To All The Wonderful Mothers…Happy Mothers Day From Zackry Cooper & Team Empowerment
“He who enjoys good health is rich, though he knows it not” – by Italian Proverb
NEWS & HEADLINES
Rates are improving, and agency MBS prices yesterday improved by .375-.50. Fannie & Freddie 4’s closed yesterday about 100.375. By and large, these securities are filled with 4.25-4.625% 30-yr mortgages. Let’s be conservative and add a point (1.0) for the value of servicing, and suddenly “the market” is paying nearly 101.50 (1.50 rebate) for a 4.50% 30-yr agency mortgage. Below that there will be some buy-downs, and above it will be some buy-ups, and it depends on rate lock period, but that’s about the pricing. This leads into…
Rates are about the best they’ve been all year. Remember all those sparkly clean 5% or even 5.50% 30-yr agency loans that the originators were producing in the last 6 months? Many of them may be coming back as refi’s. But keep in mind that loan-level price adjustments (LLPA’s) have changed, as has the FHA MIP’s, so recent prepayment speeds have been in transition over the past few months due to those, and due to servicers prioritizing loan processing for one agency over the other. And if you think components such as LLPA’s, MIP’s, and increased documentation impact the borrower’s ability to refinance, just wait and see what comes out of the QRM public comment period.
Mortgage security traders hardly know which way to turn, and I read several divergent ideas about what is going on and where investors should place their bets – any of which can be confusing to anyone not well versed in MBS lingo. But this is more relevant for originators: “Freddie Mac reported that 30-year fixed mortgage rates averaged 4.71% this week which matches the lowest level seen this year. Refi activity is likely to have increased this week as more of the 5% coupon enters into the refi window; however, a significant pickup is not expected unless mortgage rates rally to 4.50%, said a Credit Suisse report.”
Yesterday I mentioned the latest from Freddie Mac about not requesting government funds given the quarterly results. I received a helpful note: “Thanks for earnings update. One small correction, which is that this is actually the fourth time since the government took Freddie over that it reported quarterly earnings and did not ask for a Treasury draw (not the first as you reported). Freddie’s earnings are up, delinquencies down, and even its REO inventory dropped 10% in the last quarter – good things.”
Last month the government reported that the economy added 216,000 jobs in March, and the unemployment rate dipped to 8.8%. But although the number of unemployed has declined by 1 million since November, hourly earnings growth remains anemic, having been flat in four of the past five months, and don’t expect high gas prices to help the retail and leisure/hospitality industries and therefore job counts.
As mentioned above, Treasuries and MBS’s rallied yesterday. The 10-year note closed better by nearly .5 at a yield of 3.17%. Some of the commodities are coming off of their high levels, so perhaps we’ll see some better prices at the gas pump which would tend to help the consumer’s outlook. The expectations were for this morning’s numbers to show that job growth slowed in April (+185k) and that the unemployment rate was unchanged (8.8%). But nonfarm payrolls came out at +244,000, and the Unemployment Rate was 9.0% for April. The 10-yr shot up to 3.21% and MBS prices are worse by roughly .250.
THE IMPACT OF DISTRESSED PROPERTIES ON NEIGHBORING VALUES
The banks are finally getting their foreclosure paperwork in order. They will start bringing larger numbers of distressed properties to market over the next six months. We must realize that this influx of discounted inventory will have an impact on the values of neighboring homes. How large an impact?
According to RealtyTrac a foreclosure sells for 59% of the value of a similar non-distressed property. Therefore, this foreclosure inventory will affect values in two ways:
1.) As Discounted Competition
Obviously, a segment of purchasers will prefer the discounted property based on price alone. Even if the distressed property is in need of substantial repair, the buyer is getting the property at a 41% discount. Price is determined by supply and demand. Distressed properties will eat up a portion of the demand for housing and that will put downward pressure on all values.
2.) As Comparable Sales on Your Appraisal
Even after you put your house into contract, this distressed inventory can still impact your transaction. Unless your purchaser is paying all cash, there will be an appraisal of your property by the bank who is giving the mortgage to your buyer to complete the purchase. Because of the volume of distressed properties selling in almost every market, banks are instructing appraisers to use these discounted sales in determining values of non-distressed sales. We can argue the logic of this some other time. At this point, we must simply be aware that this is taking place.
Over the next several months, banks will be moving substantial numbers of foreclosures onto the market. This will impact values of other homes in the region. If you are considering selling, now might be the best time. You want to be sold and closed before these properties come to market and impact your price.
‘HOME RESCUE FAIR’ TRIES TO CURB FORECLOSURES
With foreclosures up nearly 42 percent last month, the city of Las Vegas is hosting a Home Rescue Fair to help teach home owners how they can save their homes.
At the event, home owners facing foreclosure or financial hardship will be able to have face-to-face sessions with loan specialists, housing counselors, and attorneys and attend workshops to learn how they can keep their home. Several local services – such as in education, job placement, and public benefits – will also be available at the Home Rescue Fair, which runs May 20-21.
Las Vegas’ real estate market continues to be one of the most plagued in the country by a high number of distressed sales, which is bringing its housing prices down. Home prices in the Las Vegas metro dropped to $117,000 in March, which is the lowest level since January 1996. Distressed sales accounted for 69 percent of all market transactions in March, according to DataQuick.
The foreclosure problem doesn’t seem to be easing either. Lenders foreclosed on 3,331 single-family homes and condos in March, which is up 41.6 percent from February, according to DataQuick.
However, high inventories are slowly being chipped away. Nearly 5,000 homes sold in the Las Vegas-Paradise metro area in March, the highest volume in five years, DataQuick reports. Sales increased 27.3 percent compared to one month prior, with demand mostly coming from investors and cash buyers who were snatching up bargain-priced distressed properties.
DO YOU NEED A BUYER’S AGENT?
After years of trepidation, home buyers are finally beginning to wade back into the housing market. But as they do, many are making the surprising choice to hunt alone, rejecting the assistance of what’s known in real estate as a buyer’s agent.
For years, house-hunters have had the option to work with a real estate agent who shows them properties and may ultimately negotiate the price – a counterbalance to the agent who almost invariably represents the seller. But now fewer buyers are taking it. Of the buyers who purchased a property through a real estate agent, just 57% had buyer representation, according to a 2010 report by the National Association of Realtors. That’s down from 62% in 2009 and 64% in 2006, before the housing bust. Also, fewer buyers are first learning about the home they purchase from real estate agents: just 37% are reporting real estate agents as their first source of information on the home they purchased, down from 50% a decade ago, according to NAR.
Many experts think this is a bad move – worse, for example, than trying to sell a house without an agent. For one thing, in most cases, a buyer doesn’t pay an agent; the buyer’s agent splits the commission with the seller’s agent, so the services are essentially free to the buyer. Also, a buyer’s agent can usually access historical price data for home sales in the area, which means he can recommend a bidding strategy that targets comparable properties that sold for less, rather than the mid-range. John Vogel, adjunct professor of real estate at the Tuck School of Business at Dartmouth College, calls going through this process alone “a mistake.”
There are lots of reasons buyers may choose to represent themselves. The real estate listings and detailed information that was once only available to real estate agents – like median sales prices in a neighborhood, the amount of days a home has been on the market, and how many price cuts it has endured – are now online. And because most buyers’ agents don’t get paid until a home is purchased, they have a strong incentive to see you buy something quickly, Vogel says: They may not tell a client to wait for prices to fall further.
On the other hand, some house-hunters may think they are working with a buyer’s agent, when in reality, they’re actually dealing with a seller’s agent. Many buyers contact the agent listed with the property or walk into an open house thinking the agent is working in their favor, says Paul Howard, a buyer’s-only broker licensed in New Jersey and Pennsylvania. Or some buyers may start working with an agent who has their interest at hand, but the house they want to buy is listed with the real estate company the agent works for; at that point, buyers should have the option to find an agent not tied to the property. Some seller’s agents may also discourage prospective buyers at the beginning of their search from seeking out a buyer’s agent. Commissions are already lower due to declining home values, and some would prefer not to split it, says Ginger Wilcox, head of training for buyers’ and sellers’ agents at Trulia.com. “Agents are fighting for their commissions.”
Still, in many cases buyers may be at an advantage when they work with a buyer’s agent â€“ at least compared to relying on a seller’s agent for advice or guidance. A seller’s agent is contractually obligated to help make the sale happen in the seller’s favor, often as close to the asking price as possible. Buyers’ agents can also suggest home inspectors and financing companies they’ve worked with before, says David Kent, president of the National Buyer’s Agent Association; they’re not supposed to make money off the referrals.
When searching for a buyer’s agent, experts recommend putting a few through their paces first. The most helpful agents won’t just rely on what’s listed online, says Vogel. Instead, they might drive around a neighborhood looking for signs of properties that are for sale by owners or mail letters to existing homeowners alerting them to a buyer who’s interested in a similar property to theirs. And by the time a buyer enters into a contract, his agent should be there to look for red flags.
5 WAYS TO KEEP YOUR CLIENT DATA SECURE
You can’t run your business without collecting personal and financial information about your clients. Yet, if sensitive data falls into the wrong hands, it can lead to fraud and identity theft.
Given the cost of a security breach – losing your customers’ trust and perhaps even defending yourself against a lawsuit – safeguarding personal information is just plain good business.
1. Take stock of what you have.
Know what personal information you have in your files and on your computers. Understanding how personal information moves into and out of your business and who has access to it is essential to assessing security vulnerabilities.
2. Secure your Web applications.
Pay particular attention to the applications on your Web site through which you collect information and consumers request information. These can be vulnerable to a form of hacking known as injection attacks, in which a hacker inserts malicious commands into your online form. Once the commands are in your system, the hacker can grab your data.
3. Secure your points of connection.
It’s one thing to secure your computer system; it’s another to secure the devices and applications that connect to it. These include laptops, cell phones, and your Web site. If your laptop has been compromised, it can open a door into your system.
The same thing applies to vendors who provide data processing or other services on a contract basis. If their computer is compromised, they can infect yours when they access your system. You’ll also want to limit storage of your sensitive information to only computers that don’t connect to the Internet.
4. Don’t trust just anyone.
Your security measures are only as thorough as the people who work with you. Assistants and team members must agree to uphold the confidentiality of your sensitive information and participate in training on keeping your data secure. If there’s ever any doubt, withhold their access to sensitive data.
5. Think about physical security too.
Many data compromises happen the old-fashioned way – through lost or stolen paper documents. Often, the best defense is a locked door or an alert employee. Store paper documents, sensitive files, and backups in a locked room or file cabinet.