Archive for January, 2015

East Coast Banks Prosecuted for Redlining

State Attorney Generals are prosecuting and winning settlements from banks in New York and Rhode Island for increasing originations in predominantly white neighborhoods while excluding minority neighborhoods from their mortgage business.
 
Gregory Squires of George Washington University tells National Mortgage News that the lenders probably aren’t intentionally discriminating against minorities. Instead, “seemingly benign internal policies [can] result in discriminatory lending practices.” Such policies and practices can range from avoiding branches in minority neighborhoods or failing to market in those communities to setting minimum mortgage loan amounts, which Squires calls “one of the most problematic practices.”
 
The article points out that lending patterns in minority neighborhoods have undergone a dramatic change since the financial crisis. “What we’re seeing now are not neighborhoods being flooded with subprime loans, but the re-emergence of [traditional] redlining,” says Squires.

News Roundup: Mortgage rates, CFPB survey, local taxes and all-cash home sales

Mortgage rates dropped steadily through 2014 and have continued falling in the new year as low inflation, global crises and economic turmoil in Europe drive demand for US Treasury bills higher, pushing down interest rates. The average rate on 30-year fixed mortgages fell to 3.66% as 30-year Treasuries hit 2.367%, the lowest rate ever. Combined with the federal government’s news last week that it would cut the insurance premium charged on Federal Housing Administration (FHA) loans, falling mortgage rates are expected to give a boost to first-time homebuyers in 2015. Homeowners seeking to refinance are already benefiting from falling rates.
 
Hoping to assist homebuyers looking for the best mortgage rate, the Consumer Financial Protection Bureau (CFPB) introduced an online tool to help borrowers compare rates from different lenders and prepare to purchase a home. The CFPB also released the results of its National Survey of Mortgage Borrowers, a user-friendly report that summarizes current housing market conditions and provides data about borrowers’ experiences with the lending process.
 
Also out this week: A report on tax inequality by the Institute on Taxation and Economic Policy titled “Who Pays? A Distributional Analysis of the Tax Systems in 50 States.” The Institute found state and local taxes fall hardest on the poor, consuming some 10% of their income compared to the richest one percent of taxpayers, who pay 5.4% of their income in state and local taxes.
 
Last, Corelogic reported that October cash purchases of homes continued their 22-month drop, falling to 35% of sales from a peak of 46.4% in January 2011. In California, cash purchases were 25% of all sales. Nationwide, the share of all cash sales was highest for lender owned (REO) property, at 58.7%. Cash sales have steadily declined since January 2013, with CoreLogic predicting they will return to pre-crisis levels of around 25% by 2017.

White House Lowers Insurance Premiums on FHA Mortgages

In an effort to expand homeownership among lower-income buyers, the Obama Administration has announced it will use executive action to reduce mortgage insurance premiums by 50 basis points, from 1.35% to 0.85%, on loans from the Federal Housing Administration. The reduction is expected to help support the housing market’s recovery while partly offsetting FHA fees that have risen since the financial crisis. The FHA estimates two million borrowers who purchase or refinance homes will save an average of $900 a year over the next three years.