Beyond the Headlines

ConsumerWatchdog says mortgage servicing still riddled with problems

Source: The Washington Post

 

Error-prone and even abusive practices still plague the mortgage servicing business, according to a new

report from the Consumer Financial Protection Bureau (CFPB). The report indicates that servicers have

made a variety of mistakes, including sloppy payment processing, poor communications with consumers,

and insufficient programs to ensure compliance with federal laws. Under the 2010 Dodd-Frank law, the

CFPB is tasked with oversight of consumer products, including mortgages and credit cards, due to issues

that stemmed from the 2007-2009 financial crisis.

Making sense of the story



The CFPB has launched investigations into the conduct of banks and other financial firms since

many companies continue to violate the terms of the 2012 National Mortgage Settlement.



In some instances, homeowners faced extra fees due to the sloppy payment processing of

mortgage servicers. Also, some homeowners were not notified that their loans were transferred to

another company.



Non-bank servicing firms, which are now subject to examinations, reportedly lack formal

procedures to address consumer complaints or ensure quality control. The report shows an

absence of systems for compliance management.



“Deceptive communications to borrowers” about modification requests remains an issue, and

services failed to help struggling homeowners find more manageable repayment plans where

possible. Applications for loan modifications also took too long to process.



New mortgage servicing standards are set to take effect in January 2014 to force servicers to give

homeowners easy access to information about their loans, among other things. The CFPB issued

the new standards to promote greater transparency.

Read the full story

http://www.washingtonpost.com/business/economy/cfpb-says-mortgage-servicing-still-riddled-withproblems/

2013/08/21/93a1c1e0-0a7f-11e3-9941-6711ed662e71_story.html

In other news …

Fannie Mae, Freddie Mac IgnoringWrite-Offs

Source: Bloomberg

A government auditor has revealed that Fannie Mae and Freddie Mac’s slow adoption of a new

accounting system has obfuscated an accurate picture of the companies’ finances. Specifically, the

mortgage giants have ignored billions of dollars in potential losses on overdue loans. The revelation may

cast doubts on the record profits of the two government-sponsored enterprises.

Read the full story

http://www.bloomberg.com/news/2013-08-19/fannie-mae-and-freddie-mac-said-to-avoid-billions-inwrite-

offs.html

The Housing Market Is Hot, So Re/Max Is Going Public

Source: BusinessWeek

Following in the footsteps of Realogy (parent of Coldwell Banker and Century 21) and Trulia,

Re/Max

has filed papers to go public, thereby making its public offering the third biggest IPO in the real estate

sector in the past year.

The franchiser has more than 92,000 agents in some 85 countries and reported a

2012 profit of $33.3 million on sales of $143.7 million.

Read the full story

http://www.businessweek.com/articles/2013-08-19/the-housing-market-is-hot-so-re-max-is-going-public

FHA Trims Waiting Period for Borrowers Who Experienced

Foreclosure

Source: DSNews.com

Borrowers who went through a bankruptcy, foreclosure, deed-in-lieu, or short sale can now reenter the

market in as little as 12 months under a new guideline established by the Federal Housing Administration.

The more lenient approval process does have some eligibility requirements, such as documentation of

“certain credit impairments” and economic hardship.

Read the full story

http://www.dsnews.com/articles/fha-trims-waiting-period-for-borrows-who-experienced-foreclosure-

2013-08-19

Homebuilders picked up pace of construction, permits in July

Source: The Hill

The Commerce Department has reported that construction experienced an increase of 5.9 percent from

June, thereby bringing the seasonally adjusted annual rate to 896,000. Multifamily construction also rose

26 percent. Permits jumped 2.7 percent to 943,000 largely due to a boost from apartment permits.

Read the full story

http://thehill.com/blogs/on-the-money/1091-housing/317401-home-builders-picked-up-pace-ofconstruction-

permits-in-july

Debunking the Myth of Strategic Default

Source: UCLA

Researchers at UCLA’s Ziman Center for Real Estate say data suggests that “strategic” defaults during

the 2007-2009 recession were relatively rare. They found that job loss increases the probability of default

between 5 to 13 percentage points, and severe negative equity (-20% or more) also increases the

probability of default by 5 to 18 percentage points. Reportedly, job loss is the main “single trigger”

determinant of default, which could have policy implications when it comes to promoting temporary

mortgage modifications.

Read the full story

http://www.anderson.ucla.edu/Documents/areas/ctr/ziman/UCLA_Economic_Letter_Herkenhoff_8-20-

13.pdf

Dissolving Fannie Mae, Freddie Mac may hurt borrowers

Source: The LA Times

What will the proposed elimination of Fannie Mae and Freddie Mac mean for consumers? In the absence

of a government guarantee, experts contend that mortgage rates are likely to rise, and the widespread

availability of 30-year mortgages would be jeopardized. Economists at Moody's Analytics estimate the

average mortgage borrower would see interest rates increase by one-half to three-quarters of a percentage

point.

Read the full story

http://www.latimes.com/business/realestate/la-fi-harney-20130818,0,635900.story

What You Should Know…



Home prices continued to post strong annual gains, and home sales recorded the first annual

increase in six months, according to the CALIFORNIA ASSOCIATION OF REALTORS

®

(C.A.R.). Closed escrow sales of existing, single-family detached homes in California totaled a

seasonally adjusted annualized rate of 443,520 units in July, according to information collected

by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide.



C.A.R. reports that sales in July were up 7 percent from a revised 414,670 in June and up 1.5

percent from a revised 436,870 in July 2012. The year-to-year sales increase was the first since

December 2012, following six consecutive months of declines.



C.A.R.’s July 2013 resale housing report also notes that the available supply of existing, singlefamily

detached homes for sale held steady in July at 2.9 months, unchanged from June’s Unsold

Inventory Index. The index was 3.5 months in July 2012. The index indicates the number of

months needed to sell the supply of homes on the market at the current sales rate.

Market Update

QUOTE OF THE WEEK... "If you don't understand the details of your business, you are going to fail." --Jeff Bezos, founder and CEO of Amazon.com 
INFO THAT HITS US WHERE WE LIVE... It was certainly important to understand the details of last week's Existing Home Sales report. The headline numbers showed June Existing Home Sales were down a disappointing 1.2%, to a 5.08 million annual rate. But other details were encouraging. Existing Home Sales are up 15.2% over a year ago. The median price of an existing home rose and is now up 13.5% from a year ago. Sales are near their highest levels since November 2009, when they were spiked by the big home buyer tax credit. Existing home sales remain above the 5 million a year threshold, a very decent place to be. 

No need to dig into the details of New Home Sales to see success. New single-family home sales shot up 8.3% in June, to a 497,000 annual rate, their highest level since May 2008. These sales are now up a humongous 38.1% versus a year ago.The median price of a new home also gained for the month and is now up 7.4% from a year ago. For those worried about how the recent uptick in mortgage rates would affect sales, this first look at purchase contracts signed in June shows no impact.The FHFA index of prices for homes financed with conforming mortgages was up 0.7% in May, up 7.3% over a year ago.
BUSINESS TIP OF THE WEEK... Learn all you can about the people you want as clients. Check into their social networks and blogs. Then when you get together, you can offer them something meaningful and create immediate rapport.

>> Review of Last Week

TWO UP, ONE SIDEWAYS... The Dow and Nasdaq stock indexes both closed the week marginally ahead, while the S&P 500 essentially went sideways, off less than half a point. These tepid performances reflected the wary mood of investors, as corporate earnings reports were mixed, surprising both to the upside and the down. Wall Street may also have been cautiously looking ahead to this week, packed with market-moving items, including Q2 GDP, another Fed meeting, and the July Employment Report. This isn't to say investors aren't still hopeful, as the Dow and S&P 500 are up 19% on the year and the Nasdaq is up 20%!

The economic data reported during the week continued to deliver mixed messages. June Durable Goods Orders beat expectations, but when the volatile transportation sector was excluded, the number missed estimates, coming in flat. New Home Sales were up for June, but Existing Home Sales dipped. Continuing unemployment claims slid below the 3 million threshold, but new weekly jobless claims edged up to 343,000. Happily, on Friday, the University of Michigan Consumer Sentiment Index blew past analyst predictions. 

The week ended with the Dow up 0.1%, to 15559; the S&P 500 flat, at 1692; and the Nasdaq up 0.7%, to 3613. 
The bears were back in control of the bond market, as the light week of economic data was positive enough to nudge prices down. The FNMA 3.5% bond we watch ended the week down .82, to $100.28. Freddie Mac's Primary Mortgage Market Survey for the week ending July 25 showed national average fixed mortgage rates easing for the second week in a row. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information. The Mortgage Bankers Association's Purchase Loan Index was off 2% for the week ending July 19, but up 6% over a year ago. 

DID YOU KNOW?... This week's Employment Report is released by the Commerce Department, one of 15 departments in the executive branch of the federal government. Commerce looks after a wide range of U.S. economic and business activities.

>> This Week’s Forecast

PENDING HOME SALES AND GDP SLIDE, THE FED MEETS, JOBS HOLD... What an action packed week if you're into economic data (like we are). Pending Home Salesshould be down a tad for June, and the Advanced GDP reading for Q2 is forecast to show economic growth even slower than it's been. We'll see what the Fed says about that, coming out of their FOMC Rate Decision meeting on Wednesday. 

The week ends with the July Employment Report, expected to register 188,000 newNonfarm Payrolls, as job creation holds to a moderate pace. The Unemployment Rate is predicted to inch down to 7.5%. Inflation should be OK, according to Core PCE Prices, and manufacturing should show growth in the ISM Index and Chicago PMI. Enough data for you?

>> The Week’s Economic Indicator Calendar

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates. 

Economic Calendar for the Week of July 29 – Aug 2

Date	Time (ET)	Release	For	Consensus	Prior	Impact
M Jul 29	10:00	Pending Home Sales	Jun	–1.7%	6.7%	Moderate
Tu Jul 30	10:00	Consumer Confidence	Jul	81.6	81.4	Moderate
W Jul 31	08:30	GDP – Advanced	Q2	1.1%	1.8%	Moderate
W Jul 31	08:30	GDP Chain Deflator – Advanced	Q2	1.2%	1.2%	Moderate
W Jul 31	08:30	Employment Cost Index	Q2	0.4%	0.3%	HIGH
W Jul 31	09:45	Chicago PMI	Jul	51.5	51.6	HIGH
W Jul 31	10:30	Crude Inventories	7/27	NA	–2.825M	Moderate
W Jul 31	14:00	FOMC Rate Decision	7/31	0%–0.25%	0%–0.25%	HIGH
Th Aug 1	08:30	Initial Unemployment Claims	7/27	345K	343K	Moderate
Th Aug 1	08:30	Continuing Unemployment Claims	7/20	2.995M	2.997M	Moderate
Th Aug 1	10:00	ISM Index	Jul	51.5	50.9	HIGH
F Aug 2	08:30	Average Workweek	Jul	34.5	34.5	HIGH
F Aug 2	08:30	Hourly Earnings	Jul	0.2%	0.4%	HIGH
F Aug 2	08:30	Nonfarm Payrolls	Jul	175K	195K	HIGH
F Aug 2	08:30	Unemployment Rate	Jul	7.5%	7.6%	HIGH
F Aug 2	08:30	Personal Income	Jun	0.5%	0.5%	Moderate
F Aug 2	08:30	Personal Spending	Jun	0.4%	0.3%	HIGH
F Aug 2	08:30	PCE Prices – Core	Jun	0.2%	0.1%	HIGH

>> Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months...Even if the Fed's bond purchases start to taper, Chairman Bernanke has stated they won't raise the super low Funds Rate until unemployment drops to 6.5%, a level not expected any time soon.Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

Current Fed Funds Rate: 0%–0.25%

After FOMC meeting on:	Consensus
Jul 31	0%–0.25%
Sep 18	0%–0.25%
Oct 30	0%–0.25%

Probability of change from current policy:

After FOMC meeting on:	Consensus
Jul 31	<1%
Sep 18	<1%
Oct 30	<1%