The Three Percent Solution

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32 | 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 2015 outlook calls for 4% increase in Home sales home sales and the economy made a strong comeback for the second half of 2014. Now analysts expect that recovery to continue this year. F reddie Mac predicted that 2015 will see the highest level of home sales in the U.S. since 2007 in its December 2014 U.S. Economic and Housing Market Outlook. In the report, Freddie Mac looked back at five key consen- sus predictions for 2014, how they fared, and how they will affect housing and the economy next year. In addition to home sales, the four other areas exam- ined were mortgage originations, home values, rental market, and mortgage rates. A 4 percent jump is expected for home sales up to 5.6 million in 2015, which would be the highest annual level home sales have experienced since 2007, ac- cording to the report. A weaker than expected economy and a harsh winter brought down home sales for the first half of 2014 in spite of the healthy gains that were predicted at the start of the year. But home sales and the economy made a strong comeback for the second half of 2014, and analysts expect that re- covery to continue on into 2015. Home prices gained experi- enced moderate gains in 2014, as were predicted following the double-digit increases in 2013. In 2014, home value gains grew at a rate of 4.5 percent, and in 2015, they are expected to increase by 3 percent, according to the report. Rental vacancies fell to their lowest level since 2000 in the last year, and 30 year fixed mortgage rates are expected to average 4.4 percent in 2015 after hovering just below 4 percent in December. "The recent drop in oil prices has been an unexpected boon for consumers' pocketbooks and most businesses," said Frank Nothaft, Freddie Mac VP and chief economist. "Economic growth has picked up over the final nine months of 2014, and lower energy costs are expected to support growth of about 3 percent for the U.S. in 2015," Nothaft added. "Therefore, we expect the housing market to continue to strengthen with home sales rising to their best sales pace in eight years, national house price indexes up, and rental markets continuing to dis- play low vacancy rates and the highest level of new apartment completions in 25 years." cFPB: nearly Half of Homebuyers don't shop around for Mortgages Many U.S. borrowers get their mortgage advice from their real estate agents, brokers, or lenders. c lose to half of Ameri- can homebuyers don't do the legwork when it comes to finding the best deal on their home, the Consumer Financial Protection Bureau (CFPB) reports. Looking at the shopping behaviors of mortgage borrow- ers in 2013, the bureau found that 47 percent of buyers don't take the time to shop around and compare lenders, result- ing in potentially higher costs. Furthermore, 77 percent end up applying with only one lender or broker rather than filling out multiple applications to see who will offer the best deal. "Buying a home is a big purchase, but it's just that: a purchase," wrote CFPB econo- mist Sergei Kulaev in a post on the agency's website. "We shop to find the best price for laptops or appliances, but ... almost half of us don't shop around for a mortgage when we buy a home." The CFPB survey also found that modern borrowers tend to rely on information coming from people with something to sell them, including the 70 percent who said they use lenders and brokers to get "a lot" of their mortgage information. Thirty percent said they relied heavily on their real estate agent for mortgage information. "While lenders, brokers, and real estate agents can be infor- mative, they also have a stake in the transaction," Kulaev said. "The report found many fewer, 20 to 41 percent of borrowers, get a lot of their information from outside sources such as websites, financial and housing counselors, or friends, relatives, or co-workers." Those who do shop around for the best rate stand to save thousands of dollars. Over the first five years of their mortgage, a borrower with a 4 percent 30 year fixed rate could save up to $3,500 in mortgage payments over one with a 4.5 percent rate, CFPB estimates. In order to give borrow- ers more tools to gauge their options, CFPB announced the launch of "Owning a Home," a Web-based set of resources and tools designed to give shoppers more information at every step of the homebuying process. Those tools include a guide on different loan options, includ- ing mortgage terms and types of products available; interest rate comparisons for similar borrowers; a guide to closing documents; and a final closing checklist. Introduced nearly a year after the bureau's qualified mortgage (QM) guidelines went into effect, CFPB's new program isn't its first step into borrower educa- tion initiatives. In late 2013, the bureau released a final rule on integrated mortgage disclosures, which will go into effect later this year. That rule is part of CFPB's "Know Before You Owe" program, which is intended to make mortgage disclosures and documents easier for consumers to understand.

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