housing crisis as it is the first comprehensive, bipartisan measure to deal with Fannie, Freddie and mortgage finance,” Jaret Seiberg, a senior policy analyst at Guggenheim Securities, said in a research note.

He added, however, that there “is almost zero chance the bill introduced today will be adopted” as it is currently written.

The Obama administration said it welcomed the effort and would work with both the Senate and House to find a bipartisan way to move forward with a revamp of the current system.

“The president strongly supports comprehensive housing finance reform that would forever end Fannie Mae and Freddie Mac’s flawed business model that put the American taxpayers on the hook,” said White House spokeswoman Amy Brundage.

The two firms, which back nearly half of all new U.S. home loans, were chartered by Congress to expand mortgage finance but operated as private, profit-making companies. Given the central role they played in the financial system, the government felt compelled to bail them out when they ran into trouble.

To create a new model, the bill would require private entities to buy mortgages from lenders and issue them to investors as securities. Private equity would be required to absorb a 10 percent loss of the principal underlying those new mortgage-backed securities if the loans went bad.

A new guarantor, called the Federal Mortgage Insurance Corp., would replace Fannie Mae and Freddie Mac.

It would charge and collect fees designed to cover both its operating costs and to maintain a catastrophic fund. It would also continue existing efforts to build a common securitization platform to help smaller lenders issue securities.

The new bill would not provide much for Fannie Mae and Freddie Mac’s private stock holders. The improvement in their financial fortunes has led some investors to speculate that they could be re-established as private firms.

Under the terms of their bailout, the U.S. Treasury holds $188 billion in Fannie Mae and Freddie Mac senior preferred stock, and any profits beyond what the companies need to maintain a capital buffer are swept into the government’s coffers. The Treasury also holds warrants to acquire almost 80 percent of the companies’ outstanding common stock.

The legislation would require any proceeds from Fannie and Freddie’s liquidation to go first to the Treasury, as the holder of the companies’ senior preferred shares, then to preferred shareholders and, lastly, to common shareholders.

The bill’s co-sponsors include Senators Mike Johanns, a Nebraska Republican; Jon Tester, a Montana Democrat; Dean Heller, a Nevada Republican; Heidi Heitkamp, a North Dakota Democrat; Jerry Moran, a Kansas Republican; and Kay Hagan, a North Carolina Democrat.

SOURCE: Reuters

CASE-SHILLER INDEX: Home prices up 12.1% in April

Prices for U.S. homes leaped in April, posting record monthly growth and the fastest year-over-year growth in seven years, according to S&P/Case-Shiller data released Tuesday with prices jumping a record 12.1%.

From March, prices were up 2.5% for the 20-city composite index.

All 20 cities showed positive year-over-year returns for at least the fourth consecutive month.

“The recovery is definitely broad based,” said David Blitzer, chairman of S&P’s index committee.

That should continue, despite rising interest rates and fears of further increases, he said, in part because some banks are easing credit restrictions.

Trulia shows prices rising nearly everywhere in the U.S.

Along with Phoenix and San Francisco, Atlanta and Las Vegas also posted year-over-year gains of more than 20% in April.

San Francisco was up almost 24%; Las Vegas, more than 22%: Phoenix, almost 22%; and Atlanta, nearly 21%.

In April, 19 of 20 cities posted positive returns. Detroit was the only metro where prices were flat.

While April’s numbers were strong, inventory levels are beginning to show signs of easing, and mortgage interest rates are creeping up.

“Going forward, both of these factors will help mitigate extreme price spikes caused by very strong housing demand and very low housing supply,” says Zillow chief economist Stan Humphries.

He says “runaway” appreciation in many of the large coastal metros that form the backbone of the Case-Shiller indices will begin to moderate.

While the Case-Shiller index measures prices for leading cities, data from real estate website Trulia shows prices rising nearly everywhere in the U.S., but even faster in cities than in the suburbs.

Based on median asking prices per square foot for all non-foreclosure listings on Trulia through May 2013, it found urban home prices up 11.3% year-over-year vs. 10.2% in the suburbs.

To read the complete report: Click Here

Mortgage Rates Rise for Sixth Straight Week

U.S. mortgage rates rose for a sixth week, extending a surge in interest costs spurred by speculation that the Federal Reserve will scale back stimulus efforts.

The average rate for a 30-year fixed mortgage climbed to 3.98 percent, a 14-month high, from 3.91 percent last week, McLean, Virginia-based Freddie Mac (FMCC) said in a statement. The average 15-year rate increased to 3.1 percent from 3.03 percent.

Borrowing costs have jumped in past month, pushing buyers to lock in deals before rates climb even further. Home-loan applications increased for the first time in five weeks, the Mortgage Bankers Association said yesterday. The group’s refinancing index gained 5 percent in the period ended June 7, while the purchase gauge advanced 4.7 percent.

“Mortgage applications for home purchases have built a bottom and are grinding higher,” John Herrmann, director of U.S. rate strategy at Mitsubishi UFJ Securities USA Inc. in New York, said yesterday in a note to clients. “Sales to investors and all-cash deals have accounted for a significant portion of home sales over the past two years. Going forward, the true recovery in housing needs to be led by households purchasing homes on margin.”

At the current 30-year average, monthly payments for a $300,000 loan would be about $1,429, up from $1,322 in early May, when borrowing costs hovered near record lows.
Housing Expectations

Rising demand for a tight supply of listings is fueling price gains. U.S. home prices in April jumped 12.1 percent from a year earlier, the most since February 2006, according to CoreLogic Inc., an Irvine, California-based data provider.

While increasing rates may damp home sales temporarily, “we do not think it will derail the recovery,” Michelle Meyer, a senior U.S. economist at Bank of America Corp. in New York, wrote yesterday in a note to clients. “A powerful counter to rising rates is the improvement in expectations about the housing market, as well as low inventory.”

Mortgage rates have been following a surge in 10-year Treasury yields, which touched an almost 14-month high on June 11 amid concern that the central bank may slow purchases of U.S. government debt as the economy improves.

The record rate for a 30-year loan is 3.31 percent, reached in November, according to Freddie Mac. The 15-year average fell to a record-low 2.56 percent last month.

SOURCE: Bloomberg

Housing Inventory Shortages Start to Ease

The percentage of homes for sale has risen 25 percent this year and housing inventories have started to outpace typical seasonal upticks, realtor.com® reports.

Rising home prices likely are encouraging more home sellers to test out the market. The inventory crunch may be showing signs of easing with listings rising 5.8 percent in May. Still, the number of homes for sale is low by historical standards. Listings in May are still 10 percent below year-ago levels.

The places where the number of homes for sale rose the most were Atlanta (rising 3.4 percent in May), Miami (2.8 percent), and Tuscon, Ariz. (1.8 percent).

“Even with the increases, inventories in many markets remain tight, but any easing in the extreme shortages of the past year could ultimately cool the pace at which home prices have been rising,” The Wall Street Journal reports.

Meanwhile, median asking prices rose 4.8 percent nationally over year-ago levels, according to the report. Sacramento posted the highest increase in asking prices (rising 42.3 percent from April 2012) and Oakland (a 38 percent increase).

SOURCE: Realtor Daily News