The Census Bureau reports that as of Q1, the percentage of Americans who own their homes fell to the lowest level in 20Ys (to 63.8%). Tighter lending requirements, prior foreclosures and other factors are likely reasons for the decline. In a similar vein, and yet another ranking I didn't do well in, WalletHub conducted an in-depth analysis on the safest states to live in for 2015 by analyzing data to include the number of assaults per 100,000 residents, the number of fatal occupational injuries per 100,000 employees and the percentage of the population lacking health insurance. Massachusetts ranked the safest state to live in followed by Vermont, Minnesota, New Hampshire and Hawaii. Mississippi was the least safe state to live in, followed by South Carolina, Oklahoma, Tennessee and New Mexico. Interesting findings from the analysis include, the number of murders and non-negligence manslaughters per 100,000 residents is 12 times higher in Washington D.C. than in Iowa and the number of thefts per 100,000 residents is three times higher in Washington D.C. than in Idaho.

This from Dave Stevens, President & CEO of the Mortgage Bankers Association:

Where We Are Today.

We are currently in the middle of a housing crisis.  That's right...I said it.  Industry experts, economists and even consumer groups have predicted one would emerge, albeit this is not what they expected and it is certainly sooner than anticipated. 

Yes, the word crisis is harsh and alarmist, but it accurately reflects the complete void of focus on housing as an opportunity by Washington policy makers, including the actions of the regulators and enforcement officials that are narrowing the credit box.  Fact - there is a shortage of affordable housing (both rental and owned) and the homeownership rate today is at its lowest point in over two decades.  Today's environment is not encouraging credit expansion. It's forcing lenders to be overly conservative - ultimately failing entry-level homeowners on every front.

What's the number one issue choking off access to affordable credit? Regulating through enforcement and it's happening on a case-by-case basis.  The guessing game for businesses to know if and when they may be penalized has produced the most defensive lending posture in years. This atmosphere of the unknown; this environment of fear and trepidation rather than an environment of constructive engagement and compliance have a steep cost. And we're not just talking costs for compliance or production.  We're talking costs for any mistake, even a minor one that may have no bearing on the efficacy of the loan, making lenders even more conservative in lending.  It's impacting the willingness of lenders to take the risk even to some who would otherwise qualify for their dream to obtain a home.  The regulatory environment is failing the very borrowers policymakers set out to protect - young families, thriving generations of new Americans, first time homebuyers; all the while driving up rental costs and homeownership lags and rental demand soars.

Lenders must have clearer guidance on the rules and a better understanding of what will constitute an enforcement action.  We have made some progress working with regulators on issues such as rep and warrant, FHA defect taxonomy and the supplemental ratio, but it's not nearly enough. 

Some regulators appear to have an enforcement-first strategy, instead of providing clear rules and guidance - particularly regarding unfair, deceptive, or abusive acts or practices - UDAAP actions - which expose lenders to "regulation by enforcement action."  Lenders are being subjected to zero-tolerance policies, but don't have the necessary guidance to comply with some regulations.  Refusal to clarify the rules in writing by the CFPB leaves lenders in a position for massive penalties for minor mistakes. 

The CFPB should be applauded for granting an enforcement delay on the TILA/RESPA Integration Disclosure rule (TRID).  With the number of stakeholders involved in home buying procedures, there will undoubtedly be problems.  In particular, the borrower could be affected in many ways should a closing date get pushed back (consider the cost of month-to-month rent or not having a place to go at all).  Industry stake holders - lenders, borrowers, vendors, sellers, title companies, etc., - need time to work through the initial issues before severe penalties compound the problem.

The mortgage lending industry has acknowledged and taken accountability for the role we played in actions that led to the meltdown.  Lenders have paid hundreds of billions in settlements. We've also made tremendous change in controls, compliance, and to improve the consumer experience.  Now it's time policymakers - the vast network at the federal and state level - account for their role in the recovery.  It's time to acknowledge the flaws in policy, corrections needed to the rules, and the impacts of going too far.

And it starts at the top.  Our President has only given two key housing speeches in his presidency, both in Phoenix. These were focused on enforcement, accountability, and dealing with foreclosure relief and refinance programs. There has been no public focus to promote new opportunities for homeownership and no program, other than the short-lived first-time homebuyer tax credit program, there has been a void in creating confidence in the housing market.

Unlike past Presidents in both parties - there has been no focus on homeownership as an opportunity. No discussion about unbanked, thin file, demographics and how that affects opportunities. No attempt to publicly build confidence in consumers' views about homeownership.

Unless we call this what it is - a crisis - and focus on the critical role that our national leaders can play, there is no hope of traction. I worry deeply that this Administration may leave office having done less to advance homeownership than any previous administration in memory.  And the clock is running out.  There's little time left before the next Presidential election to do anything more than public discussion, but the President can and should play a major role. 

Let's fix what needs to be fixed. Let's change the dialogue of distrust to a dialogue of confidence. Let's fix the rules to allow for innovative, sustainable, safe lending. Let's end the relentless enforcement regimes. Give us the confidence to provide access to credit to more qualified borrowers at the lower and middle income levels. Reignite the economic engine of the real estate market.

Speaking of trends, CoreLogic reported that in April, home prices were up 6.8 percent YoY and the seasonally adjusted annual rate MoM increased 14.4 percent. The past three months had an average YoY growth of 5 percent. Home prices gained on a national scale, with Seattle and Philadelphia experiencing the strongest growth at 29 percent and 28.3 percent respectively. Growth remained strong in New York, Miami and San Francisco but was weakest in Boston, Cleveland and Detroit. Denver led the YoY growth at 11.1 percent, followed by Dallas (10.3 percent) and Seattle (9.8 percent).

What's the old saying, a picture's worth a thousand words? A few weeks back a loan officer asked me about charting historical delinquency rates....and by "historical" she wanted data going back to the 1980s...and yes, by "'80s" she meant ray bans, parachute pants, and everyone wanting to be a fighter pilot--or Naval Aviator, as Maverick would point out. So I told her to listen to Kenny Loggins' Danger Zone, and check out the Mortgage Bankers Association Chart of the Week, which just so happened to have that exact chart a week prior. This week's chart, for June 5^th, shows Independent Mortgage Bankers Production Expenses; and concludes "in the first quarter of 2015, total production expenses averaged $7,195 per loan, or 311 basis points among independent mortgage bankers and bank subsidiaries.  Total production expenses include loan originator commissions, compensation for sales, fulfillment, post-closing and support staff, occupancy and equipment, technology, outsourcing and other miscellaneous expenses as well as corporate allocations." 

Cash sales make up 35% of all home sales, according to CoreLogic. That is down from the peak of 46.5% in Jan of 2011, but still well above the pre-crisis level of 25%. So for originators, this means more "gettable" business even if existing home sales don't improve all that much. I guess you can use cash sales as a proxy for distressed sales, and the places with the biggest foreclosure inventory and lowest price appreciation have the highest cash sales percent.

Plenty of LOs wonder where rates are going. No one knows with absolute certainty, but Wells Fargo has taken a closer look at the ten-year yield over time. The ten-year yield does not revert to the mean, which is interesting because GDP and inflation, the two factors that usually go into forecasting the ten-year rate, have a mean reverting behavior. This makes it difficult to predict trends as shown by a number of forecasters who predicted a fall in the ten-year yield to between 1 and 1.5% for the first month of 2015. They thought there would be continued lowered rates from 4Q of 2014. It never fell below 1.88% in January 2015. This volatility is shown further by the unstable relationship between nominal GDP and interest rates. During recessions of 1990-1991, 2001, and 2008-2009, yields were persistently above nominal GDP whereas recently they have been well below. There is a long-term downward trend but it is difficult to bet continuously on that since there would be poor short term results due to sharp jumps in the yield.

Thursday we had a bunch of news that tended to nudge rates higher. The Consumer Price Index rose .4% in May, slightly below expectations. Ex-food and energy, it rose 0.1%. On a year-over-year basis, the CPI is flat, while the core index is up 1.7%. Inflation remains below the Fed's target. Initial But the economy is driven by jobs and housing, and we learned that Initial Jobless Claims fell to 267,000 last week, another strong number. Real average weekly wages increased 2.3%. And the Philly Fed index rose to "15.2" and the Index of Leading Economic Indicators was flat at 0.7%. So Treasuries gave up ground in a "curve-steepening trade" despite a headline CPI and core CPI that missed estimates. And we closed out the 10-yr on Thursday with a 2.35% yield.

For the "joke" today, take a look at this short video which isn't funny but sure is interesting. What is shopping going to be like in the future? A friend of mine who is in the retail business that this is accomplished primarily though hardware, with software in a box. It will be quickly copied. The most important part is the intelligence that creates a "dossier" of every action, every choice, time, place, purchase, price, intent (viewed but did not purchase), etc...then feeding it back to the retailer in an analytic platform based upon a predictive, patented algorithm that gets smarter and smarter and smarter about each and every individual and adding digital, social, credit card, etc. Intelligence....and also selling it in an aggregated cluster to manufacturers - oh and all automated. It's the beginning of artificial intelligence in brick and mortar.

Jobs and Announcements

But hey, if you're in Washington, "There are some great opportunities on the operations side at Axia Home Loans, one of the fastest growing full-service mortgage banking firms in the Western United States. Founded in 2007 and privately owned, Axia has built its success upon the mission to 'create sustainable homeownership through responsible lending in the communities in which we live and work.' Axia is licensed in twelve states and operates over forty-five retail branches, employing more than one hundred loan originators and two hundred staff. As production continues to grow, Axia is seeking talented Sr. Underwriters to work in its corporate office located in Bellevue WA, its underwriting office in Lynnwood, WA, or working remote is an option."  Candidates should have a minimum of 5 years underwriting experience with Conventional, FHA, VA and USDA loans. DE preferred, but not required. Check out Axia Home Loans Careers. Axia is an Equal Opportunity/Affirmative Action Employer. Axia Home Loans is a registered trade name of Axia Financial, LLC - NMLS ID 27830.

And in the technology side, evolution in the vendor arena continues and today we have a note from www.LoanTek.com - "one of the mortgage industry's fastest growing technology providers, offering best execution pricing engine, lead management, CRM, website, and lock management solutions. LoanTek's primary goal is to help lenders increase conversion rates with consumers. To accomplish this end LoanTek focuses on delivering granular offers specific to the consumer's request, and engaging that consumer with interactive environments. Herein, LoanTek's combined pricing engine, lead management system, CRM, and website services, engage the consumer creating a 'sticky', highly validated, experience and increased lender conversion. These processes are present in every LoanTek service, from the emails that come out of LoanTek's CRM to LoanTek's website integrations on the lender's website. They are fundamental to completing the 'cycle of conversion' - taking a consumer who started their search for information online and ending that search successfully with our lending client."