Investors’ Home Purchases Total $1 Trillion Since 2011

Since 2011, investors have purchased more than 950,000 homes; and with 370,000 purchases so far this year, they have already surpassed the number of purchases they made in either of the past two years, according to a new report from RealtyTrac.

In total, investors spent $1 trillion on home purchases since 2011, according to RealtyTrac’s first-ever Investor Insight report released Monday, titled Real Estate Investor Purchase and Finance Patterns: 2011 to 2013.

RealtyTrac noted more than half of investor buys were all-cash purchases, and the percentage goes up dramatically when considering investor entities that purchased at least 1,000 homes since 2011.

In fact, RealtyTrac pointed out several differences in buying activity between smaller and larger investors.

While 54 percent of all investor purchases were made with cash, 93 percent of purchases made by investors that bought at least 1,000 properties since 2011 were cash buys, the company reported.

The status and characteristics associated with the properties acquired also varied somewhat depending on whether the investor was a more prolific purchaser.

Overall, 54 percent of homes purchased by investors were underwater but not in foreclosure, compared with 37 percent of homes purchased by investors that bought at least 1,000 properties.

On the other hand, larger investors purchased more homes in foreclosure. About 36 percent of homes purchased by large investors were in foreclosure, compared with 24 percent of total investor purchases, according to RealtyTrac’s data.

Twenty-three percent of all investor purchases were regular equity sales, whereas 27 percent of homes purchased by investors making at least 1,000 purchases were your traditional equity sales.

While more than half of investor purchases over the past few years—57 percent—have already been resold, larger investors appear to be holding onto their properties for the time being.

Among investors that have purchased 100 properties or more in the past few years, the percentage of homes that have been resold drops to 25; and among investors that have purchased 1,000 or more properties, the resold share drops to a meager 1 percent, according to RealtyTrac.


Slow Quarter Ahead Judging from Pending Home Sales

The National Association of Realtors’ (NAR) Pending Home Sales Index (PHSI) for September indicates home sales will stumble in the year’s final quarter as buyers struggle with declining home affordability.

The PHSI, a forward-looking indicator that’s based on contract signings (not closings) fell for the fourth straight month to 101.6 from August’s downwardly revised reading of 107.6—a 5.6 percent drop. Year-over-year, September’s index was down 1.2 percent from 102.8—the first yearly drop in 29 months, the association reports.

“Declining housing affordability conditions are likely responsible for the bulk of reduced contract activity,” saidNAR chief economist Lawrence Yun. “In addition, government and contract workers were on the sidelines

with growing insecurity over lawmakers’ inability to agree on a budget. A broader hit on consumer confidence from general uncertainty also curbs major expenditures such as home purchases.

“This tells us to expect lower home sales for the fourth quarter, with a flat trend going into 2014. Even so, ongoing inventory shortages will continue to lift home prices, though at a slower single-digit growth rate next year,” he added.

According to the association, September’s index was at its lowest level since December 2012, when it registered 101.3.

Still, NAR expects total existing-home sales this year will be 10 percent higher than 2012, coming out to more than 5.1 million. The national median existing-home price is expected to rise 11 to 11.5 percent this year, followed by a 5 to 6 percent gain in 2014.

On a monthly basis, all four regional PHSI values declined, with the Northeast leading the drop at 9.6 percent. The West’s PHSI was down 9.0 percent compared to August, the Midwest was down 8.3 percent, and the South’s index slipped 0.4 percent.

Annual numbers were mixed. The PHSI for the Northeast and West both fell, decreasing 6.4 percent and 9.8 percent, respectively. In the Midwest and the South, index readings were 5.7 percent and 2.0 percent above September 2012, respectively.

GSE Sees New Business Slip to Lowest Volume in 18 Months

September marked the third straight month of declining business for Freddie Mac, with purchases and issuances coming in at their lowest level in a year and a half.

Freddie Mac’s total mortgage portfolio shrank at an annualized rate of 4.3 percent in September, contracting at a slightly lessened pace compared to August’s -5.0 percent growth rate. Through September, 2013’s average monthly growth rate has been -2.0 percent.

As of September 30, Freddie Mac’s portfolio has contracted through six of the year’s first nine months. By the end of the month, its ending balance stood at $1.927 trillion.

New business fell for the second straight month to a 2013 low, with purchases and issuances totaling approximately $28.2 billion—the lowest since April 2012 ($25.9 billion). Year-to-date, new business has totaled $382.5 billion.

Multifamily new business volume was $1.0 billion in September and $18.8 billion for the year’s first nine months.

The GSE’s portfolio of mortgage-related securities and other guarantees took a downturn after improving in August, shrinking for only the third time this year at a rate of 0.2 percent.

Single-family refinance loan purchase and guarantee volume was $16.4 billion, representing 62 percent of total single-family purchases or issuances—another signal of the fading interest in refinances. Relief refinance mortgages made up 39 percent of the mortgage giant’s single-family refinance volume.

The company’s single-family seriously delinquent rate dropped to 2.58 percent, continuing the declining trend in delinquency rates. The multifamily delinquency rate was flat at 0.05 percent.

Freddie Mac reported 6,685 loan modifications in September, totaling 60,431 for the year so far.

Rising Rates and Prices, Static Incomes Lower Housing Affordability

Over the past year, home prices have risen 16 percent and mortgage rates have climbed from 3.7 percent to 4.43 percent, all while incomes have risen by just 3 percent, according to Chicago-based, which is owned by

These diverging trends have led to a decline in affordability across the nation.

“The simple fact is that the very small improvement Americans have seen in their paychecks hasn’t kept pace with a jump in home prices and mortgage rates,” said Mike Sante, managing editor of

In all 25 of the nation’s largest metropolitan areas, it is more difficult to afford a home this year than last year, according to

In fact, in 17 of the 25 markets, a median income is not enough to purchase a median-priced home. Last year, this held true in only six markets, according to

The least affordable market is San Francisco, California, where the median income is 47.93 percent below what would be necessary to purchase a median-priced home.

Three of the five least affordable markets are located in California.

San Diego is the second-least affordable market, where median income would need to rise 37.71 percent to afford a median-priced home.

Los Angeles comes in as the fourth-least affordable market, where median income would need to rise 30.13 percent.

The list is rounded out by New York in third place and Miami in fifth place.

The most affordable market is Atlanta, where the median income exceeds 24.92 percent of what is necessary to purchase a median-priced home.

Other markets in the top five list of most affordable markets include Minneapolis, Minnesota (23.86 percent); St. Louis, Missouri (17.94 percent); Detroit, Michigan (16.87 percent); Pittsburgh, Pennsylvania (11.33 percent).

JPMorgan Settles with FHFA, GSEs over Bad Loans

JPMorgan Chase reached agreements to resolve its mortgage-backed securities (MBS) litigation with theFederal Housing Finance Agency (FHFA) and rep and warranty repurchase claims from Fannie Mae and Freddie Mac.

Altogether, the bank has agreed to pay $5.1 billion—$4 billion to address FHFA’s claims of alleged violations of federal and state securities laws in connection with private-label securities (PLS) purchased by the GSEs and another $1.1 billion to cover repurchase claims on whole loans sold to the GSEs between 2000 and 2008.

The $4 billion payment relates to approximately $33.8 billion of securities sold to Fannie and Freddie between 2005 and 2007 by JPMorgan, Bear Stearns, and Washington Mutual. The bank says the “settlement resolves the firm’s largest MBS case.” Under the terms of the agreement, approximately $2.74 billion will go to Freddie Mac and $1.26 billion to Fannie Mae.

“The satisfactory resolution of the private-label securities litigation with JPMorgan Chase & Co. provides greater certainty in the marketplace and is in line with our responsibility for preserving and conserving Fannie Mae’s and Freddie Mac’s assets on behalf of taxpayers,” saidFHFA Acting Director Edward J. DeMarco. “This is a significant step as the government and JPMorgan Chase move to address outstanding mortgage-related issues.”

This is the fourth resolution reached out of 18 lawsuits filed by FHFA in 2011 against banks over MBS dealings prior to the crisis.

In separate settlements, JPMorgan Chase resolved representation and warranty claims with Fannie Mae and Freddie Mac related to single-family mortgage purchases by the two companies. Under the terms of the agreements, the bank will pay $670 million to Fannie Mae and $480 million to Freddie Mac.

Freddie Mac’s CEO Donald H. Layton said the settlements “represent solid progress” in the GSE’s “efforts to resolve legacy issues and recoup funds that are due to America’s taxpayers.” Likewise, Fannie Mae’s CEO Timothy J. Mayopoulos said the agreement “compensates taxpayers for losses fairly” and at the same time “allows Fannie Mae and JPMorgan Chase to move forward as strong business partners.”

JPMorgan said in a statement, “Today’s settlements totaling 5.1 billion dollars are an important step towards a broader resolution of the firm’s MBS-related matters with governmental entities, and reflect significant efforts by the Department of Justice and other federal and state governmental agencies.”


Investors Still Finding Ample Opportunities in Distressed Market

Residential properties sold at a faster pace in September according to a recent report from RealtyTrac.

Single-family homes, condominiums, and townhomes sold at an annualized pace of 5,673,249 in September, up 2 percent from August and up 14 percent year-over-year, indicating that the market is still ripe for investors with deep pockets looking to make an imprint on regional markets.

“The housing market continues to skew in favor of investors, particularly deep-pocketed institutional investors, and other buyers paying with cash,” said Daren Blomquist, vice president at RealtyTrac.

“While the institutional investors are pulling back their purchases in many of the higher-priced markets-places like San Francisco, Washington, D.C., New York, Seattle and Sacramento-they are continuing to ramp up purchases in markets where median prices are still below $200,000-places like Jacksonville, Atlanta, Charlotte, St. Louis and Dallas,” Blomquist said.

“The availability of distressed inventory also makes a difference. For example, institutional investor purchases have rebounded in Las Vegas corresponding to a recent rebound in foreclosure activity there,” he continued.

In September, the median price of a distressed residential property-in foreclosure or bank-owned-was $112,000, 41 percent below the median price of $189,000 for a non-distressed residential property. Distressed sales continued to account for a portion of all sales, climbing to 25 percent, up from 18 percent of all sales a year ago.

“Distressed sales remain persistently high, particularly short sales,” Blomquist added. “Markets with the biggest increases in short sales tend to be those where either foreclosure starts or scheduled foreclosure auctions have rebounded in the last 18 months – translating into more motivated short sellers – or those with a still-high percentage of underwater homeowners with negative equity.”

Institutional investors, those purchasing 10 or more properties in the last 12 months, comprised 14 percent of all sales in September. This figure is up 9 percent since September 2012. Investors flocked to big cities for investment, with Atlanta, Georgia being the biggest big city (defined as a metro area with more than 1 million people) with 29 percent of purchases by institutional investors.

The report shows that home price appreciation showed signed of plateauing in these top six appreciating markets. In all six markets, the annual increase in home prices was down compared to previous months this year.

Report: Market Will Prosper Under Ability-to-Repay, QM Rules

Today’s resilient capital market has the capacity to adapt readily to the pending Ability-to-Repay and Qualified Mortgage (QM) rules set to take effect January 10, 2014, according to a white paper CoreLogic released Friday.

The paper titled, ATR/QM Standards: Foundation for a Sound Housing Market, provides an overview of the rules themselves and examines their possible impact on the market.

The Ability-to-Repay rule requires lenders to take eight borrower attributes into consideration: “borrower’s current income or assets; current employment; the monthly payment for the loan, as well as any other loans secured by the same property; monthly payments for property taxes and insurance for which the borrower is responsible; current debt obligations; the borrower’s monthly debt-to-income ratio or residual income; and credit history,” CoreLogic explained.

A “Qualified Mortgage” meets a set of standards that provide “safe harbor” for lenders. These mortgages are automatically considered to be compliant with the Ability-to-Repay rule.
“To be QM-eligible, a loan has limits on points and fees to be paid, as well as underwriting features allowed,” CoreLogic stated.

For the first seven years under the new regulations, loans that meet the purchase requirements for the GSEs, or the underwriting standards for the Federal Housing Administration, the Veterans Administration, or the U.S. Department of Agriculture, “fall into a temporary exemption and are considered QM as long as the loan provides for no interest-only payments, has a term that does not exceed 30 years, and meets the QM limitations on points and fees,” CoreLogic stated in its white paper.

After much debate and push-back from the industry, theConsumer Financial Protection Bureau ultimately decided not to include a down payment minimum in the QM definition. In doing so, “the CFPB preserved the opportunity for higher LTV loans to remain QMs, when possible,” CoreLogic stated.

As for the Ability-to-Repay rule and QM’s effect on the industry, CoreLogic offers general support for the rules and suggests the industry will continue to prosper–-albeit with more caution than in the years leading up to the housing crisis.

“Making sure a borrower has the ability to repay is good business,” CoreLogic stated.

“Mortgages carry an expectation of repayment; it does not make sense to approve a loan application for a consumer who does not have the wherewithal to make regular interest and principal payments,” CoreLogic continued.

Some worry there will be no market for non-QM loans, wondering whether investors will be willing to take risks in such a segment of the market.

CoreLogic concedes, “It is fairly certain that the lending of the pre-crisis years will not return,” but suggests lenders will “figure out a way to deliver qualified and non-qualified mortgages in a way that meets all the regulatory requirements, incorporates sound lending and consumer protections, and makes a profit.”