FHA Loan Delinquency Rate Flattens

Posted on November 09, 2017 by Laura Lam

FHA Loan delinquenciesClosed-end loans continue to return to normal levels as overall consumer delinquencies remained steady and serious delinquency rates remained near the 10-year low.  However Federal Housing Administration loans delinquency rates seem to be slowing down.  FHA loans, popular among first-time home buyers with affordability constraints, have made steady improvements this year but may be reaching a plateau.

Loans 90-days delinquent, in foreclosure or involved in bankruptcies remained stable at 4.31% in August. The seasonally adjusted estimate was 5.2% a year ago.  Even though delinquencies have been improving, FHA loans continue to make up a large percentage of the distressed loans in the larger market, according to Altisource Portfolio Solutions.

FHA product makes up about 17% of new originations but one-third of the distressed loans in the market, Altisource’s analysis of FHA and Black Knight data shows.

While the FHA share of distressed loans is up, compared to the crisis the amount of distressed FHA product remains low, noted James Harp, director of real estate auction services at the company.  “I think the volumes have come down significantly,” he said. “It no longer makes sense for servicers to maintain large staffs.”  As a result, “a single vendor is becoming really appealing to servicers who previously wanted to diversify their vendor base,” Harp said.

More than 70% of mortgage servicing professionals surveyed predict that the volume of loans that the FHA and the Department of Veterans Affairs insure at their organizations will increase in the next 12 to 24 months, according to the Altisource study.

Source:  National Mortgage News

Storm Damage: Auto Lenders Brace for Losses

Posted on November 08, 2017 by Laura Lam

used car prices stormU.S. auto lenders are starting to tally the financial damage from late-summer hurricanes that destroyed an estimated 500,000 to one million vehicles.  So far, the impact on lenders has been relatively small, since many of them are offering forbearance to car owners who are struggling to rebuild their lives. Moreover, the biggest U.S. auto lenders have less than 10% market share, so hurricane-related losses will be spread widely across the sector, hitting credit unions and the financing arms of automakers in addition to banks.

Still, the industry’s eventual losses seem likely to run into the hundreds of millions of dollars across Texas, Florida and Puerto Rico. During the quarter, major auto lenders such as Ally Financial and Wells Fargo significantly boosted their loan-loss reserves in anticipation of higher default rates.

The costs to specific banks hinge largely on their geographic footprint. Wells Fargo has significant exposure in Puerto Rico, where damage estimates are emerging more slowly than they did in Texas and Florida. A Wells Fargo subsidiary, Reliable Auto, is the largest vehicle financing companies on the storm-ravaged island.  Wells said during its third-quarter earnings call that it built its reserves by $450 million to plan for hurricane-related losses.

Ally, which is one of the nation’s largest auto lenders, set aside $48 million during the third quarter because of the hurricanes.  “We would expect higher chargeoffs over the coming few quarters due to the localized impact of the hurricanes,” said Ally CEO Jeffrey Brown.  Ally also insures the vehicle inventories held by auto dealers. The company said that it absorbed an additional $19 million in losses in that business, but that some dealers did not file claims because they were able to move vehicles from potential flood areas to higher ground.

Because auto lending is so fragmented, the impact of credit losses on any single institution “should be relatively manageable,” stated Michael Taiano, an analyst at Fitch Ratings.  Analysts at Standard & Poor’s said they expect the hurricanes to have a bigger impact on subprime auto lenders than on firms that focus on more creditworthy borrowers. Borrowers with better credit scores tend to have more equity in their cars.

For the entire auto lending sector, there is a silver lining to the hurricanes. Used-car prices, which determine the value of lenders’ collateral, are expected to rise as hundreds of thousands of Americans who lost their cars shop for replacements.

Source:  American Banker

Are Some Cities Close to a Housing Bubble?

Posted on November 07, 2017 by Laura Lam

Urban Institute housing bubble 2According to a recent report released by the Urban Institute, with home prices on the rise, some cities are inching closer to a housing bubble.  The Urban Institute explained that in order to determine if the U.S. is in a housing bubble, knowing the reason for the price growth is critical.

In order to determine the reason for the price growth, Urban Institute utilized its housing affordability index.  Overall, housing in the U.S. remains very much in the affordable range. The median household can afford a house that is $70,000 more expensive than the median home price today. In 2006, the median household could only afford a mortgage that was $22,000 more expensive than the median home price.  First American Financial Corp.’s latest Real House Price Index found that real home prices are now 38.4% below their housing boom peak in July 2006.

First American Chief Economist Mark Fleming explains that as mortgage rates rise, affordability will continue to decline for those seeking to achieve the goal of homeownership.  “While affordability is lower than a year ago, it remains high by historic standards,” he said.  “Only three states and the District of Columbia are less affordable today than they were in January 2000.”

Urban Institutehousing bubbleThe areas that could possible cause concern include Hawaii, which is up 8.1% from January 2000, California which increased 5.7%, and Alaska, where home prices are up 4.6%. The District of Columbia is up 3.6% from that same time period.

The Urban Institute saw similar results when it measured the top 37 largest metropolitan statistical areas to find which, if any, could be areas of concern for a real estate bubble using data from CoreLogic, the U.S. Census Bureau, the U.S. Bureau of Labor Statistics and Freddie Mac. Urban Institute’s researchers looked at the area’s real increase in home prices since their lowest point and the institute’s affordability measure.

The company added the rankings together and re-ranked the MSAs most likely to be in a bubble, calling it the “bubble watch” rank. The top 10 MSAs are ranked high on both home price growth and lack of affordability measures. But further down the list, the rank could be driven by one measure or the other.

Six metros stood out above the rest: the San Francisco area and the San Jose area tied for the top ranking in the institute’s bubble watch. The Miami area and Oakland, California areas tied for third place, and the Portland and Seattle areas tied for fifth place.

Source:  Urban Institute/Housing Wire

CMBS Delinquency Rates, Loan Prices Trend Lower

Posted on November 06, 2017 by Laura Lam

trepp cmbs October 2Trepp, LLC, a leading provider of information, analytics, and technology to the structured finance, commercial real estate, and banking markets, released its October 2017 U.S. CMBS Delinquency Report last week.

The Trepp CMBS Delinquency Rate fell again in September, as more previously delinquent loans continue to be resolved. The delinquency rate for U.S. commercial real estate loans in CMBS is now 5.21%, a drop of 19 basis points from September. For the first time in 2017, the year-to-date level is lower than the final 2016 delinquency reading.

“For the past few months, we’ve been saying that further declines in the Delinquency Rate could be expected,” said Manus Clancy, Senior Managing Director at Trepp. “That certainly rang true in October, as more loans find refinancing or resolution ahead of their balloon dates. With the wave of maturities almost at its end, decreases in the overall reading should continue for the next few months.”

Delinquency readings for all 5 major property types fell in October, and no sector’s rate fell more than that of the hotel segment. The lodging delinquency rate dropped 42 basis points to 3.42% last month. The month’s second-largest decrease belonged to the industrial sector, as its delinquency reading shed 31 basis points to 6.24%. The office delinquency rate slid 18 basis points to 6.92% in October.

Only $660 million in CMBS loans became newly delinquent last month, the lowest monthly total in more than 3 years. Thanks to a nearly identical volume of loans which were cured in October, the upward pressure from those new delinquencies was nullified. Additionally, roughly $750 million in previously delinquent debt was resolved last month.

Source:  Trepp

Daylight Saving Time: Facts and Figures

Posted on November 03, 2017 by Laura Lam

daylight savingSunday, November 5, 2017, marks the end of Daylight Saving Time – a twice-a-year occurrence that we collectively partake in, changing our clocks forward an hour in the spring and back an hour in the fall. But why do we do this? What purpose does it serve? Is it really for the farmers?  You might be surprised how many misconceptions there are surrounding this longstanding practice.

Who came up with changing the clocks?  The idea to change the clocks to save daylight was first proposed by English architect William Willett in 1907 when he published The Waste of Daylight. It is believed that Willett’s idea arose from an epiphany he had that “the sun shines upon the land for several hours each day while we are asleep, and is rapidly nearing the horizon, having already passed its western limit, when we reach home after the workday is over.”  He proposed the idea to Parliament in 1908, but it was ultimately disregarded.

Who first proposed the idea of saving daylight?  Benjamin Franklin proposed the notion of making better use of the day’s light while visiting in Paris in 1784. Believing sunlight was being squandered during the day, he wrote a letter to the editors of the Journal of Paris calling for a tax on every Parisian whose windows were shuttered after sunrise to “encourage the economy of using sunshine instead of candles,” according to Michael Downing, author of Spring Forward: The Annual Madness of Daylight Saving Time.

How did World War I play a role?  After hearing about the idea proposed in England, Germany became the first country to implement changing the clocks to save daylight in 1916 during World War I, believing it would save fuel while battling the Allied Powers.

When was it first implemented in the U.S.?  Roughly 2 years later, after entering World War I, the U.S. enacted Daylight Saving Time into law also as a way to save fuel.

But does it actually save energy?  In 2005, Congress passed the Energy Policy Act, which extended DST by a month, as a way to save energy. However, a study conducted by the U.S. Department of Energy 3 years later found that the extended daylight throughout 2005 saved only about .5% in electricity use per day and only about .3% over the year.  Also, a 2008 study by The University of California at Santa Barbara found that DST could potentially pose more energy consumption.  The report cited that Indiana spent $9 million more on energy after adopting DST, suggesting a rise in air-conditioning use in the evening.

Weren’t we told it has to do with farmers?  Yes – except that’s a myth. In fact, farmers were some of the most outspoken opponents of the law in the U.S., believing that it would disrupt their farming practices, according to The Washington Post.

Are there any negative health effects with DST in the fall?  Yes, there is research supporting that DST – and the shift in sleep patterns associated with it – was associated with an increase in depressive episodes and suicides during the first few weeks of changing the clocks back an hour in the fall.

Does every state participate in DST today?  No. Two states – Hawaii and Arizona – do not observe DST.

Source:  NJ.com

1.4 Million Residential Properties Vacant in 3Q

Posted on November 02, 2017 by Laura Lam

vacant distressedNearly 1.4 residential properties were vacant at the end of the third quarter, according to ATTOM Data Solutions’ 2017 U.S. Residential Vacant Property and Zombie Foreclosure Report.  The vacant properties represent 1.58% of all residential properties, which is a 1.63% decrease in vacant properties from one year ago, the report found. However, the report also found that rate of vacant properties increased in more than half of the metropolitan area analyzed, including Chicago, New York, St. Louis, Baltimore and Phoenix.

ATTOM also found that that the number of vacant “zombie” pre-foreclosure properties – which have started the foreclosure process but have not yet been repossessed by the lender – decreased 22% from a year ago to 14,312.  “Zombie foreclosures have dwindled dramatically over the last four years as a supply-starved housing has soaked up even some of the most highly distressed properties,” said ATTOM Data Solutions Senior Vice President Daren Blomquist.

“There is evidence that the ultra-tight inventory environment in some red-hot markets is beginning to ease just a bit, with vacant property rates nudging higher in markets such as San Jose, San Francisco, Los Angeles, Boston and Denver,” Blomquist added.

The report identified the states with the highest vacancy rates as Mississippi (3%); Michigan (2.94%); Indiana (2.77%); Oklahoma (2.73%); and Alabama (2.56%).  The metropolitan areas with the highest vacancy rates were Flint, Mich. (6.89%); Youngstown, Ohio (4.49%); Beaumont-Port Arthur, Texas (3.80%); Detroit (3.77%); and Mobile, Ala. (3.77%).

According to the report, the states with the lowest vacancy rates were South Dakota (0.25%); Vermont (0.39%); New Hampshire (0.42%); North Dakota (0.69%); and Colorado (0.69%).  The metropolitan areas with the lowest vacancy rates were San Jose, Calif. (0.23%); Fort Collins, Colo. (0.24%); Lancaster, Pa. (0.26%); Manchester, N.H. (0.31%); and Provo, Utah (0.34%).

The report said the states with the most vacant “zombie” foreclosures were New York (3,528); New Jersey (2,261); Florida (1,963); Illinois (999); and Ohio (974).  Cities with the most vacant “zombie” foreclosures were New York/Newark, N.J. (3,106); Philadelphia (813), Chicago (665), Miami (571), and Tampa-St. Petersburg, Fla (477).

Source:  ATTOM Data Solutions, The Title Report

Credit Card Delinquencies Are Rising

Posted on November 01, 2017 by Laura Lam

While it’s easy to ignore when the stock market is at record highs and unemployment is reassuringly low, household debt is on the rise.  The Center for Microeconomic Data’s (CMD) latest Quarterly Report on Household Debt and Credit reveals that total household debt rose by $114 billion (0.9%) to $12.84 trillion in the second quarter of 2017.  This increase put overall household debt $164 billion above its peak in the third quarter of 2008, and 15.1% above its trough in the second quarter of 2013

Consumer debt, in many ways, should generate more concern – during the good times.  The persistence of burdensome debt after a recovery underscores systemic problems. Jobs still fly to other countries amid the rosy numbers. College still gets more expensive and student debt accelerates. In some ways, prosperity can even guarantee a worsening debt crisis when, for example, neighborhoods gentrify and resident populations of homeowners and small businesses cannot keep up.

CMD delinquentSuch dynamics may help explain the recent data from the CMD.  While the 0.9% increase in total household debt may seem modest, serious credit card delinquencies rose for the third straight quarter, a trend that has not been seen since 2009 – which was right after an economic collapse.

The CMD findings are in synch with a Harris poll conducted in April for the National Foundation for Credit Counseling (NFCC). The NFCC 2017 Consumer Financial Literacy Survey found significantly more consumers carrying credit card debt from month to month, while nearly 20% of these respondents are rolling over $2,500 or more. At the same time, in a complete reversal of a trend that began with the 2009 recovery, U.S. consumers are spending less than the previous years.  In addition to the toll this takes on consumers, it’s concerning on an economic perspective – as no one benefits when people owe more without spending more.

Source: Forbes, Federal Reserve Bank of New York

Halloween Scares Up Record Sales

Posted on October 31, 2017 by Laura Lam

halloween spending 2017This may not be good news for your waistline, but your sweet tooth might appreciate it: Halloween candy sales are crackerjack this year.  Halloween candy sales are expected to rise 4.1% from last year, reaching a seasonally adjusted $4.1 billion, according to HIS Markit data.  “Consumer confidence is riding high, so consumers are likely to splurge a little more on edible goodies,” said David Deull, a senior economist with IHS Markit.

The sales increase is particularly impressive given that candy prices have dropped 0.9% compared with last year, marking the second consecutive Halloween candy price decline, according to IHS Markit data.  This is due to improvements in global cocoa production in recent years which created downward pressure on cocoa bean prices.

Does this mean more candy in your shopping cart?  The National Retail Federation (NRF) estimates more than 179 million Americans will be participating in some type of Halloween festivities, up from 171 million last year.  By the trade group’s calculations, this year’s total Halloween spending – for costumes, cards, decorations, candy and more – will end up hitting a record $9.1 billion, up from $8.4 billion in 2016.

The upbeat readings on Halloween sales fit with what most economists are saying about consumers’ mood, which has been improving along with gains in hiring, stable retail prices, rising home prices and growing retirement savings accounts.  The latest reading of consumer sentiment shows a surge for October, according to the University of Michigan Surveys of Consumers.

Economists generally say the positive outlook for Halloween bodes well for this year’s holiday shopping season, which is a bit longer than most years. In 2017, Christmas falls 32 days after Thanksgiving – one day more than in 2016. And this matters: Christmas falls on a Monday instead of Sunday, giving consumers an extra weekend day to do some last minute shopping.

“Although this year hasn’t been perfect, especially with the recent devastating hurricanes, we believe that a longer shopping season and strong consumer confidence will deliver retailers a strong holiday season,” NRF President and CEO Matthew Shay said.  The group estimates holiday sales will be up between 3.6% and 4%, for a total of between $678.8 billion and $682 billion.

Source:  NRF, NPR, HIS Markit

Best and Worst States for Consumer Credit Scores

Posted on October 30, 2017 by Laura Lam

state credit scoresConsumer credit varies nationally due to regional variations in income and the cost of living.  According to a new study from LendEDU and Experian, the Northeast had the highest average credit score (694). The Midwest (693), Pacific (691), and Rocky Mountain (690) regions followed closely behind. The Southeast (668) and Southwest (662) regions had the lowest credit scores on average.  The best average state scores are roughly 7% higher than the national average, while the worst states are about 7% lower.

Vantage Scores were used for the rankings. Scores of 700 and above are considered good, and below 650 is considered a poor score, according to Experian.

Credit scores take into account whether scoreholders paid bills late or not at all, as well as how much credit they have access to and how much of it they are using. Credit scores are used to determine whether people can qualify for some types of loans and borrowing, like mortgages, car loans, credit cards and personal loans. The interest rate paid on a loan can also be impacted by someone’s credit score.

Experian and two other credit reporting companies, TransUnion and Equifax, created VantageScore in 2006 through a joint venture that manages the business as an independent company. While FICO and Vantage credit scores use the same 300 to 850 range, the values are not identical because of differences in their proprietary scoring models.

The national average credit score was 682. A total of 29 states had an above average credit score.  Here’s how the 5 best and worst state VantageScores stack up.

  1. Minnesota – 722
  2. North Dakota – 713
  3. Vermont – 713
  4. New Hampshire – 712
  5. South Dakota – 711
  1. Alabama – 657
  2. Nevada – 657
  3. Georgia – 656
  4. Louisiana – 654
  5. Mississippi – 648
Source:  Newsmax/National Mortgage News

Best States for Halloween Candy

Posted on October 27, 2017 by Laura Lam

A recent analysis of Halloween candy purchases found that Oregon tops the list of best states to go trick-or-treating in based on how much money residents spend on candy, with 3 Musketeers as the favorite there.  Trailing in second place is neighboring Washington – choosing 100 Grand bars as the top treat – but Oregonians spend on average $11.64 more per person on Halloween sweets.

The top states and amounts spent per person on candy:

  1. Oregon ($40.29)
  2. Washington ($28.65)
  3. New Jersey ($24.36)
  4. Utah ($23.73)
  5. California ($19.72)
  6. New York ($19.08)
  7. Pennsylvania ($18.78)
  8. Illinois ($18.19)
  9. Virginia ($17.76)
  10. Wisconsin ($16.74).

What state ranks dead last? Ohio, where residents spend only $11.22 per person on average.

To gather the data, shopping app Ibotta looked at candy purchases the week before Halloween across the USA in 2015 and 2016. During that time, Americans spent an average $16.45 per person on sweets in the days leading up to Halloween.

Slacking until the last minute on buying those sweets could cost you. Oct. 30 is the worst day to buy treats, costing you $2.75 per unit of candy.  The day-before price hike is likely because the candy aisles are slim pickings on Halloween eve, and shoppers are just grabbing what’s available rather than hunting for the best deal, Ibotta said.  The magic number of days before the big day to do your candy shopping: Four (Oct. 27), when shoppers only spent $1.94 per unit.

Local trick-or-treating should figure among the best in the country this Halloween, as New Jersey ranks No. 3 in the country, spending an average of $24.36 on candy.  While a recent CandyStore.com analysis found Jersey’s top candy to be Skittles, Ibotta found the state’s most frequently bought candy to be Snickers (both Skittles and Snickers are made by Mars, a company with a significant presence in New Jersey).

But we’d better be prepared for this onslaught of sugar. During the same time period, Ibotta found that New Jerseyans rank No. 13 in “oral care” purchases (items like toothpaste, floss and mouthwash).

Source:  USA Today/NJ.com