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HMDA Data Reveals All

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | December 18th, 2015

Each year, like clockwork, Uncle Sam calls all of the country's mortgage lenders on the carpet to prove they are making mortgage money available to everybody, everywhere -- not skipping over an ethnic group here or a county there.

There's an awful lot of data in the report that some call the mortgage census -- formally, the Home Mortgage Disclosure Act (HMDA), created by Congress in 1975. The law was intended to give hard data on lending and mortgage investment -- or the lack of it -- to minority groups and other communities.

The data collected under HMDA offers a cornucopia of mortgage information, like which companies are the largest lenders, what percentage of loans were on single-family houses, how many loans were sold by lenders into the secondary mortgage market, and how many first liens there were versus other liens.

2014's epic report has now been released: It includes numbers from 7,000 lenders and information from nearly 10 million loan applications. So what was 2014 like for the mortgage market? According to the Federal Reserve's HMDA summary, "House prices continued their upward trend evident since 2012 and mortgage interest rates declined throughout the year, although rates remained slightly higher than the historical lows reached in late 2012 and early 2013."

How difficult was it to obtain financing last year? "While mortgage credit stayed generally tight, conditions appeared to ease somewhat over the course of the year as the fraction of mortgage lending to lower-credit borrowers increased," according to the Fed. "However, growth in new housing construction was slow throughout the year, suggesting some persistent softness in new housing demand."

What percentage of the nearly 10 million applications in 2014 actually became mortgages? About 6 million. The dollar volume of those loans totaled almost $1.4 trillion, which is lower than 2013's volume, but somewhat higher than most industry pundits predicted.

The undisputed mortgage champ was Wells Fargo Bank, which made loans at a dollar volume that was twice what the next two banks originated, combined. The giant bank's total of $111.1 billion, about 8 percent of the total national volume, dwarfed Quicken Loans and Chase, which had about 4 percent each (about $56 billion apiece).

In professional football's annual draft, the last player chosen is called Mr. Irrelevant. In the lending world, that title would go to Affinity Bank, which lent only $20,000 in home loans in 2014. Rapid City, South Dakota's Telco Federal Credit Union was next to last, at a mere $24,000.

In going over the numbers, it's easy to lose sight of HMDA's original intention, which was to track loans to minorities and cull out lenders who were redlining or not making loans in the communities where they were located. But those figures are in there, too:

Of the $2.5 trillion in applications made to lenders last year, about 59 percent came from whites, and just over 20 percent came from minorities (blacks, Latinos, Asians, American Indians, native Hawaiians or people of mixed race). More than 1 in 5 applications were in the "unknown" or "N/A" categories, because many people do not fill in the "race" blank. But with minorities now around 38 percent of the American population, it appears that they continue to be underserved.

The disparity is even larger in the dollar volume of loans actually made, with whites getting 63 percent of all mortgage money last year.

Beyond those figures, HMDA also offers a wide-angle snapshot of the country's appetites for home loans. Of the 10 million applications, 89 percent were for owner-occupied units, with just 10 percent non-owner-occupied. Applications to purchase homes were just slightly more popular (51 percent) than those to refinance loans (41 percent), with just seven percent seeking home-improvement lending.

Together, the 10 million applicants sought nearly $2.5 trillion in funding, and 6 million borrowers were approved for $1.4 trillion. More than 9 in 10 sought amounts at or lower than the "conforming" mortgage ceiling imposed on investors like Fannie Mae, Freddie Mac and Ginnie Mae. The rest were seeking "jumbo" mortgages, or loans made in amounts above the $417,000 conforming ceiling. (The ceiling is higher for many high-priced areas).

The average loan amount for a first-lien mortgage last year was $233,000.

HMDA allows interested parties to track data by state, county, metro area and even census tracts to see how many -- or how few -- loans were made. Take Corson County, South Dakota. Only four mortgages were made last year, at an average of less than $100,000, in this remote area near the North Dakota border. In other words, the county is hurting for mortgages.

Corson County is wholly within the borders of the Standing Rock Indian Reservation, but it would be a mistake to think that American Indians comprise all of the 4,000 people who reside there. About a third of the population is white, and a little more than a third of the $326,000 in mortgages made there in 2014 went to whites. About 17 percent went to American Indians.

Freelance writer Mark Fogarty contributed to this report. The HMDA data was analyzed for the Housing Scene by LendingPatterns.com.

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Is Your Data Hackable?

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | December 11th, 2015

Would-be homebuyers and sellers may want to think twice about working with a real estate office where papers are strewn about and computers are left on for anyone to use at will.

Those are pretty good signs that the brokerage firm isn't careful enough with clients' personal information and is just begging to be hacked.

There are only a few cases in which data thieves have hacked real estate firms, according to the National Association of Realtors (NAR). But with the giant targets getting better and better at blocking hackers, the cybercrime experts believe that smaller companies like realty offices are next in line.

"What makes headlines are the larger data breaches," says NAR senior policy representative Melanie Wyne, part of the government affairs staff for the 1.1 million-member group. "But the trend now is smaller businesses. That's where the hackers are headed now."

Wyne, and others who participated in a risk-management and license law forum at NAR's annual conference last month, are worried that real estate outfits are not taking the necessary precautions to protect not just the identity of their buyers and sellers, but also their clients' specific financial information.

If companies aren't as diligent as they should be, Wyne says, they could be "the low-hanging fruit" easily picked off by hackers.

"If you are on the Internet, you can never be fully secure," warns Darity Wesley of the Lotus Law Center in La Mesa, California. "Data theft can impact your entire life. A lot of damage can be done," says the self-proclaimed "privacy diva."

Wesley says hackers "have become like artists; they're that good. They're very professional people. And I'm comfortable enough to call what they do organized crime."

Hackers are not just interested in swiping your bank account numbers, your Social Security number, credit card numbers and even your email addresses. They're also sophisticated enough to watch your emails to learn when you are about to close on your home purchase, then swoop in to snatch your settlement money.

The scam works something like this, according to Jessica Edgerton, associate counsel for NAR: Hackers observe your email traffic to figure out when closing is approaching. Then, they write to you and tell you to wire the closing costs to them.

Posing as your agent, or perhaps someone from the title company, it all looks official -- but it's not. And you money winds up somewhere offshore, says Linda Page of Fraleigh and Rakow Realty in Rhinebeck, New York. Page is a former chair of NAR's professional standards committee.

Wyne knows of one case where an unsuspecting buyer lost $30,000 to such a scheme. And she recalls another where a buyer decided at the last minute to stop her $100,000 wire transfer. Had she not, the NAR attorney says, the money would have been "on its way to Russia."

Edgerton says in recent months, her members are reporting an increase in this wire scam, so much so that she now advises agents to warn their clients ahead of time that a bogus email or snail-mail letter may show up.

But even if your agent doesn't give you a heads-up, your antenna should wiggle if you're on the receiving end of an email or letter advising you to send your closing cash somewhere. If you are, call your lender or real estate agent to make sure it's legit. Chances are, it's not.

Otherwise, when dealing with lenders and agents, you want to make sure they have made data security a top priority, says Wesley. Toward that end, she advises that all email traffic, personal and financial information, and the company's data storage should all be fully encrypted. If it's not, perhaps you should consider taking your business elsewhere.

Also, look for the "https:" rather than just "http:" in URLs. It's a protocol widely used for connections over a computer network, with the "s" standing for security, or more technically, a connection encryption.

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Rookie Homebuyers: Get Informed

The Housing Scene by by Lew Sichelman
by Lew Sichelman
The Housing Scene | December 4th, 2015

Millennials are graduating from college with the greatest amount of student debt of any generation. As a result, those who wish to buy a home now, rather than wait until they can truly afford it, are likely to turn to their parents for financial support.

That's not a terrible scenario. After all, mortgage rates, still relatively low, are destined to rise soon, and house prices aren't going to go any lower.

But one voice in the wilderness suggests that millennials -- those born between the early 1980s and the early 2000s -- might be better off waiting until they can afford to buy independently.

Is this real estate heresy? Not necessarily. Ray Brousseau, an executive vice president with Carrington Mortgage Services, says he'd just rather see buyers be prepared for ownership instead of getting in over their heads.

"My message is not necessarily to wait, it's to be informed -- to be educated about what they are doing," Brousseau says. "If they can (buy) quickly, fine ... But if you are not knowledgeable about the buying process and what ownership entails, you might be better off waiting until you are."

The 26-year industry veteran's advice doesn't only hold true for the country's 83 million millennials. It makes sense for first-time buyers of all ages, whether they need monetary help or not.

Here's how to become an educated first-time buyer:

-- Research. Brousseau suggests that, before shopping for a house, rookie buyers spend three to six months talking with a variety of real estate and lending professionals and becoming as informed as possible. Also, take advantage of the numerous tools available online.

-- Resources. Build a team of advisers. Certainly this group could include Mom and Dad, especially if they are homeowners -- and especially if they will be financially helping you join the ownership ranks sooner rather than later.

At the same time, realize that your folks are likely to advise you to be very cautious. After all, they don't want you to find yourself in a situation you can't handle. (Often, us old folks are too conservative.)

So, while your parents or grandparents should be on your advisory team, so should a real estate agent and a loan officer who are willing to take some time to talk with you even if you are not a prospect at the moment.

Not every professional will be willing to "waste time" with someone who doesn't plan to buy for a few more years -- or even months. But those who are, are keepers. Their experience and guidance will be invaluable.

"Most real estate professionals realize some people are not coming to the table with the property address already picked out," Brousseau says. "But any realty or loan agent worth his or her salt should be more than willing to take the time necessary to work with someone who is just beginning the process."

Your advisory team might also include friends or relatives who recently became first-time owners. Their advice about the trials and travails of becoming homeowners could prevent you from making the same mistakes they did.

"The best resources will be the people around you," says Brousseau. "Each person you speak to will have had a different experience."

-- Homework. There are plenty of tools online that can give you a feel for what homeownership is like. But stay away from those sites that purport to tell you what you can afford based on your income. They are notoriously inaccurate, and often fail to include such costs as property taxes, insurance, utilities, commuting expenses and condo or neighborhood dues.

Better to disclose your financial information to a licensed loan officer. This will not only give you an idea of a how a lender will view your situation, but it will allow you to become prequalified for a specific loan amount. Remember, though, to consider all the costs of homeownership, not just principal and interest.

-- Finances. Take the necessary steps to build a credit history, or to fix the one you already have. Your credit score will be the key to obtaining financing. So if you don't have any credit cards or accounts in your name, get them now and use them responsibly.

Obtain a Visa or MasterCard, a gas card and perhaps a department store card, but no more. Don't just stick them in your dresser drawer, but don't overuse them, either: Your balances shouldn't rise any higher than 30 percent of your available credit. Pay your credit card bills on time, and always pay more than the minimum amount due.

Similarly, if your cellphone and Internet accounts are not in your name, switch them over and pay for them with your own checking account -- yes, you need one -- so the credit-score algorithm can see that you are a good credit risk.

If you already have these sort of financial habits, obtain a copy of your credit report to make sure it contains no misinformation. And if it indicates you've missed a few payments here and there, never let that happen again. Late or missed payments can be real estate deal-killers.

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