Texas Delinquencies Jump 16% After Harvey

Posted on September 26, 2017 by Laura Lam

harvey delinquentMortgage delinquencies in areas affected by Hurricane Harvey last month were 16% higher than in July, according to Black Knight Financial Services.  More than 6,700 new 30-day delinquencies stem from the hurricane and 1,000 borrowers already 30 days past due missed another payment, said Black Knight.

Despite the spike in Harvey-related delinquencies, nationally on loans not yet in foreclosure they were flat compared with July, rising only 0.72% to 3.93%, and compared with a year ago the rate is 7.27% lower than it was last August.

Texas is now among the 5 states that have seen the most deterioration in their non-current loan percentages over the last 6 months, although states like South Dakota, Nebraska and North Dakota have seen more deterioration than Texas.  Delinquencies related to a natural disaster historically peak in the first few months and late payments for September could be more pronounced as Harvey and other hurricanes affect loans. More than a quarter of properties in Harvey-affected areas could be delinquent within 4 months after the storm, Black Knight previously forecast.

More than 2 million loans had delinquencies of 30 or more days but were not in foreclosure last month. That total was up 17,000 from July and down 148,000 from August a year ago.  When foreclosures are added to the delinquent-loan total for August, it rises to almost 2.4 million.

Prepayments also were more frequent in August compared to July but slower than they were during the same month in 2016. The monthly prepayment rate was 1.13%, which was 11.47% faster than the previous month by 32.33%, but 32.23% slower than in August 2016.

Source:  National Mortgage News

New Jersey Ranks Worst in Nation for Finances

Posted on September 25, 2017 by Laura Lam

worst statesNew Jersey is nearly $209 billion in debt and has the worst finances of any state in the nation, according to a recent report.  Truth in Accounting, a think tank that analyzes government finances, ranked all 50 states based on their debt per taxpayer. The group’s latest report said New Jersey taxpayers carry $67,200 each in debt, a burden has almost doubled since 2013, when it was $36,000 per taxpayer.

New Jersey’s massive debt load largely stems from pension and retiree health care costs for state workers. The report said the state has $118.8 billion in unfunded pension benefits and $70 billion in unfunded retiree health care costs. The think tank accused New Jersey of using “accounting gimmicks” when calculating its finances, and said the state’s books are off by $57.6 billion when it comes to public debt.

“New Jersey is in a financial tailspin that could end in disaster for taxpayers or state employees counting on their retirement benefits,” said Sheila Weinberg, founder and CEO of Truth in Accounting. “The problem affects everyone in New Jersey, but there’s a surprising lack of public awareness of the issue.”

The three major Wall Street credit-rating agencies – Fitch Ratings, Moody’s and S&P Global Ratings – have cut New Jersey’s bond rating 11 times combined under Gov. Chris Christie in large part because of the ailing pension system. After years of neglect from previous governors and lawmakers, Christie tried to save the pensions from collapse with broad reforms in 2011, only to yank billions of dollars in contributions he had pledged three years later, in 2014, amid a budget crunch.

Weinberg said the state is “beyond the point of no return” and must reckon with its debt burden by instituting tax hikes or benefit cuts.  New Jersey was one of nine states to receive an “F” grade from the think tank and was dubbed a “sinkhole state” due to its debt burden. Alaska’s finances are in the best shape, with a taxpayer surplus of $38,200, according to the report.

Source:  The Observer/Truth in Accounting

Student Loan Debt Delays Homeownership by 7 Years

Posted on September 22, 2017 by Laura Lam

An overwhelming majority of Millennials with student debt do not own a home, and believe this debt is the cause for the delay.  These are the findings of the 2017 Student Loan Debt and Housing Report from the National Association of Realtors and nonprofit American Student Assistance.  The study revealed the typical delay is about 7 years.

But home buying isn’t the only factor affected by student debt. The study showed student debt is holding Millennials back from financial decisions and personal milestones such as saving for retirement, changing careers, continuing their education, marrying and having children.

“The tens of thousands of dollars many millennials needed to borrow to earn a college degree have come at a financial and emotional cost that’s influencing Millennials’ housing choices and other major life decisions,” NAR chief economist Lawrence Yun said.

“Sales to first-time buyers have been underwhelming for several years now, and this survey indicates student debt is a big part of the blame,” Yun said. “Even a large majority of older Millennials and those with higher incomes say they’re being forced to delay homeownership because they can’t save for a down payment and don’t feel financially secure enough to buy.”

In today’s market, only 20% of Millennial respondents own a home and the majority of them carry a student debt load that surpasses their income level at $41,200 versus an average annual income of $38,800.  Most of the survey’s respondents, 79%, indicated they borrowed money to pay for the education at a 4-year college and about 51% said they are repaying a balance of more than $40,000.

Among those Millennials who do not own a home, 83% indicated their student loan debt has affected their ability to buy. The median amount of time Millennials expect to be delayed at buying a home is 7 years, and 84% expect to postpone buying a home for a least 3 years.

And even among older Millennials who already own a home, student debt still continues to influence their decisions and prevent them from buying a trade-up home.  “Millennial homeowners who can’t afford to trade up because of their student debt end up staying put, which slows the turnover in the housing market and exacerbates the low supply levels and affordability pressures for those trying to buy their first home,” Yun added.

Source:  National Association of Realtors/Housing Wire

Irma Affected More than 90% of Florida Mortgages

Posted on September 21, 2017 by Laura Lam

hurricane comparisonMore than 90% of all mortgaged properties in Florida are in a FEMA-designated disaster area following Hurricane Irma, nearly three times the number impacted by Hurricane Harvey, according to Black Knight.  “While the total extent of the damage from Hurricane Irma is still being determined, it is clear that the size and scope of the disaster is immense,” said Ben Graboske, Black Knight data & analytics executive vice president.

Irma significantly outpaces even the number of borrowers impacted by Hurricane Harvey.  “More than 3.1 million properties are now included in FEMA-designated Irma disaster areas, representing approximately $517 billion in unpaid principal balances,” Graboske stated.  “In comparison, Harvey-related disaster areas held 1.18 million properties – more than twice as many as with Hurricane Katrina in 2005 – with a combined unpaid principal balance of $179 billion.”  There were 456,000 mortgaged properties in the Hurricane Katrina disaster area, with an unpaid principal balance of $46 billion.

Over 25% of the mortgage borrowers whose properties were in areas affected by Hurricane Harvey could miss at least one loan payment over the next 4 months, Black Knight previously said.  That analysis was based on the experience following Hurricane Katrina, where like Hurricane Harvey, the majority of the damage was flood related.  With Irma, most of the damage was wind-related.

One bright spot for mortgage lenders is that Irma did not directly pass over Puerto Rico and therefore did not cause the level of damage it did on other Caribbean islands.  “This was particularly good news, as delinquencies there were already quite high leading up to the storm. At more than 10%, Puerto Rico’s delinquency rate is nearly three times that of the U.S. average, as is its 5.8% serious delinquency rate,” said Graboske.  “In contrast, the disaster areas declared in Florida have starting delinquency rates below the national average, providing more than a glimmer of optimism as we move forward.”

Source:  National Mortgage News/Black Knight

Consumers Still Overly Optimistic of Home Values

Posted on September 20, 2017 by Laura Lam

Homeowners continue to overestimate their home values, however the gap continues to narrow, according to the latest National Home Price Perception Index (HPPI) from Quicken Loans.  The index, which compares homeowners estimates and the appraised home values, showed appraised home values came in 1.35% lower than homeowner estimates in August. This gap is smaller than July’s gap of 1.55%.  This closing gap is due, in part, by the increase in appraised values which ticked up 0.19% in August. This is up 2.64% from August of last year.

“As the sun sets on the summer, some of the intense competition for housing also winds down,” said Bill Banfield, Quicken Loans executive vice president of capital markets. “It’s important to focus on the annual numbers with the Home Value Index (HVI). While there can be some monthly variations in the data, especially as seasons start to change, the annual numbers show healthy growth across the country.”

The chart shows despite the narrowing gap over the past few months, homeowners have been overestimating their home values since the beginning of 2015.

Homeowner perception varied widely from one region to the next, as appraisal values ranged from 3% higher than homeowner estimates in the West to 3% lower in the Midwest and Northeast.  Homeowners in Dallas have the most undervalued property, with appraisals coming in 2.90% higher than homeowner estimates. Homeowners in Philadelphia overvalue their homes by 3.05% on the other end of the spectrum. Homeowners in Houston had value estimates that nearly matched appraisal values. They were just 0.05% high as many were affected by Hurricane Harvey.

“One of the biggest lessons from the HPPI, is highlighting how regionalized real estate is,” Banfield said. “Homeowners who have a better understanding of their local housing market can make more informed decisions about their home. After all, their house is not just where they live, but one of their bigger assets.”

Source:  Quicken Loans/Housing Wire

Hurricanes Weigh on Consumer Confidence

Posted on September 19, 2017 by Laura Lam

united-states-consumer-confidenceAmericans became less confident in the economy after Hurricane Harvey and Hurricane Irma swept across Florida and South Texas, according to the Survey of Consumers conducted by the University of Michigan.  The Index of Consumer Sentiment decreased to 95.3 in the first part of September. This is down 1.5% from 96.8 in August, but still up 4.5% from 91.2 in September last year.

“Consumer confidence edged downward in early September due to concerns over the outlook for the national economy,” said Survey of Consumers Chief Economist Richard Curtin.  “Consumers’ assessments of current economic conditions improved, however, with the Current Conditions Index reaching the highest level since November of 2000.”  For reference, the Michigan average since its inception is 85.4. During non-recessionary years the average is 87.6 while the average during the five recessions is 69.3.

Last month, Curtin explained Hurricane Harvey could impact consumer confidence in the months ahead. Now, it seems to play the greatest role in bringing down confidence among Americans.  “The two hurricanes had a greater impact on expected economic conditions,” he said.

“Across all interviews in early September, 9% spontaneously mentioned concerns that Harvey, Irma, or both, would have a negative impact on the overall economy,” Curtin stated.  “Given the widespread devastation in Texas and Florida, it is not surprising to find these very negative initial reactions, nor would it be surprising if these negative assessments last longer than following most past hurricanes.”

The Current Economic Conditions index increased 2.7% from last month’s 110.9 to 113.9 and 9.3% from 104.2 last year.  The Index of Consumer Expectations, however, created the drag on confidence with its decrease of 4.9% from last month’s 87.7 to 83.4 in September. However, this is still up 0.8% from 82.7 last year.

Source:  Housing Wire/MarketWatch/University of Michigan

Have Americans Lost Faith in the College Degree?

Posted on September 15, 2017 by Laura Lam

wsj collegeAmericans are losing faith in the value of a college degree, with majorities of young adults, men and rural residents saying college isn’t worth the cost, according to a new Wall Street Journal/NBC News survey.  The findings reflect an increase in public skepticism of higher education from just 4 years ago and highlight a growing divide in opinion falling along gender, educational, regional and partisan lines.

Overall, 49% of Americans believe earning a 4-year degree will lead to a good job and higher lifetime earnings, compared with 47% who don’t, according to the poll.  That 2-point margin narrowed from 13 points when the same question was asked 4 years earlier.  The shift was almost entirely due to growing skepticism among Americans without 4-year degrees – those who never enrolled in college, who took only some classes or who earned a 2-year degree. Four years ago, that group used to split almost evenly on the question of whether college was worth the cost. Now, skeptics outnumber believers by a double-digit margin.

Conversely, opinion among college graduates is almost identical to that of 4 years ago, with 63% saying college is worth the cost versus 31% who say it isn’t.

Big shifts occurred within several groups. While women by a large margin still have faith in a 4-year degree, opinion among men swung significantly. Four years ago, men by a 12-point margin saw college as worth the cost. Now, they say it is not worth it, by a 10-point margin.  Likewise, among Americans 18 to 34 years old, skeptics outnumber believers 57% to 39%, almost a mirror image from 4 years earlier.

Today, Democrats, urban residents and Americans who consider themselves middle- and upper-class generally believe college is worth it; Republicans, rural residents and people who identify themselves as poor or working-class Americans don’t.

Research shows that college graduates, on average, fare far better economically than those without a degree.  The unemployment rate is 2.7% among college graduates, compared with 5.1% among high school graduates who never attended college, and Labor Department research shows that bachelor’s degree recipients earn higher salaries than those who never went to college. But the wage premium of getting a degree has flattened in recent years, Federal Reserve research shows.

Student debt has surged to $1.3 trillion, and millions of Americans have fallen behind on student-loan payments.  According to Temple University economics professor Doug Webber, costs have gone up considerably to the point where students who won’t qualify for Ivy League or good state schools, can’t justify paying high-tuition at less-prestigious schools.

Source:  Wall Street Journal
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Equifax Fallout: What You Need To Know

Posted on September 14, 2017 by Laura Lam

equifaxFor many people, the news late that Equifax was hit with a data breach that may have compromised personal data of 143 million U.S. consumers brought on a heavy case of déjà vu.  From mid-May through July 2017, social Security numbers, birth dates, addresses and, in some instances, driver’s license numbers and credit card numbers were exposed in the breach.  It may have felt like one of the many previous data breaches including Yahoo, Target, and Home Depot.  However this breach looks to be a bit more severe than most of these others and it will have consequences in multiple areas. Here’s a rundown of what we can anticipate.

Identity theft. When credit card account data is compromised, card issuers are notified, card numbers get retired, and the cards are reissued.  But with a consumer’s Social Security number, date of birth, name, address, and in some cases driver’s license number, a fraudster can open a new credit account relatively easily.  Equifax said that it hasn’t seen any unusual activity among any of the 143 million victims.  However, according to Nick Clements, former member of Citigroup’s fraud department and owner of finance site MagnifyMoney, this stuff takes time.  “There’s a long shelf life here.”

New account opening. This breach heightens the risk of fraudulent account openings at a time when banks and fintech companiess are increasingly allowing consumers to open new accounts on mobile devices in faster time frames – often in less than 10 minutes.  This info is verified by credit reporting agencies.  “Banks and fintechs will need to closely evaluate their processes in light of the Equifax breach to make sure the information they are getting is still accurately verifying their online customers,” said financial attorney Scott Sargent.

Authentication. This incident may call into question the industry’s dependence on consumer data and personally identifiable information for authentication.  They can no longer rely strictly on this info as a means of verifying identity.  Banks will have to require the use of multifactor authentication, said Al Pascual, head of fraud and security at Javelin Strategy & Research.  In addition to user name and password, they will need a one-time passcode, biometric, etc. to grant people access to applications.

Lawsuits. Within 24 hours of the announcement, Equifax was slapped with a class-action lawsuit on behalf of the victims so that the company finally adopts adequate safeguards to protect against this type of cyberattack in the future.  According to attorney Craig Newman, “the legal implications could be significant … you not only have a class action lawsuit filed … but then you have the specter of regulatory investigations.”

New credit cards. Compared to other large-scale credit card data breaches, the 209,000 card numbers exposed in this breach are small potatoes. Still, it can cost $5 or more to issue each new credit card. It’s possible banks will sue Equifax to recoup these costs.  Target paid $19 million in reparations to banks affected by its 2013 breach, in which 40 million card records were compromised.

The unknown. “Some victims didn’t even provide information to Equifax and may not even know they’ve been affected by this breach,” Newman said. “It’s clear they’re going to face additional lawsuits and regulatory inquiries. The real question is whether a breach of this magnitude forces a change in behavior and whether organizations view significant breaches as teachable moments and learn from the very tough lessons they are being dealt.”‘

Source: American Banker

Hurricane Aftermath: Over 25% Could Miss Mortgage Payment

Posted on September 13, 2017 by Laura Lam

havey defaultOver one-quarter of all mortgages in the areas affected by Hurricane Harvey are likely to become delinquent within 4 months because of the storm, according to an analysis from Black Knight.  Approximately 300,000 mortgage borrowers will miss at least one payment on their loan because of the storm, with 160,000 not making 3 or more payments.  Black Knight modeled this estimate based on changes in the delinquency rate in Louisiana and Mississippi following Hurricane Katrina in 2005.

Mortgage delinquencies in affected areas in Louisiana and Mississippi peaked at 34%, with the rate of seriously delinquent loans peaking at 16%. But there were far fewer mortgage properties affected by Katrina than for Harvey, only 456,000 loans with an unpaid principal balance of $46 billion.

“Millions of American lives have already been impacted by the storm and immense flooding … for many, their struggles are just beginning,” said Ben Graboske, Black Knight Financial Executive Vice President.  “There are 1.18 million mortgaged properties in Harvey-related disaster areas, more than twice as many as were hit by Hurricane Katrina, with nearly four times the unpaid principal balance (of $179 billion),” he added.  “This will be a long-term recovery. If the Harvey-related disaster areas follow the same trajectory as those hit by Katrina, within four months we could be looking at as many as 160,000 borrowers falling 90 or more days past due on their mortgages.”

Fannie Mae, Freddie Mac and the Federal Housing Administration have all announced temporary moratoria on evictions and foreclosure sales in Harvey-related disaster areas. With these organizations accounting for nearly 900,000 of mortgaged properties, the moratoria should help temper the negative effects, stated Graboske. Forbearance plans will help as well, though interest on the mortgage will continue to accrue under any of these efforts.

Source:  Black Knight Financial Services/National Mortgage News

Purchase Lending Hits 10-Year High

Posted on September 12, 2017 by Laura Lam

black knight lending 2During the second quarter of 2017, purchase originations jumped significantly even as refinances shrank, according to Black Knight Financial Services’ latest Mortgage Monitor report.  First lien mortgages jumped 20% from the first quarter and 16% from last year to $467 billion in the second quarter.

During the second quarter, refis fell 20%, or $37 billion, from the second quarter to 31% of the market share of originations, the lowest level in 16 years.  However, the 57% quarterly surge in purchase originations more than made up for the fall in refis. This is an increase of 6% from last year to $321 billion, the highest level since 2007.

But while purchase lending is up significantly, Black Knight explained the lending market is still performing below its peak capacity.  “The market still does not appear to be performing at peak capacity,” said Ben Graboske, Black Knight Data and Analytics executive vice president. “One key cause is the more stringent purchase lending credit requirements enacted in response to the financial crisis. Consider that borrowers with credit scores of 720 or higher accounted for 74% of all Q2 2017 purchase loans as compared to a pre-crisis average of 47%.”

“Today, there are 65% fewer purchase loans being originated to borrowers with credit scores below 720 than in those years,” Graboske said. He explained the purchase market is operating at less than two-thirds of peak capacity because of these factors.

The average purchase loan origination amount increased to an all-time high of $286,000 in the second quarter of 2017.  “As a result of growing average loan amounts for purchase originations, the total dollar amount of purchase originations is higher than averages seen from 2000-2003, prior to both the peak in home prices and the Great Recession that followed,” Graboske said.

Source:  Black Knight Financial/Housing Wire