PARAMOUNT MORTGAGE - LENDER'S BLOG

$1.5 Trillion Mortgage Originations Forecast for 2010

Washington, D.C - The Mortgage Banker's Association (MBA) in an October 13, 2009 statement forecasts an increase in home sales for year 2010. Home sales for 2009 will be better than 2008's total and interest rates will remain steady now and into the first part of 2010.

That's good news for first-time home buyers as well as repeat home buyers in metro St. Louis. They can take advantage of newly passed legislation that extends and expands stimulus plan tax credits for their home purchases.

The MBA is the national association representing the real estate finance industry. In their 2010 outlook, Jay Brinkmann, MBA's chief economist and senior vice president for research and economics states, "The recession is behind us but the effects of the recession will linger for some time" and he continued that the state of the economy will begin to moderate as the nation "resumes sustained growth in the second half of the year."

Mortgage originations should reach $1.5 trillion in 2010. Modest increases in home sales should drive purchase originations but refinance originations are expected to decline.

The MBA predicts uncertainty regarding rates immediately following the termination of the Federal Reserve's purchase of mortgage-backed securities in the first quarter 2010. No doubt the Fed will do its best to minimize adverse effects, but the elimination of these purchases will put upward pressure on all long-term rates as well as the spread between mortgage rates and Treasuries.

Here are the key points of the latest MBA forecast:

Link: 2010 Forecast

Reappraising Home Appraisers

Reported by James R. Haggerty, Wall Street Journal

After being blamed for helping to inflate home values during the housing boom, the appraisal business is again coming under fire.

Squeezed by a drop in fees, some appraisers are compensating by driving long distances to handle more assignments. Their wanderings are raising questions about whether they know enough about the distant neighborhoods they visit to accurately assess the value of homes.

Bob Blake, a flight-test engineer who lives in Palm Beach Gardens, Fla., was shocked when an appraiser who traveled 44 miles from Port St. Lucie, Fla., valued his home at $228,000 in late May. A protest was launched at the Appraisal Management Company (AMC) charging that the appraiser had failed to look at equivalent comparable homes. The AMC sent another appraiser who valued the home at $295,000, a difference of $67,000. The dispute delayed Mr. Blake's refinancing by more than six weeks and jeopardized his closing.

If appraisals come in too high, buyers may overpay, making defaults more likely. If they are too low, it becomes hard to sell or refinance homes. Many real-estate agents and builders say that the pendulum has swung too far toward caution. Inaccurate calculations by appraisers who are unfamiliar with local markets threaten to snuff out any recovery in the housing market.

In June, Evie Salazar traveled about 75 miles from her office in Corona, Calif., to do an appraisal in Cathedral City, Calif. Because business was slow, "You do what you've got to do at times to feed the family and pay the bills," she says.

Ms. Salazar, an appraiser for the past 12 years, says she researched the market carefully and did a good job. But many real estate agents and mortgage brokers charge that some wandering appraisers are coming up with dubious estimates. Too many appraisers are getting assignments in places where they "just don't know the nuances," says Rick Turley, who oversees the San Francisco Bay area for the Coldwell Banker real-estate-brokerage chain.

At the end of July this year, the Home Valuation Code of Conduct (HVCC) was enacted to ensure appraiser independence. The Code bars loan officers, mortgage brokers or real-estate agents from influencing the appraisal process or selecting appraisers. One result is that more lenders have outsourced the selection of appraisers to appraisal-management companies, or AMCs.

Paramount Mortgage, which does not use AMCs, has implemented rigorous internal quality control procedures to adhere to HVCC guidelines. Using only a select group of local and knowledgeable appraisers, Paramount can ensure accurate property evaluations. Appraisers are required to follow a set of national rules known as the Uniform Standards of Professional Appraisal Practice.

Though consumers can't choose their own appraiser -- unless they're paying cash for a home -- they should request a copy of the appraisal and examine it for any errors. If there are flaws it should be reviewed and redone if necessary.

Link: Appraisals

FHA Sets High Bar: 2 Million Loans

Providence, RI - The Federal Housing Administration (FHA) is starting a new fiscal year with a goal of reaching two million insured loans during FY 2009. Mark Fogarty, National Mortgage News reported on October 5th that if this benchmark was achieved it would break all single year records in the history of the agency.

Two million insured loans would be more volume than FHA did for calendar years 2005, 2006 and 2007 combined. Gerald Glavey, director of processing and underwriting at the Department of Housing and Urban Development, presented his data at the New England Mortgage Banking Conference. Mr. Glavey indicated that a good year for the insurer would be about one million loans.

FHA has increased its market share to a new high of 25% of the country's mortgage market. This is up 3% from just a few years ago. For first-time homebuyers, the agency has an 80% share of the market.

This number shows that the agency is on track to fulfill its mandate providing low and moderate income families the means to find safe and affordable housing options, while allowing for a competitive home sales market.

Currently, FHA borrowers' FICO scores now average 693, stated Glavey. That is a gain of 60 points from just two years ago when the typical borrower had a score of 633. At that time nearly 50% of FHA borrowers had FICO scores under 620. Presently, just 7.5% of all FHA borrowers have scores 620 and under.

For calendar year 2008, FHA insured nearly 1.5 million loans, more than double the 580,000 it did in 2007. In 2006, volume was just above 500,000 loans and in 2005 volume was slightly higher at 523,000 mortgages.

Mr. Glavey presented additional information to the conference about FHA's reverse mortgage program which insured 115,000 Home Equity Conversion Mortgages in 2008, more than double the 48,000 it did in 2005.

The agency insured 810,000 mortgages last year, and 542,000 refinances, of which 431,000 were originally non-FHA loans. The number of 2008 refinances exceeded what the agency completed for the combined years of 2005, 2006, and 2007.

Link: FHA Sets High Bar