TheMReport

September 2012

TheMReport — News and strategies for the evolving mortgage marketplace.

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THE LATEST ORIGINATION reporting an increase in demand for auto loans. In the first quarter, a net 17.3 percent of lenders said they eased auto loan standards while 35.3 percent reported an increase in demand. whether demand is increasing, decreasing, or remaining the same and similar questions for lending standards, reporting the results using a diffusion index: subtracting decreasing or un- changed demand from increasing and the percentage of respon- dents easing or not changing standards from those reporting tightening standards. Overall, the report suggests an The survey asks bankers HARP Refinances See Record Activity A REPORT FROM THE FHFA SHOWS THAT REFINANCING CONTINUES TO DOMINATE THE ORIGINATION MARKETPLACE. H increased willingness of commer- cial banks to lend, despite what appear to be consumer strains with stagnant income growth and relatively few new jobs. During the second quarter, the nation added 219,000 payroll jobs com- pared with 677,000 in the first quarter. Employment—the num- ber of people working—increased 381,000 in the second quarter compared with an increase of 1.24 million in the first quarter. Aggregate weekly earnings rose about $515 billion in the second quarter compared with almost $1.1 trillion in the first quarter. Banks continue to sit on cash reserves: $1.81 trillion at the end of the second quarter compared with $1.59 trillion at the end of the first quarter. Overall, the report suggests an increased willingness of commercial banks to lend, despite what appear to be consumer strains with stagnant income growth and relatively few new jobs. ARP-assisted refinances drove record refinance activity in the month of June, the Federal Housing Finance Agency (FHFA) has revealed. The agency released its Costs for Mortgage Loans Continue to Decline Bringing good news for lenders and potential borrowers, Bankrate's annual survey demonstrates drops in closing costs. A pointing to a victory for the industry. According to the website's new report from Bankrate.com shows significant declines in mortgage closing costs, recent study, the average cost to close on a mortgage loan in the U.S. dropped by 7 percent dur- ing the past year. Polling lenders in all 50 states over the past year," stated Greg McBride, CFA, Bankrate.com's senior financial analyst. "The main lesson of this and the District of Columbia, Bankrate.com found that the na- tion's average tally for closing costs came to just $3,754. Additionally, the company's eighth annual clos- ing costs survey revealed that title insurance and other third-party fees decreased by 12 percent from 2011, as origination fees fell by 1 percent. "This is the second year in which lenders are required to estimate third-party fees within 10 percent of the final cost. It seems like they're getting more accurate, which helps explain the sharp decrease in these fees survey for consumers is to shop around for at least three differ- ent estimates. While no one is going to move to a new state just because closing costs are lower, it's important for people to realize that there is variation even within their neighborhood and that they can save by being an educated consumer," added McBride. New York boasted the coun- Refinance Report for June 2012, showing that refinance volume remained strong in June as mort- gage rates fell to all-time lows. An estimated 33 percent of refinance volume was done through HARP, the highest percentage since HARP's inception. The report revealed that at the end of June, Freddie Mac and Fannie Mae had refinanced 422,969 loans through HARP in 2012, more than the estimated total of 400,000 for all of 2011. This brings the total number of HARP refinances by the GSEs to 1.4 million. In addition to record-low mortgage rates, FHFA attributed the increased HARP volume to enhancements made to the program in late 2011. The newly enhanced program, called HARP 2.0, removes the loan-to-value (LTV) ceiling for borrowers refinancing into fixed-rate loans and eliminates or lowers fees for some borrowers. HARP refinances for loans with LTV ratios greater than 125 percent sharply increased in June, making up more than 40 percent of total HARP volume. Lenders began selling Fannie Mae and Freddie Mac securities containing these loans starting June 1. Underwater borrowers (those try's most expensive closing costs for the third consecutive year, ringing in at an average of $5,435. Texas, Pennsylvania, Florida, and Oklahoma rounded out Bankrate.com's list of areas with the highest closing costs. Meanwhile, Missouri took the title as the least expensive state for closing costs, which came to $3,006 on average; Kansas, Colorado, Iowa, and Arkansas were also among the five cheap- est states. with LTV ratios greater than 105 percent) made up 62 percent of HARP volume in June, a 32 percent increase from May. These borrowers made up more than 80 percent of HARP volume in Arizona, Florida, and Nevada. In Idaho and California, they repre- sented more than 70 percent of HARP refinances. An estimated 18 percent of underwater borrowers nationwide opted for the shorter 15- and 20-year mortgages, a slight drop from 19 percent in May. Shorter mortgages build equity faster than traditional 30-year mortgages. THE M REPORT | 41 ORIGINATION SERVICING ANALYTICS SECONDARY MARKET

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