october 2006
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TABLE OF CONTENTS
* Economy
Will Continue to Slow, 2007 Originations Down
14% from
2006 According to Latest MBA Forecast
*
First Half 2006 Mortgage Originations Volume
Down; Non-traditional
Mortgage Volume Up
*
Subprime Mortgage
Originations Volume Down in the First Half of
2006
*
Just the Facts
*
Statewide "Don't Borrow Trouble New Hampshire"
Campaign
Launched to Help Consumers Avoid
Predatory Lending
*
Federal
Regulatory Agencies Issue Final Guidance on
Non-traditional
Mortgage Product Risk
*
MBBA-NH's Golf
Extravaganza Supports First-Time Home Buyer
Seminars
*
Program
Schedule
Economy Will Continue
to Slow, 2007 Originations Down 14% from 2006, According to
Latest MBA Forecast
Washington. D.C. (October 24, 2006) - Economic growth
will continue to slow through the rest of 2006 but should
return to near normal growth during 2007 and 2008, according
to the latest economic forecast released by the Mortgage
Bankers Association. Total residential mortgage
production in 2006 will be $2.46 trillion, the fifth-highest
level, but will drop another 14 percent in 2007 to $2.1
trillion and remain unchanged at that level in 2008.
"Despite sluggish growth, largely due to
declining residential investment and auto production in the
second half of this year, we are optimistic about a rebound
in 2007." said Doug Duncan, MBA chief economist and senior
vice president for research and business development.
"Long-term interest rates have remained low in the face of
rising short-term rates, equity prices have risen nearly 20
percent, capital expenditures remain strong, the trade
sector has turned from a big drag on growth to a modest
stimulus, and energy prices have dropped sharply."
The following are the key points of the
latest MBA forecast:
-
Real GDP growth will average about
3.1 percent in 2006, 3.0 percent in 2007 and 3.2 percent
in 2008.
-
The unemployment rate will increase
from the current level of 4.6 percent to 4.9 percent by
the end of 2006 and to 5.2 percent by mid 2007 and
remain there through 2008. We expect the labor market to
add an average of about 90,000-100,000 jobs monthly over
the next 12 months.
-
Fixed mortgage rates should remain at
about today's 6.3-6.4 percent through the rest of the
year. Rates are expected to rise to about 6.7 percent
by the end of 2007 and to about 6.8 percent by the end
of 2008.
-
The yield curve remains inverted,
with the fed funds rate and the 1-year Treasury yield
exceeding the 10-year Treasury yield.
-
The yield spread between
fixed and adjustable rate mortgages has remained at its
lowest levels in over 5 years. The share of adjustable
rate mortgages has declined from 30 percent at the
beginning of the year to 20 percent in August, according
to the Federal Housing Finance Board (which only
includes conventional loans for home purchase). We
project the decline in the share will continue through
the forecast period, reaching about 19 percent by the
end of 2008. The ARM share from the Mortgage Bankers
Association weekly survey of mortgage applications
(which include both purchase and refi loans) has shown a
much more modest decline, however. The ARM share
remained elevated at nearly 27 percent of the number of
loans by mid October, compared with about 30 percent at
the beginning of the year.
-
Total existing-home sales for 2006
will decline by about 9 percent relative to a record
level in 2005, and will pull back by about another 8
percent in 2007. New-home sales will decline by nearly
18 percent from a record high in 2005 but will slip by
about 8 percent in 2007. Both new and existing home
sales will increase modestly in 2008.
-
-
Existing
home price appreciation is expected to slow
significantly this year, with median price gains
decelerating to about 2.5 percent. Median new home price
gains are projected to moderate to about 1 percent.
Price gains for both existing and new homes in 2007 are
expected to be similar to those in 2006. Home price
appreciation should strengthen modestly in 2008.
-
Residential mortgage originations for purchase loans
will reach $1.39 trillion in 2006 and will edge down to
$1.32 trillion in 2007. Residential refinance loans will
total $1.07 trillion in 2006 and then decline to $807
billion in 2007. For 2008, both purchase and refi
originations should remain relatively flat to their 2007
levels.
-
Total
residential mortgage production in 2006 will be $2.46
trillion, the fifth-highest level ever, declining by
about 19 percent from an estimated $3.03 trillion in
2005 (the second-highest level ever). Total mortgage
originations should decline an additional 14 percent to
$2.12 trillion in 2007 and should remain flat in 2008.
-
The risks to the forecast lie mainly
on the downside. The housing sector could deteriorate
more than projected, with sharper declines in
single-family housing starts and home sales, resulting
in sustained declining year-over-year home prices. This
could lead to a marked slowdown in consumer spending
growth. If so, the Fed could start easing to prevent a
recession. However, if core inflation remains elevated
or even edges higher, the Fed would likely remain on the
sideline, increasing the risk of a recession. The MBA
believes the probability for this scenario to be small.
-
The MBA revised its estimate of total
mortgage originations in 2005 to reflect newly released
data from the Home Mortgage Disclosure Act (HMDA) and
the MBA Survey of Mortgage Originations.
The Mortgage Bankers Association (MBA) is
the national association representing the real estate
finance industry, an industry that employs more than 500,000
people in virtually every community in the country.
Headquartered in
Washington, D.C., the
association works to ensure the continued strength of the
nation's residential and commercial real estate markets; to
expand homeownership and extend access to affordable housing
to all Americans. MBA promotes fair and ethical lending
practices and fosters professional excellence among real
estate finance employees through a wide range of educational
programs and a variety of publications. Its membership of
over 3,000 companies includes all elements of real estate
finance: mortgage companies, mortgage brokers, commercial
banks, thrifts, Wall Street conduits, life insurance
companies and others in the mortgage lending field. For
additional information, visit MBA's Web site:
www.mortgagebankers.org.
First Half 2006 Mortgage
Originations Volume Down; Non-traditional
Mortgage Volumes Up
WASHINGTON, D.C. (October 23, 2006) -
First mortgage originations volume decreased 16 percent
based in the first half of 2006 according to the Mortgage
Bankers Association's (MBA's) Mortgage Originations Survey
released today. The survey results continue to show strong
demand for interest-only and payment option mortgages,
so-called "non-traditional" products.
"In the
context of a decelerating housing market and a slowing of
overall mortgage originations activity, consumers continued
to choose IOs and payment option loans in the first half of
2006," said Doug Duncan, MBA's chief economist and senior
vice president of research and business development. "In
particular, fixed-rate IO volume increased markedly. As
expected, consumers respond to changing opportunities in the
marketplace, but it looks like these products serve an
important need."
Key
findings from the survey (percentages are based on dollar
volume of originated loans):
-
For first mortgages, fixed-rate
loans, including IOs, accounted for 49 percent of loans
in the first half of 2006 compared to 47 percent in the
second half of 2005.
-
IOs accounted for 26 percent of
originations in the first half of 2006. However, the
composition of IO originations changed, with fixed rate
IOs accounting for 24 percent of all IOs in the first
half of 2006 compared to 13 percent in the second half
of 2005. Payment option mortgages ("Option ARMs")
accounted for 15 percent of the dollar volume of
originations in the first half of 2006, up from 8
percent in the second half of 2005.
-
First-time homebuyer purchases
represented almost one in three home purchases in the
first half of 2006. Their average loan amount was
$189,883, significantly less than the average loan
amount of $236,517 for non first-time homebuyers.
-
Of the first half originations, 19
percent were for single-family attached homes, 75
percent for single-family detached homes, 1 percent for
manufactured and mobile homes and 4 percent for 2-4 unit
structures. About half of single-family attached home
originations were for condos or cooperatives, the
remainder being for other single-family attached
properties such as townhouses, duplexes and rowhouses.
-
From the second half of
2005 to the first half of 2006, reverse mortgage dollar
volume decreased 23 percent, with FHA's Home Equity
Conversion Mortgages (HECMs) decreasing by 16 percent
and other reverse mortgages decreasing 76 percent.
However, the total number of reverse mortgage loans
increased 31 percent. This result was driven by a 7
percent decline in large dollar balance reverse
mortgages, but a 32 percent increase in smaller balance
HECM loans.
Data on
second mortgage originations:
The survey
included 115 participants, including almost all of the top
30 originators. During the first half of 2006, survey
participants originated $640 billion in first mortgages and
$175 billion in second mortgages.
The
Mortgage Bankers Association (MBA) is the national
association representing the real estate finance industry,
an industry that employs more than 500,000 people in
virtually every community in the country. Headquartered in
Washington, D.C., the association works to ensure the
continued strength of the nation's residential and
commercial real estate markets; to expand homeownership and
extend access to affordable housing to all Americans. MBA
promotes fair and ethical lending practices and fosters
professional excellence among real estate finance employees
through a wide range of educational programs and a variety
of publications. Its membership of over 3,000 companies
includes all elements of real estate finance: mortgage
companies, mortgage brokers, commercial banks, thrifts, Wall
Street conduits, life insurance companies and others in the
mortgage lending field. For additional information, visit
MBA's Web site:
www.mortgagebankers.org.
Subprime Mortgage
Originations Volume Down in the First Half of 2006
WASHINGTON, D.C. (October 23, 2006) -
First mortgage subprime originations volume decreased 30
percent in the first half of 2006 according to the Mortgage
Bankers Association's (MBA's) Subprime Mortgage Originations
Survey released today.
Key
findings from the survey (percentages are based on dollar
volume of originated loans):
-
For the first half of 2006, 55
percent of subprime originations were for refinance
purposes compared with 60 percent in the second half of
2005. Among subprime refinances, 75 percent were for
cashout purposes compared with 88 percent for the second
half of 2005.
Regarding
subprime second mortgages:
-
The average loan amount for second
mortgages in this half was $33,555, a decline from
$52,382 from the second half of 2005. The significant
drop in the average loan amount along with the rise in
the number of second mortgage originations was driven
largely by a sharp increase in low balance stand alone
HELOCs.
"In the
context of a decelerating housing market and a slowing of
overall mortgage originations activity, subprime mortgage
originations slowed as well in the first half of 2006," said
Doug Duncan, MBA's chief economist and senior vice president
of research and business development. "Consumers respond to
changing opportunities in the marketplace, but it looks like
these products serve an important need. In particular, one
in four subprime purchase loans was made to a first-time
homebuyer during this time period."
This is the
second report on subprime mortgage originations. The
inaugural report covered subprime origination data from the
second half of 2005. More than 25 companies participated in
this survey, including most of the top 10 subprime
originators. The origination data is from companies that
originate at least 50 percent subprime or ones that could
break out their subprime originations separately.
The
Mortgage Bankers Association (MBA) is the national
association representing the real estate finance industry,
an industry that employs more than 500,000 people in
virtually every community in the country. Headquartered in
Washington, D.C., the association works to ensure the
continued strength of the nation's residential and
commercial real estate markets; to expand homeownership and
extend access to affordable housing to all Americans. MBA
promotes fair and ethical lending practices and fosters
professional excellence among real estate finance employees
through a wide range of educational programs and a variety
of publications. Its membership of over 3,000 companies
includes all elements of real estate finance: mortgage
companies, mortgage brokers, commercial banks, thrifts, Wall
Street conduits, life insurance companies and others in the
mortgage lending field. For additional information, visit
MBA's Web site:
www.mortgagebankers.org.
Just the Facts
-
Home
builders have enjoyed a surge of demand for most of the past
decade, but they must now prepare for the down side of their
always cyclical market. Over the past ten years, home
builders constructed more houses than in any other era in
recent history. From 1995 to 2005, more than 13.5
million single-family homes went up, according to the
National Association of Home Builders (HAHB), Washington,
DC.
-
SINGAPORE - Is the global economy about to blow up with a
bang, or stall with a whimper? As International
Monetary Fund and World Bank officials met recently,
economists say that irrespective of political risks - from
the standoff between Western nations and Iran over nuclear
issues; to Mideast tension; to increased oil nationalism in
petro-rich nations - global growth has probably
peaked. (September 19, 2006 International Herald
Tribune)
-
Millions of
homebuyers could be forced to take out private insurance
coverage to protect them against unemployment, sickness,
debts, and repossession. This would add between Pounds
10 and Pounds 12 a month to repayments on a Pounds 100,000
home loan. Their monthly payments would be covered if
a buyer sudently lost their job or fell ill. The
government has been pushing the idea . . . (September 16,
2006, Daily Mail; London, England)
-
If you have
experienced foreclosure, you're not alone. Within the
last five years alone, more than 2.9 million households in
the United States have experienced foreclosure.
Unfortunately, according to a national poll recently funded
by Homeownership Preservation Foundation (www.hpfonline.org),
53 percent of American homeowners would not contact their
mortgage company for help if faced with foreclosure.
(September 16, 2006, Leavenworth Times)
-
Group
mortgages are becoming increasingly popular with first-time
buyers looking to get on to the property ladder. Some
57 percent of potential homebuyers questioned in a survey
said they would be prepared to share a mortgage with as many
as three other people. And more than three quarters of
people still living with their parents said they would
consider clubbing together with family and friends.
(September 16, 2006, The Birmingham Post)
Statewide "Don't Borrow Trouble New Hampshire" Campaign
Launched to Help Consumers Avoid Predatory Lending
 Concord,
NH
– At a press conference, a coalition of private and
public organizations, including New Hampshire Housing
Finance Authority, Citizens Bank, and Freddie Mac (NYSE:
FRE), launched a major statewide public awareness and
education campaign aimed at preventing predatory lending
practices in New Hampshire.
“I
commend the “Don’t Borrow Trouble” campaign and its
community and business partners for offering a valuable
service to consumers in our state,” said New Hampshire
Governor, John Lynch, in a proclamation written for the
event. “It is important that New Hampshire’s citizens
be made aware of the dangers and the impact of predatory
lending practices.”
The
“Don't Borrow Trouble® New Hampshire”
campaign utilizes brochures, web sites, print ads, radio
and television public service announcements throughout
the state to educate consumers who are most vulnerable
to predatory lending practices, including the elderly,
minorities and low- to moderate-income individuals. By
combining advertising and face-to-face consumer
education and housing counseling, the campaign will help
consumers avoid abusive lending practices, such as
exorbitant interest rates, excessive fees and pressuring
tactics.
Claira P.
Monier, Executive Director for New Hampshire Housing,
stated, “We are delighted to introduce this important
first-of-its-kind public awareness campaign to New
Hampshire. Low and moderate income families,
minorities, and the elderly are often targets for
unscrupulous lending schemes. New Hampshire Housing
believes it is part of our mission to make these
populations aware of the signs of predatory lending and
educate them on what they can do to avoid these
practices and still achieve their financial goals.”
The
coalition has established a toll free consumer help line
that will be staffed by trained professionals who can
offer free educational resources and counseling to
individuals seeking information about purchasing a home,
refinancing, consolidating debt, taking out a
home-equity loan, and mortgage foreclosure prevention.
Individuals can also be referred to appropriate legal or
financial experts.
“Citizens
Bank is pleased to partner with the New Hampshire
Housing Finance Authority and Freddie Mac to bring the
‘Don’t Borrow Trouble’ program to New Hampshire” said
Cathy Schmidt, President and CEO, Citizens Bank New
Hampshire. “We recognize the importance of providing
consumers with information to help them to make sound
financial choices. The more people know and understand
about credit and money management, the more likely the
will be able to protect and improve their overall
financial well-being.”
Pioneered
in Boston by Mayor Thomas M. Menino and the
Massachusetts Community and Banking Council, Freddie Mac
is the principal sponsor of the program's expansion
throughout the United States. Freddie Mac has brought
the Don't Borrow Trouble® campaign to more
than 43 locations, and has received more than 30,000
inquiries to the Campaigns' help line.
“Predatory lending practices attack the heart of our
communities. These practices can strip away home equity
and trap unwary borrowers in a dismal cycle that
ultimately replaces homeownership with foreclosure,”
said Craig Nickerson, vice president of expanding
markets for Freddie Mac. “Don’t Borrow Trouble is a
proven method to help stop predatory lending, keep
families in their homes, build wealth and strengthen
communities. These 18 organizations should be commended
for banding together and combining their resources to
educate consumers on the perils of predatory lending
practices.”
The
campaign encourages consumers to call the
Don't
Borrow Trouble®
New Hampshire toll free referral line at (866) 623-1302.
It is hoped that individuals will use this resource for
advice before they make any lending decisions that could
get them into financial difficulty. The help line is
also a resource for those who find themselves currently
in financial trouble and in jeopardy of losing their
home.
A Don't
Borrow Trouble®
New Hampshire website also has been established at
www.dontborrowtroublenh.org to give consumers
information about how to identify predatory lending
practices and provides resources for consumers who have
been victims of predatory lending.
Participating organizations of the "Don't Borrow Trouble®
New Hampshire" campaign include:
Funding
Partners:
New
Hampshire Housing Finance Authority, Freddie Mac,
Citizens Bank, US Department of Housing and Urban
Development; Counseling Partners: Affordable
Housing, Education and Development (AHEAD), CATCH
Neighborhood Housing, Consumer Credit Counseling
Services of New Hampshire and Vermont, Laconia Area
Community Land Trust, Manchester Neighborhood
Housing Services, Neighborhood Housing Services of
Greater Nashua, New Hampshire Legal Assistance;
Supporting Partners:
AARP New Hampshire, Mortgage Bankers and
Brokers Association of New Hampshire,
New
Hampshire Bankers Association, New Hampshire Community
Loan Fund.
Consumers
who would like more information about avoiding predatory
lending practices can contact the “Don’t Borrow Trouble®
New Hampshire” campaign at 1-866-623-1302 or visit the
campaign’s website at
www.dontborrowtroublenh.org.
Tips For Avoiding
Borrowing Pitfalls (Source: Freddie Mac)
Say NO to "easy money."
Borrowers should beware if someone claims "credit problems
won't affect the interest rate." Avoid solicitations for
loans that sound too good to be true. If it sounds too good
to be true, it probably is. If a solicitation is really
interesting, get it in writing!
1. Shop
around. Borrowers should talk to
several lenders to find the best loan for which they
qualify. A loan product or lending practice may
not seem predatory until compared with a similar loan
product offered by other lenders.
2. Understand
the loan terms. Borrowers should
compare loan terms from different lenders. Understand the
best loan terms available in the marketplace and compare the
APR (annual percentage rate) of loans from different
lenders. The APR takes into account both the interest rate
and the points and fees of the loan. A nonprofit housing
counselor or a lawyer can review the information with a
borrower.
3. Find
out about prepayment penalties.
Borrowers should know if the loan offered to them has a
prepayment penalty. Prepayment penalty should be a choice,
not a requirement.
4. Make
sure documents are correct. Be
cautious of someone who offers to falsify a borrower's
income information to qualify for a loan. Borrowers should
never falsify information or sign documents that they know
to be false.
5. Make
sure documents are complete. A
borrower should not sign documents that have incorrect dates
or blank fields. Be wary of promises that a lender will "fix
it later" or "fill it in later."
6. Ask
about additional fees. Borrowers
should question any items they didn't ask for. Borrowers
should also beware if they are told that single premium
credit insurance is required get a loan, or that purchasing
it will help loan approval. Review every fee and compare
different lenders' fees to ensure the most competitive loan
terms.
7. Understand
the total package. Ask for written
estimates that include all points and fees. The situation
may not seem abusive until everyone gets to the closing
table. If any fees or charges differ from what was
previously disclosed, delay the closing until all terms of
the loan are clearly understood.
8. Work
with credit counselors. A borrower
should get all the facts before deciding to combine credit
card or other debts into a home loan. Beware of scam credit
counseling/ credit consolidation agencies – unfortunately,
not all credit counseling agencies are acting in your best
interests. Talk to a community-based consumer credit
counseling agency or housing counselor before signing the
loan documents.
9. Protect
home equity. If borrowers are
taking equity out of their property, they should take out
the minimum amount needed. The equity in a home is a source
of wealth, which builds up slowly over time.
10.
If you’re not sure, don’t
sign! Get advice first! Talk to a
community-based consumer credit counseling agency or housing
counselor.
Federal Regulatory Agencies Issue
Final Guidance on Non-traditional Mortgage Product Risk
|
 The
federal financial regulatory agencies issued
final guidance to address the risks posed by
residential mortgage products often
referenced as “non-traditional”,
“alternative” or “exotic” loans. The
guidance is 45 pages long. You can obtain a
copy of the documents below. The Office of
the Comptroller of the Currency (OCC) states
“The final guidance discusses the importance
of carefully managing the potential
heightened risk levels created by these
loans. Toward that end, management should:
·
Ensure that loan
terms and underwriting standards are
consistent with prudent lending practices,
including considerations of a borrower’s
repayment capacity;
·
Recognize that
many nontraditional mortgage loans,
particularly when they have risk-layering
features, are untested in a stressed
environment. These products warrant strong
risk management standards, capital levels
commensurate with the risk, and an allowance
for loan and lease losses that reflects the
collectibility of the portfolio; and
·
Ensure that
consumers have sufficient information to
clearly understand loan terms and associated
risks prior to making a product or payment
choice. “
Addendum
NTM attachment 1 (104 KB PDF)
NTM attachment 2 (261 KB PDF)
|
|
MBBA-NH's Golf Extravaganza
Supports First-Time Home Buyer Seminars
 Goffstown,
NH – The members of the Mortgage Bankers and Brokers
Association of New Hampshire (MBBA-NH) enjoyed a fun day of
golf at their annual golf outing at Stonebridge Country
Club, Goffstown, New Hampshire, while benefiting New
Hampshire Housing’s First-Time Home Buyer Seminars.
MBBA-NH
President Bonnie Leclerc presented $3,000 to New Hampshire
Housing’s Director of Home Ownership Programs Liz
Lamoureux. “We appreciate and have become to rely on your
organization’s generous donation each year,” said Liz
Lamoureux.
For the past 11
years, MBBA-NH’s annual golf outing has benefited New
Hampshire Housing’s First-Time Home Buyer Seminars. These
seminars help guide prospective home owners through the
complicated and often confusing process of purchasing a
home. The seminars are conveniently offered statewide and
at no cost to people in New Hampshire who would like to own
their home. For more information call (603) 472-8623 or
www.nhhfa.org.
An acknowledgement and thank you to all
of MBBA-NH's Preferred Corporate Partners for helping to
make this event possible:
Programs Scheduled
Tuesday, October 10, through
Tuesday, November 14, 2006 - Course 1:
Mortgage Banking Fundamentals from 9 to 12 P.M. for six
consecutive weeks at New Hampshire Housing, 32 Constitution
Drive, Bedford, New Hampshire. Course 1 is for
employees with less than one year of experience in
residential mortgage lending. Cost to attend is
$195/members and $250/non-members. For individual
classes $35/members and $50/non-members.
Click here for more
information and to register.
Tuesday, November 14, 2006
- Network at Night from 5:30 P.M. to 8 P.M. at
Wally & Bernie's (WB's), 20 Old Granite Street, Manchester,
New Hampshire.
Click here for more information and to register.
Tuesday, December 7, 2006 - Don't Borrow Trouble
is a predatory lending campaign, developed by Freddie Mac.
Spearheading this campaign in New Hampshire is New Hampshire
Housing to educate the public through the media and 800
number. Come learn about it! More information to be announced.
Wednesday, December 13, 2006
- Annual holiday party at the Manchester Country Club, 180
South River Road, Bedford, New Hampshire, from 5:30 to 9
P.M. to benefit the United States Marines Corps "Toys for
Tots." Please bring an unwrapped toy to support this
campaign. More information to be announced..
Tuesday, February 13, through
Wednesday, February 14, 2007 - Annual Joint
Mortgage Conference at the Radisson Hotel, Center of New
Hampshire, Manchester. National sales trainer,
cocktail reception with exhibitors, fraud prevention,
economic update, compliance, etc. More information to
be announced.
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