Mortgage applications decreased 2.3% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 25, 2017. The Market Composite Index, a measure of mortgage loan application volume, decreased 2.3% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 4% compared with the previous week. The Refinance Index decreased 2% from the previous week. The seasonally adjusted Purchase Index decreased 3% from one week earlier. The unadjusted Purchase Index decreased 5% compared with the previous week and was 4% higher than the same week one year ago. The refinance share of mortgage activity increased to 49.4% of total applications from 48.7% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 6.9% of total applications. The FHA share of total applications decreased to 9.7% from 10.1% the week prior. The VA share of total applications decreased to 10.0% from 10.2% the week prior. The USDA share of total applications decreased to 0.7% from 0.8% the week prior.
US second-quarter GDP growth revised up to 3%
The US economy grew faster than initially thought in the second quarter, notching its quickest pace in more than two years, and there are signs that the momentum was sustained at the start of the third quarter. Gross domestic product increased at a 3.0% annual rate in the April-June period, the Commerce Department said in its second estimate on Wednesday. The upward revision from the 2.6% pace reported last month reflected robust consumer spending as well as strong business investment. Growth last quarter was the strongest since the first quarter of 2015 and followed a 1.2% pace in the January-March period. Economists polled by Reuters had expected that second-quarter GDP growth would be raised to a 2.7% rate. Retail sales and business spending data so far suggest the economy maintained its stamina early in the third quarter. Strong growth and a labor market that is near full employment support views the Federal Reserve will lay out a plan to start unwinding its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities next month and increase interest rates in December. With GDP quickening in the second quarter, the economy grew 2.1% in the first half of 2017. That was up from the 1.9% reported last month. Republican President Donald Trump has set an ambitious 3.0% growth target for 2017, to be achieved through a mix of tax cuts, deregulation and infrastructure spending. The Trump administration has so far failed to pass any economic legislation and is yet to articulate plans for tax reform and infrastructure. Chances are slim that the Republican-controlled US Congress will debate and pass tax reform legislation before the end of the year. So far, the political gridlock in Washington has not hurt either business or consumer confidence.
Fannie Mae, Freddie Mac suspend foreclosures and evictions in wake of Hurricane Harvey
Fannie Mae and Freddie Mac are extending additional relief to homeowners affected by the catastrophic flooding caused by Hurricane Harvey. Last week, Fannie and Freddie announced a number of measures that mortgage servicers can take to aid borrowers whose homes were damaged by the storm, including mortgage forbearance and other options. Now, with officials declaring that Harvey dumped more water on Texas than any storm in history, Fannie and Freddie announced Tuesday that each of the government-sponsored enterprises is suspending foreclosures and evictions in affected areas. Specifically, each of the GSEs is implementing a 90-day foreclosure sale suspension and a 90-day eviction suspension on borrowers whose homes are located in eligible disaster areas. Freddie Mac also said that it will be working with servicers to ensure that no property inspection costs resulting directly from Hurricane Harvey will be passed on to the affected borrowers. “We’re committed to ensuring that homeowners receive the mortgage assistance they need to overcome the devastating tragedy of Hurricane Harvey,” Yvette Gilmore, Freddie Mac’s vice president of single-family servicer performance management, said. “Once they’re out of harm’s way, homeowners should contact their servicers – the company to which they send their monthly mortgage payments. They may be eligible for forbearance on mortgage payments for up to one year if their mortgage is owned or guaranteed by Freddie Mac.”
Freddie Mac also said that it is authorizing mortgage servicers to verbally grant 90-day forbearances to “all borrowers whose homes or places of employment are located in eligible disaster areas, including borrowers with mortgages that have been previously modified or are in a modification trial period plan.” Fannie Mae noted that homeowners impacted by Hurricane Harvey may qualify for a temporary suspension or reduction of their mortgage payment for up to six months. “Our thoughts are with the families in the path of this powerful and catastrophic storm. We continue to monitor the situation in the affected areas. The storm, while weakened, continues in many areas and it is simply too early to provide any data or assessment about the scale or scope of damage resulting from Hurricane Harvey,” Carlos Perez, senior vice president and chief credit officer at Fannie Mae, said. “Preliminary assessments of actual damage at this point may be inaccurate and potentially misleading,” Perez cautioned. “We will continue to work with our Single-Family servicers to communicate our policies and ensure borrowers have access to the information and resources they need to help manage their housing challenges.”
Trump pushes tax overhaul, says it’s ‘badly needed’
President Donald Trump will kick off his lobbying effort for a tax overhaul at an event with a Midwestern manufacturing backdrop and some economic tough talk. The one thing missing? A detailed proposal. Instead, in Springfield, Missouri, Wednesday, Trump will give remarks that the White House said will focus on his “vision” for spurring job creation and economic growth by cutting rates and revising the tax code. Details will come later, officials said, when lawmakers work them out. After a year with no major legislative wins, the stakes are high for the White House and GOP leaders, who face mounting pressure to get points on the board before next year’s midterm elections. Complicating matters, the tax push comes amid an intense September workload that requires Congress to act by month’s end to fund the government and raise the debt limit, as well as pass emergency spending for the Harvey disaster. After failing to deliver on seven years of promises to repeal and replace Obamacare, many Republicans believe they must produce on taxes or face a reckoning in next year’s congressional midterm elections. If they don’t have something to show for full control of Congress and the White House, voters could try to take it all away, beginning with the GOP’s House majority. On Twitter Sunday, Trump previewed his trip, stressing the politics. Calling Missouri a “wonderful state,” he said the state’s Democratic Sen. Claire McCaskill — up for re-election next year — is “opposed to big tax cuts” and said a “Republican will win” the state. “Will be leaving for Missouri soon for a speech on tax cuts and tax reform – so badly needed!” he tweeted Wednesday morning.
Trump is kicking the effort off in Springfield, considered the birthplace of the historic Route 66 highway, known as “America’s Main Street.” Emphasizing domestic jobs, he’s appearing at the Loren Cook Company, which manufactures fans, gravity vents, laboratory exhaust systems and energy recovery ventilators. A key challenge is to frame a tax plan that could include cuts for corporations and top earners as a boon for the middle class. Officials suggested Trump would argue that cutting business taxes will benefit American companies and workers. The remarks were drafted by Trump policy adviser Stephen Miller with the speechwriting team, under Trump’s guidance, the White House said. Trump will be joined by Treasury Secretary Steven Mnuchin, Commerce Secretary Wilbur Ross, Gary Cohn, director of the National Economic Council, and Small Business Administrator Linda McMahon, said the White House. Also expected are Missouri elected officials, including Sen. Roy Blunt and Gov. Eric Greitens, as well as local business owners. Trump is expected to continue his sales pitch and Republicans are hoping the president commits in a way he never did for health care. “If you’re a Republican, you have to be encouraged by the president’s recent focus on tax reform,” said Brian McGuire, former chief of staff to Senate Majority Leader Mitch McConnell. “Not only does presidential leadership make the chances of success here far more likely, it could also very well be the difference between Donald Trump presiding over a jobs boom and Nancy Pelosi presiding over an impeachment trial.”
Foreclosures on the rise for seniors with reverse mortgages
Across the nation, an increasing number of seniors are facing foreclosure after taking out reverse mortgages, either because they fell behind on property charges or failed to meet other requirements of the complex mortgage loans, according to federal data and interviews with consumer and housing specialists. “Folks who had expected to age in place and live for the rest of their lives in their home are now having to scramble to find a new place to live,” said Odette Williamson, a staff attorney with the Boston-based National Consumer Law Center, which advocates for consumer justice for low-income people. “People just don’t know where to turn. It’s heartbreaking.” The federal Department of Housing and Urban Development, which insures most reverse mortgages in the country, says it lacks detailed data on how many homeowners have lost their homes or are facing foreclosure in the program, which was launched in 1989 and covers about 636,000 loans. Nationstar declined to comment for this article.But a HUD report issued last fall found that nearly 90,000 reverse mortgage loans held by seniors were at least 12 months behind in payment of taxes and insurance and were expected to end in “involuntary termination” in fiscal 2017. That’s more than double the number the year before. Losses in the senior mortgage program have been a drain on the Federal Housing Administration’s mortgage insurance fund that supports all single-family loan programs, including traditional forward mortgages and reverse mortgages.
HUD spokesman Brian Sullivan said the agency has tightened the requirements to reduce defaults for new loans going forward. It’s a necessary measure as its reverse mortgage portfolio — whose value can go down with defaults or home prices and property values if homes fall into disrepair — was valued last fall at negative $7.7 billion. Still, he said, reverse mortgages are “a critical resource for seniors who wish to access their accumulated home equity and age in place.” Before 2015, the only thing homeowners ages 62 and older needed to qualify for a reverse mortgage was equity in their home; lenders weren’t required to determine whether they could afford to maintain their homes or cover tax and insurance payments in the future. Some homeowners used the funds to pay off the original mortgages or ran out of money after covering living expenses over many years. Now HUD requires all borrowers to undergo a financial assessment to qualify, to make sure they will be able to pay their taxes and insurance.But tens of thousands of troubled loans remain. More than 18% of reverse mortgage loans taken out from 2009 to June 2016 are expected to go into default because of unpaid taxes and insurance, according to the HUD report. That compares with less than 3% of federally insured loans that are considered seriously delinquent in the traditional mortgage market.
Joanne Savage, an attorney with AARP’s Legal Counsel for the Elderly, said that seniors like Rayford are the victims of a past system. She joins other advocates who argue that HUD and lenders should work harder to help troubled borrowers facing displacement for relatively small debts compared with the value of their homes. “There needs to be a little more mercy,’’ Savage said. “We are going to have a steady stream of these clients for five to 10 years.” Foreclosures on these mortgages have been on the rise after a 2011 mandate from HUD requiring loan servicers to work out a repayment plan with seniors in tax and insurance default — or to foreclose if there is no way to help them. In 2015, the federal agency instituted detailed timelines for lenders to work with borrowers. HUD made the changes to shore up its insurance fund after a federal audit a year earlier that criticized it for allowing lenders to continue paying property charges for defaulting borrowers, adding to the borrowers’ final debt, which resulted in millions of dollars of losses in 2009 and 2010. In many cases, a lender paid property charges to municipalities for years, in an effort to protect the lender’s investments. Representatives of the National Reverse Mortgage Lenders Association declined to comment for this report.
Leslie Flynne, a senior vice president at the Houston-based company Reverse Mortgage Solutions, said servicers and lenders are struggling to meet strict timelines HUD set for them to deal with defaulting loans or risk losing money. She said servicers don’t want to displace struggling senior citizens, but in many cases borrowers simply don’t have enough resources to save their homes. She said seniors who obtained loans before 2015 are more likely to be in trouble. Families, nonprofits, churches and others should work to help them, Flynne said. “You have people who have run out of money, they can’t pay their taxes, and they are awaiting a miracle,” she said. Why elderly homeowners didn’t pay their taxes depends on their story. Some say they weren’t aware they had to pay taxes and insurance, thinking the charges would be covered by lenders; others knew about their obligations but ran out of money; others still say they think loan servicers have mischarged them. Advocates of the loans — including celebrity spokesmen such as Tom Selleck and Henry Winkler — say reverse mortgages can help seniors enjoy their later years. In a recent TV advertisement for American Advisors Group, Selleck says: “Many older Americans are in a tough spot right now. Why not use a reverse mortgage loan to access that equity?” Borrowers can receive 50% to 66% of the value of their equity, depending on their age and the interest rate, generally set at about 5%. For example, a 73-year-old with a home worth $100,000 and no current mortgage could receive a loan in a lump sum or monthly installments, or a line of credit, of up to $57,900, not including closing costs, according to HUD.
The debt increases each month with interest on the loan, and in many cases fees to the servicer and an insurance payment to HUD, which guarantees to take over the debt from the lender when it grows bigger than the value of the house. The loan comes due when the borrower dies, moves or violates loan requirements. At that point, owners or their heirs who want to keep the home can pay the debt or 95% of appraised value of the property — whichever is less. Or they can walk away from the house. The federal Consumer Financial Protection Bureau has long warned about deceptive advertising and reverse mortgages. In December, the federal agency fined three companies — American Advisors Group, Reverse Mortgage Solutions and Aegean Financial — for alleged false claims, saying they told seniors with reverse mortgages that they would not have to make monthly payments or face foreclosure, omitting the risks of failing to pay property charges. “These companies tricked consumers into believing they could not lose their homes with a reverse mortgage,’’ said Richard Cordray, bureau director. The companies did not admit wrongdoing in settlements that required them to collectively pay $790,000 in fines. Sarah White, a foreclosure prevention attorney at the nonprofit Connecticut Fair Housing Center in Hartford, said she went from never hearing of problems with reverse mortgages to spending a large portion of her workday helping senior citizens stave off foreclosure.