Monday, November 26, 2012

FHA Upcoming Policy Changes

The FHA plans to accelerate its recovery

In the same report, issued by the Housing Administration last week, that showed a negative economic value for its capital reserve fund for the first time in its history last week, the FHA outlined an “Action Plan” to strengthen the fund and speed its economic recovery in the next few years.

The FHA projects that, if no policy changes or other operating changes were to be made, its fund will be positive in 2014 and reach the mandated ratio of 2.0 percent by 2017. With new policies and programs in place, the FHA is expecting the fund will be positive within the year and reach the mandated capital reserve ration by 2014.

Upcoming policy changes outlined by the FHA

  • Strengthen assistance programs for delinquent homeowners — the FHA is aiming for payment reductions of at least 20% for FHA-HAMP modifications
  • Streamline FHA short-sale process — and reduce the number of traditional FHA REO foreclosures, which are significantly more costly
  • Change the FHA premium cancellation policy — premiums will be required to be paid for the life of the loan, a change from the current policy which allows homeowners to let the policy lapse after the home had achieved 22% equity
  • Increase the mortgage insurance premium by 0.1 percent
  • Accelerate asset disposal programs to sell up to 10,000 distressed mortgages each quarter
  • Revise the HECM (reverse mortgage) program to lessen its negative impact on the fund — projected changes include reducing the initial amount borrowers are allowed to draw at loan orgination and reducing the maximum amount of funds available to the borrower throughout the program

Read the FHA’s full report here.

Monday, November 19, 2012

FHAs Annual Report Is In

Reserve Fund Is Low — Will the Treasury Need To Help?

Negative capital reserve does NOT indicate operating deficit

The U.S. Department of Housing issued its Annual Report to Congress on the financial status of the Federal Housing Administration’s Mutual Mortgage Insurance (MMI) Fund for the fiscal year 2012 last week. Most notably, the report reveals that the fund currently has a negative economic value of $16.3 billion. 

It is important to note that the fund’s negative value does not mean that the FHA is unable to pay insurance claims or is running a current operating budget.

FHA unlikely to petition Treasury support

Although the FHA could petition for a Treasury draw, the decision as to whether that’s necessary doesn’t rest on the projections outlined in the report, but on the President’s budget proposal, which will be released in February — even then, the final determination won’t be made until September of next year. The report’s estimate of this year’s deficit also does not include $11 billion of expected capital accumulation from the FHA’s current “book of business.” 

The FHA, which was created in 1934 to revive the country’s housing market after the Great Depression, has never had to call upon the Treasury for financial support.

Capital reserve fund down from 2011

The Congress mandates that the FHA’s capital reserve fund be no less than 2 percent of the FHA’s “insurance-in-force” — with $1.13 trillion of insurance-in-force for FY 2012, the current capital reserve fund ratio is about -1.44 percent, down from 0.24 percent in 2011 (when the fund had an economic value of $2.6 billion).

Fund predicted to be in the black within 2 years or less

The FHA predicts that — without any policy changes or other operating changes that might impact the FHA’s recovery — the fund will be positive in 2014 and reach the mandated ratio of 2.2 percent by 2017.


Read the FHA’s full report here.


Monday, November 12, 2012

New Mortgage Applications Up, ReFi’s Down

Mortgage Rates Stay Fairly Steady (And Low)

Refi applications drop 4 weeks in a row

The last week in October saw a 6 percent drop in refi applications from the prior week, marking the fourth straight week of decreases. Interestingly, just a month earlier, in September, refinance applications reached their highest level in three years.

Mortgage rates continue to hover near all-time lows

Mortgage rates have been holding fairly steady at nearly record lows, which may partly explain the drop in applications for refinancing. As a senior economist at Wells Fargo Securities put it, “People who are not underwater have already refinanced. People who want to refinance but couldn’t are already underwater.”  (via Medill Reports)

Refinancing activity drop predicted to continue next year

At the Mortgage Bankers Association’s annual convention earlier this month, consensus seemed to be that mortgage originations would go up next year, but refinancing would drop in the second part of the year.

Tuesday, November 6, 2012

New Home Sales Continue to Rise

Highest Sales Level In More Than 2 Years

Month to month improvement nearly 6%

The Census Bureau reports that sales of new single-family homes rose 5.7 percent from August 2012 to September. The seasonally adjusted annual rate in September was 389,000 — up from August’s 368,000. The new home sales rate in July of this year was 374,000 — a two-year high.

Annual increase more than 25%

September 2012 saw a 27.1 percent increase in new home sales over September of last year. The median sales price of a new home in September was $242,000 — up nearly 12 percent over the same time last year.

Housing market recovery seems solid

Bloomberg interviewed an economist with RBS Securities in Connecticut who said that

“All the things that were really holding back housing are finally starting to lift. It really is tough to find any bad signs here. Inventories are very, very lean. Assuming the economy remains on track, housing should continue to improve for the rest of the year and into 2013.”

Gathered from

·       Home Sales Rising to Two-Year High Spur U.S. Growth: Economy (Bloomberg)

·       New-home sales up 27 percent from a year ago (Inman News)

·       New home sales jump to two-year high (NBC Bottomline)