Mortgage Rates Inch Further Down

graph with housesFreddie Mac recently released the results of its Primary Mortgage Market Survey® showing average fixed mortgage rates moving down again across the board. Average fixed rates that continue to run below four percent will help keep affordability high for those in the market to buy a home as we head into the spring homebuying season.

“The average 30-year fixed mortgage rate fell to 3.69 percent following a decline in 10-year Treasury yields,” says Len Kiefer, Freddie Mac deputy chief economist. Low mortgage rates are a welcome sign for those in the market to buy a home this spring season and will help to support homebuyer affordability. Existing home sales in February increased slightly, but less than expected, to a seasonally adjusted annual rate of 4.88 million units. Meanwhile, new home sales outperformed expectations and surged 7.8 percent to an annual pace of 539,000 units.”

The 30-year fixed-rate mortgage (FRM) averaged 3.69 percent with an average 0.6 point for the week ending March 26, 2015, down from the prior week when it averaged 3.78 percent. A year ago at this time, the 30-year FRM averaged 4.40 percent.

Additionally, the 15-year FRM this week averaged 2.97 percent with an average 0.6 point, down from the last week when it averaged 3.06 percent. A year ago at this time, the 15-year FRM averaged 3.42 percent.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.92 percent this week with an average 0.4 point, down from the week prior when it averaged 2.97 percent. A year ago, the 5-year ARM averaged 3.10 percent.

Additionally, the 1-year Treasury-indexed ARM averaged 2.46 percent this week with an average 0.4 point, unchanged from the last week. At this time last year, the 1-year ARM averaged 2.44 percent.

For more information, visit www.FreddieMac.com.

REPOST: HUD Secretary Tells Realtors FHA Is Exploring Alternative Credit Scoring Models to Expand Mortgage Access

Credit score on a digital tabletA diverse group of housing industry stakeholders participated in a credit access symposium recently to discuss how alternative credit scoring models could expand access to mortgage credit for responsible borrowers who may have thin credit histories or extenuating circumstances like medical debts.

The event, co-hosted by the National Association of REALTORS®, the Asian Real Estate Association of America and the National Association of Hispanic Real Estate Professionals, included two roundtable discussions and a keynote address from Secretary of Housing and Urban Development Julián Castro.

“REALTORS® support safe, responsible access to mortgage credit for borrowers who can show they are ready and able to own a home and keep up with monthly payments. Unfortunately, overly restrictive lending, except to buyers with near-pristine credit scores, prevents many otherwise qualified buyers from entering the housing market,” says NAR President Chris Polychron.

NAR first called on federal regulators and the credit and lending communities in 2011 to reassess the entire credit structure and look for ways to increase the availability of credit to qualified borrowers who are good credit risks.

Work by the Harvard University Joint Center for Housing Studies indicates that borrowers with lower incomes as well as minorities face higher rejection rates on their mortgage applications. NAR analysis of mortgage data from 2007 to 2013 indicates that the share of rejected loans due to credit scores was significantly higher for African Americans and American Indians.

“If lenders and the government-sponsored enterprises were to adopt alternative credit scoring methods, such as FICO 9 and VantageScore 3.0, they could expand access to mortgage credit without dramatically increasing risk in the housing market,” says Polychron.

The newer credit scoring models put less emphasis on the impact of unpaid medical bills, and the effect of missed payments on debts that have subsequently been paid off is eliminated. FICO 9 and VantageScore 3.0 incorporate public utility and rental housing payments, information that helps lenders to evaluate younger persons and minorities who might not have a history of credit use. FICO estimates that its new model could improve scores by 25 to 100 basis points.

“The biggest limitation to borrowing is tight credit standards,” says NAHREP Past President Jerry Ascencio. “These conditions are exacerbated by outdated credit scoring models that don’t take into account the unique spending and savings patterns of Hispanic borrowers. Alternative credit scoring models need to consider these patterns so creditworthy borrowers are not turned away from the American Dream of homeownership.”

Jim Park, AREAA past chair, notes that there was a clear consensus from all of the symposium’s participants that the government-sponsored enterprises should update their scoring models and also create added market competition in the credit evaluation system.

“These critical efforts will expand credit to more minority and immigrant consumers and reverse the unfortunate trend of homeownership decline in America,” he says.

At the event, Secretary Castro underscored the agency’s commitment to widening the circle of opportunity for responsible families by making homeownership more affordable and accessible.

“FHA’s work alone will not solve all the industry’s challenges, which is why I appreciate this focus on out-of-the-box thinking,” he says. “I know that new credit scoring models are being developed so that non-traditional factors can be considered when determining creditworthiness.”

Castro says FHA is exploring the use of new credit scoring models. “We’ll look at every option that brings housing opportunities within reach of more Americans,” he says.

NAR will continue to work with Secretary Castro and housing industry stakeholders to identify solutions to the mortgage credit crunch so that individuals who are ready to own a home are not unnecessarily shut out of the market.

For more information, visit www.realtor.org.

One in Four U.S. Foreclosures Are ‘Zombies’ Vacated by Homeowner

zombie_foreclosureRealtyTrac® recently released its Q1 2015 Zombie Foreclosure Report, which found that as of the end of January 2015, 142,462 homes actively in the foreclosure process had been vacated by the homeowners prior to the bank repossessing the property, representing 25 percent of all active foreclosures.

The total number of zombie foreclosures was down 6 percent from a year ago, but the 25 percent share of total foreclosures represented by zombies was up from 21 percent a year ago.

“While the number of vacated zombie foreclosures is down from a year ago, they represent an increasing share of all foreclosures because they tend to be the problem cases still stuck in the pipeline,” said Daren Blomquist vice president at RealtyTrac. “Additionally, the states where overall foreclosure activity has been increasing over the past year—counter to the national trend—tend to be states with a longer foreclosure process more susceptible to the zombie problem.”

“In states with a bloated foreclosure process, the increase in zombie foreclosures is actually a good sign that banks and courts are finally moving forward with a resolution on these properties that may have been sitting in foreclosure limbo for years,” Blomquist continued. “In many markets there is plenty of demand from buyers and investors to snatch up these distressed properties as soon as they become available to purchase.”

Florida, New Jersey, New York have most zombie foreclosures

Despite a 35 percent decrease in zombie foreclosures compared to a year ago, Florida had the highest number of any state with 35,903—down from 54,908 in the first quarter of 2014. Zombie foreclosures accounted for 26 percent of all foreclosures in Florida.

Zombie foreclosures increased 109 percent from a year ago in New Jersey, and the state posted the second highest total of any state with 17,983—23 percent of all properties in foreclosure.

New York zombie foreclosures increased 54 percent from a year ago to 16,777, the third highest state total and representing 19 percent of all residential properties in foreclosure.

Illinois had 9,358 zombie foreclosures at the end of January, down 40 percent from a year ago but still the fourth highest state total, while California had 7,370 zombie foreclosures at the end of January, up 24 percent from a year ago and the fifth highest state total.

“We are now in the final cycle of the foreclosure crisis cleanup, in which we are witnessing a large final wave of walkaways,” said Mark Hughes, Chief Operating Officer at a real estate firm covering the Southern California market. “This has created an uptick in vacated or ‘zombie’ foreclosures and the intrinsic neighborhood issues most of them create.

“A much longer recovery, a largely veiled underemployment issue, and growing examples of faster bad debt forgiveness have most likely fueled this last wave of owners who have finally just walked away from their American dream,” Hughes added.

Other states among the top 10 for most zombie foreclosures were Ohio (7,360), Indiana (5,217), Pennsylvania (4,937), Maryland (3,363) and North Carolina (3,177).

“Rising home prices in Ohio are motivating lending servicers to commence foreclosure actions more quickly and with fewer workout options offered to delinquent homeowners, creating immediate vacancies earlier in the foreclosure process,” said Michael Mahon, executive vice president at a real estate company covering the Ohio housing markets of Cincinnati, Dayton and Columbus. “Delinquent homeowners need to understand how prices have increased in recent months, and how this increase in equity may provide positive options for them to avoid foreclosure.”

Metros with most zombie foreclosures: New York, Miami, Chicago, Tampa and Philadelphia

The greater New York metro area had by far the highest number of zombie foreclosures of any metropolitan statistical area nationwide, with 19,177—17 percent of all properties in foreclosure and up 73 percent from a year ago.

Zombie foreclosures decreased from a year ago in Miami, Chicago and Tampa, but the three metros still posted the second, third and fourth highest number of zombie foreclosures among metro areas nationwide: Miami had 9,580 zombie foreclosures,19 percent of all foreclosures but down 34 percent from a year ago; Chicago had 8,384 zombie foreclosures, 21 percent of all foreclosures but down 35 percent from a year ago; and Tampa had 7,838 zombie foreclosures, 34 percent of all foreclosures but down 25 percent from a year ago.

Zombie foreclosures increased 53 percent from a year ago in the Philadelphia metro area, giving it the fifth highest number of any metro nationwide in the first quarter of 2015. There were 7,554 zombie foreclosures in the Philadelphia metro area as of the end of January, 27 percent of all foreclosures.

Other metro areas among the top 10 for most zombie foreclosures were Orlando (3,718), Jacksonville, Florida (2,368), Los Angeles (2,074), Las Vegas (1,832), and Baltimore, Maryland (1,722).

Metros with highest share of zombie foreclosures: St. Louis, Portland, Las Vegas

Among metro areas with a population of 200,000 or more and at least 500 zombie foreclosures as of the end of January, those with the highest share of zombie foreclosures as a percentage of all foreclosures were St. Louis (51 percent), Portland (40 percent) and Las Vegas (36 percent).

Metros with biggest increase in zombie foreclosures: Atlantic City, Trenton, New York

Among metro areas with a population of 200,000 or more and at least 500 zombie foreclosures as of the end of January, those with the biggest year-over-year increase in zombie foreclosures were Atlantic City, New Jersey (up 133 percent), Trenton-Ewing, New Jersey (up 110 percent), and New York (up 73 percent).

For more information, visit www.realtytrac.com.