The Consumer Financial Protection Bureau (CFPB) has released the Ability-to-Repay rule of its new Qualified Mortgage (QM) definition, and so far, the industry has given the definition mostly praise. The definition is intended to curb reckless mortgage lending by giving lenders a legal safe harbor if they originate loans that meet the definition.
The nascent U.S. housing recovery appears to be strengthening as the new year gets under way, according to the National Association of Home Builders (NAHB), a trade group in Washington, D.C., and CoreLogic, an analytics company in Irvine, Calif.
Markets on the mend
Below is an excerpt from the latest Market Trends newsletter:
Mortgage rates tick upward
The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index, released Tuesday, posted its fifth consecutive rise in builder confidence for newly built single-family houses. The latest gain pushed the September index to its highest level in more than six years, according to the Washington, D.C.-based trade group.
Due to rising mortgage rates and an under performing market, special interest groups have begun to exhort lawmakers to expand one of the year’s more appealing home-buying incentives. The National Association of Home Builders along with the Business Roundtable, “an association of chief executives,” have prompted lawmakers to increase the first-time homebuyer tax credit by $7,000 and expand the offer to all homebuyers. The group would also like to see the tax credit’s December 1 deadline pushed back.
Housing professionals argue that creating more of an incentive for “trade-up” buyers, or non-first-time homebuyers, would create significantly more demand in the marketplace: Read the rest of this entry »
Chances are you’ve heard the phrase “you are the company you keep.” For some banks, the fear of keeping risky company has been reason enough for them to consolidate.
Despite never even falling behind on payments, numerous home builders have been told by banks that their business is no longer needed. Bank regulators have put the pressure on financial institutions to limit their exposure to the risky industry:
Dave Brown, one of the best-known home builders in Tempe, Arizona, had kept his head above water through the housing downturn, not missing a single interest payment on his loans. So he was confounded a few months back when one of his banks, spooked by the decline in his company’s revenue, suddenly demanded millions of dollars in additional collateral to continue carrying loans on his projects.
New home sales along with home prices have decreased once again in May. Despite an encouraging increase in April, new home sales are down for the sixth time in seven months. In May, new homes were sold at a seasonally adjusted annual rate of 512,000, a 2.5% drop since April. The median price of a new home dropped to $231,000, a decline of 5.7% from a year ago.
Existing inventory of unsold units grew to 10.9 months in May. Economists predict the rising inventory of unsold homes will only cause home prices to drop even further, prompting less and less buyers to enter the market.