Rates remain well above their level at the end of 2021.

US mortgage rates posted the biggest drop in more than two years, offering homebuyers a slight reprieve from this year’s massive surge in borrowing costs.

The average for a 30-year loan declined to 5.10% from 5.25% last week, Freddie Mac said in a statement Thursday. That was the biggest decline since April 2020, but rates are still well above the 3.11% level at the end of last year.

While rates fell this week, their rapid rise over the past four months has started to take a toll on demand. New home sales, measuring signed contracts, dropped to the lowest level since the start of the pandemic lockdowns, according to government data released this week. Existing home transactions are also falling.

The Federal Reserve is raising interest rates to combat inflation, raising affordability concerns for buyers who are struggling to find properties. The median mortgage payment for new purchase applications in April was up 8.8% from a month earlier due to higher rates and rising home prices, according to Mortgage Bankers Association data released Thursday.

“Mortgage rates decreased for the second week in a row due to multiple headwinds that the economy is facing,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “Despite the recent moderation in rates, the housing market has clearly slowed, and the deceleration is spreading to other segments of the economy, such as consumer spending on durable goods.”

​At the current 30-year average, a borrower with a $300,000 mortgage would pay $1,628 a month, roughly $346 more than at the end of last year.

Latest report show four consecutive months of decline.

Sales of newly built single-family homes dropped to a seasonally adjusted annualized rate of 591,000 in April.
This is 16.6% below the revised March rate of 709,000 and 29.6% below the April 2021 estimate of 809,000, according to data released by the US Census Bureau and the Department of Housing and Urban Development.

This fourth consecutive month of decline unfolded against the backdrop of rising mortgage rates and home prices, said Kelly Mangold, principal at RCLCO Real Estate Consulting, who noted that the 30-year fixed mortgage rates surpassed 5% in mid-April, “the first time since the Great Recession in 2009.”

The Bureau and HUD reported that homes sold at a median price of $450,600 in April, while the average sales price was at $570,300. According to George Ratiu, senior economist at real estate listings website Realtor.com, this reported median sales price is 20% higher than last year, “pushing the monthly mortgage payment $720 higher, a 57% increase at today’s average mortgage rate.”

“The market for new homes is mirroring broader real estate trends, as rising inflation is taking a bigger chunk out of Americans’ paychecks and surging borrowing costs are compressing homebuyers’ budgets,” said Ratiu.

Mangold added that latest new home sales figures reveal how the market continues to feel the impact of on-going geopolitical turmoil and supply chain issues. Still, she noted that there’s continued for-sale housing demand from millennial households, with many migrating from high-cost coastal markets to high-growth sunbelt markets with higher builder inventory.
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“The for-sale housing market has remained a strong performer during the entirety of the pandemic, and despite the somewhat uncertain economic conditions – demand for additional new housing remains strong,” said Mangold.
The seasonally adjusted estimate of new houses for sale at the end of April was 444,000, representing a supply of 9.0 months at the current sales rate, revealed the Bureau and HUD.

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Volatility continues….

US mortgage rates continued to be erratic and unpredictable, with the 30-year fixed mortgage rate slipping to 5.25% this week.

After hitting 5.30% last week, the popular 30-year fixed-rate home loan dropped to 5.25% for the week ending May 19, Freddie Mac’s Primary Mortgage Market Survey revealed. That’s more than two percentage points higher than last year’s 3% average.

“Economic uncertainty is causing mortgage rate volatility,” said Sam Khater, chief economist at Freddie Mac. “As a result, purchase demand is waning, and homebuilder sentiment has dropped to the lowest level in nearly two years. Builders are also dealing with rising costs, meaning this posture is likely to continue.”

The 15-year fixed-rate mortgage also fell five basis points week over week to 4.43% and was up from 2.29% during the same time last year.

The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.98%, down from 4.08% a week ago and up from 2.59% a year ago.

Despite this week’s decline, the volatility in rates and worsening affordability conditions have put off some prospective buyers. According to the Mortgage Bankers Association, mortgage applications were down 11% week over week. Refinance activity accounted for 33% of total applications, while ARM share of mortgage activity made up for 10.3% of total loan applications.
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“General uncertainty about the near-term economic outlook, as well as recent stock market volatility, may be causing some households to delay their home search,” explained Joel Kan, MBA’s associate vice president of economic and industry forecasting.

NAR reveals existing-home sales figures in its latest report.
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Existing-home sales fell for the third consecutive month as buyers continued to feel the pinch of high mortgage rates and home prices exacerbated by low supply.

Total existing-home sales dwindled 2.4% from March to a seasonally adjusted annual rate of 5.61 million in April, according to the National Association of Realtors. Year-over-year sales were down 5.9% to a 5.96 million pace.

“Higher home prices and sharply higher mortgage rates have reduced buyer activity,” said NAR chief economist Lawrence Yun. “It looks like more declines are imminent in the upcoming months, and we’ll likely return to the pre-pandemic home sales activity after the remarkable surge over the past two years.”

“The data reinforces that the average price of a home is out of reach for most looking to enter the market, and with rising interest/mortgage rates, it’s just gonna keep getting tougher,” said David Auerbach, managing director of Armada ETF Advisors.

On the brighter side, total housing inventory improved 10.8% month over month to 1.03 million units at the end of April. Unsold inventory also increased, up from a 1.9-month supply in March to a 2.2-month supply at the current sales pace.

“Housing supply has started to improve, albeit at an extremely sluggish pace,” Yun said. “The market is quite unusual as sales are coming down, but listed homes are still selling swiftly, and home prices are much higher than a year ago.”
The median existing-home price for all housing types was $391,200, up 14.8% from April 2021. Properties typically remain on the market for 17 days, with 88% of homes sold staying on the market for less than a month.

Additionally, data from Freddie Mac showed that the average commitment rate for a 30-year conventional fixed mortgage rate jumped from 4.17% in March to 4.98% in April. That’s compared to the 2.96% average commitment rate across all of 2021.
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“Moreover, an increasing number of buyers with short tenure expectations could opt for five-year adjustable-rate mortgages, thereby assuring fixed payments over five years because of the rate reset,” said Yun. “The cash buyers, not impacted by mortgage rate changes, remain elevated.”

Buyers, it seems, are unaware. 

The threat of wildfires is spreading across the US, and the problem is becoming more acute as Americans moving to high-risk areas are unaware of the dangers, new research has shown.

Data released this week by New York-based First Street Foundation, a non-profit research group, showed that the problem was compounded by climate change, which has resulted in a rise in wildfires across the country, and the fact that the Federal Government does not map high-risk wildfire hot spots.

The peer reviewed study, titled ‘The 5th National Risk Assessment - Fueling the Flames’, calculated fire risk to residential and other properties across the US, estimating the risk of wildfire on a property-by-property basis, and up to 30 years into the future.

It estimated that a whopping 1.5 million properties across the US faced “extreme” risk of fire, while a total of 8.7 million were under “severe” or “major” threat of wildfires. The majority – 69.6 million – faced a “moderate” or “minor” risk.

The states with the largest number of properties with at least 0.03% risk in 2022 were listed in order as California with 4.65 million, followed by Texas (4.56 million), Florida (3.93 million), Arizona (1.89 million), and Oklahoma (1.14 million), respectively.

Half of all addresses in the lower 48 US states faced “some degree of wildfire risk”, according to the non-profit’s data, adding that the number will rise to 56% by 2052. In some rural states more than 90% of properties already faced some risk.

Citing the situation in California, it said more than 4.6 million properties - roughly 40% of the state - had at least a “moderate” risk of burning in a wildfire within the next three decades.

Another hot spot was Roseville in Sacramento, where more than 34,000 homes out of nearly 45,000 surveyed had “some risk of being affected by wildfire over the next 30 years”.

Roy Wright, a former head of risk mitigation at the Federal Emergency Management Agency, was quoted in the New York Times saying that the government had failed to inform house buyers of the potential risks of moving to fire prone areas.

“For too long, we have let people live in communities, and even attracted them to join a community, while keeping them in a state of ignorance about the risk that they’re under,” said Wright, adding that he hoped the data would “draw attention to the risk and drive people to take action”.

The new data follows warnings that the West could be facing a particularly bad year for wildfires, which have so far affected more than a dozen states in 2022.

Last week, more than 20 homes were destroyed and 11 damaged in Orange County, California, while more than 130 were under evacuation orders as a result of a brush fire made worse by a prolonged drought, according to reports.  

Greg Dillon, director of the Forest Service’s Fire Modeling Institute, was also quoted by the New York Times, saying people shouldn’t discount the threat of wildfire “just because they’re not in the highest risk categories on such maps”.

He said: “If you’re in anything but the lowest risk category, you should be talking to your neighbors about risk mitigation and what you can do. In a lot of the United States, there’s a potential for fire.”

Florida, due to its thick combustible vegetation that includes pine trees and palmetto, was also named as the state with the most properties facing at least a 1% wildfire risk, followed by Texas and California, with about 100,000 properties each.

Worryingly, the data also predicted that within 30 years the number of existing properties facing at least a 1% risk of fire will almost quadruple to 2.5 million.

A separate report published last year by proptech firm SitusAMC predicted that home insurance costs will soar for people living in areas at risk of extreme weather events as climate change becomes more severe across the US.

One of the report’s authors, Jennifer Rasmussen, told Mortgage Professional America that the average homeowner “was not cognizant of the sheer magnitude of these insurance rate increases”.
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She said: “People just aren’t aware that these natural disaster risks are occurring everywhere. It’s not just where the headline news points you to in terms of where natural disasters are occurring.”

Here are some factors you need to consider.

There are scenarios in which paying your mortgage with a credit card can be a good idea, especially if the rewards you earn outweigh the fees. There are, however, other cases in which using your credit card to pay off a mortgage can put you on a slippery slope financially (see: using a credit card to avoid foreclosure). Here are some important things to consider.

Is it really a good idea to pay off your mortgage using a credit card?

The short answer is: Technically, yes. But it can be a difficult situation to navigate. Whether or not it is a good idea to pay off your mortgage using a credit card may depends on whether the rewards you can earn by doing so outweigh the fees. If paying off your mortgage using your credit card does not damage your budget or your credit, you can consider it.

On the other hand, third-party payment providers could accept your credit card payment before cutting a check to your mortgage lender—but the convenience fee might be too much to make it worth it for you. Additionally, if you are already spending a big part of your credit limit, or if most of your money is already tied up in bills for the month, paying off your mortgage using a credit card is not the best move. Doing so could actually damage your credit score and strain your budget even further over the long term if you fail to repay your credit card bill in full.

A deciding factor for you might be whether you have a big enough credit line to take on your housing payment plus all of the other expenses that you usually use your credit card for. Something else to consider are the possible credit card rewards you may earn.

When should you use your credit card for mortgage payments?

You should use your credit card to pay off your mortgage if you can gain advantage by doing so. Here are some non-mortgage-related benefits to using your credit card to pay off your mortgage:

Earn rewards. 

When you are pursuing a credit card welcome bonus that you could not otherwise earn, it may make sense to pay your mortgage with a credit card. It might also make sense if you are earning a higher rate of rewards than the card processing fees you will be required to pay.

Consider fees and interest.

 If you want to catch up on your bills or spread out your monthly payment, it does not make the most sense to pay your mortgage with a credit card. You might also be putting yourself on thin ice financially if you transfer secured debt at a lower rate (average mortgage) to an unsecured credit card charging a higher interest rate.

Avoid late payments.

t is best to ensure you have the money to pay your credit card bill every month, because if you let it linger too long, the interest begins to pile up and you lose whatever benefits you may have gained. Not only does this put your mortgage at risk, it can also wreak havoc on your credit.

Avoid foreclosure. 

Using your credit card to avoid foreclosure is definitely not recommended, since adding credit card debt on top of missed mortgage payments is not likely to improve your situation.

Factors to consider when paying off mortgage using credit card

Paying off your mortgage using a credit card might not be worth it for your credit, your budget, or both—even if you can figure out a way to do so. Before choosing that option, here are some factors to consider:

Fees vs. rewards. 

Earning rewards on your mortgage bill—which is usually significant—can make it tempting to pay off your mortgage with a credit card. However, your earnings may be eliminated by the price of a third-party processing fee. For example, you will end up paying $71.25 extra every month if you have a mortgage payment of $2,500 and you are paying a 2.85% processing fee.

Cost of interest.

If you fail to pay your credit card bill off completely each month, you will incur costly interest charges by putting your mortgage payment on a credit card. The long-term costs of increasing ongoing balances would certainly cancel out any rewards you might earn from using your credit card.

Effect on your credit scores. 

Using your credit card to make mortgage payments could potentially use a significant portion of your credit limit and increase your credit utilization ratio, which compares your total credit limits with your total debt. Your credit utilization ratio significantly affects your credit scores. Since you want to ensure your ratio is lower than 30%, making mortgage payments that cost thousands of dollars will likely have a negative impact.

Stymied by higher rates, application activity falls for the first time in weeks.

US mortgage applications have decreased for the first time in three weeks amid a continued surge in mortgage rates, the Mortgage Bankers Association reported Wednesday.

Mortgage application volume fell 11% week over week as mortgage rates stayed over 2% higher than a year ago and close to the highest levels since 2009. Refinance and purchase applications were also on a downturn, down 10% and 12%, respectively, from the previous week.

“For borrowers looking to refinance, the current level of rates continues to be a significant disincentive,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “Purchase applications fell 12% last week, as prospective homebuyers have been put off by the higher rates and worsening affordability conditions.”

A recent report from Freddie Mac showed that the 30-year fixed-rate mortgage increased to 5.30% following the Fed’s half-percentage-point rate hike last week.

Of total applications, the share of refinance activity inched up six basis points to 33%, while the adjustable-rate mortgage (ARM) share of activity decreased to 10.3% of total applications.
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“General uncertainty about the near-term economic outlook, as well as recent stock market volatility, may be causing some households to delay their home search,” Kan said. “These results were consistent with MBA’s May forecast released earlier this week, which now calls for fewer home sales and mortgage originations in 2022 compared to a year ago.”

While housing prices aren’t showing any signs of leveling off in the near future, one analyst says he expects total sales to drop precipitously in the coming months.

Ian Shepherdson, chief economist and founder of research consulting firm Pantheon Macroeconomics, predicts existing-home sales will tumble 25% between February and the end of summer. In real numbers, that brings the annual pace from 6.02 million to 4.5 million.

“The housing market is in the early stages of a substantial downshift in activity, which will trigger a steep decline in the rate of increase of home prices, starting perhaps as soon as the spring,” Shepherdson wrote in a note.

The prediction is based upon data from the Mortgage Bankers Association that shows an 8% decline in loan applications. That comes as the average monthly mortgage payment has increased by over $400 per month, Shepherdson calculates. And it could be a canary for the housing industry.

Should the market slow down, he notes, many potential sellers could opt not to list, in an effort to not “be the last person trying to sell into a falling market.” That would hurt existing market supply issues even more.

The slowdown could impact new-home sales, in addition to existing homes, he says. And that could have some more severe long-term economic impacts.
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“A sustained drop in home sales—new-home sales will fall too—would be a direct drag on GDP growth, at the margin, via downward pressure on residential investment, and all the services—legal, removals, and others—directly tied to sales volumes,” he said. “It would also depress retail spending on building materials, appliances, and household electronics.”

But homebuyers are far from discouraged.

Hot on the heels of the latest Fed rate hike, the 30-year fixed US mortgage rate increased three basis points to 5.30%, Freddie Mac reported Thursday.

As of May 12, the average 30-year fixed-rate mortgage was up to 5.30% compared to 2.94% at this time last year. The uptick follows the FOMC’s move on Monday to increase the benchmark rate by half a percentage point – the biggest interest rate hike in 22 years.

The 15-year fixed-rate mortgage, however, posted a slight week-over-week decrease, down to 4.48% from 4.52% a week ago and up from 2.26% a year ago. The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.98% - two basis points higher than a week ago and up by more than a percentage point from last year’s 2.59% average.

Even though higher rates have caused monthly payments to increase by roughly one-third year over year, Freddie Mac chief economist Sam Khater noted that consumers’ appetite for buying homes remains strong.

 “Several factors are contributing to this dynamic, including the large wave of first-time homebuyers looking to realize the dream of homeownership,” Khater explained.
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“In the months ahead, we expect monetary policy and inflation to discourage many consumers, weakening purchase demand and decelerating home price growth,” he added.

Scam fraudulently eliminated home mortgages before profiting on sales.

A California man was sentenced this week to 15 years in prison for a bank fraud scheme aimed at fraudulently eliminating home mortgages before profiting on subsequent home sales, the US Attorney’s Office for the Eastern District of California said.

James Christopher Castle, 57, formerly of Petaluma, Calif., was given the lengthy prison sentence for the scheme. Last August, a jury found Castle guilty of 35 counts of bank fraud. According to evidence at trial, in May 2020, Castle was extradited to the United States from Australia. Castle previously fled to New Zealand and then Australia in 2011 when it became clear that his scheme was unravelling, the US Attorney said.  After a three-year extradition process, Castle was transported back to the US by the US Marshals Service to stand trial in the United States.  

Between April 22, 2010, and Nov. 18, 2011, justice officials said, Castle was the leader of a conspiracy that ran a “mortgage elimination program” that purported to help distressed homeowners avoid foreclosure. The conspirators fraudulently altered the chain of title on residential properties, sold the properties, and received the sales proceeds.

Justice officials described how, as a requirement for participation in the “mortgage elimination program,” the conspirators enrolled homeowners as members in a Nevada City-based church named Shon-te-East-a, Walks With Spirit, or its successor entity Pillow Foundation. The conspirators told the homeowners that these entities would offer protection against the banks.

Castle directed other co-conspirators in all aspects of the mortgage elimination program, including recruiting homeowners into the scheme, marshaling the necessary recorded documents, and guiding the homes through sale, officials said. Once the homeowner enrolled with Shon-te-East-a or Pillow Foundation, Castle would cause a sham deed of trust to be created and recorded, giving the impression that the homeowner had refinanced the mortgage loan with a new lender. In reality, officials noted, the new lender was a fake entity controlled by the conspirators, and the homeowner owed no money to the purported new lender.

The next step in the process was also a recorded document. According to the US Attorney’s Office, the conspirators caused a fake deed of re-conveyance to be recorded, giving the appearance that the true mortgage loan had been discharged and that the true lien holder no longer had a security interest in the home.

With title appearing to be clear, the conspirators caused the sale of the home and split the proceeds between the co-conspirators and the homeowners.

In total, 37 properties were sold through the Shon-te-East-a conspiracy. The conspirators recorded fraudulent documents on an additional approximately 100 homes but were unable to sell these before the scheme unraveled, officials added. 
                              
Three other co-defendants have previously entered guilty pleas. On April 21, 2017, Remus A. Kirkpatrick, 65, formerly of Oceanside, pleaded guilty to one count of falsely making writings of lending associations and was sentenced to six years in prison. On May 26, 2017, Michael Romano, 75, of Benicia, Calif., pleaded guilty to conspiracy and was sentenced to three years in prison. On July 14, 2017, Laura Pezzi, of Roseville, Calif., pleaded guilty to falsely making writings of lending associations and was sentenced to time served.

In related cases, on Sept. 04, 2015, Tisha Trites and Todd Smith, both of San Diego, Calif., pleaded guilty to related charges. Trites is scheduled to be sentenced on June 14, 2022, and Smith was sentenced to two years in prison.

Two other co-defendants, George B. Larsen, 60, of San Rafael, and Larry Todt, 70, of Malibu, Calif., were convicted of conspiracy and bank fraud following a jury trial in December 2017. Larsen was sentenced to 10 years in prison, and Todt was sentenced to seven years and three months in prison.
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Co-defendant John Michael DiChiara passed away on Aug. 24, 2019, while awaiting trial.