¨The Student Loan Effect: How Debt Impacts Homeownership for Millennials
Freddie Mac’s Insight & Outlook report for September focuses on the challenges faced by three types of student loan borrowers, and how loan down payment mortgage loans could help, or not help, make homeownership possible.
“The low homeownership rate among millennials is still something of a puzzle—it cannot be explained solely by the increase in student loan debt,” says Sean Becketti, chief economist, Freddie Mac. “However, student debt plays a role—higher balances are associated with a lower probability of homeownership at every level of college and graduate education. And recent data has confirmed that not all student debt is created equal. Students who attended schools with less-certain educational benefits have not fared well. Borrowers who did not complete their studies have fared worst of all. These groups are likely to continue to affect the pattern of homeownership among millennials. Moreover, a change just this month in Federal Housing Administration policy will make it more difficult for some student loan borrowers to qualify for a mortgage.
Is the student debt overhang holding back homeownership among millennials?â€¨ While the homeownership rate has been declining for all age groups, the rate among millennials is particularly low.
Student debt tripled over the past 10 years, reaching $1.2 trillion in the fourth quarter of 2014. Aggregate student debt expanded for all age groups, however, the balances are concentrated among those under 30 years old and those between 30 and 39 years old.
Before the crisis, homeownership rates of 27-to-30-year-olds with student loans (evidence of at least some college education) were 2 to 3 percent higher than homeownership rates of those with no student loans. That gap began to close during the recession and reversed in 2011. By 2014, the homeownership rate of borrowers was about one percentage point lower than the rate of non-borrowers.
Recent findings suggest that it may be useful to think of student loan borrowers as being divided into three groups: successful investors, disappointed earners, and at-risk borrowers.
The at-risk borrowers group is a particular focus for Freddie Mac’s efforts to support prudent, affordable lending to low-and-moderate income borrowers. The impact on credit scores of poor repayment performance may make it particularly difficult to assist some members of this group.
For the disappointed earners—and even some of the successful investors—Freddie Mac’s Home Possible Advantage(SM) program, with its option to pay as little as 3 percent down, may provide help in purchasing that first home.
“Our Outlook this month shows the economy has not kicked into gear yet, and the Fed’s recent decision to defer increasing short-term interest rates suggests they share this view,” says Becketti. “At the same time, the housing market is on its way to having the best year since the recovery began. Keep in mind that the housing sector is coming back from rock bottom and housing activity remains weak compared to historical norms. At the same time, Fed watchers must feel they are watching a revival of ‘Waiting for Godot.’ Approaching every meeting of the Federal Open Market Committee, the market braces itself for a Fed tightening, only to watch the Committee delay any action for at least one more meeting.”
At the current pace, home sales this year are expected to be the highest since 2007. Existing home sales in August fell a little short of expectations, but the inventory of existing homes for sale remained below the six-month mark.
The faster-than-expected decline in the unemployment rate is boosting demand for homes. However, a more significant contributor is likely the continued low level of mortgage rates, which has kept affordability high despite impressive gains in house prices. The interest rate on 30-year fixed rate mortgages averaged 3.9 percent in August, and the rate on 15-year fixed rate mortgages averaged 3.12 percent.
Based on upward revisions of the 2014 Home Mortgage Disclosure Act (HMDA) data on mortgage origination, and stronger-than-expected housing activity in the first half of 2015, Freddie Mac has increased its estimate of 2015 mortgage originations to $1.53 trillion and 2016 originations to $1.40 trillion.
A video preview, along with the complete monthly Insight & Outlook commentary, is available here.
Hackers’ latest scam: tricking home buyers into wiring them settlement funds
By Jill Chodorov October 12
I hate to be the bearer of bad news — but there is yet another scheme con artists are using to swindle you out of money.
Here’s how it goes down.
You’re about to settle on a home. You get an e-mail from your real estate agent or from the title company, requesting funds to be wired to an account for settlement. The e-mail purports a last-minute change in wiring instructions.
You dutifully wire the money using the new instructions.
Then, the call comes from the title company the day before settlement, asking why you have not sent your funds for settlement. This is the moment you learn that you have sent hundreds of thousands of dollars to a thief.
This scheme is not new. But a recent resurgence of wire fraud in the real estate industry, and the increase in its sophistication, prompted the National Association of Realtors (NAR) and many national title insurance companies to issue warning bulletins to the industry.
“We don’t have any hard numbers about how much buyers have lost, but we do have an increasing number of reports that it is happening,” said Katie Johnson, general counsel of the NAR.
According to Johnson, the hackers are monitoring e-mails and waiting patiently to determine what is the best scam. They realized that real estate transactions involve a large amount of money right before closing.
“The scammers are following information about transactions online on the MLS [multiple-listing service] or in the public records,” said Matthew Alegi, a partner at Potomac law firm Shulman Rogers. “It is only a matter of time before someone local gets hit with a six-figure cybertheft.”
Alegi and his staff foiled a recent attempt by a hacker to have proceeds of a property sale wired to the hacker’s account.
“We received an e-mail saying that the proceeds should be wired rather than mailed,” Alegi said. “Our title processor checked with the seller and learned that the e-mail had not come from him.”
According to Alegi, if you wire money to a wrong account, the bank will not reimburse you. “There is usually no recourse to get your money back,” Alegi said.
These schemes are getting harder to catch. The hackers have improved their grammar, and they obtain an almost identical e-mail address, making it very difficult to identify it as a scam.
Patrick Weed, broker of Patrick Realty Company in Kensington, and his buyer client also prevented a potential $20,000 loss.
“I received a call from my buyer asking why I e-mailed her asking for an additional deposit of $20,000 for her purchase in Olney,” Weed said. “She told me that she responded to my e-mail, and that I sent her an e-mail back.”
The e-mails stated that the money was necessary to ensure a smooth and easy transaction.
Weed said he never sent his client an e-mail asking for an additional $20,000. The hacker monitored his e-mail and was able to garner exact details about the transaction. The hacker provided wiring instructions to a bank in Texas.
Unfortunately, some people have fallen for this scheme and have lost money.
“Someone in Chicago recently lost $130,000, and in Texas there was a recent loss of $30,000,” said Johnson. “It is prevalent, and it is increasing.”
“We have to be more vigilant than ever,” Alegi said. “Consumers need to be aware. Brokers need to be aware. Title companies need to be aware.”
Here are some tips for buyers and sellers to protect themselves from becoming a victim to wire fraud:
- Never send any sensitive financial information via e-mail, including banking information, routing numbers or PINs.
- Prior to wiring any funds, you should contact the intended recipient via a verified telephone number and confirm that the wiring information is accurate. Do not rely on telephone numbers or Web site addresses provided within an unverified e-mail.
- Clean out your e-mail account on a regular basis. Your e-mails may establish patterns in your business practice over time that hackers can use against you.
- Change your usernames and passwords on a regular basis.
- Make sure to implement the most up-to-date firewall and anti-virus technologies on your server or computer.
- Report any fraudulent activity to the FBI via its Internet Crime Complaint Center.
Jill Chodorov can be reached at firstname.lastname@example.org.
Seattle Times Article on Upside Down Home Values in Our Area: http://www.seattletimes.com/business/real-estate/local-home-sales-slow-median-prices-edge-lower-in-september
HOPE NOW Hits 24 Million Mark Assisting with Troubled Mortgages
By John Voket
A while ago, I announced the formation of HOPE NOW, an alliance between counselors, mortgage companies, investors, regulators and other mortgage market participants.
This innovative alliance was encouraged by The Department of the Treasury and the U.S. Department of Housing and Urban Development to bring together diverse stakeholders to address challenges in the mortgage market and create collaborations to solve problems.
HOPE NOW servicers reported almost two million solutions in 2014 in states from California, and New York, to Nevada, Oregon, Virginia, and Washington.
And the organization just released its second quarter 2015 data, which shows that since 2007 the mortgage industry has completed a total of 24 million workout plans and six million proprietary loan modifications for homeowners – reaching another milestone in its efforts to assist families with troubled mortgages.
Between last April and June, approximately 411,000 homeowners received non-foreclosure solutions from mortgage servicers, and non-foreclosure solutions outpaced completed foreclosure sales by a margin of more than four to one (411,000 solutions, vs. 89,000 foreclosure sales).
This is due to the fact that there are several long term and short term solutions available to at-risk homeowners when facing delinquency or foreclosure. Permanent loan modifications in Q2 2015 totaled approximately 113,000 and short sales totaled 24,000.
While other non-foreclosure solutions (including repayment plans, deeds in lieu, other retention plans and liquidation plans) made up the rest of the total number.
When homeowners do not qualify for long term permanent loan modifications, mortgage servicers continue to look for short term options that, in many cases, lead to a permanent solution.
Learn how HOPE NOW might be able to help you or someone you know, or just view the agency’s latest full data set here.
If you want more information on your home value contact me. Judy Gratton 206-276-3289