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| Homeownership Rate at Lowest Point Since 2000 |
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Fratantoni, Mike; Kan, Joel; Sorohan, Mike
The homeownership rate for the fourth quarter fell to 67.2 percent, a decrease from 67.6 percent in the third quarter and from 67.5 percent in the fourth quarter of 2008. This matched the lowest level of homeownership since the second quarter of 2000.
Homeownership rates are significantly affected by seasonal factors, so when adjusted to account for these factors, the homeownership rate was 67.3 percent, a slight decrease from 67.4 percent in the third quarter and from 67.6 percent in the fourth quarter a year ago. The seasonally adjusted homeownership rate is also at its lowest level since the second quarter of 2000.
Homeownership rates declined across the country, with the South posting the steepest drop, falling to 69.1 percent from 69.7 percent. This is the lowest level seen in the South since the fourth quarter of 1999. The West had the next-sharpest decrease, with the rate falling to 62.3 percent from 62.7 percent. The 62.3 percent rate is the lowest seen in the West since the first quarter of 2002. Homeownership in the Midwest decreased to 71.3 percent from 71.6 percent, while the Northeast saw a very slight decline to 63.9 percent from 64.0 percent.
First-time home buyers purchasing starter homes have accounted for a larger-than-normal share of activity in the housing market recently. One result of this is that the homeownership rate for younger households (those under 35) increased, while all other age groups saw declines, with the steepest decline coming in the 35-44 age category.
Homeownership rates have fallen across the income spectrum. The homeownership rate for households with incomes below the median has declined from 53.1 percent in the fourth quarter of 2005 to 50.2 percent in the fourth quarter. For households with above-median income, the homeownership rate has declined from 84.5 percent in 2006 to 81.8 percent in the fourth quarter.
The rental vacancy rate decreased in the fourth quarter to 10.7 percent, down from last quarter’s record high 11.1 percent. The homeowner vacancy rate increased to 2.7 percent in the fourth quarter from 2.6 percent in the third, but is down from the record high 2.9 percent reached in 2008.
Over the past year we’ve seen an increase of more than 1 million occupied housing units. The bulk of this increase has been among occupied rental units, which posted a 700,000 increase, with an increase of 300,000 occupied owned units. The total number of vacant housing units increased by 100,000 over the year, driven by an increase in vacant rental units. A positive finding was that the number of vacant properties for sale decreased over the year by 119,000 units. On the negative side, we saw an increase of 379,000 properties that were vacant and for rent.
In a separate report, Integrated Asset Services, Denver, reported this week that its IAS360 House Price Index fell by another 0.7 percent in December; with five consecutive months of price drops, the Index said home prices fell by 5.3 percent for all of 2009, on top of a reported 11.7 percent decrease in 2008.
The Index is now off by more than 22 percent from its high-water mark in July 2007; the index has dropped to a level last seen in mid-2004.
“There’s something to be said for the fact that the decline has at least slowed,” said IAS President and CEO Dave McCarthy. “But I still think the risk of continued weakening in house prices nationally is considerable.”
The South census region saw a house price increase of 2.3 percent, a rebound of which McCarthy attributed to price declines having dramatically improved housing affordability and demand. Alabama and Georgia both posted increases of 10 percent. The Northeast, meanwhile, fell for the fourth month in a row, losing another 1.7 percent in December. The West lost ground for the month, slipping by 1.0 percent, but the Midwest turned in the worst performance, dropping an “outsized” 4.2 percent. IAS said steady declines in the region have swept prices back to levels seen in late 2003.
(Michael Fratantoni is vice president of research and economics at the Mortgage Bankers Association. He can be reached at mfratantoni@mortgagebankers.org. Joel Kan is associate director of research and business development at MBA. He can be reached at jkan@mortgagebankers.org). |
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This following commentary was submitted by ACUMA member Jess Lederman, Kinetca FCU, Manhattan Beach, CA...
In my opinion, the key to building purchase money relationships is building a bridge between an institution’s portfolio lending and mortgage banking strategy. That’s the philosophy I preach to anyone who will listen. For example, at Kinecta we’re focused on a goal of getting originations to 2x the size of the balance sheet in the next couple of years– implication is that for every $1 of portfolio money we lend out, we want to originate about $9 of salable. So by, say, 2012 we’re a $5 billion FCU originating $10 billion of loans—of which about $1 billion would be for portfolio and $9 billion for sale. Key to that is understanding that portfolio capacity is pure gold in a dysfunctional market. It goes without saying that an institution should originate high-quality loans at decent yields—but that’s only the starting point. Portfolio capacity should be allocated, to the extent practical (i.e., after meeting walk-in-the-door member needs) to strategic referral sources (realtors and builders in retail, or key wholesale/correspondent relationships) which can use that portfolio capacity to increase their own market share and will reward the CU with a large share of vanilla salable business. Which of course means more members, more consumer lending, etc. Our objective is to move beyond our current retail/wholesale/correspondent channels later this year and offer mortgage services to other credit unions nationwide—whether retail origination or simply serving as their correspondent investor. The key would be private-label servicing the loans we buy on their behalf, so they can cash out on the full servicing value but retain the relationship with the borrower through a partner that won’t solicit those members.
Jess Lederman
Mr. Lederman is a co-founder of three successful national mortgage businesses, including two of the first private-sector counterparts to Fannie Mae and Freddie Mac. He is the architect of several breakthroughs in both for-profit and non-profit housing finance, including the first SEC-registered securities backed by adjustable-rate mortgages and the first affordable-housing securitization of ground-lease fees. Mr. Lederman has published over forty books on the global financial markets, including ten books on mortgage banking and the secondary mortgage market, several of which have become standard reference books used in the Mortgage Bankers Association of America’s prestigious School of Mortgage Banking. He has published and lectured extensively on both interest-rate and credit risk management.
In addition to serving as Director of Pricing for PMI Mortgage Insurance, Mr. Lederman has held positions as Vice President of Sales and Marketing for Sears Mortgage Securities Corporation; as Executive Vice President responsible for all aspects of national mortgage banking at both Bear Stearns Mortgage Capital Corporation and Ohio Savings Bank; and as executive director for an affordable housing non-profit organization. Prior to joining Kinecta, he served as Senior Managing Director/Chief Risk Officer for Countrywide Home Loans and Countrywide Bank, playing a key role in guiding the mortgage giant to its merger with Bank of America. Mr. Lederman graduated Phi Beta Kappa and summa *** laude from Columbia University, where he received both his BA and MBA degrees.
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This article was forward to ACUMA by our mermber Walt Mullen, Sr. Vice President with Title Resource Group, Mt. Laurel, NJ...
by Jennifer Saranow Schultz
Tuesday, February 9, 2010provided by
Customers of the biggest banks in the United States are the least likely to believe their financial institution does what's best for them as opposed to what's best for the bottom line, according to a new report from Forrester Research.The report, Forrester's annual Customer Advocacy rankings, ranks nearly 50 financial services firms in the United States by the percentage of each firm's customers who agree with the statement: "My financial provider does what's best for me, not just its own bottom line." The results are based on a survey of about 4,500 consumers.The bottom seven of this year's rankings, first to last, are Bank of America, Chase, Capital One, TD/Commerce, Fifth Third, Citibank, and in last place, HSBC.Among Bank of America customers, 33 percent agreed with the statement above, while 31 percent of Chase customers agreed, 29 percent of Capital One customers agreed, 28 percent of TD/Commerce Bank customers agreed, 27 percent of Fifth Third Bank customers agreed and 26 percent of Citibank customers agreed.Among HSBC customers, only 16 percent said they agreed with the statement, the lowest customer advocacy score ever reported in the United States, down 10 percentage points from HSBC's score last year and in line with other recent similar poor rankings of other HSBC units.An HSBC spokesman declined to comment on the survey, since he hadn't seen it yet.To put the rankings in perspective, large banks have generally been at the bottom of the list since the survey was initiated seven years ago, and many of the banks have alternated between the bottom spots year to year, said a Forrester vice president, Bill Doyle, who wasn't aware of anything particular HSBC has done recently that would make its score so low. Last year, for instance, Capital One was at the bottom with 22 percent of its customers agreeing with the statement. In fact, the more customers a banking institution has, the lower its customer advocacy ranking is likely to be, according to Forrester.Why the poor rankings for the big banks? "Part of it is that the banks are preoccupied with their bottom line. They are public institutions who are in business to make money for their shareholder and inevitably, that shows to customers," Mr. Doyle said.A high customer advocacy ranking means that customers tend to believe their bank takes their side in disputes, does what is right even if it's not required by regulation to do so, gives fair rates or performance comparisons and is clear about charges and fees, Mr. Doyle said.Wells Fargo/Wachovia, by contrast, did better than the other big banks. About 40 percent of its customers said they believed the bank does what is best for them, with Wachovia's customers probably pulling up Wells Fargo's ratings, Mr. Doyle said. Wachovia has generally done substantially better in the rankings than the other big banks.According to Mr. Doyle, customer advocacy rankings are a predictor of customer retention and attrition, and customers who rate their financial service firms high are more likely to consider their firm for additional products. In contrast, customers who give their banks a low ranking are most likely to switch in the next year and are "going to be reluctant to put any more money and open new accounts at those institutions," Mr. Doyle said.This means the low rankings don't bode well for the bigger banks, many of which are reaching federal limits for how much they can increase deposits by acquiring other banks and must rely on attracting more customers to increase revenue.Credit unions ranked much higher than the big banks, as they have in previous years, with 70 percent of credit union customers saying their financial institution puts their interests first. Mr. Doyle said this is because of credit unions' different operating model -- they are owned by customers -- and because they tend to emphasize customer service.After credit unions, the bank run by USAA, a financial services company that serves the military and their families, came in next with 64 percent of its customers agreeing with the statement. It was followed by ING Direct, with 46 percent. Regional banks including PNC, U.S. Bank and BB&T came in next with rankings similar to Wells Fargo/Wachovia. Regional banks, which often can't afford big advertising campaigns, tend to emphasize customer service, Mr. Doyle said.Insurance firms, meanwhile, remained the highest rated firms for customer advocacy, with more than half of all customers rating their insurers high on customer advocacy and insurers representing two-thirds of the firms in the top half of the rankings. The ranking of investment firms, meanwhile, fell below banks for the first time since the rankings began. Investment firm rankings tend to fall when the market isn't doing well, Mr. Doyle said.
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Good day to all…We are officially off and running in 2010. I wanted to take this opportunity to make some bold projections for mortgage loan production in 2010. We know 2009 was a great year for the mortgage origination CUs. 2010 will be much different.The MBA forecast projects total 2010 originations at $1,278 trillion. This total is down some 40% from 2009. In addition the forecast reduces the percentage of refinance transactions from 65% of the 2009 total to only 39% of the 2010 total. We believe the 2009 origination total for the CU industry to be around $90 billion. This calculates to approximately to 4.25% market share. We would like to set a target of 4% for 2010. This means the CU originating CUs should originate approximately $51.1 billion to maintain a 4% market share this year. We realize the fact that the refinance percentage is much lower this year will make our goal a bit more difficult and challenging for the CU system. We do believe this is possible and ACUMA is poised to continue to focus on this target. It will be difficult but not impossible. Achieving our goal will require a unified effort both in terms of market awareness and performance not only from your lending staff but all departments of the credit union. In the next edition of our Pipeline magazine you will receive some critical tips on how to work more effectively with Realtors®. Once again since purchase money loans will dominate the market we will need to improve our efforts in that area. We will begin our Web Cast information and education very soon. We will first deal with some of the compliance issues and then move more into identifying and cultivating business opportunities. Please make sure you are working with your Marketing staff right now to take full advantage of the First-Time Homebuyers Tax Credit now expected to expire on June 30th of this year with loans qualified by April 30th. We will work at this in many other areas culminating with a longer and more intense ACUMA Fall Conference in September of this year. This would be the perfect time to make certain our ACUMA Network and Community of CUs is strong and begins growing. I look forward to working with all ACUMA members, the nation’s CURENs and everyone else contributing to these efforts.Please do keep in touch and please remember a weekly average of $1billion in CU loan originations is what we need. All the best…Sincerely,.BobBob Dorsa, President
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Due to a timing issue ACUMA Submitted the following to Chairman Matz on October 22. What is your opinion?
Members are encouraged to discuss and debate this issue here on the ACUMA COmmunity Blog...
Thanks...
Bob.
October 22, 2009 The Honorable Debbie Matz, ChairmanNational Credit Union Administration1775 Duke Street
Alexandria, VA 22314-3428 RE: ACUMA Comment: Extending the $8,000 First-Time Homebuyer Tax Credit Dear Mrs. Matz: The American Credit Union Mortgage Association (ACUMA) brings together the shared real estate lending and financing interests of nearly 8,000 credit unions and credit union service organizations (CUSOs). ACUMA assists credit unions with their goals of expanding homeownership and extending access to affordable housing to their 90 million members around the country. We very much appreciate the Government’s efforts on behalf of homeowners over the course of the past year and urge the President and Congress to extend and expand the $8,000 First-Time Homebuyer Tax Credit program. The Internal Revenue Service (IRS) recently reported that well over 1 million taxpayers have benefited from the tax credit, many of these credit union members. We are experiencing this positive impact at a local level on a daily basis. While the tax credit program has enabled more of our members to realize the American dream of homeownership, it has also helped to improve the overall housing market. We feel homeownership is one of the foundations of economic stability. This emphasizes the need to ensure we do not upset a fragile housing market just as we begin to see signs of stabilization. Many small businesses rely on the housing market and are starting to experience positive gains as the housing market recovers. ACUMA supports the Mortgage Bankers Association’s (MBA) position that supports tax initiatives that would encourage home purchase activity. ACUMA further supports the following MBA recommendations pertaining to changes to the current tax credit:
- Expand eligibility to ALL homebuyers – While the tax credit has proven to be effective in helping first-time homebuyers, a large number of Americans are thinking about moving from their current home for various reasons and might be incented by a tax credit to do it now, when the economy needs it the most.
- Increase the tax credit to a maximum of $15,000 – Increase the tax credit up to 10 percent of the home purchase price up to a maximum of $15,000. The credit may include a phase-out based upon adjusted gross income as reported on a borrower’s most recent tax returns.
- Require the tax credit to be repaid in certain instances – The borrower should repay the tax credit only if the residence is sold within the first three years (exception for employment-related moves) or in the event of a taxpayer default on any other mortgage that existed at the date the tax credit is claimed. This would discourage “buy and bail” behavior, where a borrower uses the tax credit for his or her advantage and walks away from an existing mortgage obligation.
Tax credit should be available for settlement – If practical, facilitate the Internal Revenue Service (IRS) sending funds claimed by the taxpayer directly to the settlement agent of the property transaction for a down payment.
- Enhancements effective immediately – Any enhancements to the programs should be effective on the date of enactment and should be in effect for at least 12 months to ensure the greatest economic stimulus.
One addition to the MBA recommendations would be to consider we recognize the cost of buying one’s first home varies widely based on location. The tax credit currently calls for it to be applied based on a nationwide salary cap. We would recommend the administration consider varying the salary cap based on the Median Statistical Area’s average home price. ACUMA believes that the First-Time Homebuyer Tax Credit has had a significant positive impact on our economy, and we support extending and expanding it so more of our 90 million members nationwide may experience the joys of homeownership. As we approach the end date of the current program, we urge Congress to consider the MBA’s recommendations to expand the program to include all homebuyers, increase the credit up to $15,000, make funds available for closing, and extend the overall program by at least 12 months. Problems in the housing market helped to lead the nation into recession. Stimulating the housing market will have an immediate impact on consumers and small businesses and help to sustain a positive recovery for our nation. Respectfully submitted, John Reed John Reed, Chairman Bob Dorsa, President
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The timeframe set by the Obama administration for allowance of an $8,000 tax credit for first time homebuyers is scheduled to end on November 30, 2009.
Are you in favor of the President extending this deadline for one more year? Do you believe Credit Unions can contribute and provide more viable options for first time homebuyers needing funds to purchase and finance a residence?
ACUMA represents the leading mortgage lending Credit Unions and CUSOs in the nation. Why not exert whatever leverage we can to engage the administration to strongly consider this possibility. American's need this and America's Credit Unions need it...
Please fel free to post your comment. Thanks again...
Sincerely,
Bob Dorsa
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What does this tell us when 53% of all CU loans are mortgages and our market share is still below 6%? Add to this Tuesday July 28th Case-Shiller Index UP for the first time in three years? Does anyone else feel housing may be bottoming? CUs take note. Our window of Opportunity just closed a bit?
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ACUMA member Tim Mislansky, SVP of Wright Patt Credit Union and President of myCUSO in Fairborn, Ohio would like to know...How many CUs are signing the Treasury agreement to participate in the modification program for portfolio loans?
Please post your comment here or email Tim directly at TMislansky@wpcu.coop.
Tim and I thank you in advance
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This questions was submitted by ACUMA Member Glen Ogden, from Appleton, WI.
"I just spent three days in Chicago at the MBA Secondary Conference. Correspondent mortgage companies are hurting for warehouse lines and most banks are simply not offering them. The few that are are charging huge fees and rates and churning their lines every thirty days. The product being offered right now are all agency eligible or FHA insured loans. I see a real need and a way for our credit union to get some more money out the door. WHat are others doing?"
You may post your comment here or email Glen directly at Glen.Ogden@communityfirstcu.org.
Thanks again.
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The following question was submitted by ACUMA Member Leslie Creech from Virginia CU in Richmond VA.
Section 32 of Reg Z is changing beginning October 1, 2009. We will no longer use the Treasuries + 8% test – it will change to the Freddie Mac PMMS +1.5% test. We have run this test on all loans closed in 2009 and so far 7 loans <would> have failed primarily due to the Loan Level Price Adjustments instituted by the GSE’s. HUD admitted that Jumbo loans would likely be considered High Cost under this test but our loans are conforming cash-out refinances to members with lower credit scores. We are afraid that we will not have a choice but to not offer cash-out refinances to those members with less than a 700 credit score. Is anybody else testing? If Yes, do you have similar results? You may either post your comment here or reply to Leslie at leslie.creech@vacu.org.Thanks again...
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The following question was presented by ACUMA Member Phil Poehler, from Prevail CU in Seattle, WA.
I am seeking feedback as to methods and accointing procedures to book in our “servicing retained premiums” on loan sales to Fannie Mae? Any direction you can provide me would be greatly appreciated.
You may post a reply here or email Phil directly at PPoehler@prevailcu.com. Thanks again....
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The following question was submitted from ACUMA Member Nathan Lombard from Redstone FCU in Huntsville, AL.
Will most Credit Unions will be able to use the exemption of not having absolute lines of independence due to our limited staff size? I am trying to determine how we can comply with the Code of Conduct as mandated by Fannie Mae but can’t find a way to ensure that the staff that oversee the appraisal process is appropriately trained and qualified in the area of real estate appraisals. Anyone that has a working knowledge of real estate operations already work in the department. How others are complying, short of engaging with an appraisal management company, please share.
Please post your reply here to send it directly to NLombard@REDFCU.org.
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Tim Sciborski, SVP Community First Credit Union in Appleton, WI writes... "We have always been a strong mortgage lender but this year has seen an increase in market share. The opportunity exists. All you have to do is go for it!The support of your CEO and the marketing department is key. We have done a couple of promos where we have featured a 5 and a 10 year in house product. These promos were done mainly through radio, some newspaper and direct marketing to the realtor community. In addition our branch personnel supported us in any way they could. Fielding phone calls and making appointments for our originators. With these promos we also require a true “relationship”. For those among us that have been around long enough to remember that a checking account always came with the mortgage loan, well it’s true here. If you want that great rate you need checking with direct deposit. And even though we gave rates out as low as 3.95% and 4.99% the profitability of these members is very high. The average almost 5 services per member. I also received a call from a long time mortgage banker in our market that said; “I can’t beat you so I want to join you.” So you know we are reaching the market and the realtors with our message.
Overall we are at 28% loan growth for the year and real estate has been a large part of this."
What do you think? What can you ofer to others who are searching for strategies?
Please add your comments for all to see...
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Tim Mislansky, Senior Vice President - Wright-Patt Credit Union President - Wright-Patt Financial Group would like to ask the following question...
In order to continue to make high LTV loans his CUSO is looking for new programs that achieve their goal while mitigating risk. "We're giving consideration to doing a pledged asset mortgage where mom & dad pledge a CD on deposit at the CU as collateral to avoid PMI for their borrower" asks TIm....
If you are doing this please comment here and pass your experiences to TIm.
Please post a comment or ask a questions. ACUMA members collectively have answers to all of your questions!
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This subject was submitted by Doris Ortiz, Vice President - Lending CBC FCU in CA. Doris asks...
"In our last exam the NCUA required that we create a policy and start monitoring non-owner occupied real estate loans according the regulatory requirements (Part 723.6 g) for Member Business Loans. While the regulation reads “periodic financial statements, credit reports, …” ,our regulators want us to do this annually. I am concerned that if we require our borrowers to provide us with this information annually it will cause them to take their business to a lender that does not require it – which, I believe would be any lender other than a credit union. I am looking for a credit union that does these periodic reviews to request that they share their policies and procedures with me. By the way, I asked the regulator for a credit union contact and they could not provide me with the name of any credit union already doing this." On behalf of Doris, thank you in advance for your comment!
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