Category Archives: Servicing

First American: Fraud and misrepresentation grew in February

February saw an increase in fraud activity and defects in mortgage loan applications, according to the First American Loan Application Defect Index from First American Financial Corp., a provider of title insurance, settlement services and risk solutions for real estate transactions.

The frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage loan applications increased 4.1% from January and 1.3% from last year.

“This month, the Loan Application Defect Index surged higher as rising mortgage rates continue to put downward pressure on lower risk mortgage refinance activity,” First American Chief Economist Mark Fleming said. “The March rate increase by the Federal Open Market Committee and strong economic performance will continue to pressure rates upward.”

The index estimates the frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage loan applications. The defect index reflects estimated mortgage loan defect rates over time, by geography and by loan type.

Despite this increase, however, the index is still down 25.5% from its peak in October 2013.

The defect index for refinance transactions increased 3.4% month-over-month, but is still down 6.2% from last year. Purchase transactions also decreased from January by 2.4%, but remained up 2.4% from a year ago.

The increase in defects is also due to a shift toward adjustable-rate mortgage loans as mortgage rates rise.

“Defect, fraud and misrepresentation risk continues to respond to the shift in market composition,” Fleming said. “Rising mortgage rates continue to increase the share of higher risk purchase loan applications, but they are also incenting more borrowers to apply for ARMs.”

“The savings for the consumer can be significant, but ARM loan applications have historically had higher defect, misrepresentation and fraud risk,” he said. “The increasing popularity of adjustable rate mortgages is something to keep an eye on as the spring home-buying season warms up.”

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Trulia: Housing inventory tumbles to all-new low

Housing inventory plummeted in the first quarter of 2017, but that drop is even more pronounced in the starter home and trade-up markets, according to a new report from Trulia.

Comparing the national housing stock in the 100 largest metros from the first quarter of 2012 to the first quarter of 2017 shows starter homes witnessed the largest drop in inventory. During that period, the number of starter and trade-up homes fell 8.7% and 7.9%, respectively. Contrarily, inventory of premium homes fell only 1.7% from 2012 levels.

This chart shows the path of starter, trade-up and premium homes since 2012. While all types of housing inventory dropped from 2012 to 2013, starter and trade-up homes continued to pull inventory levels down in the coming years.

Click to Enlarge


(Source: Trulia)

And as inventory becomes more scarce, median home prices continue to rise. Starter and trade-up homebuyers need to spend 2.9% and 1.6%, respectively, more of their income than last year to buy a home.

Looking at the past year, starter homes fell from 26.9% of the market to just 25.9%, while trade-up homes fell from 24.1% in the first quarter of 2016 to 23.03% in 2017. Premium homes, on the other hand, saw an increase from last year’s 49% to 51%.

Click to Enlarge


(Source: Trulia)

Inventory is falling several reasons, and Trulia points out three of those in its report.

1. Investors – who bought up many foreclosure units during to housing crisis and now use them as rental units.

2. Price spread – when prices of homes in different segments of the housing market diverge from each other, it makes it difficult for homeowners to trade-up to the next segment.

3. Slow home value recovery – the slow recovery made it difficult for some homeowners to break even on their home and gain enough equity to sell.

However, Trulia pointed out that the increasing home prices bring with them a whole new problem. The report explained too little recovery might make it difficult for homeowners to sell their home but cheap to buy one, while too much recovery might make it easy for them to sell but difficult to buy.

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NAHB: White House asked for our help to get Gorsuch on Supreme Court

With the threat of Democratic filibuster looming in the Senate, the White House is apparently turning to homebuilders for help with getting Neil Gorsuch confirmed as the country’s next Supreme Court Justice.

According to a post from the National Association of Homebuilders, the group’s CEO, Jerry Howard, visited the White House on Thursday as part of a “small group” of national association executives who were asked to help in the confirmation process for Gorsuch.

And according the group’s post, the NAHB will answer the White House’s call.

“As Senate Democrats prepare for a filibuster, the Trump Administration has called on NAHB to help speed the appointment of Neil Gorsuch to the U.S. Supreme Court — and your association is honored to comply,” the group said in the post.

Gorsuch is currently in the confirmation process to fill the court’s open seat, but Democrats are threatening to filibuster and perhaps scuttle Gorsuch’s nomination altogether.

But the Republicans, the White House, and apparently homebuilders aren’t ready to give up on the Gorsuch fight.

According to the post, Howard was at the White House to represent the real estate industry at the meeting, where the groups discussed “how these associations’ extensive grassroots networks can lead the charge” to get Gorsuch confirmed.

The post states that NAHB senior leadership has “long viewed” Gorsuch as a “respected jurist” and as an “excellent” candidate for the Supreme Court.

The group also says that there are a “number of important land use decisions” before the Supreme Court now, therefore it will be beneficial to see Gorsuch confirmed quickly.

“Our members understand how important it is to fill this seat, and we will do everything we can to make it happen,” Howard said in the post.

The NAHB’s post does not say if the group met with President Donald Trump or not, but Trump did attend the group’s mid-year meeting last year during his campaign.

During the meeting, he spoke of his comfort in the room because he views himself as a builder and told the crowd that he intended to cut regulations if elected – a promise he’s worked to keep so far.

And now NAHB is prepared to help the White House get Gorsuch confirmed.

According to NAHB, its members will be doing work in the field to move Gorsuch’s nomination through.

In addition to those efforts, NAHB is “planning an advertising and social media campaign targeting those states whose senators can work to avoid the filibuster to move the nomination process forward,” the group said.

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