15 to go before the Presidential election and it promises to be another rough-and-tumble week as Donald Trump and Hillary Clinton take off the gloves (wait, they haven’t yet?). There are also many key numbers for our industries including New Home Sales for September, coming after we learned last week that sales of previously-owned homes rebounded solidly last month. And a special shoutout to all of you attending the Mortgage Bankers Association Annual Convention and Expoin Boston. #Forward!
Democratic presidential nominee Hillary Clinton is far outpacing her Republican rival Donald Trump in campaign contributions from mortgage bankers and brokers, but the industry’s lackluster donation activity exposes a sense of apathy toward candidates who have not made housing policy a focal point in their campaigns.
In an election year dominated by controversy and big personalities, contributions activity from the mortgage industry has remained relatively muted, but still up from the recent midterm cycles. This year, there’s been just over $5 million in mortgage industry donations, down from $5.5 million four years ago and $6.5 million in 2008, according to data from the Center for Responsive Politics, the nonpartisan, nonprofit organization that
Among all donors, Clinton has raised roughly twice as much in campaign funds as Trump, not including money donated to outside groups. But among mortgage industry donors, Clinton has received five times what Trump has.
But Trump’s lackluster support from the mortgage industry does strike some as surprising given his background as a commercial real estate developer.
“While he develops commercial real estate and resorts, I think the man gets the machinations of a transaction,” said Brian Montgomery, vice chairmanof The Collingwood Group and a former Federal Housing Administration commissioner. “In the abstract, you could think that’s a positive for the mortgage industry.”
Beyond Trump’s real estate background, there are further concerns that a Clinton administration would not bring meaningful change for the industry, particularly regarding concerns of overregulation. Clinton, Lowrie said, “seems to be more focused on expanding housing’s reach.” That is perhaps a reflection of the Democratic Party’s housing platform, which aims to promote fair lending and government programs.
“If she does win, I think the industry could expect more of the same,” Montgomery said.
Consequently, Montgomery said that professionals in the industry may now be shifting their focus to congressional races “to build a firewall” that would keep a potential consecutive Democratic administration in check.
And if past precedent is any indicator, the mortgage industry may want to prepare for a Clinton White House. With the exception of Mitt Romney in 2012, the presidential candidate who received the most in donations from the mortgage industry has won in every election since 1992.
read more: http://www.nationalmortgagenews.com/news/compliance-regulation/why-clinton-trump-arent-getting-more-mortgage-industry-money-1089268-1.html?zkPrintable=true
What Clinton/Trump Need to do to Fix Housing
The Collingwood Group Chairman Tim Rood with his take on what Clinton and Trump need to do to fix housing, on Fox Business Network’s Cavuto:
>click to watch: https://www.youtube.com/watch?v=znVK4JpdhCE
#Mortgage Crisis Not Over Yet
The world’s second-biggest ratings firm says it expects the Justice Department to sue over bond grades it issued prior to the 2008 housing market collapse, setting up one of the industry’s last crisis-related legal clashes.
The U.S. plans to bring a case against Moody’s Corp. that alleges violations related to residential mortgage bonds and other complex securities, the company said, citing a Sept. 29 letter from federal authorities. Moody’s said “a number” of states are also pursuing a case. The Justice Department has been investigating Moody’s for applying rosy grades on these deals in the buildup to the last financial crisis, according to people familiar with the situation.
Moody’s Chief Executive Officer Ray McDaniel said on a Friday conference call with analysts that he wouldn’t be able to comment beyond the company’s public disclosure, and Chief Financial Officer Linda Huber said she couldn’t discuss legal costs “because we’ve just received this correspondence.” A spokesman for the Justice Department declined to comment.
Credit ratings played a central role in the last financial crisis as firms awarded positive marks to residential mortgage bonds that later went bad, triggering widespread losses. Investors still overwhelmingly rely on the three biggest firms—S&P Global Ratings, Moody’s and Fitch Ratings—when deciding whether to buy bonds.
Thus far ratings firms have paid roughly $2 billion in fines and settlements related to that crisis-era behavior, a fraction of the amount paid by U.S. banks for missteps during the same period. Moody’s agreed seven months ago to a $130 million settlement with the largest U.S. public pension ending a lawsuit alleging “negligent misrepresentations” surrounding residential mortgage bond deals.
The largest single settlement so far involved the world’s largest ratings firm, S&P, which in 2015 paid around $1.5 billion to resolve a raft of similar lawsuits with the Justice Department and more than a dozen states. In the S&P case government lawyers cited a 2007 exchange where employees said a mortgage-bond deal “could be structured by cows and we would rate it.” An S&P spokeswoman declined to comment.
Any settlement with Moody’s is likely to be large, but the case has proven more difficult than the one against S&P, people familiar with the matter have said. Moody’s kept its ratings information more tightly guarded than S&P, with a policy of quickly wiping emails, making for a thinner paper trail, these people said.
read more: http://www.wsj.com/articles/moodys-says-justice-department-is-preparing-a-complaint-1477056302
Jumbo Mortgages: Big Banks Still Love Them
Big mortgages are all the rage at the largest U.S. retail banks.
Lending for jumbo mortgages, those that exceed $417,000 in most U.S. markets, surged at J.P. Morgan Chase & Co. and Bank of America Corp. in 2015, according to new data. The banks originated $37.1 billion and $23.3 billion, respectively, of jumbos—up 88% and 68% from 2014. U.S. Bancorp’s jumbo lending increased around 50% to $8.3 billion.
The figures are based on Inside Mortgage Finance’s analysis of recently released mortgage data by banks and other lenders under the Home Mortgage Disclosure Act.
Banks have been increasingly targeting the jumbo loan market since the housing bust. Jumbo borrowers tend to be among the lowest-risk mortgage customers because they have higher credit scores on average and make larger down payments. The loans also have a lower delinquency and foreclosure rate than smaller loans, according to mortgage-data firm Black Knight Financial Services.
At some large banks, jumbos now account for a much larger share of mortgages. At Citigroup Inc., for instance, jumbos accounted for 52% of total mortgage dollars originated in 2015, up from 42% a year prior, according to Inside Mortgage Finance. The bank says its total jumbo originations rose 53% in 2015 from the prior year to $19.1 billion.
Regional banks are also ramping up jumbo lending. Regions Financial Corp. says it originated about $1.5 billion in these loans last year, up about 85% from a year earlier. SunTrust Banks Inc. and Citizens Financial Group extended $3.8 billion and $2.3 billion, respectively, up 61% and 76%, according to Inside Mortgage Finance.
By comparison, jumbo lending across all the institutions that reported under the mortgage disclosure act increased 34% year over year.
More recently, there has been a shake-up in the top ranks of jumbo lenders. J.P. Morgan became the largest jumbo lender by volume, based on the loans it originated and bought from other lenders, in the first quarter of 2016. In doing so, it unseated Wells Fargo &. Co., which had held that position since 2010, according to Inside Mortgage Finance.
Most banks hold jumbos on their books, another appealing aspect since banks profit from the difference between the loan’s interest payments and the interest they pay out on deposits. The loans are also perceived by banks to be safer because they don’t carry the risk of buybacks, should things go wrong, like mortgages they sell to Freddie Mac or Fannie Mae.
read more: http://www.wsj.com/articles/jumbo-mortgages-big-banks-still-love-them-1477070789
Healthy Forecast for Commercial Real Estate
Ten-X reports whuile commercial real estate prices on the whole are continuing to rise at a healthy pace,the retail and hotel sectors continue to lag. Their All Property index rose 1% in October, bringing it 6.9% higher than a year ago. Price growth has remained near this pace for much of the year, though it is nearly half the growth rate seen during 2015. Pricing trends in the office, industrial and apartment sectors remain robust, while the retail sector is experiencing more moderate growth and the hotel sector continues to see prices decline.
The office sector saw prices rise 1.5% in October according to the Ten-X Nowcast, bringing prices nearly 14% higher than a year ago.
Apartment sector prices increased 1.8% from a month ago and are also nearly 14% above their year ago level.
The Ten-X Industrial Nowcast saw prices continue their steady expansion, rising 1.5% in the month and just under 13% from a year ago.
The retail sector continues to lag according to the Ten-X Nowcast, with pricing only increasing 0.7% in the month and just 6.5% from a year ago.
The Ten-X Hotel Nowcast remains in outright decline. Hotel pricing fell 0.3% in the month and is now more than 8% lower than its year ago level. This is the most severe year over year decline for the sector in the history of the Nowcast.
Situs survey data shows lowered expectations, as do Google search trends. The sector is struggling amid an expansion of traditional supply and the rise of technological upstarts such as Airbnb. This has resulted in occupancy erosion, and a dramatic deceleration in RevPAR growth.
read more: www.ten-x.com/company/blog/october-2016-ten-x-commercial-real-estate-nowcast/?UTM_Medium=SOCIAL
U.S. Mall Investors Could Lose Billions as Retail Gloom Deepens
The dramatic shift to online shopping that has crushed U.S. department stores in recent years now threatens the investors who a decade ago funded the vast expanse of brick and mortar emporiums that many Americans no longer visit.
Weak September core retail sales, which strip out auto and gasoline sales, provide a window into the pain the holders of mall debt face in coming months as retailers with a physical presence keep discounting to stave off lagging sales.
Some $128 billion of commercial real estate loans – more than one-quarter of which went to finance malls a decade ago – are due to refinance between now and the end of 2017, according to Morningstar Credit Ratings.
Wells Fargo estimates that about $38 billion of these loans were taken out by retailers, bundled into commercial mortgage-backed securities (CMBS) and sold to institutional investors.
Morgan Stanley, Deutsche Bank and other underwriters now reckon about half of all CMBS maturing in 2017 could struggle to get financing on current terms. Commercial mortgage debt often only pays off the interest and the principal must be refinanced.
The blame lies with online shopping and widespread discounting, which have shrunk profit margins and increased store closures, such as Aeropostale’s bankruptcy filing in May, making it harder for mall operators to meet their debt obligations.
Between the end of 2009 and this July e-commerce doubled its share of the retail pie and while overall sales have risen a cumulative 31 percent, department store sales have plunged 17 percent, according to Commerce Department data.
read more: www.reuters.com
Bank Legal Costs Cited as Drag on Economic Growth
A heightened emphasis by banking regulators and law-enforcement officials on financial misconduct may be constraining global growth, some officials warn.
Legal expenses are among the burdens weighing on banks, policy makers say. “The roughly $275 billion in legal costs for global banks since 2008 translates into more than $5 trillion of reduced lending capacity to the real economy,” Minouche Shafik, a deputy governor of the Bank of England, told a New York conference of regulators and bankers Thursday.
Other policy makers have expressed concern that strict crackdowns on banks’ lapses in carrying out anti-money-laundering regulations have led banks to nearly cut off several emerging markets from the global financial system, damping their economies. The International Monetary Fund, in particular, has sounded that alarm repeatedly this year and held a conference highlighting the issue at its annual meeting in early October.
Regulators say the fines and their enforcement actions reflect widespread misconduct in the industry, and that the way to reduce compliance costs is for banks to improve their behavior. Indeed, the event Ms. Shafik addressed—a Federal Reserve Bank of New York conference on “Reforming Culture and Behavior in the Financial Services Industry”—focused largely on new strategies that governments could adopt to further pressure banks to alter practices to better comply with existing laws.
Ms. Shafik blamed the high fines, and resulting costs to the economy, on “the wave of misconduct which has emerged in the aftermath of the financial crisis” and explained the BOE’s strategy for “better regulation” to “improve standards and ethics in financial markets.”
“There are certainly public costs” when banking culture falls short of regulatory expectations, William Dudley, president of the New York Fed, said at the conference. “To the extent we don’t have trustworthiness in banking…that actually undermines the effectiveness of the financial community.”
read more: www.wsj.com/articles/boe-official-bank-legal-costs-since-2008-reach-275-billion-1476974749
A majority of new homes that completed construction in 2015 included two-car garages, according to the Census Bureau.
For new single-family completions in 2015, 61% of homes offered a two-car garage. Another 24% of homes possessed a garage large enough to hold three or more cars. Just 6% of newly-built homes had a one-car garage, and only 1% possessed a carport. Another 9% of new homes had no garage or carport.
Over the last two decades, there has been a shift in parking options. As home size has grown, the share of homes with a three or more car garage has grown as well. In 1992, 11% of homes had a garage for three or more cars. That share rose to a peak of 20% in 2005, before falling to 16% in 2010.
In contrast, the market share of homes with no garage or carport has been on the decline. In 1992, 15% of new single-family homes had no parking facility. That share fell to 8% in 2005, before rising slightly to 13% in 2010.
read more: http://eyeonhousing.org/2016/10/garages-in-new-homes-2015-data/
>Here’s the way the calendar shapes up:
- MBA Convention and Expo – Boston
- FHFA House Price Index 9:00 AM ET
- Case-Shiller Home Price Index 9:00 AM ET
- Consumer Confidence 10:00 AM ET
- New Home Sales 10:00 AM ET
- GDP 8:30 AM ET
- Consumer Sentiment 10:00 AM ET
Have a productive week ahead.