Fewer homeowners are paying off their mortgages early

Posted on September 06, 2018 in Uncategorized | Add Your Voice

Fewer homeowners are paying off their mortgages early

Residential mortgage prepayment rates slowed in 48 states and the District of Columbia between the 12-month period that ended April 30 and the 12-month period that ended July 31, according to data in reports issued by MountainView Financial Solutions, a Situs company.

The 12-month prepayment rate on all mortgages nationwide fell from 11.2% as of April 30 to 10.8% as of July 31, a decline of 40 basis points. Michigan and Tennessee had the largest slowdown in prepayment speeds, with declines of 70 basis points between the two reporting periods. Kentucky and Mississippi had prepayments slow by 60 basis points, while five states (Alaska, California, Colorado, Nebraska and Oregon) and Washington, DC, had declines of 50 basis points.

The only two states that didn’t decline between the two reporting periods were North Dakota and Wyoming, where the rates were unchanged.

Nationwide, interest rates and numerous macroeconomic factors determine the pace at which homeowners refinance their mortgages, sell their homes or otherwise pay off their mortgages earlier than the full term of their loans. However, when you look at any specific state or zoom in on one ZIP code, you realize that local economic conditions, unemployment rates, home prices and home sales are driving the prepayment decisions of individual borrowers.

Investors in mortgage servicing rights (MSRs) and whole loans therefore need to carefully monitor and model prepayment speeds at a state or even more micro level, according to Mark Garland, Managing Director of Analytics and head of MSR valuation at MountainView.

“Prepayment speeds are where we spend 75-80% of our time in pricing MSRs – it’s that important,” said Garland in a recent interview about the report. “Servicing is an elaborate bet on how long a mortgage will live. If you can get speeds right and kind of miss some of the other data trends, you’ll be very accurate in determining value. Conversely, if you get all of the other analysis right and you’re off on your prepayment speeds by even a little, your valuation will be blown up.”

MountainView’s latest report is available for download. Beyond the ranking of states relative to the average prepayment rate nationwide, the report includes state-specific graphs showing the 15-year trends of prepayment rates compared to refinance volumes and home price appreciation levels.

Would CFPB nominee hamstring the agency by slashing its budget?

If Kathy Kraninger ultimately gets confirmed as the next permanent director of the Consumer Financial Protection Bureau, many experts expect the agency will undergo a major cost-cutting effort.

Kraninger, a senior official at the Office of Management and Budget, was mostly tight-lipped about her plans for the agency at her July nomination hearing. But watchers saw clear signals of her interest in the agency’s budget as a focus, as well as in conducting cost-benefit analyses of all rulemakings.

“Being from OMB, I think [Kraninger’s] going to really go through the agency and determine what value is being had for the money being spent,” said Keith Noreika, a partner at Simpson Thacher and the former acting comptroller of the currency.

The Senate Banking Committee approved Kraninger’s nomination last month along strictly party lines. Observers say the odds favor her confirmation in the full Senate, but she faces a tight congressional calendar and strong Democratic opposition over her lack of a consumer protection background. A floor vote may not happen until after the midterm elections.

Read more: American Banker

This is how much you’ll pay in hidden costs when you own a home

Repainting a home is one of the many expenses home sellers will need to account for when listing their property.

Owning a home doesn’t come cheap these days.

Americans will have to spend nearly $9,400 in “hidden” costs to own and care for a median-priced home, according to a new analysis from real-estate website Zillow and services marketplace Thumbtack.

Necessary costs, including property taxes, utilities and homeowners insurance, add up to more than $6,300 on average. But in some cities these costs can be significantly more. In San Jose, Calif., for instance, homeowners will spend more than $17,000 per year on these required expenses.

Additionally, homeowners will generally spend more than $3,000 on average on home maintenance, such as house cleaning, lawn care and appliance repairs. The cost of labor for these projects varies. Homeowners in Portland, Ore., pay more than $3,800 on average for these services, while their peers in Miami spend only $2,570 on average.

“Ongoing maintenance costs and annual fees are some of the most common surprises for first-time home buyers after they finally become homeowners,” Zillow senior economist Aaron Terrazas wrote in the report.

Read more: MarketWatch

Home price gains start to slow this summer

National home prices increased 6.2 percent year over year in July 2018, and are forecast to increase 5.1 percent from July 2018 to July 2019. The July HPI gain was a slowdown from early spring 2018 gains of 6.6 percent. Further, an analysis of the market by price tiers indicates that lower-priced homes experienced significantly higher gains, according to the latest CoreLogic Home Price Index (HPI®) Report.

CoreLogic analyzes four individual home-price tiers that are calculated relative to the median national home sale price. The lowest price tier increased 8.9 percent year over year, compared with 7.4 percent for the low- to middle-price tier, 6.5 percent for the middle- to moderate-price tier, and 5 percent for the high-price tier.  Appreciation in the low-price tier began pulling ahead of the other price tiers in 2013, and appreciation in the low-price tier has been steady since then. The five-year appreciation rate (from July 2013 to July 2018) for the low-price tier was 48 percent, compared with five-year appreciation of 38 percent for the low- to middle-price tier, 33 percent for the middle- to moderate-price tier, and 25 percent for the high-price tier.

Read more: CoreLogic

Should you roll your student loans into a mortgage?

As Americans accumulate debt, they’re also looking for ways to manage it. From balance-transfer credit cards to loan modifications, there are options for people who want to pay off or consolidate what they owe. Rolling student loan debt into your mortgage is one of those options.

The two types of debt most Americans carry are mortgages and student loans. This year, student loan debt climbed to $1.5 trillion, the second-largest consumer debt category after mortgages, at a staggering $9 trillion, according to the Federal Reserve.

Last year, Fannie Mae, which buys and packages most of the mortgages in the U.S. and sells them to investors, added an option for mortgage borrowers with student loans: Student loan cash-out refinance. Borrowers who opt for this pay off their student debt by refinancing their mortgage.

Fannie Mae will waive the loan-level price adjustment that normally applies to these transactions. The cost of price adjustments depends on the borrower’s risk factors, such as credit score and debt-to-income ratio. Some people could pay 1 percent of the loan to get the arrangement.

Read more: CNBC

After a Starbucks opens in town, housing prices tend to rise, Harvard study finds

Each new Starbucks boosts the value of housing prices in a neighborhood. And not by an insignificant amount.

This data point is revealed in a broader study on gentrification by the Harvard Business School that relied on information from Yelp, the online restaurant review platform, and the United States Census.

A new Starbucks introduced into a ZIP code is associated with a 0.5 percent increase in housing prices within a year, the paper found.

It’s not clear whether housing prices are rising due to the Starbucks opening itself or simply because more affluent customers who would go to the coffee chain have moved into the area.

Harvard economics professor Edward Glaeser said Yelp data reveals it may be the latter. The study found that each 10-unit increase in the number of reviews is associated with a 1.4 percent increase in housing prices in the ZIP code.

Read more: CNBC

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