This is the selection of posts from the second half of 2019. I’ve focused on lending, US markets only and there’s much more at each link to read. I’ll have more in the comments below later. Thanks for dropping by.

July 1, 2019 “Chris Birk, a spokesman for Veterans United, the nation’s largest VA lender, said the program is as popular now as it’s ever been. Before the 2007-08 housing market crash, VA loans accounted for just 2% of all mortgages. Now they account for 12%. ‘VA loans are not one-time-only deals; veterans can get multiple loans over their lifetime, provided they don’t default on the loan. The only difference is that the closing-cost fee veterans are charged increases on the second and subsequent mortgage. Many simply roll the cost into their loan amount and can use the no-money-down strategy to build a small portfolio of income-producing rental homes. It’s a vehicle for wealth creation,’ Birk said.”

July 2, 2019 “Jeff Duffey, who runs a real estate firm that handles both existing and new home sales in Dallas, thinks that too many sellers believe Dallas is experiencing a boom market that gives them total control over pricing. ‘For example,’ he says, ‘two to three years ago, it was hard to find many homes in North Dallas that were listed between $400,000 and $600,000. Now I can show someone homes for five straight weekends and still not go through all of the active listings in that price range. Sellers who have overpriced their homes or who think they don’t need to go through the trouble to fix up their homes for sale are watching their properties sit on the market. Buyers don’t want those homes and they don’t need them.’”

July 10, 2019 “Auction.com’s first Client Summit Survey reported that 40% of its respondents revealed the western region of the U.S. is expected to see the largest rise of distressed properties in the second half of 2019. The west region posted a 10% quarter-over-quarter increase in foreclosure starts in Q1 2019, higher than the nationwide 7% increase and tied with the south for the largest regional increase. ‘Additionally, several bellwether markets in the West region posted year-over-year increases in foreclosure starts, including San Diego County, California, (up 16%); Salt Lake County, Utah, (up 11%); Denver County, Colorado, (up 20%); Snohomish County/Seattle, Washington, (up 36%); and Multnomah County/Portland, Oregon, (up 48%),’ the report states.”

July 11, 2019 “Christopher Cunningham, a Senior Loan Officer with Guild Mortgage Company, says there are programs to help buyers, even in a tough housing market. ‘Fannie Mae and Freddie Mac have gotten creative recently with higher debt-to-income ratios allowable,’ Cunningham said. ‘Guild offers a first-time homebuyer program. The State of Nevada and Rural Housing have tons of down payment programs that can help with down payments and closing costs. You see a lot of realtors asking the seller to cover closing costs these days, so the affordability is there if you can get creative.’”

“He says a lot of clients are surprised when they find out what they qualify for. ‘Every day I find someone who is scared to even start the process leave my office and is ecstatic to look for homes,’ Cunningham said. ‘And who doesn’t want to buy a home? It’s so exciting!’”

July 15, 2019 “While Hispanics comprise only 18% of the U.S. population, the group accounted for nearly 63% of new U.S. homeowner gains over the past decade, according to the National Association of Hispanic Real Estate Professionals. Jason Madiedo, chief executive of Las Vegas-based Alterra Home Loans, said 80% of his company’s loans are to Hispanic buyers and 70% are to first-time buyers who are fearful that if they don’t buy a home now they won’t ever be able to afford one. ‘The FOMO—the fear of missing out—has sort of set in,’ he said.”

“Lenders are also targeting Hispanics. Eva Angelina Romero, a real-estate agent in Nashville, said that more small lenders are offering programs geared to Hispanic buyers. One uses a tax identification number instead of a social security number, which a buyer wouldn’t have if undocumented. She said that while most of her clients used to be non-Hispanic, now 80% are Latino. ‘Mortgage companies are looking at that segment even more so now than before because refinances are not as plentiful [and saying] this is an opportunity we can no longer wait on,’ Mr. Madiedo said.”

July 17, 2019 “Foreign purchases of U.S. homes have dropped by half over the last two years. Real-estate agents said the pain from the foreign pullback is palpable when they try to sell high-end condos in Miami and New York or mansions in southern California and Seattle. ‘Generally speaking, we are in the largest market correction since the Great Recession in New York City,’ said Martin Eiden, a real-estate agent who has had to cut prices on listings from Midtown Manhattan to Brooklyn in the last year. ‘The foreign buyers have pretty much all but disappeared,’ he added. ‘I’m helping a lot of foreign buyers get their money out of this country as fast as possible.’”

“Glenn Phillips finds himself explaining to sellers the reasons why they might have to take a loss on their homes. Phillips and the agents at his company, Lake Homes Realty, have learned that to sell a high-end property, they may need to be brutally honest with homeowners whose asking price is way above what the market will bring. That’s a tactic brokers didn’t need to use before the housing crash.”

July 19, 2019 “Plano home prices have started to cool over the past year, according to industry experts. One particularly high-value Plano home Realtor Cassandra Stahl had been trying to sell recently has been sitting on the market for longer than usual. Her client, after buying the home for $630,000 two years ago, was still having trouble selling it recently after bringing the asking price down to $599,000. ‘It’s frustrating for the seller, and frustrating for me too because it’s got great schools, so it would seem that it should move very quickly,’ Stahl said. ‘But it hasn’t.’”

July 23, 2019 “Michael Borella, the sales manager at Movement Mortgage, said if you’re looking to buy a new home, now is a good time to do so. There are options out there whether you have 20 percent to put down or zero. ‘THDA is a great option there are a lot of 0% down loans. I always tell people, be prepared to spend $1,000. So where do you begin? Find a loan officer and bring important documents with you. ‘Bank statements, W2’s tax returns and tax returns aren’t always needed but they’re good to have,’ he said.”

July 24, 2019 “More Central Floridians are taking out zero-down loans to buy a home. ‘We didn’t have to put $30,000 down on a house, but you still get the house you want,’ said Christina Martinez, whose family bought a home in Kissimmee a few months ago with a zero-down loan through Veterans Affairs. ‘We could have put (something) down, but since we didn’t have to, we just didn’t.’”

“‘As people have recovered, now banks are becoming a little bit looser with their lending standards,’ said Jason Martin, a financial adviser with Allgen Financial. Stacy Luna, a lender with Atlantic Bay Mortgage Group, says buyers who don’t make much of a down payment are more likely to lose their homes to their lenders. ‘Unfortunately, what we do find with people with less skin in the game, those are the people who end up in foreclosure,’ Luna said. ‘Maybe they lose their job, or maybe they had a roommate and now the roommate’s gone, something breaks on the house. All they know is I only had $1,000 in it so why should I stay?’”

“For Dana Signore, a single mother who recently bought a house in Clermont, the only way she could afford to buy a home was if she didn’t put anything down. She qualified for a zero-down loan through the USDA for her $230,000 home. ‘That was really the only option,’ Signore said. ‘The money wasn’t there.’”

July 25, 2019 “Shanan Shepherd is co-owner of Shepherd Nelson Realty, based in Leander. Q: What should you tell your Realtor when you first meet? A: If you’re behind on your payments, tell your agent. It’s going to come out, and the agent can be proactive with your mortgage company to prevent foreclosure. But they can’t help you if they don’t know. Q: How long should a homeowner keep his or her home on the market before reconsidering selling? A: If your home hasn’t sold within 60-90 days, then you need to re-evaluate a lot of things. Is your house overpriced? Ninety percent of the time that is the problem.’”

July 27, 2019 “Alan Wang, an agent based in Santa Clara, has seen buyers avoiding townhomes and condos in favor of single-family homes, even if they have to stretch their budgets and mow their own lawns. Wang sold a two-bedroom townhome in Campbell last year for $915,000. This year, a neighbor in the townhome community asked him to sell a similar unit. Wang listed the property at $899,000 and had little interest for months, he said. Finally, they advertised the property at a below-market ‘teaser price’ of $499,000, designed to ignite a bidding war. The price drew plenty of interest, but only 2 of 18 offers came in over $700,000. The property sold for $722,000.”

July 28, 2019 “Obviously King County’s ‘Balanced Market’ is not somewhere between 4 and 6 months. As we can see in the chart above, the median price in King County fell from $650,000 in June of 2018, to $565,000 in January of 2019. The average months of inventory during that time period was 2.0475 months, with the highest month of inventory in September of 2018, at 2.83 months. Thus, at just an average of 2 months of inventory, it was very much a buyer’s market based on the drastic median price decline.”

“We have a dataset above that shows drastically declining AND increasing median prices when inventory is right around 2 months. Further, we have a dataset above that shows a higher percentage increase in median price with inventory at 1.938 months in the first half of 2019, than when inventory was at .9966 months during the first half of 2018. Are you confused, because I’m confused. Months of Inventory is not the stat to reference when discussing what Puget Sound’s balanced market is.”

July 29, 2019 “‘From an investor perspective, Brickell is a no-go zone, simply because of the amount of oversupply that exists,’ said Peter Zalewski, a principal with CondoVultures.com. ‘The cost of a condo there is so rich that landlords are having to subsidize their tenants, because the rents won’t cover the monthly costs. Before there was no alternative if you wanted to live in downtown. Suddenly there are a lot of alternatives and they are more competitive, too. The days of the Brickell landlords ruling over all are gone, just like the Spanish conquistadors.’”

August 6, 2019 “So if school is out, the University is expanding and Bay Area buyers have cash – is it time for everyone to go into debt and buy Merced real estate again? Pretend you are a home builder and you finally pay for permits on 100 new homes. In this environment, the builder might want to extend their own financing — especially if they can get a 20+% premium for their product — rather than relying upon an outside bank to finish the job. This ‘in-house’ finance practice is supported by piles of money available from hedge funds, money market managers and the like — all offering terms competitive or ‘faster and better’ than a buyer’s traditional commercial bank. In time though, underwriting can become lax as the builder and financier both want ‘a sale’ on their books by any means necessary — increasing risks for everyone long-term.”

August 6, 2019 “The July glut in the resale market is sparked, in part, by sellers who are finding ‘it’s harder to be a landlord in Seattle than it used to be’ because of regulatory changes and pressure from falling rents, said Seattle Redfin agent Jessie Culbert, who specializes in condos.”

August 16, 2019 “It’s getting harder and harder to buy a home in San Diego. But according to Veterans United Home Loans, VA loans in California are surging, and they’re up 15 percent this year in San Diego. VA purchase loans in California are up 66 percent from 2013 to 2018. Chris Birk, Director of Education at Veterans United Home Loan, says in some cases veterans and service members, if they qualify, can get a VA loan for no money down. ‘They don’t have to build pristine credit,’ adds Birk.”

August 23, 2019 “Foreign investors purchased $77.9 billion in residential property in the 12 months ending in March, down 36% from the previous 12-month period, the National Association of Realtors said. Meanwhile, more Chinese homeowners have been selling their American houses and condos because they can’t pay the maintenance costs with their money trapped in China, says Jeff Lu, vice president of Fidelity National Title Insurance Company. In Irvine, population 280,000, ‘There are 65,000 houses… and 21,000 of them are owned by Chinese.’ Lu says.”

August 24, 2019 “The next time you buy a house, your lender might deploy a drone and a computer algorithm to size up the property instead of a tape-measure-toting human appraiser. Federal regulators are moving to allow a majority of U.S. homes to be bought and sold without the involvement of licensed appraisers, by increasing from $250,000 to $400,000 the value of homes exempt from a human evaluation.”

September 5, 2019 “The Trump administration said it would support returning mortgage-finance giants Fannie Mae and Freddie Mac to private hands. ‘Our view is that the government footprint has become too big,’ Treasury Secretary Steven Mnuchin said. ‘There are people in Washington who are happy to leave this the way it is for another 10 or 20 years, and that’s not us. We feel an obligation to try to fix this.’”

“Figuring out how to refashion the companies remains the largest single piece of unfinished business from the financial crisis. ‘Investors will be much pickier and charge more for the loans they are willing to invest in,’ said Jim Parrott a former Obama administration housing adviser who is now an industry consultant. ‘That’s not to say we shouldn’t consider reducing the government’s role in places, but we should be honest about its impact.’”

September 10, 2019 “The U.S. housing finance system is worse off today than it was on the cusp of the 2008 financial crisis, Republican lawmakers and Trump administration officials warned on Tuesday. Fannie Mae and Freddie Mac, the two government-controlled enterprises that stand behind half the country’s mortgages, are way too undercapitalized, and lending standards have actually deteriorated since the housing crash, the officials said.”

“‘I will tell you as a safety-and-soundness regulator, when I look at a $3 trillion institution that is leveraged 1,000 to 1, it keeps me up at night,’ Federal Housing Finance Agency Director Mark Calabria, the companies’ regulator, told the committee. ‘If we do nothing, this is going to end very badly.’ What’s more, Fannie and Freddie are less equipped for a downturn now than they were before the crisis, Senate Banking Chairman Mike Crapo (R-Idaho) said. Before 2008, he said, the companies held 45 cents in capital for every $100 in mortgages; today that figure is 19 cents.”

“As it stands, underwriting standards at Fannie and Freddie have ‘gotten worse, not better,’ Calabria said, pointing to a ‘massive expansion’ of loans with high debt-to-income ratios in recent years. Efforts to reduce risk, though, would inevitably result in fewer people getting mortgages — a point Democrats on the committee made repeatedly. When Sen. Jack Reed (D-R.I.) pressed the officials to identify people who would not be able to get mortgages under the plan, Mnuchin said ‘there may be certain people today who really shouldn’t get a mortgage because they can’t afford them.”

September 14, 2019 “What’s up with mortgage rates? Jeff Lazerson of Mortgage Grader in Laguna Niguel gives us his take. The case touches on the rare issue of ‘business purpose’ loans, when borrowers use their own homes as collateral ‘to finance their dreams,’ as one of the law firms in the case put it. But this obscure case could have outsized implications by allowing ‘fog the mirror’ mortgages if the loan is for ‘a business purpose.’ But there is so much money to be made by every lender licensed in California (not just the private money lenders). Count California as ground zero for the next mortgage meltdown.”

October 4, 2019 “The federal government has dramatically expanded its exposure to risky mortgages. In 2019, there is more government-backed housing debt than at any other point in U.S. history, according to the Urban Institute. A growing number of homeowners faces debt payments that amount to nearly half of their monthly income. ‘There is a point here where, in an effort to create access to homeownership, you may actually be doing it in a manner that isn’t sustainable and it’s putting more people at risk,’ said David Stevens, a former commissioner of the Federal Housing Administration. ‘Competition, particularly in certain market conditions, can lead to a false narrative, like ‘housing will never go down’ or ‘you will never lose on mortgages.’”

“The Federal Housing Finance Agency, at the time under Director Mel Watt, began working on plans to direct Fannie Mae to purchase loans with higher debt-to-income thresholds, Watt said. ‘It is intuitive – you think the higher somebody’s debt-to-income ratio, the more problems they are going to have,’ he said from his home in North Carolina, where he is now retired. ‘But that’s just not the best criteria to apply to be quite honest.’”

October 8, 2019 “‘There’s another,’ said ‘Mary Jo,’ an Orange County realtor who did not want her name used, pointing at another of the large houses, this one advertising over 4,000 square feet. All of this has spiraled to a large number of hard-to-sell homes that are overvalued, expensive, that the owners don’t want to take a loss on, and younger people don’t want to buy. It’s difficult to estimate the average number of unsold McMansions, but real estate agents have reported that McMansions are hard to turn around. So much so that some neighborhoods are estimated to have half of their McMansions unsold or in foreclosure.”

“‘Some of our buyers only hang on to them for a year,’ said Mary Jo. ‘It’s the crisis hitting us. People can’t afford these, raise the money for a decent down payment, but then after a job loss or plain can’t affording it do to other higher costs, they foreclose or they sell the house. I can’t say how many are unsold in California, especially since many of them go in and out of being sold or on the market. But in Orange County it’s at least 10 to 15 percent of McMansions in states of not being sold in some developments, like if it’s in foreclosure or escrow. But it depends, become some neighborhoods have a much higher rate,’ Mary Jo explained, motioning to the row of houses with signs in front of them down the street.”

October 10, 2019 “Suastegui and Espinar are not the only Rise preconstruction buyers to take a beating in Miami’s resale market. The Real Deal found that 12 units at the 43-story building were resold between January 2018 and June 2019, at a time when the developer was also unloading more than 100 remaining units. Eleven of those resellers flipped their units at prices way below what they paid during the project’s preconstruction ramp-up. The spokesperson said some of the 12 Rise resellers were distressed buyers who needed to cash out. ‘We’ve been seeing incidences like this across Miami lately,’ the spokesperson said.”

October 15, 2019 “In Orlando, more than 1 in 10 people who applied for a loan were denied. Having bad credit and too much debt were the main reasons for denials. Daniel Betancourt, an agent in Orlando, said he hasn’t had any problems with clients getting approved, and pointed out that lending standards have actually loosened In the last few years. Brad Siebert, branch manager for The Mortgage Firm in Maitland said he was ‘shocked’ by the report. ‘I will tell you that it’s been years since I submitted a loan that hasn’t gotten approved,’ he said. ‘I’ve had more loans approved every year going back since I can remember. I don’t answer the phone and say, ‘Oh boy, it’s a Florida loan.’”

October 23, 2019 “A side comment made by a regulator during a congressional hearing Tuesday shows how little is settled when it comes to the fates of the two companies that underpin much of the housing finance market in the United States. ‘If the circumstances present itself to where we have to wipe out the shareholders, we will,’ Federal Housing Finance Agency director Mark Calabria said during a hearing before the House Financial Service Committee, referring to Fannie Mae and Freddie Mac’s shareholders.”

“Calabria frequently noted that Fannie and Freddie were operating at leverage ratios of 500 to 1, while most major banks are only allowed to maintain leverage ratios of 10 to 1. ‘Even if every single loan Fannie and Freddie made were pristine, they would still fail at that level of leverage’ in the event of a downturn, Calabria said.”

November 4, 2019 “The subprime mortgage-backed bond may be dead in America a decade after it helped trigger the global financial crisis, but a security with some of the same high-risk characteristics is starting to take off. It’s called the non-qualified mortgage — basically a loan granted to borrowers whose checkered financial record made them ineligible for conventional mortgages. This surge in issuance of non-QM bonds, as they’re called, comes just as some initial indications of delinquency rates on the loans are starting to emerge. The short answer: They’re high. About 3% to 5% in some bonds, according to Barclays Plc.”

“Fund managers’ willingness to plow money into these securities shows how the intense suspicion that met mortgage bonds after the housing bubble burst last decade is starting to slowly fade. ‘It’s obviously disturbing this late in the cycle to see originations for these loans at the kind of level they’ve kicked up to,’ said Daniel Alpert, managing partner at Westwood Capital. ‘The housing market is not quite ready for a big infusion of this product.’”

November 5, 2019 “Behind the concern aired recently at the Financial Stability Oversight Council headed by Secretary Mnuchin: the rapid growth of so-called shadow banks in the origination and servicing of home loans, especially riskier ones. ‘There is a real weakness here,’ said University of California, Berkeley professor Nancy Wallace, who co-wrote a 2018 paper titled ‘Liquidity Crises in the Mortgage Market’ with a fellow academic and three Fed economists. ‘Many of these firms are financially fragile.’ That’s because they’re dependent on short-term bank credit lines that could be pulled at times of financial stress.”

“Unlike conventional banks, the independent mortgage companies are generally monoline operations, dependent on one business to make money. Of the dozen or so evaluated by Moody’s none have an investment-grade rating on their debt. They’re not regulated by the Fed or the Federal Deposit Insurance Corp. And they lack the deposit base and access to emergency Fed financing that commercial banks enjoy.”

November 19, 2019 “A new study indicates that first-time home buyers are having more mortgage delinquency problems than they have since 2010. Black Knight’s most recent Mortgage Monitor report had some alarming findings: Nearly 1% of mortgage loan originations in the first quarter of 2019 were delinquent six months after origination. That’s a 60% increase over the past two years and the highest since 2010.”

“The rise in early-stage purchase loan delinquencies was higher for first-time buyer loans than repeat buyer loans. So why are first-time home buyers struggling to make mortgage payments? According to Black Knight, it’s largely because credit scores are down, homes are more expensive, and debt-to-income ratios are rising as a result. ‘Many first-time buyers feel pressure to compete and try and win an offer on a home. This can cause issues later when finally having to deal with new debt and repayment liability,’ notes Andy Harris, president of Vantage Mortgage Group.”

December 10, 2019 “Fannie Mae and Freddie Mac are pulling back on some mortgages meant to make homeownership more affordable, their latest effort to rein in risk at the behest of their regulator. David Battany, executive vice president for capital markets for Guild Mortgage Co., a San Diego-based lender, said Fannie and Freddie are rejecting some of his firm’s loans that they once would have agreed to back. Fannie and Freddie have now shrunk the share of these loans in their businesses for three straight quarters, according to industry research group Inside Mortgage Finance.”

“Mr. Calabria said he wants to make sure the companies won’t require another bailout. He said he also wants Fannie and Freddie to avoid making loans that may go bad during a downturn. ‘I think there’s a lot of evidence that we’re near the top of this cycle,’ Mr. Calabria said. ‘It would be counter to their mission where we get borrowers into loan products that would leave them vulnerable in a downturn.’”

December 12, 2019 “Foreclosure auction inflow data points to a third wave of post-recession distress building in late 2019 and early 2020. A total of 43,232 residential properties nationwide were referred to Auction.com in Q3 2019 for a potential future foreclosure auction, up from the previous quarter and a year ago to the highest level since Q1 2017. The characteristics of the increasing foreclosure auction inflow are distinct enough to label it a third wave of distress emerging in the wake of the Great Recession.”

“The emerging third wave of distress is primarily driven by a rising undercurrent of defaults among government-insured loans and privately held loans. Two sub-categories within the overall government-insured space stand out: VA-backed loans with a 31% increase and FHA-backed loans serviced by mid-market lenders—many of them so-called nonbank lenders and servicers—with a 17% increase.”

“The Black Knight report shows that the delinquency rate at six months after origination is trending higher for loans originated in 2018 and 2019, with a more extreme upward trend among Ginnie Mae-securitized loans—primarily comprising VA- and FHA-backed loans. The report shows that 3.3% of Ginnie Mae-securitized loans originated over the past 12 months were delinquent at six months, up from 3.1% for loans originated in 2018 to the highest level since 2009.”

“Among all loan originations, the delinquency rate six months after origination was 1% for loans originated in the first quarter of 2019, up from 0.9% for loans originated in 2018 to the highest level since 2010.”

“Among 2,410 counties with foreclosure auction inflow into Auction.com in Q3 2019, 870 counties (36%) posted a year-over-year increase in foreclosure auction inflow, including Maricopa County (Phoenix), Arizona; Miami-Dade County, Florida; Los Angeles County, California; and Bexar County (San Antonio), Texas. Also posting year-over-year increases in foreclosure auction inflow in Q3 were all three counties in the Seattle metro area: King, Pierce, and Snohomish; and three counties in the Denver metro area: Denver, Arapahoe, and Adams.”

“‘Some of the markets with the biggest inflow increases in the third quarter may be surprising given they have been rock stars of the real estate recovery of the last seven years,’ said Jesse Roth, SVP of Strategic Partnerships and Business Development at Auction.com. ‘But those markets may now be victims of their own success, with an unsustainable run-up in home prices pushing the limits of affordability for many homebuyers in recent years. Those financially stretched borrowers now have less equity cushion to protect against foreclosure, particularly if they are in a government-insured loan that came with a low down payment and down payment assistance.’”

December 14, 2019 “What might make delinquencies rise a long decline into historically low levels after the Great Recession? Mike Rawls, EVP of Servicing for Mr. Cooper points to slowdowns in home prices across the country. ‘Home price appreciation has slowed across the country and we are starting to see early stage delinquencies rising from historic lows,’ Rawls told DS News.”

“A consumer-led recession is unlikely, Kurt Johnson, Chief Credit Officer for Mr. Cooper noted, as incomes have risen steadily through 2019, while unemployment has stayed historically low. This was offset, he noted, by slow home price appreciation. ‘This should increase delinquency rates, particularly with low-down-payment, first-time homebuyers in FHA products—an historically more labor-intensive product to service,’ Johnson said.”