Delinquency Rate Near 10-Year Low

Posted on August 16, 2017 by Laura Lam

corelogic delinquenciesThe mortgage delinquency rate reached its lowest point in nearly a decade in May due to tighter underwriting, according to CoreLogic. Also improving mortgage performance were employment growth and rising home prices.

About 4.5% of mortgages were in some stage of delinquency in May, a decline of 0.8 percentage point from the previous year when the overall delinquency rate was 5.3%. The serious delinquency rate in May remained unchanged from April at 2%, and was at its lowest since November 2007 when it was also 2%.

Frank Martell, CoreLogic president and CEO, credits underwriting practices for the delinquency rate improvements.  “A prolonged period of relatively tight underwriting criteria has driven delinquencies down to pre-crisis levels across many parts of the country,” he said.  “As pressure to relax underwriting standards increases, the industry needs to proceed carefully and take progressive, sensible actions that protect hard-fought improvements in mortgage performance.”

Early-stage delinquencies, defined as 30-59 days past due, declined from 2% in May 2016 to 1.9% in May of this year. The share of mortgages that transitioned from current to 30 days past due also declined 0.1 percentage point from May 2016.

“Strong employment growth and home price increases have contributed to improved mortgage performance,” said Frank Nothaft, chief economist for CoreLogic.  “Early-stage delinquencies are hovering around 17-year lows, and the current-to-30-day past-due transition rate remained low at 0.8%.

“However, the same positive economic conditions helping performance have also contributed to a lack of affordable supply, creating challenges for homebuyers,” Nothaft added.  In May, national home prices rose 6.6% from the previous year, driving down home buyer affordability rates.

Source: National Mortgage News/Mortgage Professional America

Homeowners and Appraisers Still Don’t Agree

Posted on August 15, 2017 by Laura Lam

Quicken Home Value 7-17Across the U.S., homeowners continue to overvalue their home in comparison to appraisers, but the gap is narrowing. Homeowners overestimated property value by 1.55% in July.  Home values are also continuing their upward trend, rising 0.33% last month and 4.21% since last July.

Appraisals were below homeowner expectations by 1.55%. Still, this is an improvement over the 1.70% difference in June. Real estate values are heavily influenced by local trends and in many of the hottest markets, appraisals actually came in above homeowner expectations, but in other major areas, they were quite a bit lower.

“The home appraisal is one of the most important data points in the mortgage process. It determines the level of equity the homeowner has and, if the owner’s estimate is too far from how the appraiser views the property, it can cause the mortgage to be restructured,” said Bill Banfield, Quicken Loans Executive Vice President of Capital Markets.

On a regional basis, homeowners in the West were closest to actual property value, with their estimates coming in 1.30% higher than appraisal values. The South followed with a difference of 1.53%. The Midwest and Northeast brought up the rear at 1.68% and 1.73%, respectively.

Breaking down the metro data, Dallas has supplanted Denver as the nation’s hottest housing market with appraisal values coming in 2.83% higher than homeowner expectations. Philadelphia and Baltimore are tied at the low-end, with their estimates coming in 3.04% higher than appraisers.

Home values are up 1.60% for July in the Northeast. The region is still playing catch-up, though, with only 2.65% annual growth. The South was next, up 0.67% and 4.34% on the year. It was followed by the West, which has 5.64% annual price appreciation and was up 0.28% for the month. Finally, homeowners in the Midwest saw their property values rise 0.23% and 3.63% on the year.

Source:  Quicken Loans/National Mortgage News

CMBS Delinquency Down in July

Posted on August 14, 2017 by Laura Lam

Image result for CMBS delinquency rate julyThough the Trepp CMBS Delinquency Rate climbed steeply in June, it retreated just as quickly in July. The delinquency rate for US commercial real estate loans in CMBS is now 5.49%, a decrease of 26 basis points from the June level.

The rate is now only 2 basis points higher than where it stood at the end of May. Delinquency readings for four of the five major property types fell in July, with the lodging sector being the only one to increase, according to Trepp.

According to the report, “After hitting a post-crisis low in February 2016, the reading has consistently climbed since early 2016 as loans from 2006 and 2007 have reached their maturity dates and have not been paid off via refinancing. The rate has moved up in 13 of the last 17 months.”

Delinquency readings for 4 of the 5 major property types fell in July, with the lodging sector being the only one to increase.  The July rate is now 73 basis points higher than the year- ago level, and 26 basis points higher year-to-date. The reading hit a multi-year low of 4.15% in February 2016. The all-time high was 10.34% in July 2012.

About $1.4 billion in loans became newly delinquent in July. Almost $1.2 billion in loans were cured last month, and about $1.7 billion in CMBS loans that were previously delinquent were resolved with a loss or at par.”

Source:  Trepp/Boston Real Estate Times

Consumers Speed up Card Replacement Cycle

Posted on August 11, 2017 by Laura Lam

Despite the heightened security that comes with EMV chips and tokenization, consumers remain worried about their personal data being exposed in a seemingly nonstop parade of breaches. This leads to many cardholders requesting a new card as a precaution, even if they have no evidence that they were directly affected by a particular breach.

“It’s less about their cards being compromised than seeing news about a major breach at a place where they shop,” said Rob Dixon, product director at CPI Card Group.  “The customer wakes up and sees a report about a breach, and wants to have his or her card replaced quickly whether they are a victim or not.”  Dixon did not say how many cards get replaced across the market because of this fear, but given the rising number of breaches and the attention these breaches receive, it’s likely this anxiety will be around for some time.

This trend may also drive the use of virtual cards, which can be reissued faster because they can arrive in an app.  “Mobile wallets have struggled to take off over the last 10 years, but as they gain traction, consumers will want to get cards and they won’t want to go through the process of waiting for cards in the mail,” Dixon said.

CPI Card Group will expand and market technology over the next year that allows instant issuance of virtual cards, selling issuers on the benefit of making card accounts available for mobile app use within a few minutes.  Virtual instant issuing is becoming more common as card makers adjust to a future that has a heavy emphasis on mobile, said Tiffani Montez, a senior analyst at Aite Group.. “They’re going to want to make sure they are creating a product that supports where the consumers are going to be,” she added.

There will still be a demand for traditional instant issuance of plastic cards. In general, the number of financial institutions that offer instant issuance is increasing, Montez said. She added that about 23% of institutions in the U.S. offered the service at the end of 2016, a number that’s expected to reach 55% by 2021.

Source:  Payments Source/American Banker

Consumer Borrowing Slows in June

Posted on August 10, 2017 by Laura Lam

Image result for federal reserve consumer credit June 2017Consumer borrowing slowed a bit in June from the torrid growth in the prior month, but continued at a solid pace, according to government data released Monday.  Total consumer credit increased $12.4 billion in June to a record seasonally adjusted $3.86 trillion, posting an annual growth rate of 3.9%, according to the Federal Reserve.  This is down from a revised $18.3 billion gain in May, which was the strongest rate in six months.

Consumer borrowing slowed a bit in the second quarter as a whole, continuing a trend in place since last fall. Credit rose at a 4.5% annual rate during the second quarter, down slightly from a 5% pace in the first quarter.  The June increase in consumer borrowing was below economists’ estimates for a $16 billion gain, according to Econoday.

The historical main source of credit growth, nonrevolving credit, which covers loans for education and cars, rose at an annual rate of 4.9% in June, down from 8.2% in May.  Student lending has been on a downward trend.  Revolving credit, which is mostly made up of credit-card loans, increased at an annual rate of 3.9% in June, down from 5.7% in May.

Economists are watching consumer credit closely as they expect spending to drive growth in the remainder of 2017.

Source:  MarketWatch

Homeownership Up From 50-Year Low

Posted on August 09, 2017 by Laura Lam

Image result for Homeownership Rate census bureauThe U.S. homeownership rate climbed in the second quarter, a signal that the sharp downward spiral that began after the housing crash is finally reversing.  The homeownership rate hit 63.7% in the second quarter, the Census Bureau said, a jump of nearly a full percentage point from a year ago, when it touched a 50-year low of 62.9%. The share of Americans who own homes has climbed steadily since then.  The homeownership rate also edged up from the first quarter, when it sat at 63.6%.

“The damage the [2007-09] great recession has done to the homeownership rate is likely reversing course,” said Ralph McLaughlin, chief economist at home tracker Trulia.

The quarterly reports can be volatile, but several factors point to sustained improvement. The number of new-owner households exceeded new renter ones for the second consecutive quarter. Some 1.26 million new-owner households have been formed since the second quarter of 2016, while there are 702,000 fewer renter households than there were a year ago, according to the Census.  There are now more homeowners in the U.S. than any time since 2009, according to Zillow.

That doesn’t bode well for apartment landlords, who are battling a flood of new supply that is pushing vacancy rates up and keeping rent growth tepid in many parts of the country.  The national vacancy rate climbed to 4.4% for the quarter from 4.2% a year earlier, according to data provider Reis Inc.

Nonetheless, the trend is good news for the housing market and the U.S. economy overall, given the boost that new-home construction provides. Builders are likely to continue ramping up production of starter homes in response to increasing demand from millennials.  The homeownership rate for households headed by someone under 35 years old climbed to 35.3% in the second quarter, up from 34.1% a year earlier.

Source:  Wall Street Journal

Small-Business Optimism Highest in 10 Years

Posted on August 08, 2017 by Laura Lam

08032017WFSBIgraph1Small business owners are more optimistic than they have been in a decade, according to a new Wells Fargo and Gallup small business survey.  The survey resulted in a Small Business Index score jump to 106, an 11-point increase from April, which was driven by stronger financial situations, healthy revenues, easier access to credit and an increase in hiring.  The last index score is the highest since April 2007 when it was 113.

“Our latest survey tells us that small business owners continue to feel confident about their current situation and are optimistic about the future,” said Mark Vitner, managing director and senior economist at Wells Fargo. “As the economy strengthens, small business owners are reporting improvements in their day-to-day operations, particularly their sales. With their finances in better shape and fewer business owners expressing concern about the regulatory environment, more businesses are planning to boost capital spending and hiring. It’s reassuring to see these improvements, and to see that optimism has returned to its highest level since early-2007.”

But challenges remain.  The business owners surveyed said retention of quality hires, struggles with finding new customers, taxes and regulations, and the overall economy were areas that remain a challenge.

In addition, seasonal changes to businesses remain predictable — a part of the challenge of attracting new customers.  To offset the decreased activity in off-season times, companies are reducing capital expenditure or hours for employees, according to the survey.

Source:  Gallup/Wells Fargo/NJ Biz

Consumers Grow Pessimistic About Future

Posted on August 07, 2017 by Laura Lam

consumer sentiment 7-17Consumers grew slightly less optimistic in their future this July, however confidence levels remain historically high, according to the Survey of Consumers conducted by the University of Michigan.  Consumer confidence remained largely unchanged for the month, the survey of consumers  revealed.  But this means Americans appear the most optimistic about the current economic situation in U.S. than they have in 12 years.

July consumer sentiment ended up at 93.4, the group said. Meantime, economists expected the July measure of consumer attitudes to fall slightly more, to 93.1, according to a survey from Thomson Reuters.  U.S. consumer sentiment last fell to 95.1 in June, sinking 2.1% from May.

“The relatively small decline still left the Sentiment Index higher in the first seven months of 2017 than in any other year since 2004,” the group’s chief economist, Richard Curtin, said in a statement. “The size of the decline was tempered by record favorable views of Current Economic Conditions, which rose to its highest level since July of 2005.”

“At the same time, consumers expressed less optimism about future prospects for the overall economy and for their own personal finances,” Curtin added.  Many consumers feel nervous about the future: Financial expectations fell from 90.3 in January to 80.5 in July, and Curtin adds that if that number continues to decline by another 10 points in the second half of 2017, “the loss would become more worrisome.”

Source:  CNBC/Housing Wire

Most Americans Die With Debt

Posted on August 04, 2017 by Laura Lam

die with debtYou’re probably going to die with some debt to your name. In fact, 73% of consumers had outstanding debt when they were reported as dead, according to December 2016 data provided to by credit bureau Experian. Those consumers carried an average total balance of $61,554, including mortgage debt. Without home loans, the average balance was $12,875.

The data is based on Experian’s FileOne database, which includes 220 million consumers. Among the 73% of consumers who had debt when they died, about 68% had credit card balances. The next most common kind of debt was mortgage debt (37%), followed by auto loans (25%), personal loans (12%) and student loans (6%).  These were the average unpaid balances: credit cards, $4,531; auto loans, $17,111; personal loans, $14,793; and student loans, $25,391.

That’s a lot of debt, and it doesn’t just disappear when someone dies.  For the most part, your debt dies with you, but that doesn’t mean it won’t affect the people you leave behind.  According to Darra L. Rayndon, an estate planning attorney, “Debt belongs to the deceased person or that person’s estate.”  If someone has enough assets to cover their debts, the creditors get paid, and beneficiaries receive whatever remains. But if there aren’t enough assets to satisfy debts, creditors often lose out.  Family members do not then become responsible for the debt, as some people worry they might.

However, things are not always that straightforward. The type of debt you have, where you live and the value of your estate significantly affects the complexity of the situation.  For example, federal student loan debt is eligible for cancellation upon a borrower’s death, but private student loan companies tend not to offer the same benefit. They can go after the borrower’s estate for payment.  If family members live in a home that is being used as an asset, they may have to take over the mortgage or sell the home in order to pay creditors. Accounts with co-signers or co-applicants can also result in the debt falling on someone else’s shoulders. Community property states, where spouses share ownership of property, also handle debts acquired during a marriage a little differently.

Poor planning can leave loved ones with some significant stress.  To protect them, it’s important to properly prepare.   Consider getting life insurance and meeting with an estate planning attorney to make sure everything’s covered in the event of your death.  If you don’t have a will or designate beneficiaries for your assets, the law in your state of residence decides who gets what.


Senior Home Equity Hits All-Time High

Posted on August 03, 2017 by Laura Lam

senior home equitySenior homeowners saw an increase in their home equity in the first quarter of 2017, according to a report from the National Reverse Mortgage Lenders Association (NRMLA).  The report showed homeowners aged 62 and older saw their home equity increase by 3.1% to $6.3 trillion in the first quarter. This is up from $6.13 trillion from the fourth quarter.

This growth in housing wealth for seniors was driven by an estimated 2.6%, or $199.3 billion, increase in senior home values, and was offset by a 0.6% increase in senior-held mortgage debt which totaled $9.2 billion.

The NRMLA/RiskSpan Reverse Mortgage Market Index, a quarterly measure of home equity held by older homeowners, increased to 227.07 in the first quarter, an all-time high since the index was first published in 2000.

“Older adults who want to stay in their own homes as they age, and we know a majority do, may find that the house that was perfect for raising a family lacks the features to support aging in place,” said NRMLA President and CEO Peter Bell.  “But, instead of moving out, various modifications, such as stairless entryways and wider bathroom door frames, can be made to accommodate new mobility and accessibility needs,” Bell said. “The housing wealth our seniors have built up in their homes over the years, their home equity, can be used to update the family house into a space for living comfortably and independently for years to come.”

Source:  NRMLA/Housing Wire