TEAM EMPOWERMENT MORTGAGE CHATTER: March 29; News & Headlines; 13% of Homes are Empty – Census Says; Month’s Shadow Inventory; Where Did All The 1st Time Homebuyers Go? Mortgage Delinquencies Decline

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“The great secret of success in life is for a man to be ready when his opportunity comes.” — Benjamin Disraeli: Was England’s prime minister



Today the FDIC Board will vote on a credit risk-retention proposal that is required under the Dodd-Frank bill. A joint release yesterday from the Federal Reserve, HUD, FDIC, FHA, OCC and SEC said all the agencies this week “are considering for approval a notice of proposed rulemaking that addresses section 941 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.” If all the agencies approve, the proposal will be published in the Federal Register for public comment. Look for the proposed thresholds on banks retaining 5% of mortgages unless excluded by being “Qualified”: purchase with at least 20% down, no cash out refi with 25% down, cash out refi with 30% down, with minimum income standards and no borrower who fell two months behind within the previous two years could get a qualified mortgage.

How is the jumbo market doing out there? In the 4th quarter of 2010 roughly $33 billion of jumbo mortgages were funded. This is higher than 2009’s fourth quarter by 57% according to survey figures compiled by National Mortgage News’ Quarterly Data Report. **Ask Me About RPM’s Jumbo Program**

NAR came out with its Pending Home Sales Index yesterday, viewed by some as a leading indicator for the housing sector since it measures sales activity based on sales of units where contracts have been signed but the transactions have not closed. Nationwide the number was +2.1% month over month, but down over 8% versus a year ago. We also learned that Personal consumer spending rose by 0.7% in February, and Personal Income increased 0.3%. Inflation is increasing as the overall PCE price index went up 1.6% from February 2010, compared with a 1.2% gain in the 12 months ended in January. The Fed’s preferred price measure is core PCE, which excludes food and fuel, rose 0.2% for a second month, and was up 0.9% from a year earlier.

But the recent improvement in US Treasury prices, and the corresponding drop in rates, has been erased as we are now at March 10 levels – the same as prior to the Japanese earthquake. The 10-yr closed at 3.45%, and MBS prices closed flat to 3 ticks higher, respectively, on 5s down through 3.5s, while 5.5s and 6s were a plus to a tick lower on relatively light trading volume. REITs are steadily emerging as a key source of levered demand for agency MBS, which is helping to keep mortgage rates low relative to Treasury rates (spread).

The Treasury auctioned $35 billion of 2-yr notes (a weak auction), will do $35 billion of 5-yr notes today and $29 billion of 7-yr notes on Wednesday. Today is another report on housing – S&P Case-Shiller HPI for February at 6AM PST. We also will have Consumer Confidence for March 9AM CST, along with the $35 billion 5-yr auction. So far the 10-yr is roughly unchanged at 3.45% and MBS prices are also roughly unchanged.


Of all U.S. homes, 13 percent stand vacant, according to U.S. Census Bureau statistics.

“More vacant homes equal more downward pressure on home prices,” says Brad Hunter, chief economist for Metrostudy, a real estate information provider.

But there are a few surprises on the census’ list of most empty states. Here are the states with the highest proportion of empty housing, according to census data:

1. Maine: 22.8 percent

2. Vermont: 20.5 percent

3. Florida: 17.5 percent

4. Arizona: 16.3 percent

5. Alaska: 15.9 percent

The U.S. Census includes empty properties such as ski lodges, beach houses, and pied-Ã -terres when configuring its vacancy rate – properties that most other real estate statisticians would not include in their data.

While these are often summer homes or second homes, the census groups them with homes that have been sold but not occupied, empty homes for sale or rent, and homes used by migrant workers.

“You can only live in one home,” William Chapin of the Census Bureau’s Housing Statistics Branch told CNNMoney. “If you own five homes that you occasionally live in, four of them will be counted as vacant.”

Paul Bishop, the vice president for research for the National Association of REALTORS®, told CNNMoney that these properties aren’t vacant in the usual sense.

“A vacation home is hardly the same situation as a foreclosed home that has been taken back by the bank,” he says.

In Maine, for example, more than two-thirds of the 160,000 vacancies were vacation homes in 2009. Vermont had a similar number.


Last week, it was reported on the National Association of Realtors’ (NAR) Economists’ Outlook and gave cx you a map showing the percentage of overall sales that distressed properties represented in each state. Today we want to show you another map from the same NAR outlook. This one shows the number of months shadow inventory by state:

NAR explained their methodology:

The map shows the number of months it would take to clear the shadow inventory by state. The months’ supply is estimated by dividing the shadow inventory and the monthly number of distressed sales. The numbers range broadly from 51 months in New Jersey to 7 months in Nevada. When looking at months’ supply it is important to keep in mind that this estimate highly depends on saturation of distressed sales. Given that New Jersey over the past year on average reported about 20 percent of existing home sales to be distressed sales, it will take a longer period for the shadow inventory to clear. In contrast, Nevada’s distressed sales averaged a considerable 70 percent share of the existing sales and at that rate the current shadow inventory would clear in 7 months.

Bottom Line

Appreciation of residential real estate will not take place until a region works their way through the shadow inventory that exists. This map gives you an indication of when that will occur in your state.


In January, first-time home buyers made up 29 percent of the market, the lowest since the National Association of REALTORS® started tracking first-time buyers on a monthly basis in 2008.

In a healthy market, first-time buyers generally make up 40 percent to 45 percent of all purchasers. So with low interest rates and falling housing prices, why are first-time home buyers sitting on the sidelines?

A USA Today article highlighted some of the factors that have first-time home buyers skittish about the market:

Tougher lending standards: Some first-timer buyers can’t meet credit or employment history requirements, Guy Cecala, publisher of Inside Mortgage Finance, told USA Today. Lenders also are requiring higher credit scores and some want higher down payments that are shutting out more first-timers. The best loan terms usually require 20 percent down payment or more, says Greg McBride, senior analyst at

Expired tax credits: Federal incentives that included lures for first-time buyers gave a big boost to home sales in 2009 and 2010. But with those tax credits now expired, first-time buyers aren’t as eager to jump in to the housing market.

Competition from cash buyers: NAR reports that cash buyers accounted for a record-reaching 33 percent of existing-home sales in February. Sellers like cash deals because those transactions are more likely to close, says Jerry Abbott of Grupe Real Estate in Stockton, Calif. As such, competing against these cash buyers has left some first-time home buyers out.


Mortgages for single-family homes that are 90 days or more delinquent declined for the third consecutive month in February, Freddie Mac reports.

Delinquencies on single-family homes dropped to 3.78 percent in February from 3.82 percent in January. What’s more, delinquencies were lower than the 4.2% rate reported one year ago.

Freddie Mac also reported that it has completed 23,017 loan modifications for the first two months of the year. Loan modifications in February totaled 11,885 and totaled 11,153 in January.

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