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Wednesday, March 27, 2013

Impact of Labor Shortages on Housing Recovery


Lately, home prices have been increasing. Part of the reason for this is that there is a shortage of housing laborers. In a recent survey by the National Association of Home Builders, more than half of the builders reported that these labor shortages have lead to paying higher wages or bids in order to secure a project, thus the increase in home prices. This lack of laborers in all facets of residential construction has been impeding the housing and economic recovery.

"The survey of our members shows that since June of 2012, residential construction firms are reporting an increasing number of shortages in all aspects of the industry - from carpenters, excavators, framers, roofers and plumbers, to bricklayers, HVAC, building maintenance managers and weatherization workers. The same holds true for subcontractors," said NAHB Chief Economist David Crowe.

This lack of laborers can be attributed to the fact that many skilled residential construction workers were forced to find other types of jobs during the recession and they are no longer available now.  As a result, many current homes are experiencing delays in completion. Some projects are even being turned down and cancelled altogether because there aren't enough workers to complete the task.

"What used to be high-paying, skilled jobs vanished as builders across the nation went out of business or were forced to let workers go," said NAHB Chairman Rick Judson, a home builder from Charlotte, N.C.

Other problems consist of a lack of buildable lots, and an increase in the cost for materials and labor.  To help meet the growing demand for skilled labor , the Home Builders Institute (HBI) along with NAHB, are working to provide career training and job placement opportunities in the building industry. HBI offers many pre-apprenticeship training programs in a variety of skilled trades that can hopefully help meet the needs of communities across the nation. They have a success rate of 80% of their students being placed into jobs after graduation.

"We are ramping up our efforts to train diverse populations and place them in jobs to meet the growing demand of the building sector," said HBI President and CEO John Courson.

"Even in a period of relatively high unemployment, we still need to complement our job training efforts by bringing in foreign workers to meet the needs of home builders and home buyers," added Judson.

All of this training is very important for the economy. Currently, the labor shortages are slowing down the housing recovery and hurting job and economic growth overall. However, as the economy heals and grows, the demand for housing will continue to grow. This is will also be good for the mortgage industry as more and more people will need to fund their new homes.

Tuesday, March 26, 2013

Expired Payroll Tax-Cut Barely Noticed by Workers


In January, the payroll tax cut expired, meaning that paychecks are now 2% less than they were before. Many economists predicted that consumer confidence and spending would suffer as a result, but it turns out that retail sales actually rose higher than expected, and consumer confidence rebounded. In fact, Bankrate.com surveyed workers and found that 48% of respondents didn't even notice that they were being paid less. 7% said that the loss has not had an affect on their finances.

“It’s very encouraging. It means other things going on are helping,” said Mark Zandi, chief economist at Moody’s Analytics. "We are weathering the storm well, at least so far, better than I would have thought."

However, Zandi also cautioned that the impact could take longer to become evident and that the results of the survey may not be accurate since it is only based on consumer perceptions. He said that there is a "wealth effect" currently taking place because of record highs in the stock market and a rebounding real estate market. These two things themselves do not put more money into American's pockets, but people seem to be willing to save less and spend more.

“The job creation numbers were sufficient to make consumers believe that their economic situation was improving,” said Richard Curtin, director of Surveys of Consumers at the University of Michigan’s Survey Research Center, which publishes a monthly survey of consumer confidence. In February, consumer sentiment rose nearly  5% over January’s figure.  “Hours increased and employment increased, so more people had more money in their income even if taxes were higher,” Curtin said.   42 percent of the workers surveyed said that they cut their spending. These respondents were middle class with household incomes between $50,000 and $75,000.

It isn't really surprising that so many people did not notice the disappearance of the tax cut. It was created to give Americans a few more bucks on their checks in hopes that they would turn around and feed that money back into the economy without realizing it. It was a stealthy boost that consumers weren't meant to even notice.

Friday, March 22, 2013

News: Bailout Deal in Cyprus


If you have been watching the news, no doubt you've heard about the bailout crisis in Cyprus. Today it was reported that a solution to this problem may be possible. The European Union has set some guidelines for the bailout to which Cyprus must adhere. It is expected that they will reach an agreement today so that parliament can approve of specific measures that will fall within these guidelines.

This news came a couple hours after the Cypriot finance minister left Moscow empty-handed due to Russia turning down their appeals for aid. This left the island without any other option than to make a bailout deal with the EU. An agreement must be reached before Tuesday or Cyprus will face the collapse of its financial system.

Now Cyprus is left with a short deadline to find 5.8 billion euros which were demanded by the EU in return for a 10 billion euro ($12.93 billion) bailout. Without it, Cyprus's emergency funds would be cut off by the European Central Bank and the result could quite possibly push Cyprus out of Europe's single currency.

One of the proposed plans involved luring Russian investors to cut-price Cypriot banks and gas reserves since wealthy Russians have billions of euros at stake in Cyprus's crippled banking sector. However, after intense talks regarding the crisis, Russia has officially ended the talks without any results. It turns out Russian investors are not interested in Cypriot gas.

Lawmakers are still debating measures proposed by the government to raise the 5.8 billion euros in order to receive the bailout. They considered a "solidarity fund" that bundled state assets, including future gas revenues and nationalized pension funds, as the basis for an emergency bond issue.

Another idea involved a restructuring bill that would split Cyprus Popular Bank into good and bad assets. The government would also call for the power to impose capital controls to stem a flood of funds leaving Cyprus when the banks reopen on Tuesday after being shutdown for a week.

Unfortunately, Cyprus's partners in the 17-nation currency bloc are becoming increasingly unimpressed. Even the citizens are growing angry. On Thursday, there were long lines at ATMS full of Cypriots who were outraged that the deal would involve a levy on bank deposits.  Hundreds of demonstrators also gathered outside of parliament after hearing rumors that Popular Bank would be closed down and its staff laid off.

Right now, the only hope Cyprus seems to have is to receive that bailout. We will know more regarding the situation later in the day.

Thursday, March 21, 2013

Most Economists Agree: Recovery Gaining Momentum


Last week, nearly every article and report in the news claimed or suggested that the pace of the U.S. economic recovery is gaining momentum. Economic Forecasters are considering reassessing their previous thoughts as we see positive statistics like a rise in Retail Sales by 1.1%, and the Consumer Price Index's increase of 0.7%.  However, some argue that these were mostly due to higher gasoline prices and building material prices.

Despite mostly positive claims, it appears as though the economy has felt the effects of the expiration of the 2% Social Security tax holiday, sequestration, and higher gas prices. These issues have fallen squarely on the shoulders of middle- and lower-income households who already have a limited amount of ways to cut spending in the short term.

Aside from these particular struggles, the overall opinion is that the recent economic data has indeed been strong. The most significant data includes housing reports such as Housing Starts & Building Permits, and Existing Home Sales.  Investors are interested in how the Fed will react to it and they wonder whether it will have an affect on monetary policy.

Wednesday, March 20, 2013

Two Nebraska Bills Amend Mortgage Requirements


As of March 7th, some new amendments to lender licensing rules were enacted thanks to two bills that were passed in Nebraska. They are intended to clarify the requirements for installment loan brokers, payday lenders, mortgage bankers, and mortgage loan originators. The first one is called the LB 279, (short for Legislative Bill.) It makes non-substantive clarifications to how a "loan broker" is defined. It also narrows down the exemption for accountants to certified public accountants only. Additionally, this bill gives the Nebraska Department of Banking and Finance authorization to share examination reports and other confidential information with the Consumer Financial Protection Bureau and any other relevant state regulators.

The second bill is known as LB 290 and it was designed to remove many of the mortgage licensing requirements that were previously applicable to individuals. It also identifies the duties of mortgage loan originators, including providing notification to the department within 10 days of events such as bankruptcy, criminal indictments, and suspension proceedings.  They must also notify the department within 30 days of other changes, such as changing employer and address. This bill also allows firms to submit reports electronically. It also states that the 120-day period for calculating abandonment of a license application must begin from the date that the department sends the applicant an electronic notice of deficient items.

Both of these bills are set to take effect three months after the end of Nebraska's legislative session, which falls on May 30, 2013.

Tuesday, March 12, 2013

Report: HUD Taking Steps to Enforce Fair Housing Act


Compared to previous administrations, the Obama Administration's efforts have proven to be more vigorous in enforcing state and local governments to comply with fair housing obligations through the Department of Housing & Urban Development (HUD). There was a recent report by three different national civil rights organizations that find Obama to be doing superior work toward improving housing conditions across the country. However, despite these high marks, the report also noted that there is plenty of "unfinished business" for HUD to attend to, including finalizing a regulation codifying its grantees' obligation to further fair housing.

“This report indicates that HUD has, for the first time, taken significant actions to enforce the Fair Housing Act’s requirement that recipients of federal housing assistance affirmatively further fair housing,” said Joe Rich, director of the Fair Housing and Fair Lending Project at the Lawyers’ Committee for Civil Rights Under Law. “Such action is important in achieving the goal of the Act to provide fair housing throughout the country. But, it is also important that HUD release its long awaited regulation addressing this requirement.”

There are plenty of things that HUD has done already, including their participation in increased enforcement in federal court cases. They've processed and investigated private fair housing complaints, and adopted a "disparate impact" rule that codifies existing court interpretation of the Fair Housing Act. HUD has also increased its review and rejection of state and local "Analyses of Impediments" to Fair Housing, which is a requirement of federal housing. Additionally, HUD has undertaken compliance reviews that have resulted in voluntary compliance agreements addressing fair housing requirements.

All in all, the civil rights groups are pleased with HUD's leadership. In the past, many of these enforcement actions were completely avoided, but today's HUD is determined to reform its own programs to improve fair housing for all.

In one case, HUD helped to persuade a suburb of New Orleans to repeal a discriminatory zoning ordinance that had previously excluded African American families from the area. HUD promotes racial integration in housing, even though it has been moving at a slow pace. If HUD can pick up the pace in the areas that are still lacking, residential integration can be reached.

“Our families, our communities, our economy and our country are all enriched and strengthened when we have open access to healthy, diverse neighborhoods,” said Shanna L. Smith, president and CEO of the National Fair Housing Alliance. “HUD has a critical role to play in making sure that state and local governments are doing all they can to create diverse communities and make sure they are open to everyone. The rule to affirmatively further fair housing is needed to provide jurisdictions with clarity about their obligations and guidance about how to achieve this important goal.”

Thursday, March 7, 2013

Number of Mortgage Apps Increase


The Mortgage Bankers Association's (MBA) most recently Weekly Mortgage Applications Survey has compiled data for the week ending March 1, 2013.  According to this information, the number of mortgage applications filed has increased by 14.8% compared to a week earlier. The volume of mortgage loan applications is determined by the Market Composite Index. It tallied the current data on a seasonally adjusted basis. On an unadjusted basis, the Index increased 15% compared to last week.

The number of refinance applications remains the same as last week, sitting at 77% of total applications.

These statistics are good for the mortgage industry. The increase of applications proves that more and more people are continuing to leap into the world of homeownership. This hints that the economy is recovering and jobs are stable.

Wednesday, March 6, 2013

The Importance of the FHA


Here at Quest Loans, we specialize in FHA Loans. Many people don't realize that the Federal Housing Administration (FHA) has a very important role in the mortgage industry. When the private mortgage market collapsed, the FHA stepped up to help make mortgage insurance available to millions of qualified home buyers across the nation. 80 years ago, Congress actually designed the mortgage insurance fund to do just that.

To prove how crucial the FHA is, the National Association of Realtors put together a testimony before the Senate Banking Committee praising the administration. According to NAR President Gary Thomas, without the FHA the housing downturn and economic recession would most likely have been far worse for the nation.

“FHA continues to play a significant role in the housing market and recovery. We applaud them for their leadership and strength during the housing crisis, and for continuing to serve the needs of hardworking American families who wish to purchase a home,” said Thomas, who is also the broker-owner of Evergreen Realty, in Villa Park, Calif.

He also noted that the FHA has always provided access to mortgage financing and it has never offered risky mortgage products, used predatory lending practices, or engaged in exotic underwriting. However, the FHA incurred great financial losses as a result of overall market conditions that led to increased foreclosures.

Despite this, Thomas said that the NAR is confident that the FHA is moving closer to helping to stabilize the mortgage insurance fund, and they've also made many administrative changes to minimize risk. Those changes include five increases to mortgage insurance premiums since 2009, implementing credit score floors, hiring a credit risk officer, requiring higher down-payments for those who have lower credit scores, and putting a series of measures in place to increase their lender responsibility and enforcement.

“FHA currently has one of the strongest books on record and the quality of borrowers has skyrocketed; continued market improvements and rising home prices will also help improve the fund’s future financial condition,” said Thomas. “Had FHA not stepped in to fill the market gap, many families would have been unable to purchase homes, current homeowners would have experienced far greater drops in equity and their home’s value, and our nation’s economy would be much further from a recovery.”

Tuesday, March 5, 2013

FHFA's 2013 Conservatorship Scorecard for the GSEs


Edward J. Demarco, the Acting Director of the Federal Housing Finance Agency (FHFA), has recently released the 2013 Conservatorship Scorecard for Fannie Mae and Freddie Mac.  This "Scorecard" is literally rating their performances on things like "the quality, thoroughness, creativity, effectiveness, and timeliness of their work products." They are also graded on how well they cooperate and collaborate with FHFA, each other, and the industry.

The three keywords that they must focus on are "Build, Contract, and Maintain." These were brought up in 2012 as the three goals of the FHFA's Strategic Plan for the GSEs.

"Build" refers to their goal to "build a new securitization infrastructure platform for the secondary mortgage market."

They must also "Contract the Enterprises dominant presence in the marketplace while simplifying and shrinking certain operations by lines of business."

And finally, they must "Maintain foreclosure prevention activities and credit availability for new and refinanced mortgages."

"Despite some signs of normalization in the housing market, our nation finds itself in the uncomfortable position of having over 90 percent of new mortgage originations supported by the federal government," said DeMarco. "That support is provided directly through government loan programs like the Federal Housing Administration (FHA), and through the financial support that the Treasury Department provides to maintain the solvency of Fannie Mae and Freddie Mac."

In the works is a new "joint company" headed up by the FHFA to focus on securitizing home loans. This is hoped to lead to decreased government involvement in the mortgage market. It would also mean that the FHFA is forcing Fannie Mae and Freddie Mac to abandon their current separate systems and construct a single infrastructure to support the mortgage market. This new entity will be the previously mentioned "joint company". It will be more structured and it will be owned by Fannie Mae and Freddie Mac.

Monday, March 4, 2013

30-Year Fixed-Rate Has Dropped!


According to Freddie Mac's recent Primary Mortgage Market Survey (PMMS), the average fixed-rate mortgage (FRM) for a 30-year term has been lowered! After not changing much in the past month, the rate has now clocked in at an average of 3.51 percent, which is down from 3.56 percent last week. This means good news for those seeking to purchase a home or refinance. This time last year, the 30-year FRM was averaging 3.90 percent.

"Mortgage rates eased somewhat as the consumer price index in February held steady for the second month in a row," said Frank Nothaft, vice president and chief economist for Freddie Mac. "House price indicators, however, showed gains in 2012. The S&P/Case-Shiller national home price index rose 7.3 percent last year, reflecting the largest four-quarter growth since the third quarter of 2006. This, in part, was a driving force that pushed up the number of existing and new home sales in February to the highest levels since July 2007 and July 2008, respectively."

The housing market is progressively becoming stronger as time passes. With these low interest rates, more and more people are able to save money every year on their mortgages. If your mortgage rate is currently higher than 4%, we'd recommend calling us and asking about refinancing.

It is also possible to switch from a 30-year FRM to a 15-year FRM as well, which may further reduce your overall mortgage balance. The 15-year FRM is averaging at 2.76 percent.  Ask us if this option may be right for you!

Call Quest Loans at 888-883-5252 with any and all questions you may have! We are interested in helping you save money!

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