TheMReport

36 | TH E M REP O RT O R I G I NAT I O N S E R V I C I N G A NA LY T I C S S E C O N DA R Y M A R K E T ORIGINATION THE LATEST Prepayments, Purchase Originations Trend Up Refinancing is on the rise even while credit stays more or less the same. A new market report sug- gests both purchase and refinance originations will pick up momentum in the coming months, though that trend may not last, with mortgage rates expected to lift. Analyzing data as of the end of May, Black Knight Financial Services reported another gain in monthly prepayment activity—an indicator of refinancing—mark- ing the third straight month of increases. At the same time, long-term fixed mortgage rates fell to 4.19 percent, their lowest level in more than half a year. "Looking at this situation at a more granular level, we found that although prepayment rates actually decline on 2008 vintage loans, that year's mortgages still represent the highest total rate of prepayments," said Kostya Gradushy, manager of loan data and customer analytics for Black Knight. "For 2009 through 2013 vintages, prepayments were up across the board over the past few months." While up 21 percent since the start of the year, refinance activity remains down signifi- cantly from levels observed dur- ing the boom in 2012 and early 2013, the company says. In a similar report, Capital Economics found refinance applications in June were down 75 percent compared to boom levels. Meanwhile, Black Knight also found that seasonal purchase origination activity has risen, with approximately 897,000 originations through April, just less than the number observed last year. Overall, the company reported that credit standards don't ap- pear to be easing for either purchase or refinance loans, "as both average loan-to-value (LTV) ratios and credit scores on both purchase and refinance origina- tions remain relatively strict and essentially unchanged." Finally, Black Knight also reported that continued home price appreciation has driven the country's total share of underwa- ter borrowers to 8.9 percent. However, looking at distressed borrowers (those 90 or more days past due or in foreclosure), 78 percent are in negative equity. NAR: HAWK Program Could Do More Could the program for preventing foreclosures . . . be too expensive? T he National Association of Realtors (NAR) lent its support to the Home- owners Armed with Knowledge (HAWK) pilot pro- gram but has concerns that it will not do enough to lower insurance premiums for homebuyers. In a letter sent to HUD, the organization reiterated its appre- ciation for the Federal Housing Administration's (FHA) efforts to provide reduced mortgage insurance premiums to first-time homebuyers but complained about the high mortgage insur- ance premiums and counseling fees that come along. The HAWK Pilot Program for new homebuyers provides FHA insurance pricing incentives to first-time homebuyers who participate in housing counsel- ing that covers how to evaluate housing affordability and mort- gage alternatives, financial advice, and the rights and responsibili- ties of homeownership. FHA announced the program in May as part of its "Blueprint for Access," outlining additional steps that the agency is taking to expand access to credit for underserved potential borrowers. Under the program, first-time homebuyers who participate in the four-year pilot program will benefit at closing from a 50-basis- points reduction in the upfront mortgage insurance premium and a 10-basis-points reduction in the annual premium. If buyers complete post-closing housing counseling and do not have delinquencies greater than 90 days in the first 18 months after closing, they will receive an ad- ditional 15-basis-points reduction on the annual premium starting the loan's 25th month. NAR contends that, despite the counseling incentive, FHA insurance rates are too high. "As the leading advocate for homeowners, Realtors are con- cerned about FHA's high annual mortgage insurance premiums and the insurance requirement for the life of the loan," NAR presi- dent Steve Brown said. "FHA fees make up nearly 20 percent of a monthly mortgage payment today and are making it more difficult for qualified buyers to purchase a home. Since FHA is on target to meet and exceed its capital reserve requirements in the next fiscal year, we encourage FHA to support premium reductions across the board." The letter also voiced concern that the cost of the counseling envisioned under the program, a combined total of $500 if all counseling sessions are at- tended, is too high and would prevent many qualified first-time homebuyers from accessing the market. NAR recommended that lenders be allowed to mitigate some of the counseling costs. Otherwise, it could take buyers two years to offset the cost of counseling with the premium reductions offered under the HAWK program and even lon- ger if buyers have to satisfy other financial programs separately. FHA contends that HAWK will save the average buyer ap- proximately $325 a year—or almost $9,800 over the life of their loan.

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