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.

CFPB Expands Home Mortgage Reporting Rules

The Consumer Financial Protection Bureau (CFPB) announced new rules aimed at making federal home loan data more useful and transparent. The draft rules would update the federal Home Mortgage Disclosure Act (HMDA), which requires financial institutions to report their home loan activity by loan type, borrower census tract, and myriad other variables.
Data from HMDA are the leading source of information about the U.S. mortgage market. In 2012, financial institutions provided details of 18.7 million mortgage applications and loans. HMDA data have helped identify lending disparities and possible discrimination in the credit market. However, as Mortgage News Daily notes in its coverage of the new rule, HMDA data don’t provide adequate disclosure about loans like adjustable-rate mortgages or non-amortizing debt — products that helped contribute to the mortgage crisis.
The CPFB agrees, concluding HMDA data “must address the informational shortcomings exposed by the financial crisis, meet the needs of homeowners, potential homeowners, and neighborhoods throughout the nation, and reflect changes in business practices and the technological evolution of the mortgage market.”
The proposed changes improve the way home equity lines of credit and reverse mortgages are reported and expand disclosure to include data points like property value, loan term, total points and fees, information on teaser or introductory rates, and the applicant’s age and credit score. The proposed rule also would also require the largest banks to begin reporting HMDA data quarterly, rather than annually, in order to make the data more timely and actionable.
The update is required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, passed by Congress in 2011 after the mortgage crisis. The CPFB is accepting comments on the proposed rule until October 22. The full text of the rule and information about submitting comments can be found on the CPFB website.

California Foreclosure Starts Inch Up Again

Year-over-year foreclosure activity – default notices, scheduled auctions and bank repossessions – continued to decline in California in March, according the latest RealtyTrac report. However, notices of default – the first stage of the foreclosure process – rose 10 percent in the first quarter from the same period in 2013.
There are a couple of reasons for the uptick in new foreclosure activity, reports the Riverside County-based Press-Enterprise. Banks have adjusted to the 2013 California Homeowner’s Bill of Rights and begun to push through foreclosures that may have been delayed, says Daren Blomquist, vice president at RealtyTrac.
Still, California is in better shape than it was a few years ago, reports Capitol Public Radio. While the number of properties starting the foreclosure process in January was 6,900, at the height of the crisis in 2009 and 2010, that number was closer to 50,000. By 2012, notices of default averaged 17,000 a month, and in 2013, that number fell to about 6,800 a month.
RealtyTrac’s Blomquist cautions that the numbers for 2013 were artificially low because of the hiatus by lenders on foreclosure actions. “We saw a year of the numbers going down, and [in 2014] we will see another year of the numbers bouncing up to catch up the deficit,’’ he said.

Upcoming First-Time Homebuyer Workshops

The RTF is co-sponsoring two Saturdays of free first-time homebuyer workshops. Money Management Intl. and sponsors US Bank and the County of San Diego will hold the workshop in Santee on November 23 and Poway on December 7. Both workshops start at 9:30 am and run all day. Prospective homebuyers can get information on budgeting and credit use, obtaining a mortgage, shopping for a home, the appraisal and inspection process, mortgage closing, and life as a homeowner. Click on the event dates above for location and pre-registration information.

April 2013 California Property Report

PropertyRadar’s California Property Report for April 2013 shows property sales continued their 12.9 percent year-over-year contraction, driven largely by a 39.4 percent decline in distressed property sales. The report credits the fall in distressed sales in part to reduced foreclosure activity as a result of 2012’s California Homeowner Bill of Rights and new foreclosure prevention guidelines issued by the Office of the Comptroller. Cash sales continued to be 29.3 percent of the market, a steep increase over numbers in the range of 6.2 to 8.4 percent seen in 2001-2007.

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