MReport June 2017

TheMReport — News and strategies for the evolving mortgage marketplace.

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56 | TH E M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T GOVERNMENT THE LATEST FHFA Reports Interest Rate Drop The 13-basis point decline was the first decrease reported in several months. A ccording to the Fed- eral Housing Finance Agency (FHFA) in late April, interest rates on conventional purchase-money mortgages decreased nationally from February to March. The FHFA Index showed the aver - age interest rate on all mortgage loans decreased 13 basis points to 1.12 percent in March, from 4.25 percent in February. The National Average Contract Mortgage Rate for the Purchase of Previously Occupied Homes by Combined Lenders Index was 4.12 percent for loans closed in late March, down 15 basis points from 4.27 percent in February. The average interest rate on conventional 30-year fixed-rate mortgages fell 17 basis points in March to 4.24 percent, below February's 4.41 percent. The average loan amount for all types of loans was $392,700 in March, up from $301,600 in February by $11,100. March is the first month in several months to see a decline in mortgage rates. January and February both saw an increase in rates nationally, though applica - tion rates are on the rise. The Mortgage Bankers Association's Builder Applications Survey showed applications rising throughout March and into April. According to the survey, year- over-year new home purchases for March 2017 increased 6.7 percent compared to March 2016. Month-over-month, applications grew 23 percent. Average loan size decreased in March, from $330,208 in February to $328,192. The largest percentage of loan applications were conventional loans, 67.5 percent, while RHS/ USDA loans composed 1.0 percent, and VA loans composed 12.8 percent. As interest rates dropped, prices rose, as shown in the FHFA's last House Price Index for February. House prices rose an average of 6.4 percent that month year-over-year, and are up 0.6 percent month- over-month. These are the highest prices in several months. Tax Cuts to Affect Banks Proposed tax reform would significantly decrease taxes for large banks and are intended to benefit small businesses as well. O n April 26, Treasury Secretary Steven Mnuchin released a tax reform plan which could have a significant impact on the mortgage industry and the fi - nancial industry as a whole. In an interview with The Hill, Treasury Secretary Steven Mnuchin called the tax cuts in President Trump's reform "The biggest tax cut and largest tax reform in history of this country." The proposal calls for a reduction of cor - porate taxes down to 15 percent, cutting the top tax bracket down to 35 percent, and doubling the standard deduction. The new corporate tax rate would benefit all banks. According to a post on The Motley Fool, Bank of America pays the sixth-most in taxes of any business in the country, and third-most of any bank, followed by JPMorgan Chase and Wells Fargo. A cut from 35 percent to 15 percent could boost Bank of America's revenue by 19 percent, according to Motley Fool. Though big banks such as Bank of America will be positively im - pacted by these tax cuts, Mnuchin stated the tax cuts are intended to be a benefit to small businesses as well. "What we think is important is small business. Small business owner operators will have the benefit…" he said. "The average American should have simple taxes," Mnuchin said, adding that many people won't end up paying any taxes under the administration's plan. In The Hill's interview with Mnuchin, he said that lower tax rates will boost GDP growth from between 1.6 and 1.8 percent up to 3 percent, but experts have been debating how these cuts would be offset. "We definitely need tax reform as a way to grow the economy, and lowering the corporate tax rate is an important piece of that. But there's been no talk of what the offsets are," said Maya MacGuineas, President of the Committee for a Responsible Federal Budget on Forbes. "We've seen time and time again that economic analysis shows that tax reforms that are paid for grow the economy more than those that aren't. And what I don't want to see that this tax reform is going to be paid for by magic." "The biggest tax cut and largest tax reform in history of this country." —Steven Mnuchin, Treasury Secretary

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