The Week Ahead
The Senate is in session while the House continues its work remotely.
- NEXTSummer20, 8/23-25
- Digital Mortgage, 9/14
- MBA Annual, 10/18-21
- NCSHA Annual, 10/24-27
- NEXTDC20, 11/10
Senate Republicans Engage on COVID 4
Led by Senate Majority Leader Mitch McConnell (R-KY), the US Senate returned to Washington this week and focused on completing a draft COVID 4th package bill in the range of $1 trillion.
The set of Senate measures include direct payments to individuals, a revised unemployment benefit targeted at 70% of wage replacement and a new PPP for small employers with revenues down 50% or more year-over-year. This package will be used as the base bill to negotiate with the House on their version of a COVID 4 package, the HEROES Act; a measure that is more than three times larger than the Senate’s.
With COVID-19 hospitalizations increasing, and the President acknowledging that the pandemic will get worse before it gets better, it is now expected that a COVID 4 package will be signed into law prior to the August recess.
The mortgage markets have fared well through the pandemic to date benefitting from a low rate environment, generous CARES Act forbearance provisions and tight inventory that is driving up real estate prices.
The rental side remains a question mark as eviction risk is rising with the end of stays.
OCC Proposes ‘True Lender’ Rule
The OCC proposed a rule that would determine when a national bank or federal savings association (bank) makes a loan and is the “true lender.”
Banks’ lending relationships with third parties can facilitate access to affordable credit. However, the relationships have been subject to increasing uncertainty about the legal framework that applies to loans made as part of these relationships.
The proposed rule would resolve this uncertainty by specifying that a bank makes a loan and is the “true lender” if, as of the date of origination, it (1) is named as the lender in the loan agreement or (2) funds the loan. Comments are due on 9/3/2020.
Existing Home Sales ‘Amaze’ at 21% Higher MoM
Sales of existing homes jumped nearly 21% in June compared with May, according to NAR.
It was the largest monthly gain since the Realtors began tracking the data in 1968 and came after sharp declines over the previous three months due to the coronavirus pandemic. Sales were still 11.3% lower annually.
This count is based on closings, so it represents contracts signed in late April and May, before much of the national economy began to reopen and before the most recent surge in coronavirus cases.
Home sales could have been more robust, had there simply been more homes for sale. The supply of existing homes available fell a remarkable 18.2% annually to just 1.57 million homes for sale at the end of June. Based on the current sales pace, that represents a four-month supply. Last June 350,000 more homes were on the market.
“The market’s performance has been admittedly shocking, amazing, considering that typically when you have surging unemployment, housing activity tends to fall,” said Ivy Zelman, CEO of Zelman Associates. “That tends to be the case going all the way back to World War II.”
FRE Uses ‘Text Mining’ to Identify ADUs
Freddie Mac published Identifying Accessory Dwelling Units from Real Estate Listing Descriptions Using Text Mining this week and found the scarcity of affordable housing in high-cost areas of the country has resulted in the passing of ordinances aimed at reducing restrictive zoning in some jurisdictions. These cities have adopted ADU-friendly legislation, making units legal in many neighborhoods.
Today, there are 1.4 million single-family properties with ADUs. They were identified using a national-level dataset of 600 million Multiple Listing Service transactions dating back to the late 1990s.
California, Florida, Texas and Georgia account for half of the 1.4 million ADUs in the U.S., according to Freddie Mac.
Sam Khater, Freddie Mac’s chief economist, said “The nation’s affordable housing crisis has intensified in this turbulent economic environment, and ADUs are increasingly providing a viable affordable housing option for people of all ages. This analysis is both unique and large in scale, giving us insight into the growing movement of accessory dwelling units.”
Unlike previously published reports on ADUs using homeowner surveys and building permit data, this paper addresses both legal and illegal units across the United States. By efficiently text-mining listing data, FRE identified unique properties with ADUs.
While accessory dwellings have existed in high-cost areas of the country long before cities began to relax zoning laws, FRE research shows first-time ADU listings increased more rapidly from 2009 to 2019, growing at an average annual rate of 8.6%. Over this ten-year period, ADU listings as a percentage of total active listings rose from 3.5% to 6.6%. In 2019, 78,000 accessory units were either sold or rented, up from 36,000 units in 2009. The South and West regions, where population growth has been strongest, outpaced other regions in terms of ADU expansion over the last decade.
By turning qualitative description data into quantitative measures, researchers can better understand the characteristics of ADU markets across the country.
Fed Nominee Advances
The nomination of Judy Shelton to serve on the Federal Reserve board was passed out of committee this week.
Shelton, whose nomination by President Trump has faced months of delays because of skepticism from key Republicans, was approved this week by the Senate Banking Committee on a party-line vote. She will now face a vote before the full Senate chamber.
Shelton has long been an advocate for tying the value of the dollar to gold, but she has been downplaying that since she was nominated.
If Trump were to lose reelection, Shelton and Waller’s confirmations would leave no empty seats at the Fed for the new president to immediately fill. Should Trump win, critics have raised fears that he might nominate Shelton as Fed chair when Jerome Powell’s term as chief ends in 2022.
Faith’s Corner: 53% of Borrowers Lost Income
LendingTree published a new report this week that shows 53% of mortgage borrowers in the United States have lost income during the pandemic. About 4 in 10 mortgage borrowers said they, or members in their household, have been receiving unemployment benefits.
Compounding the issue is layoffs once thought to be temporary are becoming permanent in many cases.
Nearly one-third (32%) of borrowers have deferred paying bills other than their mortgage, due to the COVID-19 crisis. The top two deferred payments were for auto loans (11%) and credit cards bills (10%).
“Unfortunately, the response to the coronavirus crisis has been very poor; many layoffs that were temporary are beginning to become permanent, and the economy is likely to remain weak well into 2021,” LendingTree asserted.
A little over two-thirds (67%) of mortgage borrowers facing income loss would consider skipping a debt payment to make ends meet:
- 23% would default on credit card payments
- 15% would default on student loan payments
- 5% would default on auto loan payments
Of the 30% of borrowers in forbearance, more than 4 in 10 (44%) have an annual household income of at least $100,000, which is more than any other income bracket.
2Q Sales Profit at 36% ROI
ATTOM Data Solutions reported its second-quarter 2020 U.S. Home Sales Report showed home sellers nationwide realized a gain of $75,971 on the typical sale, up from the $66,500 in the first quarter and from $65,250 a year ago.
The typical $75,971 home-sale profit represented a 36.3 percent return on investment compared to the original purchase price, up from 34.5 percent in the first quarter and from 33.7 percent a year ago, to another post-Recession high. This comes as median home prices increased, year over year, in almost every market around the country with enough data to analyze.
Shaun Donovan Running for NYC Mayor
Former HUD Secretary Shaun Donovan is running to be the next mayor of New York City in the November 2021 election. Out of the gate, he has a sizable head start in fundraising on his competition by outraising the entire field of other candidates.
Donovan raised $662,000 compared to the combined $594,000 in the same period from the other 11 candidates who have also declared.
Editor’s note: This is a compilation of industry periodicals (including American Banker, Bloomberg, Mortgage Bankers Association media, Politico and the Wall Street Journal among others) and is intended solely for the use of the addressee and not for further distribution without the sender’s permission.
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Faith Schwartz is the owner of Housing Finance Strategies, a professional services firm founded in 2016 to provide Strategic Advisory Services, Government and Industry Relations, Public Policy Expertise, Roundtable and Event Management and Professional Speaking Services.