CoreLogic: 5 predictions for housing in 2016

Origination volume likely to drop

Brena Swanson | December 7, 2015 | Original Article

It’s looking like next year will bring more of the same in housing. According to CoreLogic, the U.S. will enter an eighth consecutive year of expansion in the second half of next year. One noteworthy, negative point however is that dollar volume of single-family mortgage originations is estimated to drop.

It’s looking like next year will bring more of the same in housing, according to CoreLogic’s (CLGX) 2016 Outlook for Housing.

“As we approach the start of 2016, the consensus view among economists is that economic growth will continue, and the U.S. will enter an eighth consecutive year of expansion in the second half of next year. Most forecasts place growth at 2 and 3 percent during 2016, creating enough jobs to exert downward pressure on the national unemployment rate,” said Frank Nothaft, senior vice president and chief economist at CoreLogic.

Nothaft predicts that housing can expect to see these five features next year:

1. Interest rates will increase

Homeowners who have adjustable-rate mortgages or home-equity loans will most likely see a rise in their interest rate because the Federal Reserve is expected to raise short-term interest rates approximately one percentage point between now and the end of 2016.

Fixed-rate mortgages will also rise, perhaps up one-half of a percentage point between now and the end of 2016, reaching 4.5% for 30-year loans. Despite this increase in interest rates, mortgage rates will remain historically low.

2. Household formations will significantly add to housing demand

More than 1.25 million new households will be formed in 2016 due to improvements in the labor market and lower unemployment rates. These new household formations will increase housing demand, specifically in the rental market.

3. Rental homes will continue to be in high demand

Rental vacancy rates are at or near their lowest levels in 20 years, and rents are rising faster than inflation. High demand for rental homes—both apartments and houses—will likely continue in 2016, especially from new, young households.

4. Home sales and home prices will likely increase

Not only is the rental market hot, but overall purchase demand may lift 2016 home sales to the best year since 2007. Nationally, home prices will likely rise at a quicker rate than inflation, but not at the same rate as last year. The CoreLogic Home Price Index showed a year-over-year increase of 6% in the last 12 months; however, 2016 is only expected to see increases of 4%-5%. This increase in home sales and home prices can be attributed to the improved economy, which has enhanced homeowners’ feelings of financial security.

5. The dollar volume of single-family mortgage originations will fall around 10%

The single-family mortgage origination decline will occur even though home equity lending is expected to rise and originations of home purchase loans will likely rise about 10% in volume next year. The growth in those two areas will be offset by a 34% drop in refinance, reflecting the higher mortgage rates and dwindling pool of borrowers with a strong financial incentive to refinance. While single-family mortgage originations are expected to fall, multifamily originations will likely rise. This gain reflects the higher property values and new construction that adds to permanent mortgage usage.

House members try end run for TRID grace period bill

Tying it to appropriations bill to avoid veto

Brena Swanson | December 4, 2015 | Original Article

The Homebuyers Assistance Act, H.R. 3192, which passed the House in October by a vote of 303-121, has yet to make its way to the Senate and the president has threatened to veto it if it gets to his desk.

The bill provides a four-month grace period for businesses that are working in good faith to comply with the TILA-RESPA Integrated Disclosure rule from the Consumer Financial Protection Bureau that went into effect Oct. 3.

Rep. French Hill, R-Ark., sponsored the bill, which passed the Financial Services Committee on July 29 on a bipartisan vote of 45-13, with several prominent Democrats also championing it.

The industry, including the National Association of Realtors, the Mortgage Bankers Association, and more than a score of other trade associations, have been pushing the government to pass the Homebuyers Assistance Act.

In order to move the bill along, Hill and 21 other members of Congress sent a letter to Speaker of the House Paul Ryan, Majority Leader Kevin McCarthy and House Appropriations Committee Chairman Hal Rogers urging them to add the provisions of H.R. 3192, the Homebuyers Assistance Act, to any year-end spending legislation.

Here’s a brief clip from the letter:

The provisions in H.R. 3192 no way delay the implementation of TRID or shield any wrongdoers from legal recourse or penalties—it simply provides a temporary safe harbor for those making a good-faith effort to comply with a very complex rule.

We respectfully request that the financial regulatory relief language, such as that included in the FY 2016 Senate Financial Services and General Government Appropriations Act, be modified to reflect the provisions of H.R. 3192 and included in any year-end legislation to provide certainty to the real estate industry and help prevent further costly market disruptions and delays for American homebuyers.”

Check here for the full letter.

By adding it to any year-end spending legislation, it gives the bill a greater chance of passing since the White House already said that it would veto the Homebuyers Assistance Act.

“The CFPB has already clearly stated that initial examinations will evaluate good faith efforts by lenders. The Administration strongly opposes [the bill], as it would unnecessarily delay implementation of important consumer protections designed to eradicate opaque lending practices that contribute to risky mortgages, hurt homeowners by removing the private right of action for violations, and undercut the nation’s financial stability,” the White House said in its release.

“If the President were presented with H.R. 3192, his senior advisors would recommend that he veto the bill,” the statement says.

TRID is a real obstacle to mortgage process

Contrary to some reports

Brena Swanson | November 30, 2015 | Original Article

Nearly two months into the new TRID world and the impacts of the Consumer Financial Protection Bureau’s Know Before You Owe mortgage disclosure rule, also called the TILA-RESPA Integrated Disclosures rule, are starting to come to light.

Despite reports saying that TRID hasn’t caused any major lending delays, the key word in all the reports is ‘yet.’ And while the issues may not be creating giant hurdles in the mortgage industry, they are still a direct result of TRID.

According to HousingWire sources, the title industry, for one, is struggling to adapt to the new TRID rules.

TRID’s impact

For example, according to the source, after consideration, one title company decided that it would not perform the new TRID loan closings because of the liability that the new rule poses, citing they have had no hands-on training, only training through web sites and printed information, causing them to feel unqualified enough to do the best job.

And that’s not the only company having trouble. The source also noted that a land title company in Colorado said they had two transactions last week that did not close because the lender did not meet the delivery time frame for the closing disclosure.

However, issues in the title industry shouldn’t come as a giant surprise.

In a hearing before the House Financial Services Committee’s Housing and Insurance Subcommittee in May, Diane Evans, president of the American Land Title Association, addressed the glaring issue in the new TILA-RESPA Integrated Disclosure Rule in regards to title insurance.

“For the majority of real estate transactions, the rule requires a complicated formula that will disclose to consumers an inaccurate price for title insurance. Under this new rule, the CFPB actually mandates that the correct and actual price of title insurance products be withheld from consumers,” Evans said in her testimony before the subcommittee.

And the title industry isn’t the only sector starting to see side effects from TRID.

“There has been a spike in the number of real estate agents requesting commission advances from our company recently, and this seems to have at least a correlation with TRID,” said Jake Kucheck, director at Express Cash Flow.

“The thought is that even if there is no massive delay or impact caused by TRID, or if we simply haven’t seen it yet, agents have nonetheless had a change in their psychology due to the expectation of longer transactions, and thus, more of them have requested advances against their commissions,” Kucheck said. “Whether it’s because real estate agents are scared of what happened or scared of what might happen we can’t say.”

However, he noted that seasonal trends do play a part too since there are typically fewer real estate transactions in fall months. As a result, agents may be stretching their budgets already due to a seasonally expected reduction in income.

The industry’s game plan

The industry, including the National Association of Realtors, the Mortgage Bankers Association, and more than a score of other trade associations, have been pushing the government to pass the Homebuyers Assistance Act, which provides a four-month grace period for businesses that are working in good faith to comply with the new 1,888-page rule from the CFPB.

Rep. French Hill, R-Ark., sponsored the bill, H.R. 3192, which passed the Financial Services Committee on July 29 with a bipartisan vote of 45-13, but prominent Democrats also championed it.

Rep. Brad Sherman, D-Calif., one of the co-sponsors of the bill, said the bill would help ensure access to mortgage credit during the hold-harmless period because it would allow small lenders to work toward full compliance without penalty.

Defying the threat of a White House veto, the House on Oct. 7 passed bipartisan legislation to help homebuyers avoid delays and disruptions when closing on their new homes by a bipartisan vote of 303-121.

The measure is currently waiting to go to the Senate for consideration.