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Tuesday, January 25, 2022

Loans for Condos? New Rules Start to Have an Effect

 By Jeff Lazerson

Fannie’s tighter loan requirements post-Surfside collapse started Jan. 1; Freddie’s start Feb. 28. In the meantime, the list of no-loan condo projects will likely keep growing.

HERMOSA BEACH, Calif. – A nightmare scenario looms for condo buyers applying for certain types of federally backed mortgages. If you are selling or are looking to buy an attached condominium in a community with five or more attached units, conventional financing from mortgage giants Fannie Mae and Freddie Mac may soon become elusive.

Beginning Jan. 1 for Fannie and starting Feb. 28 for Freddie, the mortgage giants are putting the screws to a required HOA questionnaire. New questions ask applicants about the structural integrity of the community and whether any code violations are anticipated.

No doubt, Fannie and Freddie’s updated lender mandates are in response to the Florida condo tower that killed 98 people last June 24. Years of deferred maintenance at the Champlain Towers in Surfside caused the 12-story building to collapse.

Answering the agencies thoroughly and completely could force lenders to decline a mortgage application. (Remember: Mortgage lenders fund a loan, and then may sell it to Fannie or Freddie).

“Yes, lenders are declining projects even for a simple special assessment for repairs now. Things are just trickling in right now because the guidance started Jan. 1,” said one condo project approval expert, who asked to remain unnamed because he’s not the media spokesman for his company. “Soon enough we’ll see the effects hit all the condo market. I’ve only seen it affect projects with major issues at this point; meaning (the project) has code violations and millions of dollars of repairs underway.”

Answering these questions honestly or possibly with a guess could bring liability in the form of future lawsuits against HOA stakeholders, such as the property management company, board members, inspectors, engineers and the association.

If the questionnaire isn’t completely answered because the answers are unknown or undetermined, it might mean the purchase or refinance gets torpedoed.

Here is a sprinkling of questions included in Fannie Mae’s Form 1076 condominium project questionnaire (posted December 2021 and updated to eight from five pages):

Question: Is the HOA aware of any deficiencies related to the safety, soundness, structural integrity or habitability of the project’s building(s)?

My take: If management didn’t know about any deficiencies, for example, and answered as such, should they have reasonably known these calamities could come up later?

Question: Is it anticipated the project will, in the future, have such violations (zoning ordinances, codes, etc., which are related to safety, soundness, structural integrity or habitability)?

My take: For the love of peace, how could one possibly determine if yet-to-be-written, jurisdictional codes trigger new violations in the condo complex?

These dubious questions could be akin to a winning lottery ticket for any attorney who lives in the world of HOA litigation.

Why is this so problematic? The nation has a huge community of really old condos and many of them are backed by Fannie Mae and Freddie Mac mortgages. The U.S. has as many as 156,000 condo associations and cooperatives housing between 27 million and 32 million Americans, according to the Community Associations Institute (CAI).

“Seventy percent of all condo loans in the U.S. are Fannie or Freddie (backed),” said Dawn Bauman, senior vice president of government affairs at CAI. “Sixty to 70% of all condo complexes are more than 30 years old.”

Fannie Mae has a published list of 82 “unavailable” California condo-projects, including the Marina City Club in Marina Del Rey, which has $80 million to $140 million in needed repairs according to a report last year. That a 10-acre complex is one of nearly 1,000 “unavailable” condo projects nationwide. To Fannie Mae, unavailable means a property is ineligible for purchase by the agency.

One mortgage executive told me Fannie is making the rounds, emphasizing these new condo questions during lender visits. So don’t be surprised if that unavailable list explodes as Fannie collects more intel.

To be fair, Fannie and Freddie need to dig more deeply to assess and consider condo structural risk before purchasing those mortgages from lenders. The mortgage giants also may disqualify a condo community for other reasons, such as a lack of budget reserves.

If your loan is denied over the Fan or Fred HOA certification answers, you may be able to get funded on what the industry calls a non-warrantable loan. You should expect to pay perhaps one-half to one point higher in rate than conventional financing. You also might have to provide a larger down payment or have more remaining equity compared with Fannie-type requirements.

But buyer beware: Non-qualified mortgage lenders that offer the exotic non-warrantable condo mortgages are not a loan approval shoo-in, either.

For example, California-based LendSure has a condo guidance checklist to help determine investor risks. The common three items it looks at are investor concentration (how many rentals are in the complex), single investor (does one person or entity own a bunch of the units), and litigation against the condo complex, according to Joe Lydon, co-founder, and managing director of LendSure.

Why so much deferred maintenance? Unit owners are often resistant to increased HOA fees or special assessments for repairs and updates.

Condo complex building inspections can run $15,000 to $50,000 depending on the number of units, according to Bauman.

“Community Associations Institute is lobbying for laws mandating reserve studies and building inspections,” said Bauman. CAI is also asking Fan and Fred to give HOAs more time to be able to address so many of the new HOA questions. “Five years to ramp-up the requisite building inspections.”

Fannie Mae provides weekly updates of approved condo projects in Florida.

Copyright © 2022, Daily Breeze, all rights reserved. Jeff Lazerson is a mortgage broker.

Study: Minority Florida Buyers Denied More Loans

By Sam Sachs 

TAMPA, Fla. – In the current housing market, owning a home is already difficult, especially for first-time homebuyers. Across the United States, minorities are approved for mortgages less often than their white neighbors, according to Zillow.

Zillow, a real estate company, studied mortgage denials across the country to see which demographics were denied mortgages more often. The company analyzed data from the Home Mortgage Disclosure Act (HDMA) during its research.

“The mortgage denial rate was 84% higher for Black applicants than white applicants in 2020 (the latest year for which data is available), according to HMDA, up from 74% in 2019. Nationwide, 19.8% of Black applicants were denied a mortgage in 2020, the highest among races and much higher than the 10.7% of white applicants who are denied,” according to data Zillow analyzed from the HMDA.

Unlike credit card payments, student loans, or other types of consumer debts, home equity turns from money-sink into a wealth asset over time for many Americans.

As property values rise and homeowners pay off their loans, i.e. mortgages, the market turns shelter into an investment. Rising home prices are now increasing equity amounts for homeowners more quickly, as the shortage of available housing inventory for buyers stays limited.

In Florida, the largest percentage of mortgage rejections in 2020 were among American Indian or Alaska Native homebuyers, with 22% of all applicants denied mortgages. According to the Zillow report, closely behind were Black homebuyers, with 21.8% of them seeing their mortgage applications denied.

“Prior to the pandemic, Black homeownership had already hit a record low of 40.6% in the second quarter of 2019,” according to CNBC.

Data from the U.S. Census Bureau showed that pre-pandemic Black homeownership had fallen to 40.6% by the second quarter of the fiscal year. By 2020 Q2, the number of Black homeowners had risen to 47%, but fell again in 2021 Q2 when the percentage shrunk again to 44.6%. In 2019 Q2, at the same time, 57.7% of Asian, Native, Hawaiian and Pacific Islanders owned their homes. That number went up to 61.4% in 2020 Q2, but fell to 58.7% in 2021 Q2.

In the past five years, from 2017 to 2021, Black homeowners across the U.S. remained the demographic in the United States with the lowest percentage of homeowners among their population.

Hispanic families weren’t far behind, while non-Hispanic white families had the highest homeownership rates nationwide, at 71.8% or higher, quarter by quarter.

Echoing a higher likelihood of homeownership among white families and homebuyers, Zillow’s study of HMDA data showed that, compared to all minority demographics, whites had the lowest mortgage denial rate, at just 14.3% in Florida.

Tampa rental data shows minorities spend more income on rent than white neighbors, and Zillow reported a similar gap trend in Tampa concerning the rent burdens families face. The study was published in October 2021, finding that Black and Latinx families spent a higher percentage of their monthly income on rent, meaning more households were rent-burdened compared to their white neighbors.

Mortgages have, historically, been cheaper options than renting while also providing financial equity to families.

The Zillow study showed that households of color “were more likely to report encountering housing and economic challenges due to the pandemic.” Black families were reportedly “more likely than white ones to report a job or income loss and difficulty keeping up with mortgage or rent payments,” adding to the issue of mortgage denial. Mortgage approval is also affected by income, after all, a mortgage is a loan, and the ability to pay off the loan has a significant effect on approval.

“Black home purchase applicants in 2020 had a median income of $67,000, compared to an overall median of $83,000 for all applicants,” Zillow reported. “This may help explain why Black mortgage applicants had smaller down payments in 2020 than applicants from other races.” Zillow also said the median property value of homes Black applicants were trying to purchase through a mortgage was typically lower than any other applicants’ property values, on average.

“Black applicants also typically applied to purchase less-expensive homes in 2020 than applicants from other races – a median property value of $225,000 for Black applicants and $275,000 for all applicants,” Zillow reported. “The typical down payment from a Black applicant was $16,600 less than the overall median down payment in 2020.”

Affordable housing concerns are common across the U.S., as material shortages and limited housing markets push prices up for those trying to buy their first homes, or move somewhere new.

© 2022 WFLA, Nexstar Broadcasting, Inc. All rights reserved.

Thursday, January 20, 2022

Lenders Make it Easier for Buyers to Qualify, but only for Higher Priced Homes

 WASHINGTON – The availability of mortgage credit increased in December, according to the Mortgage Credit Availability Index (MCAI), a report from the Mortgage Bankers Association (MBA). The index is based on data from an Ellie Mae business tool, AllRegs Market Clarity.

The MCAI rose 0.8% to 125.9 in December. If the MCAI declines, it suggests that lending standards are tightening; if it increases, it suggests a loosening of credit by lenders. The index was benchmarked to 100 in March 2012.

The MCAI for conventional loans increased 0.8%, while the government MCAI (FHA, VA, USDA) increased by 0.7%.

Two categories under the Conventional MCAI umbrella also rose month-to-month – jumbo loan MCAI increased by 0.6%, while the MCAI for conforming loans rose by 1.1%.

“Credit supply increased in December, with growth across both conventional and government segments of the market,” says Joel Kan, MBA’s associate vice president of economic and industry forecasting. “The overall credit index increased to its highest level since May 2021, but remained 30% below its pre-pandemic level.”

Kan says December’s looser credit standards mainly came in the adjustable-rate-mortgage and lower-credit-score markets “likely due to a combination of the rising rate environment and affordability challenges. Lenders expanded offerings to qualified borrowers who were the most impacted by these market conditions.”

He also notes an uptick in government streamline refinance programs “to aid borrowers still looking to refinance before rates rise even more.”

Year-to-year, however, jumbo loans saw the biggest spike in looser credit standards.

“The overall supply of mortgage credit only grew around 3% compared to the same month a year ago, with a 34% increase in jumbo credit availability contributing to most of that growth,” Kan says. “Government credit supply, as well as conforming credit, saw tightening last year.”

© 2022 Florida Realtors® - By Kerry Smith

Sunday, January 16, 2022

2021 Foreclosure Activity Hits All-Time Low

 By Kerry Smith

That tsunami of foreclosures expected when forbearance ended? Barely a splash. ATTOM predicts an uptick that won’t reach “normal levels” until year’s end.

IRVINE, Calif. – In 2021, foreclosure filings – default notices, scheduled auctions and bank repossessions – hit an all-time low, according to ATTOM’s Year-End 2021 U.S. Foreclosure Market Report. The percent of U.S. properties in foreclosure dropped 29% over 2020 and 95% from a peak of nearly 2.9 million in 2010.

ATTOM says it’s the smallest number of foreclosures since it began tracking in 2005. Overall, 151,153 U.S. properties had foreclosure filings in 2021 or 0.11% of all U.S. housing units, down from 0.16% in 2020 and down from a peak of 2.23% in 2010.

Florida still ranks fairly high in a state-by-state ranking, however it’s not the top foreclosure state in the nation, as it was for many months during the Great Recession. And given the overall drop in 2021 foreclosures, Florida foreclosures did not have a large impact on the market.

“The COVID-19 foreclosure tsunami that some people had anticipated is clearly not happening,” says Rick Sharga, executive vice president at RealtyTrac, an ATTOM company. “Government and mortgage industry efforts have prevented millions of unnecessary foreclosures, and while it’s likely that we’ll see a slight increase in the first quarter, we probably won’t see foreclosure activity back to normal levels before the end of 2022.”

Bank repossessions down 98% since 2010 peak

Lenders repossessed 25,662 properties through foreclosure (REO) in 2021, down 49% from 2020 and down 98% from a peak of 1,050,500 in 2010 – also the lowest level as far back as data is available – 2006.

Florida ranked second in the number of REOs (2,287) after Illinois (3,472). California (1,839), Pennsylvania (1,293) and Texas (1,236) rounded out the top five.

 “We believe that repossessions will continue to be lower than normal throughout 2022,” Sharga says. “Homeowners have a record amount of equity – over $23 trillion – and over 87% of homeowners in foreclosure have positive equity. This means that most borrowers will have an opportunity to sell their house at a profit rather than lose everything to a foreclosure auction.”

Foreclosure starts at a record low

The number of homes entering the foreclosure process also hit record lows (since first data collection in 2006), dropping 30% in 2021 compare to 2020, and down 96% from a peak of 2,139,005 in 2009.

 “The government’s foreclosure moratorium, the mortgage forbearance program and the mortgage servicing guidelines enacted by the CFPB in August have kept foreclosure starts artificially low over the past year,” Sharga says. “While the recovering economy should prevent a huge increase in defaults, we should see a gradual increase in foreclosure activity as these programs expire, and servicers exhaust all loan modification options for delinquent borrowers.”

Only four states – and not Florida – saw a 2021 increase in foreclosure starts: South Dakota (up 20%), Vermont (up 36%); North Dakota (up 71%) and Nevada (up 85%).

However, ATTOM says three metropolitan areas (population greater than 1 million) saw an increase in foreclosure starts year-to-year, including Miami (up 17%). Birmingham, Alabama, (up 4%) had a bit less, but Las Vegas, Nevada, (up 142%) had notably more.

Foreclosure rates

Overall, Florida’s foreclosure rate (0.23% of housing units had a foreclosure filing) ranked third nationally. Nevada (0.26%) and Illinois (0.23%) had more, while Delaware (0.21%) and New Jersey (0.19%) had less.

© 2022 Florida Realtors®

Mortgage Rates Jump Almost 1/4 Point – to 3.45%

 By Matt Ott

The Fed announced it would tighten monetary policy more quickly, which pushed the 30-year, fixed-rate mortgage higher compared to last week’s 3.22%.

SILVER SPRING, Md. (AP) – Average long-term U.S. mortgage rates jumped again this past week, reaching their highest level since March 2020, just as the coronavirus pandemic was breaking in the U.S.

Mortgage buyer Freddie Mac reported Thursday that the average rate on the benchmark 30-year home loan rose to 3.45% this week from 3.22% last week. It was at 3.5% in late March of 2020 when the pandemic was just starting. A year ago, the 30-year rate stood at 2.79%.

The average rate on 15-year, fixed-rate mortgages, popular among those refinancing their homes, rose to 2.62% from 2.43% last week.

“This was driven by the prospect of a faster than expected tightening of monetary policy in response to continued inflation exacerbated by uncertainty in labor and supply chains,” said Sam Khater, Freddie Mac’s chief economist. “The rise in mortgage rates so far this year has not yet affected purchase demand, but given the fast pace of home price growth, it will likely dampen demand in the near future.”

Available housing has been in short supply since long before the pandemic started, and prices have risen close to 20% in the past year. Higher mortgage rates could make it even harder for homebuyers to secure a new home.

Mortgage rates have been expected to rise this year after the Federal Reserve announced last month that it would begin dialing back its monthly bond purchases – which are intended to lower long-term rates – to slow accelerating inflation. But even with the expected three or four rate increases in 2022, the Fed’s benchmark rate would still be historically low at around 1%.

On Wednesday, the government reported that inflation spiked to 7% in December from a year earlier, the sharpest such increase in four decades. Earlier Thursday, the Labor Department reported that prices at the wholesale level surged by a record 9.7% in December from a year earlier.

In addition to surging inflation, experts expect robust economic growth and the tight labor market to continue to push rates higher.

Although U.S. jobless claims climbed by 23,000 last week to 230,000, it’s still low by historic standards, and the highly contagious omicron variant doesn’t appear to have triggered layoffs yet.

Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.

Tuesday, January 11, 2022

Where the housing market is going in 2022 as told by 7 leading forecast models


Monday, January 10, 2022

2021 Home Loans Broke Records with 9% Increase

 By Alex Veiga

Mortgage bankers say buyers borrowed $1.6T last year for home purchases, topping the 2005 housing bubble’s $1.5T. They expect another new record this year.

LOS ANGELES (AP) – The fierce competition, low mortgage rates and soaring prices that helped raise mortgage borrowing to record heights last year is expected to drive lending even higher this year, experts say.

Banks lent an estimated $1.61 trillion for home purchases last year, up about 9% from 2020, according to the Mortgage Bankers Association (MBA). That tops the $1.51 trillion lent at the peak of the housing bubble in 2005, the highest on records going back to 1990.

Lenders issued 4.74 million loans to borrowers buying a home last year, down from 4.92 million in 2020, according to the MBA. Even so, the dollar value of for-purchase loans increased last year as home prices surged, often as homebuyers agreed to pay well above a seller’s asking price to outbid competing offers.

“Strong housing demand, persistent increase in housing demand, constrained supply, increase in prices – that’s what led to that record purchase level last year,” said Mike Fratantoni, the MBA’s chief economist.

The housing market has strengthened during the pandemic as many Americans transitioned to working at home, which put additional living space at a premium. Steady job growth, a stock market at all-time highs, rising rents and expectations of higher mortgage rates have also spurred homebuyers, even as skyrocketing prices and a historically low level of homes for sale have shut out many others.

Median U.S. home prices in October were nearly 20% higher than a year earlier, according to the most recent S&P CoreLogic Case-Shiller home price index.

The housing market is expected to continue to sizzle this year, which is why the MBA projects that the dollar value of for-purchase home loans will climb to a new high of $1.74 trillion.

While the for-sale inventory may end up being a little better than in 2021 as homebuilders crank out more homes, it still won’t be enough to give the upper hand to buyers, Fratantoni said.

“2022 is still going to be a seller’s market,” he said. “There’s more demand than supply, and that’s why we’re very confident that prices are going to keep going up.”

Meanwhile, homebuyers are likely going to have less buying power this year to cope with rising home prices.

The extraordinarily low mortgage rates that have helped intensify housing market demand are expected to continue creeping higher in 2022 as the Federal Reserve phases out the monthly bond purchases it has been making since the early days of the pandemic. The central bank has already signaled that it expects to start raising interest rates as early as this spring to check sharply rising inflation.

The average rate on the benchmark 30-year fixed-rate mortgage stuck around 3% in 2021. The MBA’s forecast calls for that average rate to rise to 4% this year.

That’s close to other housing economists’ forecasts. The National Association of Realtors projects the average rate will rise to 3.7% by the end of this year. Greg McBride, chief financial analyst at Bankrate, forecasts rates will peak at 4%, but end the year at 3.5%.

“It will be a bit of a roller coaster ride,” McBride said. “The higher rates we expect in 2022 won’t take the winds out of the sails of the housing market, but it will change the refinancing equation significantly.”

Homeowners borrowed some $2.32 trillion in 2021 to refinance their mortgage, down about 12% from 2020, when refinancing hit a record high, according to the MBA. Taken together, mortgage refinancing in 2021 and 2020 amounted to nearly $5 trillion.

The MBA forecasts mortgage refinancing will fall to $870 billion this year, the lowest since 2018′s $467 billion.

Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.

Thursday, January 6, 2022

U.S. Home Price Forecasts through November 2022


CoreLogic HPI Forecasts

HPI National Change

November 2021 National Home Prices

Home prices nationwide, including distressed sales, increased year over year by 18.1% in November 2021 compared with November 2020. On a month-over-month basis, home prices increased by 1.3% in November 2021 compared with October 2021 (revisions with public records data are standard, and to ensure accuracy, CoreLogic incorporates the newly released public data to provide updated results).

Forecast Prices Nationally

The CoreLogic HPI Forecast indicates that home prices will remain flat on a month-over-month basis from November 2021 to December 2021, and increase on a year-over-year basis by 2.8% from November 2021 to December 2022.

HPI National Change

“Over the past year, we have seen one of the most robust seller’s markets in a generation. While increased interest rates may help cool down homebuying activity, we expect 2022 to be another strong year with continuing upward price growth.”

-Frank Martell
President and CEO of CoreLogic

This graph shows a comparison of the national year-over-year percent change for the CoreLogic HPI and CoreLogic Case-Shiller Index from 2000 to present month with forecasts one year into the future. We note that both the CoreLogic HPI Single Family Combined tier and the CoreLogic Case-Shiller Index are posting positive, but moderating year-over-year percent changes, and forecasting gains for the next year.

Economic Impact on Home Prices

While 2021 was a record-breaking year for U.S. home price growth, for many prospective buyers the hot housing market will continue to exacerbate ongoing affordability challenges into the new year — and beyond. Though home price growth remains at historic highs, it is projected to slow over the next year. However, economic growth and inflation will most likely lead to increases in mortgage rates, which will further erode affordability.

“Interest rates on 30-year fixed-rate mortgages averaged a record low of 2.96% during 2021, helping to keep monthly payments low in the face of record-high home prices. However, the Federal Reserve appears poised to allow interest rates to rise in 2022. Higher rates will intensify buyer affordability challenges, especially in overvalued local markets.”

– Dr. Frank Nothaft 
Chief Economist for CoreLogic

HPI National and State Maps – November 2021

The CoreLogic HPI provides measures for multiple market segments, referred to as tiers, based on property type, price, time between sales, loan type (conforming vs. non-conforming) and distressed sales. Broad national coverage is available from the national level down to ZIP Code, including non-disclosure states.

Nationally, home prices increased 18.1% year over year in November. No states posted an annual decline in home prices. The states with the highest increases year-over-year were Arizona (28.6%), Florida (25.8%), and Idaho (25.5%).


HPI Top 10 Metros Change

The CoreLogic HPI provides measures for multiple market segments, referred to as tiers, based on property type, price, time between sales, loan type (conforming vs. non-conforming) and distressed sales. Broad national coverage is available from the national level down to ZIP Code, including non-disclosure states.

These large cities continue to experience price increases in November, with Phoenix leading the way at 30.5% year over year.

Markets to Watch: Top Markets at Risk of Home Price Decline

The CoreLogic Market Risk Indicator (MRI), a monthly update of the overall health of housing markets across the country, predicts that metros such Prescott, Arizona; Worcester, Massachusetts; and Lake Havasu-Kingman, Arizona, are at the highest risk (50-70% probability) of a decline in home prices over the next 12 months. Merced, California, and Springfield, Massachusetts, are also at moderate risk (25-50%) of a decline.  


CoreLogic HPI features deep, broad coverage, including non-disclosure state data. The index is built from industry-leading real-estate public record, servicing, and securities databases—including more than 40 years of repeat-sales transaction data—and all undergo strict pre-boarding assessment and normalization processes.

CoreLogic HPI and HPI Forecasts both provide multi-tier market evaluations based on price, time between sales, property type, loan type (conforming vs. non-conforming) and distressed sales, helping clients hone in on price movements in specific market segments.

Updated monthly, the index is the fastest home-price valuation information in the industry—complete home-price index datasets five weeks after month’s end. The Index is completely refreshed each month—all pricing history from 1976 to the current month—to provide the most up-to-date, accurate indication of home-price movements available.