Monday Morning Cup of Coffee takes a look at news coming across HousingWire’s weekend desk, with more coverage to come on bigger issues.
Nearly 20 trade groups representing lenders, banks, credit unions, title companies and others are urging federal regulators to provide guidance on how they plan to enforce a new mortgage disclosure regime that goes into effect Oct. 3.
The implementation of the Truth in Lending Act/Real Estate Settlement Procedures Act integrated disclosures poses significant "challenges" for mortgage lenders, according to a letter signed by the 18 groups.
The Consumer Financial Protection Bureau indicated that regulators will be "sensitive to the good-faith efforts" of lender efforts to comply with what is known as TRID. But the trade groups want more specifics from regulators on what that means. (Though the CFPB wrote the rule, enforcement of the new disclosures is spread out among various regulators.)
"We urge the Federal Financial Institutions Examination Council to provide needed certainty by articulating precise policies for examining and supervising financial institutions for the initial months after the TRID implementation," the Sept. 8 letter says. "The FFIEC should formally implement a clearly articulated transition period that addresses how regulators will oversee and examine regulated institutions for TRID compliance during this transition period."
The signers note that the TRID framework represents a "sea change for every participant in the mortgage lending process," including borrowers, lenders, appraisers, real estate agents, mortgage brokers, builders and other service providers.
The industry groups that signed the joint letter are: American Bankers Association, American Land Title Association, American Escrow Association, The Appraisal Firm Coalition, Appraisal Institute, Collateral Risk Network, Consumer Bankers Association, Community Home Lenders Association, Consumer Mortgage Coalition, Community Mortgage Lenders, Credit Union National Association, Housing Policy Council, Independent Community Bankers of America, Mortgage Bankers Association, National Association of Home Builders, National Association of Mortgage Brokers, National Association of Realtors and Real Estate Services Providers Council, Inc.
Fiddling while Rome burns? At Confounded Interest, Anthony Sanders points out that even as Wells Fargo (WFC) is getting gun-shy about Federal Housing Administration loans, the head of Consumer Financial Protection Bureau director Richard Cordray is taking credit for the “housing recovery.” Which, why not? The President got a Nobel Prize a month into office that even the committee now admits wasn’t a thing.
John Shrewsberry, Wells Fargo’s CFO, said Wednesday that the San Francisco bank will not make loans to FHA borrowers with low credit scores because of their higher rates of default.
Richard Cordray, Director of the CFPB, is taking credit for the success of the housing market.
This is success? Lowest new home sales (adjusted by population) and crashing homeownership rates?
Who makes the case for modestly declining home prices? Bank of America/Merrill Lynch ABS analyst Chris Flanagan, that’s who.
The last time the Fed began a tightening cycle was in mid-2004, he notes.
“A little over one year later, in September 2005, (annual) home price growth peaked at 14.5%. Two years later, in July 2006, home prices peaked. The subsequent story, of course, made history,” he writes in a client note. “This time around, home price growth peaked at 10.9% in October 2013, a few months after taper talk in May 2013.
“Home prices have yet to peak, but with the Fed tightening cycle soon to be underway (we'll see on that but we'll assume for now that's true), it's a good time to consider whether a peak in home prices is on the horizon and what might lay in store on the other side,” Flanagan says
He says he see little chance of a repeat of the epic decline in home prices of 10 years ago. But, with that said, he underscores that he does believe that home prices are likely to peak at some point in 2016, and experience modest declines, or at a minimum flat line, in subsequent years.
“This is not meant to be an uber-bearish assessment of home prices. The projection is for a net decline of roughly 2% between June 2015 and late 2019, a fairly small number,” he says. “Moreover, we still see 3% upside potential between June 2015 and October 2016. We are mindful that policy makers may have something to say about falling home prices, and that renewed intervention could stem the decline that our model calls for. But, for now, we simply review what our home price model is suggesting as the future course for home prices.”
Affordable housing groups see a brewing crisis with the dearth of affordable rental housing.
Citing new research by Harvard University’s Joint Center for Housing Studies and Enterprise Community Partners Inc. that suggests the number of households spending more than 50% of their income on rent is expected to rise at least 11% from 11.8 million to 13.1 million by 2025.
The research, if accurate, paints a bleak picture of a growing renter affordability crisis, with the largest increases expected among older adults, Hispanics and single-person households. The findings suggest that even if trends in incomes and rents turn more favorable, a variety of demographic forces—including the rapid growth of minority and senior populations—will exert continued upward pressure on the number of severely cost-burdened renters.
“Our analysis shows that even in the unlikely event that income growth greatly outpaces rent gains, the number of severely cost-burdened renters will remain near current record levels,” said Christopher Herbert, managing director of Harvard’s Joint Center for Housing Studies. “Given these data, it is critical for policymakers at all levels of government to prioritize the preservation and development of affordable rental housing as there are simply not enough quality, affordable rental units to provide housing for the millions of households paying over half their income in rental costs.”
The study says that between now and 2015, the number of severely burdened households aged 65-74 and those aged 75 and older rise by 42.1% (830,000 to 1.2 million) and 38.9% (890,000 to 1.2million); the number of Hispanic households with severe renter burdens increases 27.3% (2.6 million to 3.4 million); and the number of severely burdened single-person households jumps by 12% (5.1 million to 5.7 million).
A U.S. Treasury Department "veteran" bureaucrat misled a federal court three years when he stated that "the government did not know Fannie Mae and Freddie Mac were about to return to profitability," according to a recent article in the New York Post based on legal documents in the Fairholme trial.
The bureaucrat in question is Mario Ugoletti, who played a key role in creating the Preferred Stock Purchase Agreements, which were later amended to become the Net Worth Sweep.
The Post article says that Ugoletti's "sworn statement" on Dec. 17, 2013, in which he is denying FHFA and Treasury knew the GSEs were about to turn profitable, is contradicted by others. The article highlights the coincidental timing of events:
More than a year earlier, when losses at the two companies were forecast far into the future, the government moved to sweep any possible future Fannie and Freddie profits into Treasury's coffers.
But just weeks after the sweep, both Fannie and Freddie returned to profitability — and now lawyers for Fairholme, citing recently uncovered evidence, claim the official was not being honest.
The FHFA's Ugoletti, in a sworn statement to the federal court on Dec. 17, 2013, denied that the FHFA and Treasury knew accounting losses would soon be reversed when the sweep occurred.
But Susan McFarland, the Fannie chief financial officer who was there in 2012 when the decisions were made, disputes Ugoletti's statements, Fairholme lawyers said in their Aug. 19 filing.
Some key data comes out this week. On Monday the National Association of Realtors releases existing home sales for August. Analysts expect a step back because, after three straight months of gains, the consensus is calling for a 1.7% decline in August. Lack of homes on the market is a leading factor holding down sales, NAR says.
Tuesday the FHA releases its home sales report for July. Indications on home prices are soft recently but that could change. Following an undersized 0.2% rise in June, forecasters see a respectable 0.4% gain in July for the FHFA house price index.
And then on Thursday, we’ll see the new home sales report for August. A small rise is expected for new home sales where the consensus is calling for a 515,000 rate in August from July's 507,000. Limited supply has been holding back sales, many say, and any additional troubles in August could be blamed on stock market losses.
No banks closed in the week ending Sep. 18, according to the Federal Deposit Insurance Corp.