676,535 624,753


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Business Economics (NABE). So, what are some of the factors and trends currently happening that are likely to impact the way lenders do business moving forward? Let’s take a look. ABILITY TO REPAY Federal rules as well as common sense tell us that lenders must veri- fy the ability of borrowers to repay residential mortgages. While there are exceptions for such things as open-end credit plans, timeshare plans, reverse mortgages, and tem- porary loans (a loan for 12 months or less), the ability-to-repay rule is still the compliance gold standard. Lenders take this stuff seriously, which may explain why the typical loan application vies with “Gone With The Wind” in terms of length and heft. “With the size of an average mortgage loan at more than 500

at a 13-year low in 2018 according to figures from ATTOM Data Solu- tions. ATTOM reports there were foreclosure filings — default notic- es, scheduled auctions, and bank repossessions — on 624,753 U.S. properties last year. And, despite all of the paperwork, many of these distressed properties were never actually foreclosed on. The reason is that home values have been rising in most markets. The National Association of Real- tors (NAR) says median existing home values reached $249,500 in February — the 84th straight month of year-over-year gains. With rising prices, some dis- tressed owners can simply sell in the open market for enough to cover the debt — and many do! In 2018, says ATTOM, only 230,305 properties were actually fore- closed on. Interest rates are also looking very positive for homebuyers right

now, averaging 4.54 percent in 2018 according to Freddie Mac, well below the long-term average of 8.08 percent going back to 1971. By late March 2019, the big GSE said weekly rates for 30-year fixed-rate financing had fallen to 4.06 percent , down almost half a percent from the 2018 average. In effect, it’s very difficult to see the growing stresses in the under- writing process because the system is now so successful. However, success masks the reality that low rates and rising prices are not guaranteed. They can come and go as the economy evolves. And the economy, as we all know, always evolves. “The U.S. economy has reached an inflection point, with the con- sensus forecasting real GDP growth to slow from 2.9% in 2018 to 2.4% in 2019, and to 2.0% in 2020,” said Kevin Swift in March. Swift is presi- dent of the National Association for


Why Mortgage Applications Have to Change


A h, the continued plight of the American mortgage system. While each year millions of home- owners finance and refinance real estate with few problems, the system is increasingly fraught with new complexities and potential pitfalls. Updates are constantly

needed to keep up with a num- ber of outside factors and trends. Without change, the system would increasingly be impacted by risk, fraud, and losses — factors which would result in fewer originations and higher rates. And so, the lend- ing industry needs to be ready for

anything. It may seem difficult to be- lieve that the mortgage system is stressed in any significant way. All of the traditional fundamentals appear to be positive. For instance, foreclosures — the most obvious measure of industry issues — were

6 think realty housing news report

june 2019 7

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