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CoreLogic – mortgage rate forecasts call for higher rates and suggest an 11-plus% jump in buyers’ mortgage payments by next August

While the US median sale price has risen by just under 6% over the past year, the principal-and-interest mortgage payment on the median-priced home has increased nearly 15%. Moreover, while the CoreLogic Home Price Index Forecast suggests US home prices will rise 4.7% year over year in August 2019, some mortgage rate forecasts indicate the mortgage payments homebuyers will face by then will have risen by more than 11%. One way to measure the impact of inflation, mortgage rates and home prices on affordability over time is to use what we call the “typical mortgage payment.” It’s a mortgage-rate-adjusted monthly payment based on each month’s US median home sale price. It is calculated using Freddie Mac’s average rate on a 30-year fixed-rate mortgage with a 20% down payment. It does not include taxes or insurance. The typical mortgage payment is a good proxy for affordability because it shows the monthly amount that a borrower would have to qualify for to get a mortgage to buy the median-priced US home. The US median sale price in August 2018 – $226,155 – was up 5.7 year over year, while the typical mortgage payment was up 14.5% because of a nearly 0.7-percentage-point rise in mortgage rates over that one-year period.

A consensus forecast suggests mortgage rates will rise by about 0.5 percentage points between August 2018 and August 2019. The CoreLogic HPI Forecast suggests the median sale price will rise 1.9% in real, or inflation-adjust, terms over that same period (or 4.7% in nominal terms). Based on these projections, the real typical monthly mortgage payment would rise from $922 in August 2018 to $1,000 by August 2019, an 8.4% year-over-year gain. In nominal terms the typical mortgage payment’s year-over-year gain would be 11.4%. An IHS Markit forecast calls for real disposable income to rise by around 2.5% over the next year, meaning homebuyers would see a larger chunk of their incomes devoted to mortgage payments. When adjusted for inflation the typical mortgage payment puts homebuyers’ current costs in the proper historical context. Figure 2 shows that while the inflation-adjusted typical mortgage payment has trended higher in recent years, in August 2018 it remained 28.1% below the all-time peak of $1,283 in July 2006. That’s because the average mortgage rate back in June 2006 was about 6.7%, compared with an average rate of about 4.6% in August 2018, and the inflation-adjusted US median sale price in June 2006 was $248,980 (or $199,500 in 2006 dollars), compared with an August 2018 median of $226,155.

Walmart 3Q earnings beat expectations, but revenue misses

Walmart, the world’s biggest retailer, said Thursday its third-quarter adjusted earnings per share (EPS) beat Wall Street expectations on strong online shopping, but revenue was a miss. EPS was $1.08, higher than the $1.01 that had been expected and a penny more than the year-earlier quarter. Revenue came in at $124.9 billion, less than the $125.5 billion analysts polled by Refinitiv expected, but higher than the $123.2 billion in the year-earlier quarter. Same-store sales increased 3.4% and e-commerce sales surged 32%. In the US e-commerce sales climbed 43%. The company raised its fiscal 2019 guidance for adjusted EPS to a range of $4.75 to $4.85, up from $4.65 to $4.80.

NAR – realtors see increase in commercial income and sales volume for second straight year

Commercial real estate markets are on the rise, with Realtors® specializing in commercial real estate reporting both an increase in members’ gross income and sales volume, according to the National Association of Realtors® 2018 Commercial Member Profile. Corresponding to tightened inventory conditions, sales transactions for NAR’s commercial members have slowly decreased in the last two years, down from eight in 2016 to seven in 2017. The annual study’s results represent Realtors®, members of NAR, who conduct all or part of their business in commercial sales, leasing, brokerage and development for land, office and industrial space, multifamily and retail buildings, as well as property management. “The commercial real estate industry is strong and is on pace with the growing economy. Although there is a slight decrease in transactions, commercial professionals have reported improvements in their markets and business activity for consecutive years. Realtors® reported that sales volume and costs of sales increased this year, as well as median gross annual income,” said NAR President John Smaby. The median gross annual income for commercial members hit an all-time high of $150,700 in 2017, up from $120,900 in 2016. The median sales transaction volume in 2017, among members who had a transaction, was $3,870,500, an increase from the median sales volume of $3,500,000 in 2016. The median dollar value of sales has also steadily risen since 2013 to its peak of $602,500 for all commercial members in 2017, up from $543,500 in 2016.

The median gross leasing volume was $705,500 in 2017 for members who had a transaction, an increase from $538,500 in 2016. Brokers and brokers’ associates reported the highest annual gross income of $186,900 and $139,700, respectively, while sales agents reported $104,600, an increase from $81,300. Commercial members with less than two years of experience reported a median annual income of $44,000 in 2017, up from $31,500 in 2016; and those with more than 26 years of experience reported a median annual income of $192,600 in 2017, up from $162,200 in 2016. “Commercial real estate professionals are reporting great growth in the past year, which has convinced more and more members to enter the commercial industry. Fifty-one% of NAR’s commercial members worked in sales as their primary service area, followed by 16% in leasing and 12% in investment. Twenty-nine% of NAR’s commercial members worked with commercial buildings, with 13% on multifamily structures, retail, and office space. Forty-nine% of NAR’s commercial members were brokers, 29% licensed sales agents, 17% broker associates, and five% were appraisers. The median age of commercial members remained the same as last year, 60, while the median age for NAR’s commercial members with two years of experience or less was 46. Thirty% were female, up from 27% in 2017 and 70% were male, down from 73% in 2017. Seventy-eight% of commercial members worked at least 40 hours a week.

Oracle loses $10B Pentagon contract protest as rivals fear Amazon is front-runner

The US Government Accountability Office (GAO) denied a protest by tech giant Oracle on Wednesday, which claimed the Pentagon’s $10 billion pending cloud contract violated federal procurement standards and was biased toward e-commerce giant Amazon. Oracle objected to the Pentagon’s request for a single-award contract, said its solicitation process “unduly restrict[s] competition,” and asserted there were potential conflicts of interest related to the procurement process. The GAO shot down those claims, saying the Pentagon’s decision to pursue a single-source contract to obtain the cloud services was fine since “the agency reasonably determined that a single-award approach is in the government’s best interests for various reasons, including national security concerns, as the statute allows.” It also rejected conflicts of interest claims. Oracle filed the protest in August. IBM still has a complaint on file with the GAO that has not yet been resolved. In a statement, a spokesperson for the company said “both the warfighter and the taxpayer ” would benefit from a process that is truly competitive. “We are convinced that if given the opportunity to compete, DoD would choose Oracle Cloud Infrastructure for a very substantial portion of its workloads because OCI delivers the best, most performant and most secure product available at the best price,” the company spokesperson said.

The Defense Department’s pending cloud storage contract, known as Joint Enterprise Defense Infrastructure (JEDI), could span a decade and will likely be its largest yet – valued around $10 billion. The department issued draft requests for proposals to host sensitive and classified information and is expected to announce a single winner next year. Last month, search giant Google pulled its bid for the JEDI contract, amid concerns the job does not align with the company’s artificial intelligence principles. Google has dealt with employee protests and concerns over producing technology for the US military. Amazon, Oracle, IBM and Microsoft are believed to be the top contenders – but the single-source clause sparked concerns among rivals that Amazon was likely to be the winner, due to its other standing cloud deals. Microsoft released a statement in March saying it believes the best strategy would leverage “the innovations of multiple cloud service providers.” Google also said it believed a multi-cloud approach would be in the government’s best interest, “because it allows them to choose the right cloud for the right workload.” Amazon, which already holds a $600 billion cloud contract with the CIA, has a robust cloud computing division, known as Amazon Web Services, which one analyst predicts could generate $60 billion in revenue over the next five years. Earlier this year, the Pentagon dramatically scaled back the value of a contract it signed with Amazon partner REAN, to $65 million from $950 million. The original five-year agreement — which was legally challenged by Oracle – was to help accelerate agencies’ migration to the cloud.

Airbnb takes Boston to court over city’s “draconian” short-term rental rules

The city of Boston has new rules surrounding short-term rentals that are set to go into effect on Jan. 1, 2019. The rules are designed to limit the growing number of short-term rentals in the city by restricting who can list their house or apartment on a short-term rental site. But according to the most prominent short-term rental site, Airbnb, Boston’s short-term rental rules violate the Constitution, multiple federal laws, and Massachusetts state law. Therefore, the site is asking a federal judge to invalidate the city’s rules. This week, Airbnb sued the city of Boston in federal court, claiming that the city’s short-term rental ordinance requires the site (and similar sites) to police its platform far more than it does now and share confidential user information with the city. As the Boston Globe wrote this week, the city’s rules would place serious restrictions on who can rent out a unit or house via the short-term rental site. From the Globe report: “Under the rules set to take effect in January, Airbnb investors and apartment tenants would be prohibited from renting their homes by the night, and property owners would not be allowed to list more than one unit on the website. Airbnb has about 6,300 listings in Boston. Studies suggest an outsized share of its business comes from investors and other hosts the rules are aimed at curtailing.”

Airbnb claims that the city’s rules go “much further than that,” and threaten short-term rental sites with “draconian” punishments should they violate the city’s rules. “This is a case about a city trying to conscript home-sharing platforms into enforcing regulations on the city’s behalf, in a manner that would thwart both federal and Massachusetts law. The City of Boston has enacted an Ordinance limiting short-term residential rentals by hosts. But it goes much further than that,” Airbnb claims in its lawsuit filing. “The Ordinance also enlists home-sharing platforms like Airbnb into enforcing those limits under threat of draconian penalties, including $300-per-violation-per-day fines and complete banishment from doing business in Boston,” Airbnb continues. “Airbnb believes that home-sharing may be lawfully regulated, and it has worked with dozens of cities to develop the tools they need to do so without violating federal or state law,” the filing adds. “Boston’s heavy-handed approach, however, crosses several clear legal lines and must be invalidated.” According to Airbnb, Boston’s short-term rental rules would also force the site and others like it to “actively police third-party content on their websites by penalizing the design and operation of their platforms and restricting and imposing severe financial burdens on protected commercial speech.” And the site claims that the city’s rules would require it to “to disclose to the City confidential information about its users without any legal process or precompliance review.”

Airbnb also claims that the city requires short-term rental platforms to enter into nebulous “agreements” with the city that carry heavy penalties. “The Ordinance, for example, compels Airbnb to enter into undefined so-called ‘agreements’ with the City that will require Airbnb to take down listings posted by third-parties and prevent whatever scope of listings in whatever manner Boston dictates—or else be barred from Boston altogether,” Airbnb claims. According to Airbnb, the city’s rules violate the Communications Decency Act, the Stored Communications Act, the First, Fourth, and 14th Amendments of the Constitution, and the Massachusetts Declaration of Rights. To that end, the company is asking a judge to nullify the city’s rules. The city, of course, is standing by its rules but is not commenting on the lawsuit. “We cannot comment due to pending litigation,” Boston city pokesperson Samantha Ormsby said.

MBA – comments on FHA’s annual report to Congress

Robert D. Broeksmit, CMB, President and CEO of the Mortgage Bankers Association (MBA), issued the following statement regarding the US Department of Housing and Urban Development’s (HUD) Annual Report to Congress Regarding the Financial Status of the FHA Mutual Mortgage Insurance Fund. “The continued growth of the Capital Reserve Ratio is welcome news, and indicates that FHA is effectively serving its core mission in the single-family market – providing safe and affordable credit to qualified first time and low-and moderate-income borrowers – while appropriately managing its risk and protecting taxpayers. “The increase in the MMIF capital ratio to 2.76% in fiscal year 2018 moves the program farther above the 2% statutory minimum. Importantly, the forward book of business continues to perform well, with significant improvements in key indicators such as serious delinquencies, early payment defaults, claims payments, and loss rates. “We are glad to see that FHA is closely monitoring the increasing risk in the forward portfolio, indicated by rising debt-to-income ratios, declining credit scores, and the increasing use of downpayment assistance programs. While current FHA delinquencies are quite low, it is prudent to keep an eye on these trends to ensure the program does not face undue challenges if, and when, the economy and job market cool. “The drain on the fund presented by the HECM program continues a trend that MBA has highlighted previously and remains a topic of concern. Reverse mortgages are an important financial tool that, if used properly, can allow the growing number of retirees to age in place. MBA applauds the recent steps FHA has taken to stabilize and improve the HECM program, and policymakers should continue considering ways to insulate the forward program from the volatility in the reverse program.”

NAHB – statement from NAHB Chairman Randy Noel on FHA actuarial report

Randy Noel, chairman of the National Association of Home Builders (NAHB) and a custom home builder from LaPlace, La., issued the following statement after the Federal Housing Administration (FHA) released its annual actuarial report to Congress: “Today’s FHA report is very encouraging and shows a marked upturn in the health of the FHA Mutual Mortgage Insurance Fund. The net worth of the fund increased more than $8 billion over the past year to $34.86 billion and its capital-reserve ratio jumped from an upwardly revised 2.18% to 2.76%, which is well above the congressionally mandated level of 2%. “The report clearly shows that actions instituted by HUD Secretary Ben Carson and FHA Commissioner Brian Montgomery to enhance the agency’s capital reserves are showing positive results. It’s also another indicator that FHA’s financial picture continues to brighten and should provide momentum for the agency to consider a mortgage insurance premium reduction to help first-time home buyers and young families seeking to enter the housing market.”

ATTOM – nearly 1.5 million vacant US homes in Q3 2018 represent 1.52% of all single family homes and condos

–  Foreclosures Hazard Risk Most Recent Articles Single Family Rental

–  Vacant Home Rate Down from 1.58% in Q3 2017

–  10,000 Vacant “Zombie” Foreclosures Down From More Than 44,000 in 2013

ATTOM Data Solutions, curator of the nation’s premier property database, today released its 2018 Vacant Property and Zombie Foreclosure Report, which shows that nearly 1.5 million (1,447,906) US single family homes and condos were vacant at the end of Q3 2018, representing 1.52% of all homes nationwide — down from 1.58% in 2017. The report also found that there were 10,291 vacant “zombie” foreclosures homes nationwide at the end of Q3 2018, representing 3.38% of all homes actively in the foreclosure process. The number of zombie foreclosure homes was down from 14,312 a year ago, and the zombie foreclosure rate was down from 4.18% a year ago. “The number of vacant foreclosures is now less than one-fourth of the more than 44,000 in 2013 when we first began tracking these zombie homes,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “Policy solutions such as land banks designed to mitigate the ripple effects of vacant properties on neighborhoods and cities have had a substantial impact, and a booming housing market in many areas of the country is lifting all boats. There are still high concentrations of zombie homes and other vacant homes in some local markets and submarkets, but those high concentrations are becoming fewer and farther between.”

States with the highest share of vacant homes were Tennessee (2.65%), Kansas (2.50%), Oklahoma (2.49%), Mississippi (2.47%), and Indiana (2.45%). Among 153 metropolitan statistical areas analyzed in the report, those with the highest share of vacant homes were Flint, Michigan (6.99%); Youngstown, Ohio (3.80%); Beaumont-Port Arthur, Texas (3.71%); Myrtle Beach, South Carolina (3.70%); and Mobile, Alabama (3.69%). Among 405 US counties analyzed in the report, those with the highest share of vacant homes were Baltimore City, Maryland (7.83%); Genesee County (Flint), Michigan (6.99%); Saint Louis City, Missouri (5.93%); Bibb County (Macon), Georgia (5.73%); and Wayne County (Detroit), Michigan (5.60%). Among the 15,957 US zip codes analyzed in the report, 217 zip codes with a combined population of more than 2.8 million posted a vacant home rate of at least 10% at the end of Q3 2018. Zip codes with the highest vacant home rate at the end of Q3 2018 were led by 46402 in Gary, Indiana (31.41% vacant); 48505 in Flint, Michigan (31.17%); 46409 in Gary Indiana (28.92%); 46407 in Gary, Indiana (28.59%); and 29928 in Hilton Head Island, South Carolina (26.38%).

ADP job growth of 227,000 highest in eight months

Hiring remains strong across the US with private sector employment increasing by 227,000 jobs in October, according to the ADP National Employment Report®. Analysts were expecting 189,000 jobs would be added during the month. The most jobs were trade/transportation/utilities where 61,000 positions were added. Forty-thousand jobs were created in the leisure/hospitality category and 36,000 jobs were added in professional/business services. The US October payroll increase was the highest since February 2018. ADP revised the September payroll additions to 218,000 from 230,000. Despite a significant shortage in skilled talent, the labor market continues to grow,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “We saw significant gains across all industries with trade and leisure and hospitality leading the way.  We continue to see larger employers benefit in this environment as they are more apt to provide the competitive wages and strong benefits employees desire.” On Friday, the government will release its October payrolls report, which will offer an in-depth look at the labor market, including job additions, the unemployment rate, the labor participation rate and wage growth.

MBA – mortgage applications down

Mortgage applications decreased 2.5% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 26, 2018. The Market Composite Index, a measure of mortgage loan application volume, decreased 2.5% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 3% compared with the previous week. The Refinance Index decreased 4% from the previous week. The seasonally adjusted Purchase Index decreased 2% from one week earlier. The unadjusted Purchase Index decreased 2% compared with the previous week and was 0.4% lower than the same week one year ago. “The 30-year fixed-rate mortgage held steady over the week, but total applications decreased overall. Purchase applications inched backward from the previous week, as well as compared to one year ago – the first year-over-year decline in purchase activity since August,” said Joel Kan, AVP of economic and industry forecasts. “Purchase applications may have been adversely impacted by the recent uptick in rates and the significant stock market volatility we have seen the past couple of weeks. Additionally, the ARM share of applications increased to its highest level since 2017, but since this is a compositional measure, it was driven by a greater decrease in applications for fixed-term loans relative to the decrease in ARM applications.” The refinance share of mortgage activity decreased to 39.4% of total applications from 39.8% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 7.6% of total applications, the highest level since May 2017. The FHA share of total applications increased to 10.3% from 10.1% the week prior. The VA share of total applications decreased to 9.8% from 10.1% the week prior. The USDA share of total applications remained unchanged at 0.7% from the week prior.

Health care costs could plummet in Trump’s Medicare price revamp

HHS Secretary Alex Azar on the Trump administration’s plan to lower drug prices and efforts to stop the marketing and sale of e-cigarettes to teenagers.

President Trump is taking aim at “foreign free riding” by other nations and wants Americans to have the same benefits that produce lower drug prices, according to Department of Health and Human Services Secretary Alex Azar. The plan, unveiled by Trump in a speech last Thursday at the Department of Health and Human Services, calls for Medicare Opens a New Window.  to negotiate better deals with pharmaceutical companies. “Right now pharma is giving these discounts to other countries,” said HHS Secretary Alex Azar to FOX Business’ Stuart Varney on Tuesday. “And you know what we are doing? We are currently paying the list price plus a 6% markup in our program.” According to Azar, the new payment system would potentially save the American taxpayer and seniors billions in healthcare Opens a New Window.  “So we are just saying give us some of this, end this foreign freeriding off the backs of the American taxpayer and America’s seniors, and it will lead to $17 billion in savings over 5 years for the Medicare program and $3.4 billion of savings for America’s seniors,” he said. Azar said the savings will kick in by early 2020.

Rent just hit an all-time high

As it turns out, rents are still going up and just hit an all-time high, again. Earlier this week, the US Census Bureau reported that during the third quarter, the nationwide median asking rent topped $1,000 for the first time ever. According to the Census data, the median asking rent during the third quarter was $1,003, an increase of $52 over the second quarter and an increase of $91 over the same time period last year. That’s an increase of nearly 10% in just one year, which rents checked in at $912. The increase has been dramatic over the last few years. Just three years ago, the asking rent was a full $200 less per month than it is right now. As one might expect, the largest increase came in in the Northeast, where rents are among the highest in the nation. In the Northeast, the median asking rent rose from $1,134 in the second quarter to $1,210 in the third quarter. Interestingly, the third quarter total is actually less than it was during the first quarter, when the asking rent was $1,279. The largest year-to-date increase is actually in the South, where rents have climbed from $907 in the first quarter to $973 in the third quarter, an increase of $66. Rents in the West have also risen, from $1,345 in the first quarter to $1,382 in the third quarter, an increase of $37 this year. On the other hand, rents in the Midwest have fallen from $764 in the first quarter to $751 in the third quarter. So, despite falling in the Midwest and the Northeast, rents went up in the South and West, and all that added up to a $49 increase in rents this year. The rise in asking prices isn’t confined to rental units either. The median asking sales price for homes is going up as well. According to the Census data, the nationwide median asking sales price for a home rose to $206,400 during the third quarter, which marks the first time that figure has crossed $200,000. So there’s not much of a respite from the affordability issue in either renting or owning, and that’s bad news for renters, buyers, and everyone else (unless you’re a landlord or a seller, of course).

Black Knight – First Look: seasonal, calendar and hurricane-related pressures

Black Knight, Inc. reports the following “first look” at September 2018 month-end mortgage performance statistics derived from its loan-level database representing the majority of the national mortgage market.

–  Mortgage delinquencies rose more than 13% in September, the largest single-month rise since November 2008

–  16 of the last 19 Septembers have seen delinquencies increase, averaging a 5.2% rise over that time frame, the largest of any month during the calendar year

–  September 2018 also ended on a Sunday, which typically creates strong upward pressure on delinquencies

–  Hurricane Florence-related delinquencies spiked 38% month-over-month, with more than 6,000 borrowers already missing a payment as a direct result of the storm

–  Foreclosure starts posted a double-digit monthly decline, hitting a nearly 18-year low at just 40,000 for the month

–  Both the inventory of loans in active foreclosure and the foreclosure rate have now fallen below their pre-recession averages for the first time since the financial crisis

–  In the face of rising interest rates and affordability pressures, monthly prepayment activity – now primarily driven by housing turnover – fell by nearly 25% from August

Boeing shares surge after the company reports blowout results and raises 2018 forecast

–  The aerospace giant reports third-quarter adjusted earnings of $3.58 a share, topping Wall Street expectations by 11 cents.

–  Boeing raises its full year 2018 earnings forecast.

–  CEO Dennis Muilenberg notes that the company landed billions in military contracts this summer.

Shares of Dow component Boeing rose 3.8% in premarket trading Wednesday after the company reported strong third-quarter earnings on the back of a robust defense business and more efficient commercial aircraft production. The company also raised its 2018 earnings forecast, in what looks to be a record year for revenue. The aerospace giant reported adjusted earnings of $3.58 a share, topping expectations of 11 cents by analysts surveyed by Refinitiv. Third-quarter revenue came in a $25.15 billion, which was over $1 billion more than analysts forecast. Boeing raised its full year 2018 earnings forecast to a range of $14.90 to $15.10, up from its previous guidance of $14.30 to $14.50. Boeing may see its full year revenue top $100 billion for the first time, as well. Boeing landed billions in military contracts this summer which CEO Dennis Muilenberg highlighted and said was “important new defense business.” The Navy selected Boeing to develop the MQ-25 unmanned aircraft system and the Air Force awarded Boeing $9.2 billion to build the T-X trainer aircraft. Boeing also landed a $2.4 billion contract to build the MH-139 helicopter for the Air Force. Boeing is very in tune with the administration and customer base, says Jefferies analyst

“What really surprised us to the upside was aerospace margins in the 13% range and they’re raising their guidance for that,” Jefferies analyst Sheila Kahyaoglu said on CNBC’s “Squawk Box.”

For its its airplane-making business, Boeing delivered 190 commercial aircraft in the third quarter, bringing its total deliveries for the year to 568. The business had fallen short of delivery estimates in the second quarter but Boeing stuck to guidance in the latest report, saying the company would deliver at least 810 airplanes this year. Boeing continues to ramp up production, especially on its core 737 aircraft, and aims to get to a key production rate of 52 aircraft each month. “They maintained their delivery guidance, which means they could get to that 52 a month by the end of the year,” Kahyaoglu added. The trade war between President Donald Trump’s administration and China is a key theme Kahyaoglu is watching. She said China is “a big customer of Boeing,” representing about a third of the company’s orders for 737 aircraft. While it’s important for Boeing shareholders to pay attention to the company’s business in China, the analyst did not raise concern about Boeing possibly getting caught in the middle of the trade war. “I think Boeing’s very in tune with the administration but also with its customers,” Kahyaoglu said. Boeing shares slipped 2.3% over the last three months but the stock is still up 18.7% for the year as of Tuesday’s close of $350.05 a share.

Fannie Mae identifies new fake employers being used on mortgages

The number of fake employers showing up on borrowers’ mortgages is growing. Earlier this year, Fannie Mae issued a warning to lenders after identifying more than 30 companies that appeared to be fake that were showing up on borrowers’ mortgage documentation as their place of employment. The 30 companies were generally located in the Southern California and Los Angeles County areas. But the wave of fake employers spread throughout California, as Fannie Mae later called out 10 more potentially fake companies located in Northern California, including some in Silicon Valley. Now, Fannie Mae is issuing another warning, telling lenders that it has found five more potentially fake employers in the state of California. The newly identified potentially fake employers are:

–  BTR International, located on S. Olive in Los Angeles, CA

–  Building Blocks Learning Center, located on Calabasas Rd. in Calabasas, CA

–  Digicox Printing Material, located on Sherman Way in North Hollywood, CA

–  Volt Temp Distributors, located on Gladys Avenue in Los Angeles, CA

–  Western Law Group, located on W. Glenoaks Blvd. in Glendale, CA

According to Fannie Mae, there are a series of red flags that lenders should be on the lookout for on loans that could include a fake employer or other potential mortgage fraud issues, including:

–  TPO / broker loans

–  Originated 2015–2018 (present)

–  Employment (occupation) does not “sensibly” coincide with borrower’s profile (age or experience)

–  Borrower on current job for short period of time

–  Prior borrower employment shows “Student”

–  Starting salary appears high

–  Purported employer does not exist

–  Employer’s purported location cannot be ascertained

–  Paystub templates are similar for various employers across other (involved) loan files

–  Paystubs sometimes lack typical withholdings (health, medical, 401(k), etc.)

–  Gift letters are substantial and are not (or cannot be) supported through re-verification

Oil extends drop, falling toward $75, on demand worries

Published October 24, 2018MarketsReuters

Oil fell towards $75 a barrel to its lowest since late August on Wednesday, pressured by concern that demand is weakening and supply ample even as US sanctions loom on oil exporter Iran. In a sign supply is plentiful, industry group the American Petroleum Institute said on Tuesday US crude stocks had risen by 9.9 million barrels – more than forecast. The US government’s supply report is due at 1430 GMT. Brent crude, the global benchmark, was down $1.28 to $75.16 a barrel at 0855 GMT. It fell earlier to $75.11, the lowest since Aug. 24. US crude dropped 30 cents to $66.13. “Demand worries have been around for a while,” said analyst Olivier Jakob of Petromatrix, adding that as long as refining margins for gasoline and inter-month spreads for crude remained weak, “it’s going to be difficult to rebound.” Crude fell sharply in the previous session, with Brent closing down 4.3%. “This price movement comes as little surprise with attention now clearly being focused on the weakening economic situation and gloomy demand outlook,” said analysts at JBC in a report. A sell-off in equities due to concern about the economic outlook also weighed on crude on Tuesday. Forecasters such as the International Energy Agency already expect slower oil-demand growth for 2019 due to a slowing economy.

Wells Fargo commits $1.6 billion to help revitalize Washington, D.C.

Aiming to aid in the revitalization of the nation’s capital, Wells Fargo announced Tuesday that it is committing more than $1.6 billion in lending and philanthropy in Washington, D.C., over five years. The financial commitment is part of a new program being launched by the bank in coordination with the National Community Reinvestment Coalition called the “Where We Live” program. Through the program, Wells Fargo will triple its community giving and “concentrate resources on the biggest needs identified by community leaders,” including affordable housing, small businesses, and job skills. According to Wells Fargo, the effort will primarily be focused on Ward 7 and Ward 8, two of the city’s most economically challenged areas. Included among the effort is a five-year, $16 million philanthropic commitment that includes $4 million for Community Development Financial Institutions to help grow the small business community and $6 million for nonprofit housing initiatives, including down payment assistance and development of affordable rental properties. But the bulk of the financial effort will come in the form of more than $1.5 billion for loans and equity investments in mortgage lending, small business lending and community lending and investment.

Part of that push has already begun. According to the bank, one of the early Where We Live projects utilized $90 million in lending and equity investments from Wells Fargo to convert an abandoned housing complex into 220 affordable rental units. “Communities succeed when we all work together,” Wells Fargo CEO Tim Sloan said. “The Where We Live program is rooted in two things: investments that help people live, work and thrive, and a deep understanding that neighborhoods need long-term partners,” Sloan added. “It builds on Wells Fargo’s legacy of empowering residents and small businesses in our nation’s capital for the past 100 years, and our desire to create a compelling community investment model in Washington, D.C.” Wells Fargo isn’t the first bank to commit financial muscle to the D.C. area in this year alone. Back in April, JPMorgan Chase announced that it was committing $4 billion over five years for home and small business lending in the area as part of an expansion into the region. And now, it’s Wells Fargo’s turn to help D.C., especially in areas that are sorely in need of help. “This is an important step by Wells Fargo to expand its investment in the District, and to listen and work more closely with community groups,” John Taylor, president and founder of NCRC, said. “Expanding access to mortgage and small business loans is essential to closing the wealth gap,” Taylor continued. “Lenders need to listen and focus on the needs of the communities where they do business. It’s heartening to see Wells Fargo strengthen its commitment to do just that.”

CoreLogic – homebuyers’ “typical mortgage payment” rising at twice the rate of prices

While the US median sale price has risen by close to 6% over the past year the principal-and-interest mortgage payment on that median-priced home has increased around 13%. Moreover, while the CoreLogic Home Price Index Forecast suggests US home prices will be up 4.3% year over year in July 2019, some mortgage rate forecasts indicate the mortgage payments homebuyers will face then will have risen by more than twice as much. One way to measure the impact of inflation, mortgage rates and home prices on affordability over time is to use what we call the “typical mortgage payment.” It’s a mortgage-rate-adjusted monthly payment based on each month’s US median home sale price. It is calculated using Freddie Mac’s average rate on a 30-year fixed-rate mortgage with a 20% down payment. It does not include taxes or insurance. The typical mortgage payment is a good proxy for affordability because it shows the monthly amount that a borrower would have to qualify for to get a mortgage to buy the median-priced US home. The US median sale price in July 2018 – $230,411 – was up 5.8 year over year, while the typical mortgage payment rose 13.1% because of a nearly 0.6-percentage-point rise in mortgage rates over that one-year period.

A consensus forecast suggests mortgage rates will rise by about 0.43 percentage points between July 2018 and July 2019. The CoreLogic HPI Forecast suggests the median sale price will rise 1.8% in real terms over that same period (or 4.3% in nominal terms). Based on these projections, the inflation-adjusted typical monthly mortgage payment would rise from $937 in July 2018 to $1,003 by July 2019, a 7.0% year-over-year gain. In nominal terms the typical mortgage payment’s year-over-year gain would be 9.7%. An IHS Markit forecast calls for real disposable income to rise by around 2.5% over the next year, meaning homebuyers would see a larger chunk of their incomes devoted to mortgage payments. When adjusted for inflation the typical mortgage payment puts homebuyers’ current costs in the proper historical context. While the inflation-adjusted typical mortgage payment has trended higher in recent years, in July 2018 it remained 26.8% below the all-time peak of $1,280 in July 2006. That’s because the average mortgage rate back in June 2006 was about 6.7%, compared with an average rate of about 4.5% in July 2018, and the inflation-adjusted US median sale price in June 2006 was $248,426 (or $199,500 in 2006 dollars), compared with a July 2018 median of $230,411.

Retail apocalypse: these big retailers closing stores, filing for bankruptcy

Some of the United States’ most prominent retailers are shuttering stores or declaring bankruptcy in recent months amid sagging sales in the troubled sector. The rise of ecommerce outlets like Amazon has made it harder for traditional retailers to attract customers to their stores and forced companies to change their sales strategies. Many companies have turned to sales promotions and increased digital efforts to lure shoppers while shutting down brick-and-mortar locations. Roughly 25 retailers could file for bankruptcy in 2018, according to data from real estate firm Cushman & Wakefield. Store closures are expected to increase 33% this year to more than 12,000 locations.

–  Abercrombie & Fitch

Facing declining sales, the once-prominent fashion brand announced last March that it would close 60 of its US stores with expiring leases during its 2017 fiscal year. The chain has closed hundreds of store locations over the last few years while placing an increased emphasis on online sales.

–  Aerosoles

The New Jersey-based women’s footwear company filed for bankruptcy last year and announced plans to move forward with a “significant reduction” of its retail locations. While it’s unclear how many of Aerosoles’ 88 locations will be affected, the chain said it plans to keep four flagship stores in New York and New Jersey operational, Opens a New Window.  reported.

–  American Apparel

A fashion brand known for its edgy offerings, American Apparel shuttered all of its 110 US locations last year after filing for bankruptcy. The brand has since been acquired by Canada-based Gildan Activewear, which acquired its intellectual property in an $88 million deal.


The Los Angeles-based brand listed liabilities of more than $500 million when it filed for bankruptcy last February. The chain closed 118 store locations nationwide last year, though more than 300 remained in operation under a company-wide reorganization.

–  Bebe

The women’s apparel chain closed all of its remaining 168 stores by last May, days after it said it was exploring “strategic alternatives for the company” amid plunging sales.

–  Bon-Ton Stores Inc.

The struggling department store filed for Chapter 11 bankruptcy, according to court papers filed in February. The chain, which operates 256 stores in 23 states, also announced it plans to close 42 stores in 2018 as part of a restructuring plan.

–  The Children’s Place

A fixture at shopping malls, the children’s clothing retail said it will close hundreds of store locations by 2020 as part of a shift toward digital commerce.

–  CVS

The pharmacy retailer said it would close 70 store locations in 2017 as part of a bid to cut costs and streamline its business. CVS still operates thousands of stores nationwide.

–  Guess

Guess announced plans to close 60 of its struggling US store locations in 2017 as part of a plan to refocus on international markets.

–  Gymboree

The kids clothing retailer confirmed last July that it would close 350 of its more than 1,200 store locations to streamline its business and achieve “greater financial flexibility,” according to CEO Daniel Griesemer.

–  Hhgregg

The electronics retailer said it would close all of its 220 stores and lay off thousands of employees when it failed to find a buyer after bankruptcy proceedings.

–  J. Crew

The preppy icon, which once thrived under the direction of retail guru Mickey Drexler, is thriving no more. During a November conference call, COO and CFO Mike Nicholson said the number of planned store closings will move to 50 up from the 20-30 originally announced.  “We are committed to driving outsize growth with strong e-commerce capabilities complemented with a more appropriately sized real estate footprint” said Nicholson as reported by Opens a New Window.

–  J.C. Penney

The department store chain closed 138 stores last year while restructuring its business to meet shifting consumer tastes. The retailer also announced plans to open toy shops in all of its remaining brick-and-mortar locations.

–  The Limited

After a brutal holiday season in 2016, the clothing chain closed all 250 of its physical stores last January as part of a bid to focus on ecommerce. The closures reportedly resulted in the loss of about 4,000 jobs.

–  Macy’s

The major retailer said this month it would shutter an additional seven stores that were previously undisclosed and lay off some 5,000 workers as part of an ongoing effort to streamline its business and adjust to a difficult sales environment. Macy’s says it has now revealed 81 of the 100 store closures it first revealed in an August 2016 announcement.

–  Michael Kors

With same-store sales plunging, the upscale fashion retailer said it would close as many as 125 stores to adapt to a difficult, promotional sales environment.

–  Payless

The discount shoe retailer filed for bankruptcy last April and has moved to close about 800 stores this year.

–  RadioShack

The once-prominent electronics outlet shut down more than 1,000 store locations earlier this year. The brand now operates just 70 stores nationwide, down from a peak of several thousand.

–  Rue21

The specialty teen clothing retailer confirmed last April that it would close up to 400 of its more than 1,100 locations and later filed for bankruptcy last May.

–  Sears/Kmart

Sears Holdings is one of the most prominent traditional retailers to suffer in a challenged sales environment. The brand filed for Chapter 11 bankruptcy protection on Oct. 15, 2018, and said it would close more than 140 of its 700 remaining stores as part of its bid to restructure its debt. The embattled company listed assets of $6.9 billion against $11.3 billion in liabilities.

–  Toys R Us

The venerable toy outlet filed for bankruptcy in September 2017 amid mounting debt and pressure from wary suppliers and was forced to liquidate its remaining stores and inventories this year. The company is currently out of business, though rumors of a comeback persist.

–  Wet Seal

The teen fashion brand shuttered its 171 stores last year after previously filing for bankruptcy in 2015. Declining foot traffic at malls and pressure from competitors like Zara and H&M contributed to Wet Seal’s demise.

MBA – purchase originations to increase to $1.2 trillion in 2019

The Mortgage Bankers Association (MBA) announced today at its 2018 Annual Convention and Expo in Washington, D.C., that it expects to see $1.24 trillion in purchase mortgage originations in 2019 – a 4.2% increase from 2018. MBA anticipates refinance originations will continue to trend lower next year, decreasing by 12.4% to $395 billion. Overall in 2019, total mortgage originations are forecasted to decrease to $1.63 trillion from $1.64 trillion this year. In 2020, MBA is forecasting purchase originations of $1.27 trillion, and refinance originations of $410 billion, for a total of $1.68 trillion.  “The unemployment rate is at its lowest level in almost 50 years, resulting in faster wage growth and more confident homebuyers. While the Federal Reserve is expected to increase short-term rates further, 30-year mortgage rates should rise only modestly from here,” said Mike Fratantoni, MBA chief economist and senior vice president for research and industry technology. “We are seeing some deceleration in the rate of home price growth, but believe this is a healthy pause for the market, as it will allow income growth to catch up to the recent run-up in home values.”

Fratantoni believes that housing demand should continue to grow over the forecast horizon, with the pace of home sales held back primarily by the constrained pace of new building. He expects that home purchase originations will increase each year from 2019-2021, and that pace should continue to increase beyond the forecast horizon, given the wave of millennial buyers beginning to hit the market. “While the macroeconomic and housing market backdrops are, and should remain quite favorable, the mortgage industry continues to be challenged by the drop in origination volume, coupled with significant margin compression,” said Fratantoni. “Lenders of all types and sizes are seeing elevated costs, coupled with intensely competitive pricing, to capture more volume. This in turn is depressing revenues.” Added Fratantoni, “We expect the Fed will raise rates in December, and then three times in 2019, bringing the fed funds target to about 3%. We forecast for the 10-year Treasury rate to increase to about 3.4% and then level out, bringing 30-year mortgage rates to roughly 5.1%.” With the economy is running at full employment, Fratantoni expects that monthly job growth will average 120,000 in 2019, down from the monthly gains of 200,000 seen this year. “The unemployment rate will decrease to 3.5% by the end of 2019, which should continue to keep housing demand at a healthy level, ultimately leading to an increase in purchase originations,” said Fratantoni.

Student loan debt just hit $1.53T. Will the government forgive any of it?

In the second quarter of 2018, student loan debt reached a staggering $1.53 trillion — a burden that’s largely being borne by millennials — but the Trump administration has no plans to forgive any of those loans. “We would like people to repay their debts,” Director of the Office of Management and Budget Mick Mulvaney said. “We think that’s a fair thing to do.” Because the federal government is now the largest originator of student loans, Mulvaney said it’s “not surprising” that loan debts have skyrocketed. And as the acting director of the Consumer Financial Protection Bureau, he said the agency has been tasked with educating young people about taking out a loan, since it’s largely the first major debt they’ve taken out. “It’s like, look, if you’re going to borrow this money make sure you’re using it to get an education that can get you a job that helps you pay it back,” he said. But even Federal Reserve Chair Jerome Powell has warned that burgeoning student loan debt could derail an otherwise-flourishing economy by hindering people’s “economic life” and hurting their credit ratings. In fact, according to a new survey from the NeighborWorks America at Home, 59% of millennials knew someone who delayed buying a home because of student loan debt. Although he said it was Congress’ problem to tackle, he wondered why student debt couldn’t be discharged as bankruptcy. And in March, when asked whether student debt could hurt economic growth in the long-run, Powell said, “It will over time. It’s not something you can pick up in the data right now. As this goes on and as student loans continue to grow and become larger and larger, then it absolutely could hold back growth.” Mulvaney, however, warned that if people defaulted on their loans — or if the government offered them some type of financial break — that would ultimately fall on the taxpayers. “Face it: If you’re borrowing money right now to go to school, you’re borrowing from the taxpayers,” he said. “And if you ask for loan forgiveness, what that really means is you want other taxpayers to give you money to go to school and that’s not part of our program.”

NAHB – multifamily decline pushes overall housing starts down in September

Led by a drop in multifamily production, total housing starts fell 5.3% in September to a seasonally adjusted annual rate of 1.2 million units, according to newly released data from the US Department of Housing and Urban Development and the Commerce Department. The September reading of 1.2 million is the number of housing units builders would start if they maintained this pace for the next 12 months. Within this overall number, single-family starts edged down 0.9% to 871,000 units. Meanwhile, multifamily starts—which includes apartment buildings and condos—fell 15.2% to 330,000. Overall permits—which are an indicator of future housing production—registered a 0.6% drop in September, also due to multifamily softening. Multifamily permits decreased 7.6% to a 390,000 unit pace while single-family permits rose 2.9% to an annualized rate of 851,000. “Housing starts are in line with builder sentiment, which shows that builders are overall confident in the housing market but continue to face supply-side challenges,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “Though lumber prices have declined recently, builders remain concerned about labor shortages, especially as the number of unfilled construction jobs has reached a post-recession high.” “This report is consistent with our forecast for gradual strengthening in the single-family sector of the housing market following the summer soft patch,” said NAHB Chief Economist Robert Dietz. “A growing economy coupled with positive demographics for housing should keep the market moving forward at a modest pace in the months ahead.” Regionally in September, combined single-family and multifamily housing starts rose 29% in the Northeast and 6.6% in the West. Starts fell 13.7% in the South and 14% in the Midwest. Permit issuance rose 11.1% in the West and 0.6% in the South. Permits were down 9.8% in the Northeast and 18.9% in the Midwest.

CoreLogic – rising single-family rent prices in US vacation destinations

–  US single-family rent prices increased 3.1% year over year in August 2018

–  Orlando had the highest year-over-year rent price increase at 6.1% in August 2018

–  Low-end rental prices were up 3.9% compared to high-end price gains of 2.7%

–  Employment growth in popular US vacation destinations drives increasing rent prices

CoreLogic released its latest Single-Family Rent Index (SFRI), which analyzes single-family rent price changes nationally and among 20 metropolitan areas. Data collected for August 2018 shows a national rent increase of 3.1%, compared to 2.7% in August 2017. Low rental home inventory, relative to demand, fuels the growth of single-family rent prices. The SFRI shows that single-family rent prices have climbed between 2010 and 2018. However, year-over-year rent price increases have slowed since February 2016, when they peaked at 4.1%, and have stabilized over the last year with a monthly average of 2.8%.  National rent growth continued to be propped up by low-end rentals in August 2018, despite declining growth rates among this tier over the last quarter. Rent prices of low-end rentals, defined as properties with rent prices less than 75% of the regional median, increased 3.9% year over year in August 2018, down from a gain of 4.2% in August 2017. Meanwhile, high-end rentals, defined as properties with rent prices greater than 125% of a region’s median rent, increased 2.7% in August 2018, up from a gain of 1.9% in August 2017.

Among the 20 metro areas shown in Table 1, Orlando had the highest year-over-year increase in single-family rents in August 2018 at 6.1% (compared with August 2017), outpacing Las Vegas for the second consecutive month. Las Vegas experienced the second highest rent prices in August 2018 at 5.8% year over year. Tucson once again rounded out the top three metros with the highest rent growth, settling at 5.3% compared to August 2017. Honolulu experienced the lowest rent price increase in August 2018 at 1.2%. However, rent prices have continued to rise in Honolulu since May 2018 when the metro experienced its first rent price increase following seven months of decline. Metro areas with limited new construction, low rental vacancies and strong local economies that attract new employees tend to have stronger rent growth. Both Orlando and Las Vegas experienced high year-over-year rent growth, driven by employment growth of 4.1% and 3.7% year over year respectively. This is compared with the national employment growth average of 1.8%, according to data from the United States Bureau of Labor Statistics. Of the 20 metros analyzed, Chicago experienced the lowest employment growth in August 2018, which could be a factor in its low rent growth of 1.7%. Rent prices continue to increase in areas affected by last year’s hurricanes like the Houston metro area, which experienced growth of 3.7% year over year in August 2018. Rent growth in Houston has remained strong since October 2017, which was the first rent increase for Houston since April 2016. “Favorable economic conditions have increased disposable income for consumers, allowing them to spend more on travel,” said Molly Boesel, principal economist at CoreLogic. “This in turn has created more demand for business and more employment opportunities for residents in popular vacation destinations. Both single-family rent and home prices in these areas have responded with some of the highest price and rent growth in the country.”

Black Knight – First Look At August 2018 mortgage data

Black Knight, Inc. reports the following “first look” at August 2018 month-end mortgage performance statistics derived from its loan-level database representing the majority of the national mortgage market.

–  Mortgage delinquencies fell again in August and are now down 5.75 over the past two months

–  This marks the strongest such decline during July-August on record, since before 2000

–  Foreclosure starts also eased in August and are now more than 125 below last year’s level

–  Delinquencies resulting from 2017’s hurricanes continue to decline – just 25,100 remain in the mainland US

–  Some 391,000 homeowners with mortgages were located in Hurricane

–  Florence’s evacuation area, with an estimated 283,000 in the 18 North Carolina counties declared disaster areas so far by FEMA

–  If homeowners face similar per capita impacts to those seen from Hurricanes Harvey and Irma last year, it could result in thousands of mortgage holders falling behind on payments

OPEC, allies agree not to further increase oil production

A meeting of OPEC and its allies ended without any decision to further increase oil output despite President Donald Trump’s call for lower prices. Members of the Organization of the Petroleum Exporting Countries met on Sunday in Algiers with non-members including Russia. The committee said in a statement that it was satisfied “regarding the current oil market outlook, with an overall healthy balance between supply and demand.” It also urged “countries with spare capacity to work with customers to meet their demand during the remaining month of 2018.” Trump has been calling publicly for OPEC to help lower prices by producing more. “We protect the countries of the Middle East, they would not be safe for very long without us, and yet they continue to push for higher and higher oil prices!” he tweeted on Thursday. The price rise is notably caused by a recent drop in Iran’s supply because of US sanctions. OPEC and Russia have capped production since January 2017 to bolster prices. Output fell below those targets this year, and in June the same countries agreed to boost the oil supply. Saudi Arabia Energy Minister Khalid al-Falih told reporters that participating countries have provided over the last three months “a lot of supply to offset decreases” in Iran, Venezuela and Mexico. “Markets are quite balanced today, there’s plenty of supply to meet any customer that needs it.”

Driverless cars set to disrupt real estate

Emerging tech is going to disrupt the mortgage market for years to come. Whether its blockchain or bitcoin, just about everywhere you look there are predictions that show change will be coming fast. One popular narrative is the question of whether or not robots will replace those who work in the mortgage finance space. But forget about humanless loan officers for a second and consider this question: what about driverless cars? The data and analytics team at CB Insights examined the emerging role of driverless cars and the impact on 33 industries. While the changing role of parking garages and the corner gas station will be resulting evolution of driverless cars, will this mean home prices will rise in suburban areas? They suggest so in their article: Faster and easier commutes will shift residential property value from properties in urban centers to those in suburban areas. In commercial real estate, spaces currently predicated on human drivers will be converted to other uses.

JPMorgan Chase to open 50 branches in Philadelphia area

JPMorgan Chase will open 50 branches in the Philadelphia area over the next five years, the bank said Monday. The bank’s plan, part of its announced strategy of opening 400 branches nationally, marks one of the more striking exceptions to the financial community’s exit from Philadelphia. While some banks in the metropolitan area have added branches in recent years, others like Wells Fargo, PNC, TD, Citizens and Bank of America, have closed 330 branches in the last 10 years. “The Delaware Valley is a critically important market to our branch expansion and growth as a firm,” JPMorgan Chase CEO Jamie Dimon said in a statement, citing “more than one million” credit card, home loan and other consumer clients, plus 30,000 business clients, in the area. JPMorgan said it expects to hire about 300 people in Philadelphia, South Jersey and Delaware. It also said it will invest $3 billion for regional home and small business lending. The bank, which has assets of $2.6 trillion and employees about 11,000 people in the broader Philadelphia area, said it will invest $50 billion in 400 new offices, loans and other projects in several areas, including Philadelphia. JPMorgan, which has nearly 5,100 branches in 23 states, also said the expansion will add to the firm’s current base of more than 1 million consumers and over 30,000 business clients in Philadelphia and the Delaware Valley region.

CoreLogic – rising single-family rent prices among southern US metros

–  US single-family rent prices increased 3% year over year in July 2018—

–  Orlando had the highest year-over-year rent price increase at 6.4% in July 2018

–  Low-end rental prices were up 3.9% compared to high-end price gains of 2.7% in July 2018

CoreLogic released its latest Single-Family Rent Index (SFRI), which analyzes single-family rent price changes nationally and among 20 metropolitan areas. Data collected for July 2018 shows a national rent increase of 3%,* compared to 2.7% in July 2017. Low rental home inventory, relative to demand, fuels the growth of single-family rent prices. The SFRI shows that single-family rent prices have climbed between 2010 and 2018. However, year-over-year rent price increases have slowed since February 2016, when they peaked at 4.1%, and have stabilized over the last year with a monthly average of 2.7%.  High-end rentals continued to dampen national rent growth in July 2018, despite accelerating rates of increase among this tier. High-end rentals, defined as properties with rent prices greater than 125% of a region’s median rent, saw rent increases of 2.7% year over year in July 2018, up from a gain of 1.9% in July 2017. Rent prices among low-end rentals, properties with rent prices less than 75% of the regional median, increased 3.9% in July 2018, down from a gain of 4.3% in July 2017.

Of the 20 metros analyzed, Orlando had the highest year-over-year increase in single-family rents in July 2018 at 6.4% (compared with July 2017), officially outpacing Las Vegas where rent prices led the nation throughout the first half of 2018. Las Vegas experienced the second highest rent prices in July 2018 at 5.7%, followed by Tucson at 4.2%. Seattle experienced the lowest rent price increase in July 2018 at 1.1%. This is the first time since the start of the year that Honolulu did not see the lowest rent price increase among the 20 analyzed metros. Rent prices in Honolulu stopped decreasing in May 2018 after seven months of decline. Metro areas with limited new construction, low rental vacancies and strong local economies that attract new employees tend to have stronger rent growth. Both Orlando and Las Vegas experienced high year-over-year rent growth, driven by employment growth of 4.3% and 3.9% year over year respectively. This is compared with the national employment growth average of 1.6%, according to data from the United States Bureau of Labor Statistics. St. Louis experienced the lowest employment growth, which could be a factor in its low rent growth of 1.8%. Rent prices continue to increase in areas affected by last year’s hurricanes like the Houston metro area, which experienced growth of 3.8% year over year in July 2018. This is down from the metro’s 2018 peak of 4.4% in May 2018. However, it is up from a 1.2% increase in October 2017, which was the first rent increase for Houston since April 2016. “Single-family rents were quick to respond to the late-summer hurricanes in 2017 with increased rental demand showing up in higher rents in just one-two months after the disasters,” said Molly Boesel, CoreLogic principal economist. “Similar movements in rents could be seen in metro areas affected by Hurricane Florence in the following months.”

Trade talks with Canada to resume

Canada’s foreign minister will be back in Washington on Wednesday to resume talks aimed at reaching an agreement on a new trade deal with the US to replace NAFTA. Chrystia Freeland will meet with US Trade Representative Robert Lighthizer as a US-imposed deadline of Oct. 1 looms. It will be the first meeting between the two officials in eight days. Lower-level officials have reportedly been negotiating in recent days. American business and political leaders are increasing the pressure on Canadian Prime Minister Justin Trudeau to agree on a deal to renew NAFTA (North American Free Trade Agreement) and drop his insistence that no deal is better than a bad deal, according to Reuters. The two sides are said to be far apart in some areas and Trudeau says his Liberal government will walk away, if necessary. US negotiators are pressing for more access to Canada’s protected dairy market. US House Majority Whip Steve Scalise, R-La., issued a statement Tuesday citing “a growing frustration with many in Congress” over Canadian negotiating tactics and suggested Canada could be left out of NAFTA. Last month, President Trump announced a side deal with Mexico and made clear he was prepared to exclude Canada, if necessary. The United States takes 75% of Canada’s goods exports and Trump is threatening to impose tariffs on autos.

NAR – Realtors view technology as increasingly valuable for business, competition

As technology continues to transform and modernize the real estate industry, Realtors®, members of the National Association of Realtors®, are focused on adapting to and remaining at the forefront of this change. Last month, NAR kicked-off the inaugural Innovation, Opportunity & Investment Summit in San Francisco, where Realtors® joined real estate technology companies and the investment community to discuss evolutions in real estate technology and strategies for Realtors® to keep up with these trends. “During the iOi Summit, Realtors® collaborated with leading technology firms to identify Realtor®-friendly technology tools and resources. The summit is a part of an ongoing process of creating a dynamic, competitive real estate market that will help NAR advance our members-first mission for years to come,” said NAR CEO Bob Goldberg. Following the iOi Summit, NAR developed a survey focused on Realtors® day-to-day use of technology and analyzed ways technology continues to change how Realtors® and real estate businesses operate. According to the 2018 REALTOR® Technology Survey, Realtors® have spent countless hours and millions of dollars advancing real estate technologies and keeping up with the latest trends in order to further their business. “The iOi Summit and the Realtor® Technology Survey are both initiatives that help us better understand Realtors® use of technology, embrace change and identify the business technology tools of the future. Both are part of my vision as CEO, advocating for technologies that are Realtor®-centric and ensure a competitive market for consumers throughout the real estate transaction,” said Goldberg.

According to the survey, Realtors® continue to find the most value in current technology tools that increase efficiency and enhance remote work capabilities. The three most valuable technology tools Realtors® used in their businesses, excluding email and cell phones, were local MLS websites/apps (64%), lockbox/smart key devices (39%), and social media platforms (28%). As the real estate market becomes more dynamic and competitive with advances like smart technology, Realtors® are becoming more familiar with smart home and Internet connected devices. Realtors® always stay in touch with the latest trends buyers want in their homes. The survey found that Realtors® are most familiar with security devices (19%), home-connected wearable devices (12%), and home comfort devices (12%). While the majority of agents are satisfied with the technology tools provided by their broker, they do want some additional tools. When asked what additional technology tools Realtors® would like to see their broker provide in the future, respondents most wanted to see predictive analytics (36%), CRM tools (35%), and transaction management software (25%). According to the survey, 41% of Realtors® were somewhat satisfied with MLS-provided technology and nearly 29% were extremely satisfied with their MLS’s technology offerings. Only two% of respondents do not use any of the technology tools or services that their MLS offers. The tech tools that have given respondents or their agents the highest number of quality business leads in the last year were social media (47%), their MLS site (32%), their brokerage’s website (29%), and listing aggregator sites (29%).

Tesla chief Elon Musk’s comments spur criminal investigation

Electric automaker Tesla is under criminal investigation by the Department of Justice over comments made by CEO Elon Musk, Bloomberg reported Tuesday, citing two people familiar with the matter. The news sent shares of Tesla lower during Tuesday’s trading session. The company is reportedly being investigated for fraud after Musk rattled investors last month when he announced on Twitter that he was considering taking the company private, a process for which he claimed funding had already been “secured.” He offered no concrete details on a proposed strategy, but specified a buyout price of $420 per share. That sent shares soaring and raised concerns Musk made the announcement to give Tesla’s stock price a boost. But he later revealed that there was no concrete funding deal in place, and eventually announced he had decided it would be better for Tesla to remain a public company. The Justice Department declined to comment. A Tesla spokesperson said the company received a voluntary request for documents from the DOJ following Musk’s announcement about taking the company private, and Tesla has been “cooperative.” “We respect the DOJ’s desire to get information about this and believe that the matter should be quickly resolved as they review the information they have received,” the spokesperson said, adding that Tesla has not received a subpoena, request for testimony or any other formal process. Sources told Bloomberg the criminal investigation is still in its early stages. Last month, Musk said during an interview with The New York Times that  he wrote the tweet in his car on the way to the airport and no one reviewed it. The billionaire businessman said at the time he did not regret sending the post, having previously offered the rationale via blog post that he wanted all of his shareholders to be made aware of the situation simultaneously.

Housing market warms to buyers

For housing, it has been a seller’s market for many months but now, with low supplies and rising prices, this trend could be reversing. An analysis of the housing market by First American Chief Economist Mark Fleming and Senior Economist Odeta Kushi noted that housing inventories have increased modestly since December 2017, which marked a 25-year-low point. In December 2017, only 166 homes out of 10,000 were for sale. In July 2018, this number increased to 174 per 10,000. According to Fleming, “While this is still very low, it’s the first time we’ve reached this level since July 2017 and a slight improvement from December’s 25-year-low point.” The supply shortage is easing only in higher-end homes nationally. In July, the inventory of homes worth less than $200,000 was down 15.6% nationally versus a year ago, while the supply of homes that cost more than $350,000 increased 5.7% – with the economists citing data. According to Fleming and Kushi, potential homeowners should still “take heart” from the recent inventory increase and the slowdown in price appreciation, which are potential signals of good news for those interested in buying a home. “These factors indicate that the seller’s market may be coming to an end. It’s been six years since the end of the last one, but the rare buyer’s market may be the housing market’s future,” according to Fleming.

NAHB – builder confidence remains firm in September

Builder confidence in the market for newly-built single-family homes remained unchanged at a solid 67 reading in September on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). “Despite rising affordability concerns, builders continue to report firm demand for housing, especially as millennials and other newcomers enter the market,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “The recent decline in lumber prices from record-high levels earlier this summer is also welcome relief, although builders still need to manage construction costs to keep homes competitively priced.” “A growing economy and rising incomes combined with increasing household formations should boost demand for new single-family homes moving forward,” said NAHB Chief Economist Robert Dietz. “However, housing affordability is becoming a challenge, as builders face overly burdensome regulations and rising material costs exacerbated by an escalating trade skirmish. Interest rates are also forecasted to keep rising.” Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor. The HMI index measuring current sales conditions rose one point to 74 and the component gauging expectations in the next six months increased two points to 74. Meanwhile, the metric charting buyer traffic held steady at 49. Looking at the three-month moving averages for regional HMI scores, the Northeast rose one point to 54 and the South remained unchanged at 70. The West edged down a single point to 73 and the Midwest fell three points to 59.

CoreLogic – US homebuyers’ “typical mortgage payment” up 15% year over year – more than double the median sale price’s gain

While the US median sale price has risen by just over 6% over the past year the principal-and-interest mortgage payment on that median-priced home has increased more than 15%. Moreover, the CoreLogic Home Price Index Forecast suggests US home prices will be up 4.7% year-over-year in June 2019, while some mortgage rate forecasts suggest the mortgage payments homebuyers will face at that point will have risen almost twice as much. One way to measure the impact of inflation, mortgage rates and home prices on affordability over time is to use what we call the “typical mortgage payment.” It’s a mortgage-rate-adjusted monthly payment based on each month’s US median home sale price. It is calculated using Freddie Mac’s average rate on a 30-year fixed-rate mortgage with a 20% down payment. It does not include taxes or insurance. The typical mortgage payment is a good proxy for affordability because it shows the monthly amount that a borrower would have to qualify for to get a mortgage to buy the median-priced US home.

The US median sale price in June 2018 – $233,732 – was up 6.3 year over year, while the typical mortgage payment rose 15.1% because of a .67-percentage-point rise in mortgage rates over that one-year period. A consensus forecast suggests mortgage rates will rise by about 0.36 percentage points between June 2018 and June 2019. The CoreLogic HPI Forecast suggests the median sale price will rise 2.2% in real terms over that same period (or 4.7% in nominal terms). Based on these projections, the inflation-adjusted typical monthly mortgage payment would rise from $955 in June 2018 to $1,018 by June 2019, a 6.5% year-over-year gain (Figure 1). In nominal terms the typical mortgage payment’s year-over-year gain would be 9.2%. An IHS Markit forecast calls for real disposable income to rise by less than 3% over the next year, meaning homebuyers would see a larger chunk of their incomes devoted to mortgage payments. When adjusted for inflation the typical mortgage payment puts homebuyers’ current costs in the proper historical context. Figure 2 shows that while the inflation-adjusted typical mortgage payment has trended higher in recent years, in June 2018 it remained 25.3% below the all-time peak of $1,279 in June 2006. That’s because the average mortgage rate back in June 2006 was about 6.7%, compared with an average rate of about 4.6% in June 2018, and the inflation-adjusted US median sale price in June 2006 was $248,312 (or $199,750 in 2006 dollars), compared with a June 2018 median of $233,732.


CoreLogic – Kilauea’s lava lessons

The Hawaiian Islands are a lush tropical paradise with palm trees, beaches, and breathtaking active volcanoes. Their very makeup intrigues many, but it is also the source of potential catastrophe. The Island of Hawai’i, commonly referred to as the Big Island, is home to five volcanoes, including Mt. Kilauea. Kilauea is one of the world’s most active volcanoes which has been erupting on and off over the last several thousands of years. Kilauea’s current eruption has made headlines over the past few months, but this eruption is actually part of the ongoing eruption which began in 1983. When many people think of volcanoes they think of steep, explosive stratovolcanoes like Mt. St. Helens in Oregon or Mt. Pinatubo in the Philippines—both of which have had some of the most destructive eruptions in recent history. In contrast, the Hawaiian volcanoes are a different variety known as shield volcanoes which are characterized by their gentle sloping sides and broad domes. The eruptions are also very different in the Hawaiian shield volcanoes, where the lava is very fluid and basaltic as opposed to pyroclastic. On May 17, 2018, Kilauea experienced an explosive eruption. This type of eruption, while not entirely unexpected, is uncommon with these types of volcanoes. The flowing lava came in contact with the water table, which in turn generated the explosive eruption, sending ash plumes into the air and impacting air quality. Even though catastrophic eruptions are not common with Mt. Kilauea, the nature of the flowy basaltic lava does pose a great risk to homes and businesses in its path. CoreLogic® analyzed the area impacted to understand the potential damage.

The area impacted by the lava flow is a small, remote part of the Big Island of Hawaii, far from the popular cities of Kona and Hilo. The US Geological Survey (USGS) monitors the volcanoes and has identified a “thermal zone” which has potential for risk.  Within the entire thermal zone, there are 5,902 homes at potential risk. Of these, 1,029 homes are in the high-risk area. The area impacted is called the Leilani Estates. The average home value in this region is $230 thousand which puts the total value of residential properties at high risk around $239 million. It is important to note that a high-risk property does not guarantee that it will burn, but knowing the weight of the risk is essential for insurance companies and homeowners. According to the most recent report by Hawaii County Civil Defense on June 23, 2018, lava is covering an area of 6,144 acres. A total of 637 homes in this area have been destroyed, which is a total value of approximately $146.5 million lost. The area within the thermal zone has been evacuated, but beyond life safety, a big concern is insurance for the lost homes. Many have questioned the insurance coverage for homes lost to lava flow in Hawaii. The insurance commissioner of Hawaii Gordon Ito had commented on May 9 that most homes are covered by standard homeowner policies as the structure was lost to fire—but this is not always the case as some policies have exclusions for lava. Lava has yet to stop flowing in Hawaii, and if the past 35 years have been telling, it is unlikely to suddenly cease. While much of the lava is running off into the ocean, growing the island bit by bit, the risk remains for those homes and homeowners yet unaffected. Having a strong grasp on that risk is paramount to make smart decisions when it comes to selecting a policy which protects and restores homes.

Musk says Tesla moves from production problems to delivery problems

Tesla Chief executive Elon Musk has had what seemed like endless problems over the past couple months. He now says that the company is facing bigger logistical problem concerning delivery than overall production delays. Musk admitted problems in Twitter response to a customer complaint on a delivery delay. Tesla has been working to iron out production bumps after failing to meet production targets for its Model 3 sedans. Musk said last week, the company would eliminate some color options for its electric cars to streamline production. In the past month, Musk has been the target of much criticism and unwanted publicity following a podcast appearance in which he smoked a tobacco product that reportedly contained marijuana. Tesla has also seen the departure of a number of executives since 2016. In September alone, the automaker saw its vice-president of worldwide finance and operations, chief people officer and chief accounting officer all leave. He also was threatened with a lawsuit surrounding alleged comments against one of the cave divers that helped save the members of the youth soccer team that was trapped in a flooded mine. Back on August 7, Musk tweeted that he was considering taking the company private at $420 per share in a transaction valuing it at $72 billion, and that funding was “secured.” On the evening of August 24,  Musk, by then facing US Securities and Exchange Commission scrutiny into the factual accuracy of his financing tweet, blogged that Tesla would remain public, citing investor resistance.

Manafort to forfeit $21.7 million in real estate holdings

According to a report from NBC News, Paul Manafort will forfeit an estimated $21.7 million in New York real estate assets as part of his recent plea deal, which includes his apartment in Trump Tower worth an estimated $3 million. Manafort pleaded guilty to two counts ­– federal conspiracy and conspiracy to obstruct justice – and agreed to cooperate with Special Counsel Robert Mueller in his investigation of President Trump’s alleged involvement with Russia. Manafort also admitted guilt to 10 outstanding counts from his earlier trial in Virginia, which prosecutors could use against him should he renege on his promise to cooperate with Mueller. Manafort’s plea deal mandates the forfeiture of his Hamptons home ($7.3 million), three apartments in Manhattan, a Brooklyn townhouse, three bank accounts and a life insurance policy. Despite these forfeitures, Manafort won’t be destitute when he makes it out of the pen. He negotiated to hang on to one of his bank accounts and according to NBC News, he still has at least three properties left in his name worth an estimated $6 million.

GM recalls 1.2M pickups, SUVs for power steering problem

General Motors is recalling 1.2 million big pickup trucks and SUVs mainly in North America because of power-assisted steering problems that have been cited in a number of accidents. GM says the power steering can fail momentarily during a voltage drop and suddenly return, mainly during low-speed turns. Such a failure increases the risk of a crash. The company says it has 30 reports of crashes with two injuries, but no deaths. The recall covers certain 2015 Chevrolet Silverado and GMC Sierra 1500 pickups as well as Chevy Tahoe and Suburban SUVs. Also affected are 2015 Cadillac Escalade and GMC Yukon SUVs. Dealers will update the power steering software at no cost to owners. No date has been set to notify customers, but GM says the software is available now, so owners can contact dealers to schedule repairs. More than 1 million of the trucks are in the US, and most of the rest are in Canada and Mexico. There’s a small number in other countries. GM recalled 2014 model year trucks last year for the same problem.

DSNews – the week ahead: the pulse of the housing market

On Tuesday, the latest installment of the NAHB Wells Fargo Housing Market Index (HMI) will drop, providing insights into “the pulse of the single-family housing market.” The Index is based on a survey that asks home builders “to rate market conditions for the sale of new homes at the present time and in the next six months as well as the traffic of prospective buyers of new homes.” The previous release of the HMI found the Index dropping one point to “a solid 67” in mid-August. “The good news is that builders continue to report strong demand for new housing, fueled by steady job and income growth along with rising household formations,” said NAHB Chairman Randy Noel at the time. “However, they are increasingly focused on growing affordability concerns, stemming from rising construction costs, shortages of skilled labor and a dearth of buildable lots.” Here’s what else is happening in The Week Ahead.

–  Housing Starts Survey, Wednesday, 8:30 a.m. ET

–  MBA Mortgage Apps 7:30 a.m. ET

–  NAR Existing Home Sales 10 a.m. ET

–  Fed Balance Sheet, 4:30 p.m. ET

Micahel Arroyo pleads guilty to loan scheme

Fortune reported that a New York real estate broker pleaded guilty to a loan scheme that defrauded banks of $3.5 million, a crime for which he will spend 21 months in prison. Micahel Arroyo was sentenced to 21 months in prison and five years of supervised release for conspiracy to commit bank fraud by “shotgunning” loans, a practice where the fraudster submits several loan applications to different banks at the same time in order to underhandedly acquire multiple home equity lines of credit. Arroyo and his partner in crime Rafael Popoteur obtained loans of more than $500,000 on residential properties in New York and New Jersey from multiple banks between 2012 and 2014, according to Department of Justice officials. Popoteur also pleaded guilty to conspiracy to commit bank fraud and was sentenced to thee years of supervised release, including one year of house arrest.

ATTOM – Top Real Estate Disrupters: Purplebricks Disrupting the Realtor Role

Real estate tech company Purplebricks, which allows homeowners to list their homes for a flat fee rather than using the traditional commission-based fee structure, secured a $177 million investment in Q1 2018, the second largest in the real estate tech space during the quarter, according to RE:Tech. “We’re giving consumers a viable alternative versus the traditional real estate model,” said U.S. CEO Eric Eckardt, noting that the company appeals to investors because it is cashflow positive on an adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) basis, “which is almost unheard of for a tech company.” Purplebricks was founded in 2014 in the U.K. and has expanded to six states since its U.S. launch in September 2017: California, New York, Connecticut, New Jersey, Arizona and Nevada. “We’re moving quickly,” said Eckardt, noting the first quarter infusion of capital helped to fuel this rapid expansion. “I think that’s a really validation of great value, great service.” Purplebricks charges home sellers a flat fee of $3,600 to list and market their home for sale. On a property that sells for $500,000 that amounts to a savings of $8,900 overpaying the typical seller-side commission of 2.5 percent. Included in the fee is a local real estate agent to help with the process along with professional photography, a 3D virtual tour of the home, yard signage, and the property is listed for sale on the local Multiple Listing Service (MLS) along with popular listing portals such as Zillow, Trulia and — everything one would expect paying a real estate agent the full commission, according to Eckardt. “If you compare it to a quote-on-quote traditional real estate firm they are getting the same service,” he said, adding that every home seller gets the same level of service, whether the home is selling for $250,000 or $1 million. “Everything we do is built around the consumer.”

Prospective homebuyers using Purplebricks get a $1,000 rebate out of the buy-side commission to use toward closing costs, and Eckardt noted that buyers using Purplebricks also get access to additional online offering and negotiation tools that are not available through a traditional real estate agent. “(Buyers) can transact online 24/7,” he said, adding that the online platform enables peer-to-peer transactions. “If you see a home that you like, you can make an offer directly through the platform. … “When you want to schedule a showing, it goes directly to the home sellers.” At its heart, the Purplebricks model disrupts the traditional role of real estate agents. “The market has spoken. The shift has taken place,” Eckardt said. “There is pressure on commissions. Ten years ago the gatekeeper was the agent, but now consumers have access to that information so now the role of the agent is more of the trusted.” Along with a plethora of other online listing platforms now available, Purplebricks utilizes technology along with property and neighborhood data on its website to provide consumers with self-service access to the information and services that previously would have been provided by agents. “Data and technology is helping buyers and sellers make more informed decisions,” Eckardt said, noting that Purplebricks users can “not just look at price and features of the property, but also look at the community to help them make a more informed buying decision.” The Purplebricks’ model also releases agents from time spent prospecting for new clients given that each agent has an exclusive territory, assigned to all buyers and sellers in those territories, according to Eckardt. “We estimate that a traditional agent spends 70 percent of their time finding new business,” he said, noting that the average Purplebricks agents has seven years of experience — an indication that even veteran agents are interested in hanging up their prospecting hat. “(Our agents are) professional, full-time, ethical, just want to work with customers, not deal with online lead gen or CRM. There is a home at Purplebricks for them. “We still believe the agent is the center of the transaction,” he added. “Their role is more as a trusted advisor rather than gathering information.”

Oil climbs as US drilling stalls, Iranian sanctions bite

Oil prices rose on Monday as U.S. drilling stalled and investors anticipated lower supply once new U.S. sanctions against Iran’s crude exports kick in from November. Benchmark Brent crude oil rose $1.09 a barrel, or 1.4 percent, to a high of $77.92 and was trading at $77.50 by 1130 GMT. U.S. light crude was 50 cents higher at $68.25. “A higher oil price scenario is built on lower exports from Iran due to U.S. sanctions, capped U.S. shale output growth, instability in production in countries like Libya and Venezuela and no material negative impact from a U.S./China trade war on oil demand in the next 6-9 months,” said Harry Tchilinguirian, oil strategist at French bank BNP Paribas. “We see Brent trading above $80 under (that) scenario,” he told Reuters Global Oil Forum. U.S. drillers cut two oil rigs last week, bringing the total count to 860, Baker Hughes said on Friday. The number of rigs drilling for oil in the United States has stalled since May, reflecting increases in well productivity but also bottlenecks and infrastructure constraints. Outside the United States, Iranian crude oil exports are declining ahead of a November deadline for the implementation of new U.S. sanctions. Although many importers of Iranian oil have said they oppose sanctions, few seem prepared to defy Washington. “Governments can talk tough,” said Energy consultancy FGE. “They can say they are going to stand up to Trump and/or push for waivers. But generally the companies we speak to … say they won’t risk it,” FGE said. “U.S. financial penalties and the loss of shipping insurance scare everyone.” While Washington exerts pressure on countries to cut imports from Iran, it is also urging other producers to raise output in order to hold down prices. U.S. Energy Secretary Rick Perry will meet counterparts from Saudi Arabia and Russia on Monday and Thursday respectively as the Trump administration encourages the world’s biggest exporter and producer to keep output up. Investors are concerned about the impact on oil demand of the trade dispute between the United States and other large economies, as well as the weakness of emerging markets. “Trade wars, and especially rising interest rates, can spell trouble for the emerging markets that drive (oil) demand growth,” FGE said. Despite this, the consultancy said the likelihood of much weaker oil prices was fairly low as the Organization of the Petroleum Exporting Countries would probably adjust output to stabilize prices.

DSNews – Minority Neighborhoods Gain Equity

Minority neighborhoods saw some of the largest gains in home equity, coming from the lowest levels of home equity but seeing the most substantial gains from 2012 to 2018, according to a report from Redfin. Meanwhile, white neighborhoods, despite having the lowest levels of equity gain by percentage, still had the largest gains in absolute dollars. Additionally the home equity gap between white and minority communities expanded to $94,000 in 2018. “Home prices over the last six years rose most steeply in minority communities, and unlike in past booms when Americans just borrowed more and more money, these price gains led to real increases in wealth for homeowners of color,” said Redfin CEO Glenn Kelman. “But even though homeowners in mostly minority communities had the largest percentage gains in home equity, it was the folks living in mostly white neighborhoods who had the largest dollar gains, just because they had so much more home equity at the beginning of the recovery. This just goes to show that, even as a strong market broadly benefits homeowners, it’s still very hard for people starting with less money ever to catch up. On an absolute-dollar basis, homeowners in minority communities became wealthier, but still fell further behind.” White communities’ average home equity in 2018 was $348,000, compared to $127,000, representing a $221,000 gain. Minority communities’ average home equity in 2018 was $254,000, compared to $69,000 in 2012, a 265 percent gain, nominally a $185,000 gain. Redfin also covered mixed race communities, which saw a 199 percent gain in home equity, from $104,000 in 2012 to $311,000 in 2018. Overall, people of all races saw a 199 percent gain in equity in that time frame, from $99,000 to $293,000. According to Redfin, Riverside, CA is the only place where minority communities posted the largest equity gains in absolute dollars, followed by mixed-race and then white neighborhoods.

RMBS Performance Stays Strong

mortgagesPrime and nonprime residential mortgage based securities (RMBS) transactions performance have been improving according to the latest RMBS trends study from Fitch Ratings. Prime performance was strong in the first half of 2018, reflecting the high quality collateral attributes strong macroeconomic conditions and continued home price growth, with 60+ delinquencies averaging only 11 basis points for Fitch-rated prime transactions. According to Fitch, the expected pool losses on outstanding prime seasoned pools appears to have declined significantly in recent years, compared to the past low delinquency and significant home price appreciation in recent years. Additionally, Fitch notes that nonprime pools have benefited from strong borrower performance and lower than expected delinquencies to date. The study also found that CPRs have caused senior classes to de-lever and pool factors to decline faster than previously expected. Out of roughly 46,000 loans, only 298 loans are delinquent, and only 60 have incurred a loss. Ratings have seen positive improvements, with RMBS classes initially rated below ‘AAAsf’ since 2010, the prime sector has seen 51 percent upgraded while 16 percent of nonprime were upgraded. This includes 72 classes in Fitch’s biannual review completed in August. Additionally, combined 2018 issuance activity in the prime and nonprime RMBS sectors is on pace to more than double the previous highest annual total since the financial crisis. Volume in both sectors has already exceeded any full year since the financial crisis, with roughly $13 billion in prime and $5 billion in in non-prime RMBS issued through the first half. According to Fitch ratings in an earlier Q1 report, non-bank RMBS servicers are shifting their focus from delinquent borrowers and are concentrating their efforts on Fannie Mae, Freddie Mac, and Ginnie Mae loans. “Mortgage servicers are benefiting from a positive credit environment with clean-paying loans becoming the norm and seriously delinquent loans fading from view,” said Roelof Slump, Managing Director, Fitch. More than 90 percent of the company’s rated servicers managed to curtail delinquencies in the first quarter compared with the Q4 2017, it notes.

More companies dropping college degree requirement for new hires

More and more companies are scrapping college degree requirements for jobs in favor of candidates with experience in non-traditional education. No diploma? No problem. More and more companies are scrapping college degree requirements for jobs. They’re not saying you shouldn’t seek higher education, but not having a degree won’t be a barrier for you to work in certain jobs at their companies. Some of the 15 big companies saying “no bachelor’s degree is fine” include Google, Nordstrom, Bank of America, Ernst & Young, IBM and Apple. The changes are coming as job seekers, as well as high school graduates, consider whether college is worth the skyrocketing cost.

MBA – mortgage delinquencies down in 2nd Quarter of 2018

The delinquency rate for mortgage loans on one-to-four-unit residential properties fell to a seasonally adjusted rate of 4.36% of all loans outstanding at the end of the second quarter of 2018.  The delinquency rate was down 27 basis points from the previous quarter, but was up 12 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey. The percentage of loans on which foreclosure actions were started dropped four basis points from the last quarter to 0.24%, its lowest level since the second quarter of 1987.  “We continue to see improvement in the overall mortgage delinquency rate as the impact of the hurricanes from one year ago lessens, particularly for conventional loans,” according to Marina Walsh, Vice President of Industry Analysis at MBA. “Among the various loan types, the delinquency rate for conventional loans was two basis points lower than one year ago, prior to the hurricanes.  While delinquencies for both FHA and VA loans were up from one year ago, they were improved over the previous quarter.” “The economic outlook continues to support good loan performance.  Gross domestic product grew at a 4.1% rate, the unemployment rate was at an 18-year low, and job growth is averaging over 210,000 jobs per month, so far this year.   This means the economy is close to full employment.”  “But even with positive economic news, we continue to monitor factors that may contribute to a rise in delinquencies in future quarters.  Like past natural disasters, the wildfires in California may have a negative impact. Other factors include the aging of servicing portfolios as mortgage refinances slow, and the changing credit quality among certain loan types.”

Key findings of MBA’s Quarterly National Delinquency Survey include:

–  Mortgage delinquencies dropped across all stages of delinquency in the second quarter of 2018 compared to the first quarter of 2018.  The 30-day delinquency rate dropped two basis points from the previous quarter, while the 60-day and 90-day delinquency buckets dropped by eight and 18 basis points respectively.

–  The delinquency rate for conventional loans decreased 33 basis points over the previous quarter to 3.45%.  The FHA delinquency rate fell by 32 basis points to 8.70% and VA delinquency rate fell by 35 basis points to 3.97% over the previous quarter.

–  On a year-over-year basis, the delinquency rate for conventional loans dropped by two basis points, while the FHA delinquency rate increased by 76 basis points and the VA delinquency rate increased by 25 basis points.

–  The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure.  The percentage of loans in the foreclosure process at the end of the second quarter was 1.05%, down 11 basis points from the first quarter of 2018 and 24 basis points lower than one year ago. This was the lowest foreclosure inventory rate since the third quarter of 2006.

–  The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 2.30% in the second quarter of 2018, a decrease of 31 basis points from last quarter, and a decrease of 19 basis points from last year.

–  Both Texas and Florida continue to recover from the September 2017 hurricanes.  The non-seasonally-adjusted overall mortgage delinquency rate in Texas dropped by 26 basis points to 5.36% in the second quarter. Prior to the hurricane one year ago, the overall delinquency rate for Texas was 5.05%. In Florida, the non-seasonally-adjusted overall mortgage delinquency rate on all loans dropped 139 basis points to 5.20% in the second quarter.  Prior to the hurricane one year ago, the overall delinquency rate for Florida was 4.07%.

–  The recovery process for FHA borrowers in Texas and Florida is improving at a slower pace. The FHA non-seasonally-adjusted mortgage delinquency rate in Texas was 10.53% in the second quarter, compared to 9.56% one year ago. In Florida, the non-seasonally-adjusted FHA mortgage delinquency rate was 9.01%, compared to 6.16% one year ago.

JPMorgan slashes Tesla stock price target, shares fall

JPMorgan analysts have slashed their stock price target on Tesla to $195 from $308, back where it was before chief executive Elon Musk’s going-private tweet. On Aug. 7, Musk tweeted that he is considering talking Tesla private for $420 – “funding secured.” In communicating the downgrade, JPMorgan’s analysts wrote, “Our interpretation of subsequent events leads us to believe that funding was not secured for a going private transaction, nor was there any formal proposal.” “Tesla does appear to be exploring a going private transaction, but we now believe that such a process appears much less developed than we had earlier presumed, suggesting formal incorporation into our valuation analysis seems premature at this time,” analyst Ryan Brinkman wrote in a client note. JPMorgan analysts upped their forecast on Tesla from $198 to $308 when Tesla’s stock surged following Musk’s tweets. They have an underweight rating on the stock. The media price target of analysts covering Tesla is $336, according to Reuters.

NAHB – housing starts hold their ground in July

Total housing starts inched up 0.9% in July to a seasonally adjusted annual rate of 1.17 million units, according to newly released data from the US Department of Housing and Urban Development and the Commerce Department. The July reading of 1.17 million is the number of housing units builders would begin if they kept this pace for the next 12 months. Within this overall number, single-family starts held firm, up 0.9% to 862,000 units. Meanwhile, the multifamily sector—which includes apartment buildings and condos—rose 3% to 306,000. “Builder confidence remains solid, although it has fallen back somewhat in recent months due to rising construction costs in 2018, including lumber,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “As builders grapple with higher costs, one positive development is that lumber prices have shown signs of easing the past two months off their record high levels posted in June.” Some projects are experiencing construction start delays due to cost concerns, with the number of single-family units authorized but not started up 25% since July 2017. “Supply-side challenges including increases in material prices and chronic labor shortages are affecting affordability in many markets,” said NAHB Chief Economist Robert Dietz. “However, consumer demand remains strong due to a growing economy and job market and favorable demographics. Moreover, on a year-to-date basis, single-family construction has shown steady progress, up 7.2%, while 5+ multifamily production is up 3.4% as well.”

Regionally, combined single- and multifamily housing starts in July rose 11.6% in the Midwest and 10.4% in the South. Starts fell 4% in the Northeast and posted a 19.6% decline in the West due to affordability constraints in the coastal markets. Overall permits, which are often a harbinger of future housing production, rose 1.5% to 1.31 million units in July. Single-family permits posted a modest gain of 1.9% to 869,000. Multifamily permits were relatively unchanged, up 1.7% to 410,000. Looking at regional permit data, permits rose 5.9% in the Northeast, 5.8% in the Midwest and 1.2% in the West. Permits edged 0.3% lower in the South.

Small business optimism at 35-year high

Small business owners’ optimism touched a 35-year high in July, with businesses setting records in terms of job creation and hiring, while they cited the availability of qualified workers as their biggest challenge. In another signal of just how good this economy is, the small business owners also noted that they were able to increase prices. In July 2018, the NFIB’s Small Business Optimism Index marked its second highest level in the survey’s 45-year history, at 107.9 – just shy of the July 1983 record-high of 108. Records were set for job creation plans. A seasonally-adjusted net 23% of businesses are planning to create new jobs, while 37% of business owners said they had job openings that they could not fill in July. “Small business owners are leading this economy and expressing optimism rivaling the highest levels in history,” said NFIB President and CEO Juanita Duggan. “Expansion continues to be a priority for small businesses who show no signs of slowing as they anticipate more sales and better business conditions.” A net 35% of owners expect better business conditions, while they said the availability of qualified workers was their No. 1 problem. Owners also reported that they were increasing the compensation they offered workers. Fifty-nine% of firms were hiring or trying to hire, while 52% (88% of those hiring or trying to hire) reported few or no qualified applicants for the positions they were trying to fill. Twenty-three% of owners said their biggest business problem was finding qualified workers. “Despite challenges in finding qualified workers to fill a record number of job openings, they’re taking advantage of this economy and pursuing growth,” said NFIB chief economist Bill Dunkelberg. Profits continued to perform, and more firms raised prices in July, a positive signal of demand.

HUD Secretary Carson accuses Facebook of enabling housing discrimination

Housing Secretary Ben Carson accused Facebook on Friday of enabling illegal housing discrimination by giving landlords and developers advertising tools that made it easy to exclude people based on race, gender, Zip code or religion — or whether a potential renter has young children at home or a personal disability. The action, which comes after nearly two years of preliminary investigation, amounts to a formal legal complaint against the company and starts a process that could culminate in a federal lawsuit against Facebook. It stands accused of creating advertising targeting tools — which classified people according to interests such as “English as Second Language” or “Disabled Parking Permit” — that resulted in violations of the Fair Housing Act. The move by the Department of Housing and Urban Development came on the same day the Justice Department targeted Facebook on similar issues. In that action, the government took the side of several fair-housing groups in opposing Facebook’s efforts to have a discrimination lawsuit dismissed, arguing that Facebook can be held liable when its ad-targeting tools allow advertisers to unfairly deprive some categories of people of housing offers. Taken together, the moves mark an escalation of federal scrutiny of how Facebook’s tools may create illegal forms of discrimination, allegations that also are central to separate lawsuits regarding the access to credit and employment opportunities, which, like housing, are subject to federal legal protection. The federal actions also suggests limits on the reach of a key federal law, the Communications Decency Act, that long has been interpreted as offering technology companies broad immunity against many legal claims related to online content. “The Fair Housing Act prohibits housing discrimination, including those who might limit or deny housing options with a click of a mouse,” said Anna María Farías, HUD’s assistant secretary for fair housing and equal opportunity. “When Facebook uses the vast amount of personal data it collects to help advertisers to discriminate, it’s the same as slamming the door in someone’s face.”

Facebook said in a statement Friday afternoon, “There is no place for discrimination on Facebook; it’s strictly prohibited in our policies. Over the past year we’ve strengthened our systems to further protect against misuse. We’re aware of the statement of interest filed and will respond in court; we’ll continue working directly with HUD to address their concerns.” In March, several housing groups, led by the National Fair Housing Alliance, sued Facebook in federal district court in New York for engaging in illegal housing discrimination through its advertising tools. The company asked the court last month to dismiss the case, citing immunity because it was an “interactive computer service” protected by the Communications Decency Act. But Geoffrey S. Berman, the US attorney for the Southern District of New York, sided with the plaintiffs, arguing that Facebook was instead an “Internet content provider” under federal law because it collects and analyzes data and offers user categories that advertisers can choose, “based on demographics, interests, behaviors and other criteria.” That means that Facebook, at least in providing online tools to advertisers, falls beyond the reach of the Communication Decency Act’s immunity provisions, which are cherished by Silicon Valley and frequently portrayed as key to the ability of the technology industry to innovate freely. Berman wrote, “The Complaint sufficiently alleges that, for purposes of housing advertisements, the categorizing of Facebook users based on protected characteristics, and the mechanism that Facebook offers advertisers to target those segments of the potential audience, violated the FHA.” The Justice Department did not take a position on the merits of the legal claim overall, only about the applicability of the Communications Decency Act.

Lisa Rice, president of National Fair Housing Alliance, called the government’s action “a strong statement in support of our claims,” adding, “Facebook is one of the largest adverting companies in the world, and instead of using its vast resources to create more open markets, our claims assert that data is being harnessed in a way that perpetuates systemic bias in housing markets.” After a ProPublica investigation two years ago, Facebook said it would no longer allow advertisers to target ads for housing, credit offers and employment by “ethnic affinities,” a category the social network had created to enable businesses to reach minority groups. But the housing groups have argued that Facebook has not gone far enough. The government statement on Friday quoted this complaint in saying that the platform’s advertising tools still give landlords, developers and others the ability to target some potential renters while excluding others. An HUD news release Friday said that Facebook’s tools, while not explicitly mentioning race, disabilities or family size, allow all of that and more for advertisers interested in targeting certain groups while excluding others from housing offers. Such groups included people interested in “assistance dog,” “mobility scooter” or “deaf culture.” The advertising tools also allowed offers to exclude people interested in “child care” or “parenting,” or to target people based on their stated interest in Christianity, Hinduism or the Bible. Ads could also be tailored based on user Zip codes, the HUD release said. The formal complaint was filed four months after Carson testified on the Hill that he would be reopening HUD’s investigation into Facebook. The initial investigation had begun during the Obama administration following the ProPublica story revealing that Facebook allowed advertisers to target housing and other ads based on race.

But Carson dropped the investigation last fall. After a public outcry, he told senators in April that he had done so because of time pressures and had always intended to revisit the case. “Some of the suits that were being pursued — we didn’t really have time to study them,” Carson said in April. “We wanted to pull them back and have the chance to really study them.” A HUD official said Friday that Carson’s team began taking more time to understand the merits of the Facebook case. “They did not like the perception that they were scaling back on civil rights,” said the official, who is not authorized to speak on the record. “It doesn’t take a genius for anyone looking at Facebook to figure out that’s a problem that denies people housing. It’s hard for Facebook to justify.” The filing of the formal complaint signifies that HUD has found enough during its initial investigation to say the department believes Facebook may have violated federal housing laws. It begins an official process that allows the company to resolve the complaint by working with HUD before the department decides to either file a lawsuit or dismiss the case.

Black Knight – June 2018 Mortgage Monitor

–  Home Price Growth Slows Across Much of US; Cooling Prices, Slight Interest Rate Reductions Help Affordability Hold Steady

–  Home price appreciation slowed each month from March through May, the first three-month slide in nearly four years

–  Though every state saw prices increase in May – typically one of the strongest months for home price appreciation – the average home gained just 0.93% in value, the lowest growth rate for any May in the last four years

–  Two-thirds of both states and large metropolitan areas have seen slowdowns in rates of home price appreciation

–  32 states have seen price gains slow, while 18 have picked up speed, with California seeing three times the national average deceleration

–  Cooling home prices, combined with a slight reprieve in interest rates, have been enough to hold affordability steady

–  The cost to purchase the average-priced home has increased by only $4 per month over the past two months as compared to a $138 per month increase through the first five months of 2018

The Data & Analytics division of Black Knight, Inc. released its latest Mortgage Monitor Report, based on data as of the end of June 2018. This month, Black Knight examined the slowdown in the rate of home price appreciation seen from March through May 2018, while also gauging the impact this slowdown and slightly lower interest rates have had on home affordability. As Ben Graboske, executive vice president of Black Knight’s Data & Analytics division explained, what is being seen is not a matter of home prices falling, but rather a slowing in their continuing increase. “In May – typically one of the strongest months of the year for home price growth – every state in the nation saw home prices increase,” said Graboske. “However, the average monthly gain in value of less than one% was the lowest for any May in the last four years. In addition, the annual rate of appreciation declined each month from March through May, the first three-month slowdown in almost four years. Thirty-two states, as well as 33 of the 50 largest metropolitan areas, have experienced slowdowns in appreciation over the same period.

All that said, the annual rate of home price growth is still historically high at 6.3%, some 2.5 percentage points above long-term norms. For more than six years, we’ve been riding a wave of home price appreciation above the 25-year average. The question now is whether tightening affordability will end that streak and if more deceleration is on the horizon. “On that front, the recent cooling of home price gains and slight reprieve in rising interest rates have combined to stabilize affordability in recent months. As rates have ticked down from 4.66% in late May to 4.52% in mid-July, the monthly principal and interest payment to purchase the average home has only increased by $4 per month – significantly less compared to the $138 per month increase we saw over the first five months of 2018. Still, the $1,213 in principal and interest per month needed to buy the average home remains near a post-recession high. While that represents a nearly $500 per month increase from the bottom of the market in 2012, it’s important to keep in mind that it’s still roughly 13% less than was required back in 2006.”

This report also looked at how rising short-term interest rates have impacted holders of outstanding adjustable-rate mortgages (ARMs), finding that 1.7 million such borrowers have seen their monthly mortgage payments increase by an average of $70 over the past 12 months. This subset of borrowers had been the beneficiary of downward reductions in their rates and payments following the financial crisis, but that’s no longer the case. Increases to both the LIBOR and constant maturity Treasury rates have resulted in the average rate on a post-reset ARM rising by more than .5% over the past 12 months and nearly .75% over the past two years, pushing the average post-reset ARM interest rate to more than 4.5%. While this has not led to any measurable increase in post-reset ARM delinquencies, ARM loans are now prepaying at a 70% higher rate than their fixed-rate counterparts over the past 12 months. This is a trend that may continue as an estimated 1 million borrowers would face an additional payment increase upon their next reset if index values were to hold steady at today’s rates.

As has reported in Black Knight’s most recent First Look news release, other key results include:

–  Total US loan delinquency rate: 3.74%

–  Month-over-month change in delinquency rate: 2.71%

–  Total US foreclosure pre-sale inventory rate: 0.56%

–  Month-over-month change in foreclosure pre-sale inventory rate: -4.51%

–  States with highest percentage of non-current* loans: MS, LA, AL, WV, ME

–  States with lowest percentage of non-current loans: ND, ID, WA, OR, CO

–  States with highest percentage of seriously delinquent loans: MS, FL, LA, AL, AR

Oil prices climb following unexpected production dip

Former Shell Oil President John Hofmeister on the outlook for oil prices.

Oil prices climbed Monday amid reports that Saudi Arabia’s crude production fell unexpectedly in July, while the reimposition of sanctions on Iran sparked concerns of a tighter oil market supply/demand balance in the future. Last Friday, two OPEC sources said that Saudi Arabia produced about 10.3 million barrels per day of crude oil in July, down about 200,000 barrels per day from June, according to Reuters. OPEC and Russia agreed in June to start increasing crude oil production after prices rallied to a 3 1/2 year high on a tighter market fundamentals which followed more than a year of output curbs. The US will reimpose the first set of sanctions on Iran on Monday as part of its decision to pull out of the Iran nuclear deal. The remainder of the sanctions, including oil, will take effect in November, a White House official told FOX Business’ Edward Lawrence. The sanctions on oil could ultimately block more than 1 million barrels a day of Iran’s approximate 2.5 million barrels a day of crude oil exports.

Also, the latest drilling update indicated that production in the US decreased in the prior week. Baker Hughes on Friday reported that the number of active oil rigs decreased by 2 versus the prior week.

Wells Fargo: Error contributed to hundreds of foreclosures

Wells Fargo says a company miscalculation could be the reason for hundreds of foreclosures, the bank revealed in a regulatory filing Friday. The report, filed to the Securities and Exchange Commission, said 625 customers were “incorrectly” denied a loan modification or were not offered a modification, all of which should have qualified. Out of those cases, 400 homes were foreclosed, something Wells Fargo defends might have happened anyway. To make up for the mistake, Wells Fargo has accrued $8 million to remedy affected customers, the report said. That amount averages $12,800 per borrower but the company did not say how much each individual would get or how the compensation would be distributed. Wells Fargo spokesman Tom Goyda told the Los Angeles Times all are receiving what the company deems is appropriate given the circumstances. “We’re very sorry that this error occurred,” Goyda said, adding there is not a 100% “clear cause and effect relationship between the modification denial and the ultimate foreclosure.” Goyda said he could not say what prompted the review of the loan modifications.

The latest finding adds to the bank’s growing list of problems, including a scandal in 2016 after regulators found the bank had opened millions of accounts without customers’ permission to meet quotas and generate sales bonuses. On Wednesday, the bank agreed to pay a $2.09 billion penalty for issuing mortgage loans it was aware contained incorrect income information. The bank agreed to pay the civil penalty under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 for the actions, which the government said contributed to last decade’s financial crisis. In June, Wells Fargo agreed to pay $5.1 million to settle charges of financial misconduct, after the SEC learned the bank generated large fees by improperly encouraging retail customers to actively trade market-linked investments, which were intended to be held to maturity. In addition, the SEC found that Wells Fargo did not properly investigate employees who were engaged in the practice and supervisors systematically approved the transactions, despite internal policies prohibiting similar practices. In February, the Federal Reserve capped Wells Fargo assets until the bank reforms itself to the regulator’s satisfaction.

Millions drop off food stamps

The number of people collecting foods stamps has dropped tremendously since President Trump took office, according to the latest numbers from the US Department of Agriculture (USDA). More than 2.8 million have stopped participating in the Supplemental Nutritional Assistance Program (SNAP) – commonly known as food stamps – since Trump’s first full month in office, the data showed. Food stamp enrollment in May 2018 was 39,329,356 versus 42,134,301 in February 2017. SNAP, which provides resources for individuals and families in need of food assistance, numbers are consistent with the downward trend seen over the past few years. It also comes as the Trump administration attempts to reform the program on state and federal levels of government. Since Trump took office, the administration has zeroed in on promoting pro-growth policies. The economy is growing at a rate above predictions and job growth has been strong across the board, according to the White House.

DSNews – Goldman Sachs Moves Forward on Consumer Relief Obligation

Goldman Sachs has reached 62% of its $1.8-billion consumer relief obligation, which was enacted under its two April 11, 2016, mortgage-related settlement agreements with the US Department of Justice and three states. Eric D. Green, the independent Monitor of the consumer-relief portions of the agreements, has announced that the forgiveness of balances due on 1,127 mortgages has moved the bank $127.1 million closer to its agreement sum. Professor Green is a professional mediator and retired Boston University law professor, who was named by the settling parties as independent Monitor with responsibility for determining the fulfillment of Goldman Sachs’ consumer-relief obligations. Green has assembled a team of finance, accounting, and legal professionals to assist in the task. Since the last report, produced on May 15 of this year, Professor Green reports that “Goldman Sachs forgave the balances due on 1,024 first-lien mortgages, for a total principal forgiveness of $113,504,343, an average of $110,844 per borrower.” The bank also forgave amounts due and previously deferred on 103 first-lien mortgages, for total forgiveness of $5,139,100, an average of $49,894 per borrower.

These two reports resulted in the total reportable consumer-relief credit of $127,109,482 after the application of crediting calculations and multipliers specified in the settlement agreements. “Approximately 28 months after the settlement agreements were signed, the total amount of credit claimed and conditionally validated in my reports under both settlement agreements comes to $1,120,530,304, or 62% of the $1.8 billion target,” Professor Green said. The two agreements settled “potential and filed legal claims” regarding the marketing, structuring, arrangement, underwriting, issuance, and sale of mortgage-based securities. Goldman Sachs reached settlements with the Department of Justice, California, Illinois and New York, as well as the National Credit Union Administration Board and the Federal Home Loan Banks of Chicago and Des Moines. The bank agreed to provide a total of $5.06 billion under the settlements, including consumer relief valued at $1.8 billion to be distributed by the end of January 2021. According to the statement, the modified mortgages were spread across 45 states and the District of Columbia, “with 36% of the credit located in the settling states of New York, Illinois, and California, and 46% of the credit located in Hardest Hit Areas, or census tracts identified by the US Department of Housing and Urban Development as containing large concentrations of distressed properties and foreclosure activities.”

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