Monday Morning Cup of Coffee takes a look at news coming across HousingWire's weekend desk, with more coverage to come on bigger issues.
HousingWire broke the story on Thursday, and sources now confirm and provide additional details.
We can now report that this is part of Bank of America’s strategy to simplify and streamline itself, focusing bank-owned businesses on “operations that provide services directly to consumers.”
The anticipated closing date is Sept. 30.
CoreLogic will become a vendor supplying appraisal services to Bank of America. All domestic employees within LandSafe Appraisal are expected to transition to CoreLogic. CoreLogic wants to provide a seamless transition to support LandSafe’s business partners.
News of the sale, when HousingWire broke the story Friday, answered industry rumors that first percolated in May, with top names like Solutionstar, Fidelity and Solidifi in the running to buy the company.
LandSafe Closing Services companies are affiliated with Bank of America to provide closing services, including appraisal, credit report and verification. Only the appraisal company of LandSafe was sold.
The MBA's mortgage credit availability index has been on the rise in recent months, jumping to 125.5 in July, the highest level since June 2009. That's the good news. The not-so-good news is that the index is still only a fraction of its pre-crisis levels: while mortgage credit availability is improving, it is doing so at an extremely slow pace. Moreover, CoreLogic's Housing Credit Index, which measures realized credit access activity within the credit box, rather than the size of the box (what the MCAI provides), remains stuck in the low-end range of the past 3-4 years.
“In other words,” says Chris Flanagan, MBA/ABS strategist at Bank of America/Merrill Lynch, in a client note, “weaker credit borrowers do not appear to be responding to the loosening of mortgage credit.”
On another front, the latest housing affordability reading for May showed the index dropping back to the low end of the post-crisis range, due primarily to the steady rise in home prices. Further declines in affordability seem likely in June and July, as home prices rose further and mortgage rates moved higher, Flanagan says.
“Against this backdrop, where demand for purchase mortgage credit was already at risk of rolling over going into the back end of the year, both mortgage rates and the mortgage primary-secondary spread have dropped considerably in recent weeks, producing the strongest non-seasonally adjusted MBA purchase application index of the past five years in the latest weekly reading,” he says. “However, at the same time, the refinancing index came in near the lowest level of the past five years, even though mortgage rates were at the second lowest level over the same time frame.”
What’s all this mean? Well, basically the refinancing business is declining and lenders are "going for it" on the purchase side while they can.
“We continue to believe that housing demand would roll over fairly quickly if mortgage rates move higher, which makes us believe that long term interest rates will remain anchored near current levels,” Flanagan says. “Meanwhile, the solid employment report makes a September rate move by the Fed more likely.
“In our view, the two stories combine to make continued yield curve flattening the most likely scenario. We maintain neutral views in securitized products and agency MBS but seek to take advantage of flattening with barbell strategies that include AAA CLO floaters and long duration agency MBS and CMOs, while still preferring legacy non-agency MBS, which benefit from strength in housing,” he says.
So is the Fed rate hike on for September, or on hold? Some, like Anthony Sanders, distinguished professor of finance at George Mason University, say the former — on track — while others, like Selma Hepp, chief economist at Trulia, are more skeptical.
The Fed is looking to see “some improvement in the labor market” Hepp said, and Friday’s employment figures will probably cause them to postpone raising interest rates in September.
“Job growth continues to be driven by improvements in the West where most of the region has been growing ahead of national average. The strength of the housing market, thanks to strong job growth, is apparent in other economic numbers, including residential construction, home sales, and spending. Employment growth could be even stronger in some markets, particularly the San Francisco Bay Area, but employers are running against a limited pool of talent, particularly in tech industries,” Hepp says. “The skills gap is widening in some key growing sectors of the economy.”
Bottom line for her — it’s coming, but not as soon as September.
Meanwhile, there are few housing and mortgage finance specific metrics coming out this week, but there are some key economic indicators that the smart money will be watching. For instance, Dennis Lockhart, the head of the Atlanta Federal Reserve speaks Monday, while William Dudley who heads the New York Federal Reserve is speaking Wednesday.
The National Federation of Independent Business small business optimism index, Bloomberg’s consumer comfort index, the Red Book, retail sales and consumer sentiment all report this week. Keep an eye out for red flags — or green ones for that matter.
And, for the pessimistically minded, there is this posting from ZeroHedge about how the coalmine canaries are kinda piling up all over the place.
No banks closed the week ending Aug. 7, according to the FDIC.