Monday Morning Cup of Coffee: Condo legislation finally a law; Brexit impact on refi apps


Monday Morning Cup of Coffee takes a look at news coming across the HousingWire weekend desk, with more coverage to come on bigger issues.

H.R. 3700, the “Housing Opportunity Through Modernization Act,” finally finished the legislation process. President Obama signed the housing legislation into law on Friday, which, according to the National Association of Realtors, “will dramatically improve long-fought restrictions on Federal Housing Administration financing for condominiums.”

In light of the news, NAR President Tom Salomone said, “Realtors have reason to celebrate today as legislation easing restrictions on Federal Housing Administration financing for condominiums is finally signed into law. This is a long-awaited victory for NAR and for homebuyers for whom condos are an important and affordable option.”

The U.S. Senate passed H.R. 3700 on July 15 after the bill passed in the House of Representatives by a unanimous vote back in February.

The new changes will make the FHA’s recertification process much easier and will lower the FHA’s current owner-occupancy requirement from 50% to 35%.

The bill also requires FHA to replace existing policy on transfer fees with the less-restrictive model already in place at the Federal Housing Finance Agency.

The FHA’s current restrictions on condominium financing present a significant hurdle for one of America’s most affordable options, according to testimony given on Capitol Hill in 2015 by then NAR President Chris Polychron.

There are only three Federal Open Market Committee meetings left in 2016, and to one Fed official, there’s a possibility the Federal Reserve could raise interest rates in two of those meetings, an article by Jonathan Spicer in Reuters said.

“There is definitely a data stream that could come through in the next couple of months that I would think would be supportive of two rate increases,” said San Francisco Fed President John Williams. “There is definitely a data stream that could come through in the next couple of months that I would think would be supportive of two rate increases.”

However, he also noted, “There’s data we could get that wouldn’t be supportive of that and it could be supportive of one maybe, or of none.”

In the most recent meeting in July, the FOMC chose to forgo raising the federal funds rate as the market starts to recover from the initial impact of the U.K. choosing to leave the European Union.  

The last three meetings are scheduled for: Sept. 20 to 21, Nov. 1 to 2 and Dec. 13 to 14.

While the impact of the United Kingdom leaving the European Union might be over to some economists, it’s still very real to 2.8 million borrowers who should now refinance, Black Knight Financial Services’ latest Mortgage Monitor Report found.

“The reality is that, post-‘Brexit,’ mortgage interest rates declined by about 15 basis points – not significant in the grand scheme of things,” said Black Knight Data and Analytics Executive Vice President Ben Graboske.

“But for 2.8 million borrowers with current rates right at 4.25%, this modest decline was enough to put them 75 basis points above today’s prevailing rate, the point at which we consider a borrower to have incentive to refinance,” Graboske continued.

And in the 2.8 million borrowers, the report explained that 1.2 million also meet broad-based eligibility criteria — loan-to-value ratios of 80% or less, credit scores of 720 or higher and are current on their mortgage payments — bringing the total refinanceable population to 8.7 million.

This marks the highest level since late 2012.

Before Brexit, mortgage applications were trending down despite record low interest rates, but after, mortgage applications surged, significantly driven by refinance activity, according to the Mortgage Bankers Association’s Weekly Mortgage Applications Survey.

But the steep rise witnessed after Brexit did not last long, with both refinance and purchase applications falling in the latest MBA report.

HOAs, Homeowners Associations, carry a very negative connotation behind them, mostly due to outrageous battles with homeowners. Battles that Katy Mclaughlin recently captured in her article in The Wall Street Journal.

Here’s one example from the article:

In Rancho Bel Air, Las Vegas, a banner runs the length of Jonathan Friedrich’s roughly 4,000-square foot house. It reads: “Rancho Bel Air sanctioned $10,000 for ‘sandbagging’ me.” The banner refers to penalties a district court ordered the HOA to pay Mr. Friedrich for delays in the discovery process during a long legal dispute.

Mr. Friedrich, a 70-year-old retired general contractor, paid $350,000 for his house in 2003 and spent another $350,000 renovating and decorating, he said. He has fought with the HOA over myriad issues, including whether his home is overseen by the HOA at all.

These types of stories, sadly, are pretty common. Here are even two examples from HousingWire headlines:

As the WSJ article explains, “These disputes can happen anywhere, but in wealthy communities, the tendency to lawyer up quickly can ignite small sparks into all-consuming conflagrations. Collateral damage to neighbors can include legal costs, a soured neighborhood feeling and more difficulty in selling homes.”

Not everyone views HOAs as a negative though. An article from Bankrate notes that there is a constant debate over the true pros and cons of living in a HOA. While some buyers view HOA rules negatively, others say the regulations protect home values and the community for everyone.

Lastly, the Federal Deposit Insurance Corp. did not close any banks this past week. Welcome to the start of August and enjoy your Monday!  

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