JULY 2015

In This Issue

Existing home sales surge, prices hit record

by USA Today


Existing homes were sold at the fastest pace in eight years last month and the median sales price reached an all-time record high, the National Association of Realtors said Wednesday.


Sales increased 3.2% to a seasonally adjusted annual rate of 5.49 million in June. Economists had forecast that homes sold at a 5.4 million annual rate, according to the median estimate of those surveyed by Bloomberg. May sales were revised down slightly to annual pace of 5.32 million.


Lawrence Yun, chief economist of the realtors group, pronounced this year's spring buying season the strongest since the economic downturn.

"Buyers have come back in force, leading to the strongest past two months in sales since early 2007," he said.


Yun attributed the brisk sales to strong job growth, improved household finances and rising mortgage rates that are prodding Americans to buy now before rates climb further.

The median sales price of a previously owned home was $236,400, 6.5% above the year-ago price and above the peak price set in July 2006.


The skimpy stockpiles led to rapid sales. Homes were on the market for an average 34 days in June, down from 40 days in May and the shortest turnaround since the association began tracking the figure in 2011.


Higher prices should be prompting more homeowners to put their homes up for sale, fattening inventory. But many are waiting because low credit scores keep them from qualifying for a mortgage on a new house or their homes are still worth less than what they owe on their mortgages, IHS Global Insight said in a note to clients.


The resurgent home sales market could provide a big spark to an economy that struggled through the first half of the year. Healthy sales further reduce supplies, leading to more home construction. That generates numerous jobs in the building, manufacturing and other industries.


In June, the share of homes purchased by first-time buyers dipped to 30% from 32% in May after climbing recently, but it remains above the year-ago figure of 28%. Stronger job and income growth are spurring many young adults to move out on their own.


Single-family home sales increased 2.8%, while co-op and condominium sales jumped 6.6%.


Sales rose 4.3% in the Northeast, 4.7% in the Midwest, 2.5% in the West and 2.3% in the South.



10 best and worst cities for first-time homebuyers

by HousingWire


There are countless reasons and explanations that play into what neighborhood is best for a homebuyer. 

To help ease the process, WalletHub compiled a list of 300 U.S. cities to determine the attractiveness of their first-time homebuyer markets.

When it comes to what homebuyers should conider when choosing a neighborhood, Robert Van Order, the Oliver Carr Chair in Real Estate and Professor of Finance and Economics at The George Washington University School of Business, said:

"(It) depends on how long they expect to stay and the type of unit. If short run and, say, a condo, look to how strong sales have been and if they can resell. If more permanent, it depends on lifestyle - e.g., if looking to raise kids, first thing might be schools. Be sure to study sales of comparable housing in the area."

WalletHub assessed the real-estate landscape within 300 U.S. cities by examining three key dimensions: housing affordability, real-estate market and living environment.

And here are the top 10 best cities for first-time homebuyers


Source: WalletHub

The worst 10 cities for first-time homebuyers






MBA adjusts forecast for a drastically bigger purchase mortgage year
by HousingWire

The Mortgage Bankers Association updated its mortgage finance and economics forecast, significantly revising the volume of purchase originations upwards.  


According to the new forecast, purchase originations will reach $801 billion in 2015 and $855 billion in 2016, increasing $71 billion and $94 billion, respectively, over the association's previous forecast.


Mike Fratantoni, MBA's chief economist, along with senior MBA economists Lynn Fisher and Joel Kan, explained the drivers behind the increased forecast in MBA's July Economic and Mortgage Finance Commentary.

"The housing market recovery has shifted to a higher gear. We have revised upwards our estimates and forecasts for home sales and home prices, and the cash share of purchases has declined," the commentary stated.

"All of these factors point to higher levels of purchase originations.


Revisions to our purchase origination forecast in July result from changes in our expectations about the rate at which purchase applications and housing sales translate into dollars of mortgage originations.


In addition, purchase originations are expected to increase to $801 billion in 2015, an upward revision from $730 billion in last month's forecast, and from $638 billion in 2014. In 2016, we increased our forecast to $885 billion in purchase originations.


"More sales are being financed, and more applications are being approved. And we expect that this trend will continue into 2016 and beyond, as the broader economy and job market continue to improve," the report stated.

Mortgage rates are expected to hit 4.5% by the end of the year, which is projected to refinance volume down as expected. 


However, the MBA's forecast for refinance mortgage originations remained the same as last month.


Refinances are expected to be $551 billion in 2015, compared to $484 billion in 2014. As a result, total originations are expected to be $1.35 trillion in 2015 and $1.26 trillion in 2016, compared to $1.12 trillion in 2014.



G-fee cuts significantly delayed by controversial Senate transportation bill
                                                                              by HousingWire



A controversial bill currently under consideration in the U.S. Senate would substantially delay cuts to the fees that Fannie Mae and Freddie Mac charge lenders to guarantee loans, and use those very fees to fund massive transportation projects.


The Developing a Reliable and Innovative Vision for the Economy Act, also called the DRIVE Act, is a six-year highway authorization that will allow planning for important long-term projects around the country, and provides three years of guaranteed funding for the highway trust fund, according to the Senate Committee on Environment and Public Works.


The bill's backers, which a bipartisan coalition led by Senate Majority Leader Mitch McConnell, R-Ky., and Sens. Jim Inhofe, R-Okla., and Barbara Boxer, D-Calif., say that the $47 billion bill is "fully offset with spending reductions or changes to federal programs and does not increase the deficit or raise taxes."


But one of the so-called "pay-fors" in the bill - the mechanism which funds the bill - is a significant delay to scheduled cuts in g-fees.


According to the Senate Committee on Environment and Public Works, increases in Fannie and Freddie's g-fees, which were originally put in place in 2011, are set to decline by 10 basis points at the end of 2021.


But to fund part of the transportation bill, the decrease in g-fees would be delayed until the end of 2025 - a four-year extension of the increased g-fees.


The Senate Committee on Environment and Public Works said that the delay in g-fee cuts would fund $1.9 billion of the $47 billion needed to fund the bill.


In the Senate Committee on Environment and Public Works explanation of the funding of the bill, which can be read here, it states, "the regulator for Fannie Mae and Freddie Mac recently completed a review of the guarantee fees and found 'no compelling economic reason to change the general level of fees' which are continued by this provision."


But the bill was met with controversy, as McConnell called for a vote from the full Senate on the bill, after reportedly introducing it just only one hour earlier.


According to a report from TheHill.com, the Senate voted 41-56 against moving forward with the bill, with many Senators stating that they did not have enough time to review the 1,030-page bill.


The bill wasn't only met with controversy on the Senate floor, some of the largest groups in housing finance are decrying the use of g-fees to fund transportation projects.


The president and CEO of the Mortgage Bankers Association, David Stevens, criticized the Senate plan, urging Congress to "go back to the drawing board" on the funding for the bill.


"Taxing homebuyers, which is the practical effect of increasing guarantee fees, to pay for unrelated government spending like this, is simply bad policy," Stevens said.


"It's bad for borrowers, it's bad for the housing market and it's bad for the economy, just as all three are finally showing signs of recovering from the 2008 meltdown," Stevens continued. "That is why we are asking all senators to vote against this bill until they can find a more appropriate funding mechanism."


The MBA said that its grassroots advocacy arm, the Mortgage Action Alliance, issued a "call to action," requesting that its members contact their senators and tell them to reject the g-fee provision.


"G-fees are a critical risk management tool used by Fannie Mae and Freddie Mac to protect against losses from faulty loans," the MBA said in a statement.


"Increasing g-fees for other purposes effectively taxes potential homebuyers and consumers looking to refinance their mortgages," the MBA continued. That increase has harmed homebuyers and consumers--and continues to do so every day. Please contact your senators to make clear to them that homeownership cannot, and must not, be used as the nation's piggybank."


Earlier this year, the MBA joined the American Bankers Association, American Land Title Association, Credit Union National Association, Financial Services Roundtable, Housing Policy Council, Leading Builders of America,National Association of Federal Credit Unions, National Association of Home Builders, and National Association of Realtors to send a letter to the leaders of the U.S. Senate Committee on the Budget, requesting that g-fees no longer be used to fund federal spending.

The letter was in response to a push from bipartisan group of senators, led by Sen. Mike Crapo, R-Idaho, and Sen. Mark Warner, D-Va., who announced a budget point of order that would prevent G-fees from being used to offset federal spending, a practice the Senators call a "budgetary gimmick" and a "back door tax" on homeowners.


The MBA wasn't alone in voicing its displeasure with the bill.

Tom Woods, chairman of the National Association of Home Builders, called the bill "outrageous" and said that g-fees should not be used in this manner.

"It is outrageous that Congress would consider using g-fees to cover the cost of programs completely unrelated to housing," Woods said.


"With first-time homebuyers still hesitant to enter the marketplace, it makes no sense to impose what amounts to a new tax on homeownership that will disproportionately affect low- to moderate-income borrowers," Woods continued.


"These fees should only be used for their intended purpose - to protect against mortgage defaults and ensure the safety and soundness of the housing finance system," Woods said.


"Before attempting to advance the transportation bill again, senators must strip the g-fee provision out of the legislation and look for other means to fund the measure," Woods concluded. "Homeownership cannot, and must not, be used as the nation's piggybank."


The bill is still under consideration, but according to a separate report from TheHill.com, Senate Minority Leader Harry Reid, D-Nev., said Wednesday that he has "some significant issues" with the bill and plans to meet with other Senate Democrats to debate the bill.


"We've worked through the night and I think we have a basic understanding of it," Reid said, per TheHill.com. "So I'm having a caucus today, and we'll have my ranking members from Finance, Commerce, Energy, Banking report on how they look at this bill. It's my hope that we can work our way through all the issues dealing with this legislation."



LifeLock Once Again Failed at its One Job:  Protecting Data
by Wired


Customers who hired the infamous ID theft-protection firm Lifelock to monitor their identities after their data was stolen in a breach were in for a surprise. It turns out Lifelock failed to properly secure their data.


According to a complaint filed in court today by the Federal Trade Commission, Lifelock has failed to adhere to a 2010 order and settlement that required the company to establish and maintain a comprehensive security program to protect sensitive personal data users entrust to the company as part of its identity-theft protection service.


This is ironic, of course, because Lifelock promotes its services to companies that experience data breaches and urges them to offer a complimentary Lifelock subscription to people whose data has been compromised in a breach. To properly monitor victims' credit accounts to protect them against ID theft, Lifelock requires a wealth of sensitive data, including names and addresses, birth dates, Social Security numbers, and bank card information.


Protecting that data should be a primary concern to Lifelock, particularly in light of the fact that many of its customers have already been victims of a breach. But the FTC found in 2010 that the company had failed to provide "reasonable and appropriate security to prevent unauthorized access to personal information stored on its corporate network," either in transit through its network, stored in a database, or transmitted over the internet.


Lifelock had been ordered to remedy that situation, but according to the complaint filed today, it has failed to do so. The complaint is currently sealed, but the previous finding from 2010 provides insight into the company's security failures.


Lifelock's CEO was himself a victim of identity theft in 2007 when a thief used his widely advertised Social Security number to obtain a $500 loan.

The CEO OF Lifelock, Todd Davis, became famous for advertising his Social Security number on television ads and billboards, offering a $1 million guarantee to compensate customers for losses incurred if they became a victim of identity theft after signing up for the company's services.


For an annual subscription fee, Lifelock promised customers that it would place fraud alerts on their credit accounts with the three credit reporting agencies. As a result, the company said, thieves would not be able to open unauthorized credit or bank accounts in their name.


"In truth, the protection they provided left such a large hole ... that you could drive that truck through it," FTC Chairman Jon Leibowitz said in 2010, referring to a Lifelock TV ad showing a truck painted with the CEO's Social Security number driving around city streets.


Leibowitz said the promises were deceptive because thieves could still rack up unauthorized charges on existing accounts-the most common type of identity theft. It also couldn't prevent thieves from obtaining a loan in a Lifelock customer's name.


In fact, Lifelock CEO Davis was the victim of identity theft in 2007 when a thief used his widely advertised Social Security number to obtain a $500 loan in Davis' name.


Lifelock also promised customers that sensitive data they provided the company to perform its protection services would be encrypted and protected in other ways on Lifelock's servers and accessed only by authorized employees on a need-to-know basis.


"Your documents, while in our care, will be treated as if they were cash," the company promised.But it turned out that none of that data was encrypted. The company also had poor password management practices for employees and vendors who accessed the information, and Lifelock failed to limit access to sensitive data to only people who needed access.


What's more, the company failed to apply critical security patches and updates to its network and "failed to employ sufficient measures" to detect and prevent unauthorized access to its network, "such as by installing antivirus or antispyware programs on computers used by employees to remotely access the network or regularly recording and reviewing activity on the network," the FTC found.


"As a result of these practices, an unauthorized person could obtain access to personal information stored on defendants' corporate network, in transit through defendants' corporate network or over the internet, or maintained in defendants' offices," the FTC said in 2010.