Fed’s Rate Increase Could Threaten #Housing Demand in 2017

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December 13, 2016
Fed’s Rate Increase Could Threaten Housing Demand in 2017

The Fed begins its two-day meeting this morning and it’s widely believed Yellen and company will announce a rate increase as the meeting ends tomorrow.

Rising interest rates pose a dilemma for people who love their mortgage more than they hate their house.

A sustained period of rising rates could freeze homeowners with rock-bottom mortgages who otherwise might want to trade up for bigger or better properties.

Such situations, which economists call “rate lock,” could weigh on housing demand in 2017, economists said.


“Rising interest rate dynamics set the stage for tougher affordability assessments especially for those with imperfect credit. Lenders will need to find ways to take and manage credit risk to fuel a robust housing market,” says the Collingwood Group Managing Director Tom Booker.

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Ten-X EVP Rick Sharga on the Jim Bohannon Radio Program said he expects the Fed to raise rates by a quarter-point, but that we should remember mortgage rates will not necessarily follow that rise.”

A seven-year run of historically low mortgage rates has encouraged home buying, helping increase prices sharply after the housing crash. The S&P CoreLogic Case-Shiller U.S. National Home Price Index reached a record in September.

But mortgage rates have jumped more than half a percentage point since the election, and economists are bracing for higher rates in 2017.

The average rate for a 30-year fixed-rate mortgage rose to 4.13% last Thursday, according to Freddie Mac, up from 3.54% before the election. That was the highest level since October 2014.

The latest bump boosts the monthly cost of owning the typical U.S. home by more than $70 a month, or about $26,000 over the life of a 30-year fixed-rate mortgage, according to Black Knight Financial Services, a mortgage and real estate technology and data provider.

America’s First Real Estate Presidency

The White House has been home to lawyers, generals, professors and career politicians, but never a real estate sharpie like Donald Trump. For more than five decades, intellectuals like Arthur M. Schlesinger Jr. have been warning us about the perils of the imperial presidency—the unrestrained expansion of presidential power beyond its proscribed constitutional limits. What they should have been bird-dogging was the advent of the real estate presidency.

If you’re wondering what’s behind Trump’s transition antics over the past few weeks—exaggerating the sticker cost of Air Force One, rolling the dice on an official phone call with Taiwan, sweet talking/shaking down Carrier to keep its factory in the United States—look no further than the real estate mind-set, which defines the way Trump thinks and acts. As a real estate guy, he always craved risk, preaching its virtues in his 2007 book Trump 101: The Way to Success. “Frequently, the risk will be well worth the gamble, but sometimes it will be more than you can afford,” he wrote. How true! His appetite for risk—and his impulsiveness—led him to assume loans for casinos and hotels in the 1990s and the 2000s that proved too dear. When he couldn’t cover the loans, he was forced the make several trips to bankruptcy court to save his skin. Similarly, as president-elect, Trump has already rolled big. Last week, he shook up relations with China with a daring—or stupid, depending on your point of view—phone conversation with the president of Taiwan. His entire presidential run demonstrated his attraction to risk, as he called other candidates cruel names, operated with only a skeletal staff, and defied calls by the pros to run more ads and build campaign operations.

Then there’s Trump’s unique relationship with the truth, which earned him a chart-busting 59 four-Pinocchio ratings from Washington Post fact-checker Glenn Kessler during the campaign. That’s a whole lot of big, fat lies in a very short period; but by developer standards, it’s a modest haul. Developers, to remain solvent, must crumple reality in a manner that keeps their clients, contractors, suppliers, partners and bankers content. It’s a business in which lying is not a sin but a virtue. After all, the clients, contractors and suppliers are all lying to the developer, too. These lies aren’t white lies in real estate land, they’re green, situational truths spoken in the pursuit of dollars. Trump’s business training clearly gave him a grounding in lying that has served him well in politics. He brazenly said on more than a dozen occasions during the campaign that he had never said things that he was on record saying. Lying worked so well for him that we can expect a surplus of Pinocchios and Pants-on-Fire ratings from the press when his lies emanate from the Oval Office. “Serious voter fraud in Virginia,” he lied on Twitter two weeks ago, giving us a preview.

read more: http://www.politico.com/magazine/story/2016/12/donald-trump-real-estate-presidency-214504

Ally is Back

Ally Bank is back in the mortgage business.  The one-time GMAC Finance company has a new product  called Ally Home. The mortgage offering is another example of Ally Bank further expanding its financial services product portfolio. The company launched a credit card in June and entered the wealth-management business when it acquired TradeKing Group in April.

Ally Home features mortgage products with varying term options for fixed-rate and adjustable-rate loans to serve customers looking to buy a new home or refinance an existing mortgage.

Fannie Mae will Waive Appraisals on some Refinance Loans

Thanks to a program that started Saturday, some homeowners won’t have to pay or wait for an appraisal on certain refinance loans backed by Fannie Mae.

Instead of requiring an inspection by a human appraiser, Fannie will use its automated valuation model on qualifying loans. Fannie Mae already waives property inspections on about 3 percent of all loan applications that come through its automated underwriting system. Under its new “enhanced property inspection waiver” program, that could rise to 10 percent, Fannie says.

In the Bay Area, physical appraisals start around $450 for a typical home and take about two weeks, said Aaron LaRue of Clara Lending, an online mortgage bank.

Fannie’s no-appraisal offer applies only to refinance loans on single-family homes and condos worth up to $1 million. The loan amount must be less than Fannie Mae’s limits, which vary by region. In most Bay Area counties, the limit is going up to $636,150 next year from $625,500 this year.

Also, the loan-to-value ratio cannot exceed certain limits.

On “limited cash-out refis,” where the owner takes out no cash or just enough to cover closing costs, “we will go up to 90 percent loan-to-value,” said Zach Dawson, Fannie Mae’s director of credit risk. He estimated that 25 percent of limited-cash-out refis could qualify for the appraisal waiver.

read more: http://www.sfchronicle.com/business/networth/article/Fannie-Mae-will-waive-appraisals-on-some-10786837.php

Owner of Building Where 2 Girls Were Killed Has History of Neglect: Tenants

The list of problems in Esther Estime’s Ditmas Park apartment take up almost an entire page in the lawsuit she and other tenants of the apartment building at 2010 Newkirk Ave. filed against landlord Moshe Piller. There are holes in the floor and the window frames aren’t properly fitted, allowing in cold drafts of air. A mouse hole by the radiator keeps her apartment infested with vermin. In her bedroom, the fire escape window glass is broken and the walls are cracked. The ceiling of the decrepit apartment once collapsed on her 10-year-old son, she said.

red more:  http://dnain.fo/2gzS48p

Ultra-rich Americans Own Average of 9 Homes

When you’re a billionaire, where do you keep your second home? What about your ninth?

The mega-rich of the U.S. are largely keeping their foreign properties in the Americas, according to a new study from AIG Private Client Group, a division of American International Group (AIG) that caters to “ultra high net worth” clients. These clients, defined as those who pay an excess of $250,000 in annual personal insurance premiums, amount to several hundred of AIG Private Client Group’s customers, which includes 40% of the Forbes 400 wealthiest Americans. They own an average of nine homes abroad, with more than 50% of these located in the Americas. That includes 14% in Mexico, 13% in the Bahamas and 9% in the Caribbean. Some own properties in Europe as well, with 12% in England and 9% in France.

While AIG’s study focused on its own high net worth clients in the U.S., another global survey of mega-rich individuals showed most own an average of 2.7 residential properties per household. That report, from data firm Wealth-X and luxury real estate broker Sotheby’s International Realty, defined ultra high net worth people as those who have at least $30 million in assets. About 211,000 people in the world fall into that group, one research firm said. It found the U.S., UK, Switzerland and France were the most common.

read more: http://www.marketwatch.com/story/ultra-rich-americans-own-an-average-of-9-homes-heres-where-they-are-2016-12-03?link=sfmw_tw

Still Ahead


  • Quicken Loans Home Value Index for November
  • Fed Meeting Begins


  • Fed (Rate Hike?) announcement, 2 p.m. ET


  • NAHB Housing Market Index for December, 10 a.m ET


  • HUD/Census Bureau New Residential Construction Report for November, 8:30 a.m. ET
The Trump Transition

Inside Word From @realDonaldTrump Economic Team Meeting

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Collingwood Group Chairman Tim Rood met in New York with President Trump and his economic team including Treausry Secretary-designate Steven Mnuchin and Chief of Staff Reince Preibus.  Rood came away from the meeting impressed that the team wants to cut through red-tape and regulation to help fix housing and mortgage industry problems.  There was also talk of the future for Fannie Mae and Freddie Mac, public housing and more.

Many important business leaders were also in attendance  including that “My Pillow” guy.

 >CLICK HERE:   Collingwood’s Rood explained this and more in an appearance on CNBC Power Lunch 

Carson Conundrum

Reaction flooding in to President Elect Donald Trump’s choice, tapping Ben Carson as his nominee for Housing Secretary.

Collingwood Group Chairman Tim Rood on Fox Business’s Cavuto said, “Dr Carson is an intelligent, impassioned, and empathetic individual.”

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As for his lack of experience in the housing arena that may be a positive, Collingwood’s Rood says, “Sometimes the very best policy makers are those who listen; and sometimes, good leaders who are not steeped in the subject matter are better listeners than those who believe they have all the answers.”

>Click Here for Collingwood Chairman Tim Rood’s full interview on FBN’s Cavuto

B.Montgomery_-_Head_Shot.jpgCollingwood Group Deputy Chairman Brian Montgomery tells Westwood One’s First Light radio show, “There is little doubt President-elect Trump greatly admires and respects Dr. Ben Carson and felt strongly about him joining his Cabinet.

Having spent almost eight years in the Executive Office of the President, I speak from experience in saying a Cabinet Secretary who has the ear of the President is a positive for that agency and individual.  In this instance, I think Dr. Carson will be able to “elevate” the issue of Housing within the Trump Administration.  The fact Dr. Carson is a household name I believe will provide him a larger platform to articulate his vision for how best to help tackle any number of issues within the housing arena: shortage of affordable rental housing, the impact of new regulations which have constricted the mortgage market, and the growing senior population and how best to address their housing need.,”

sharga tv.jpg“Dr. Carson’s nomination is an indication of the tremendous respect that President-Elect Trump has developed for his former rival,” says Ten-X EVP Rick Sharga.Sharga adds “Dr. Carson has spoken out in the past about the need to revitalize many of the country’s urban areas, so it wouldn’t be a surprise if he focuses on doing that, and trying to find solutions to the growing problem of affordable housing. Since Dr. Carson has also discussed the unintended consequences of over-reaching government regulations, it’s possible we may also see some streamlining, or regulatory relief as well.”

By the way, Fannies’ stock price ended the day down 5 percent, Freddie’s is down 6 percent, and both were going even lower in after-hours trading

-“The Trump Effect” on Housing, The Collingwood Group Chairman Tim Rood on Fox Business’s Cavuto: https://www.youtube.com/watchtim chicago.jpg?v=TqPcoYyJuo

-Rood on the National Business Report  >CLICK HERE TO WATCH: https://youtu.be/nxQu7fxkyOg-Collingwood Group’ Chairm

-Collingwood’s Rood on Business First AM >CLICK HERE TO WATCH: https://youtu.be/6OKQyEQ-bpo

-Rood with the trifecta, a third television interview from the Chicago Board of Trade >CLICK HERE: https://www.youtube.com/watch?v=vU0MXC8vRRo

Industry Insight: The Opportunity for Change in Housing Policy

DS News covered what the future of loss mitigation will look like after the expiration of HAMP on December 31, 2016. To explore the topic further, DS News sat down with Meg Burns, Managing Director of The Collingwood Group, to discuss the opportunities that come from pairing a new administration with housing policies such as loss mitigation, regulatory compliance, and more.


Burns joined The Collingwood Group in 2014, and as Managing Director, supports the firm’s Business Advisory and Business Development practices. Prior to Collingwood, Burns served as the Senior Associate Director of the Office of Housing and Regulatory Policy at the Federal Housing Finance Agency (FHFA). There, she managed various policy and regulatory initiatives involving single-family and multifamily finance and loss mitigation strategies, as well as insurance-related activities of the government-sponsored enterprises. As such, she was actively involved in industry-wide discussions regarding the role of the federal government in addressing the mortgage crisis.

With the end of HAMP drawing close, what is to come for loss mitigation?

The fact that the sunset of HAMP coincides with the arrival of a new leadership team in Washington is a great opportunity because there is a chance for a really fresh policy dialogue. The good news is that the industry has a lot of work that has been underway for quite sometime now to put forward a good plan for a new set of loss mitigation strategies including a particular set of modifications. It is a very cool time for HAMP to be expiring in some respects and I think that what we will see are some programs that really do reflect the lessons that have been learned. I also think that the reason a new leadership team in Washington is so helpful is because we can have really honest discussions and assessment of what those lessons learned are. It is often a lot easier for a new group of policy leaders to embrace the policy achievement of the team before them but also to acknowledge program flaws without feeling defensive or like they were integrally associated with them. At its core, what was reaffirmed through the HAMP experience was something that most good policymakers know very well which is that complicated program rules generally translate into fewer program beneficiaries. In the HAMP space there was an extended period where they were really striving for perfection and precision both in the data collection aspect and some of the calculations to determine who was eligible. One of the lessons learned in HAMP is that striving for that perfection and precision really rendered  fewer distressed borrowers eligible. I think that what we will see are the modifications that replace HAMP will be modifications that follow some basic rules rather than complex calculations.

Aside from HAMP, what other policy changes might be impacted by the entrance of a new administration?

I think there is tremendous opportunity across the board and I think that the new leadership team has certainly publicly acknowledged a concern with the heavy-handed nature of the regulatory framework in Washington D.C. today. If the new team begins their policy discussion from that perspective, there is a chance that we will see some of the very aggressive enforcement activity move into a space where those who are responsible for monitoring the leading communities activities will start to identify problems and issues but more for the purpose of addressing them and resolving them as opposed to taking very stringent enforcement actions. That type of enforcement outcome clearly has resulting in less lending activity and stifled access to credit. There is a huge opportunity for the Trump Administration to revisit the way rules have been enforced and to take a more relaxed approach not to identifying problems, but to how those problems get resolved. That should make a big difference for lending activity in the country and help more consumers.

Do you think that taking a relaxed approach will possibly improve homeownership?

I do. I think that the nature of the regulatory expansion over the past eight years has affected home sales. The cost in certain parts of this country to build homes has increased so substantially that it’s almost impossible in certain communities to construct starter and affordable homes. I think there is certainly a good opportunity for this new administration to take a look at ways to reduce some of that regulatory activity to the extent that the federal government has a role. This will also impact the lending space where there have been a lot of new regulations put in place as a result of Dodd-Frank in part. They have had a suffocating effect on the ability of lenders to reach the population of borrowers who are most in need of affordable financing options.

read more: http://www.dsnews.com/commentary/11-18-2016/industry-insight-opportunity-change-housing-policy


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