A First: Re-Performing Loan Deals Outpace Non-Performing Loan Deals
From the third quarter of 2017 through the first quarter of 2018, the volume of re-performing loans (RPLs) traded in the secondary market exceeded the volume of non-performing loans (NPLs) for the first time. Amid these market conditions, RPL pricing has firmed up and in certain instances increased, while NPL pricing has held steady. These are two key findings in the Q1 2018 1st Lien Whole Loan Secondary Market Color report recently released by MountainView Financial Solutions, a Situs company.
In the report, MountainView confirms that most of the recent volume in the secondary market has come from RPL sellers, as the volume of NPL deals out for bid has slowed dramatically since late 2017.
In the first quarter of 2018 the market witnessed a firmness in RPL pricing and a respectable increase in pricing on certain pools. This pricing was due to several factors, including enhanced securitization economics, continued home price appreciation and more participants in the sector, which created a more competitive bidding environment.
The Q1 2018 1st Lien Whole Loan Secondary Market Color report indicates that RPL pool pricing, as represented by percentage of unpaid principal balance, ranged from the mid-80s to upper 90s, depending on pool characteristics. The pool size and loan servicer also contribute to pricing outcomes, with higher premiums being paid for larger pools (at least $50 million) and pools serviced by larger, non-specialty servicers.
In its analysis of NPL deals brought to market in the first quarter, MountainView said geographic portfolio concentrations for the first time witnessed a much higher percentage of judicial foreclosure state assets. In judicial foreclosure states, courts must approve foreclosures, which adds significant time to the process, and thus contributes to lower overall pricing for these pools. Assets in judicial foreclosure states tend to trade below 65% of broker price opinion (BPO), while loans in non-judicial states trade in the range of 74-85% of BPO.
Geography aside, in the first quarter, MountainView saw larger NPL pools generally trade in the mid-70s of BPO, which represents pricing in line with what the market saw in 2016 and 2017.
The full report is available for download on MountainView’s website.
Pending Home Sales Lurch Lower as Supply Crunch Chokes Housing Market
Home contract signings are sputtering to a halt this spring selling season.
The numbers: U.S. pending home sales fell 1.3% to a reading of 106.4 in April, the National Association of
Realtors said late last week.
What happened: NAR’s index of pending home sales hit a three-month low in April. The index tracks real-estate transactions in which a contract has been signed, but the transaction hasn’t closed.
While March’s original reading was revised upward, that’s small potatoes compared to the big picture. The index is lower than year-ago levels for the fourth straight month. The Econoday consensus forecast was for a 0.4% increase.
The big picture: The Realtors called the lack of homes for sale a “crisis” earlier in the year and there’s no relief in sight. Sales of previously owned homes slumped in April as shoppers found slim pickings. Contract signings precede sales by approximately 45 to 60 days, so this report signals the next batch of existing-home sales data could also disappoint.
Read more: Marketwatch
Loan Defects Up Since 2017
The frequency of loan defects, fraud, and misrepresentation in the information submitted in mortgage loan applications remained flat in April 2018, but increased slightly over April 2017. That’s according to the latest release of the Loan Application Defect Index, published last week by First American.
As explained in the release, First American’s Loan Application Defect Index (LADI) “reflects estimated mortgage loan defect rates over time, by geography and loan type.” The LADI held steady between March and April 2018, but increased slightly year-over-year (YOY), rising by 1.2 percent.
The Defect Index for refinance transactions increased by 1.4 percent over March 2018, and was up 7.6 percent year-over-year. The Defect Index for purchase transactions, however, decreased by 2.2 percent month-over-month and increased 2.2 percent year-over-year.
For a bit of longer-term perspective, the Defect Index peaked in October 2013 — since then, it has decreased by 19.6 percent.
Read more: DSNews
Builders, Developers Remain Positive About Multifamily Market
The level of demand and vacancy rates for multifamily housing have kept builder and developer confidence in the market positive in the first quarter, according to the Multifamily Production Index (MPI) and the Multifamily Vacancy Index (MVI) released by the National Association of Home Builders (NAHB).
The MPI, which measures builder and developer sentiment about current conditions in the apartment and condo market, was unchanged from the previous quarter at 53 on a scale of 0 to 100. The MVI, which measures the multifamily housing industry’s perception of vacancies, remained essentially unchanged with an increase of one point to 42, which is seen as healthy for the multifamily market.
“Multifamily builders and developers are reporting solid demand around the country, as shown in the vacancy rate for the first quarter,” said Steve Lawson, chairman of NAHB’s Multifamily Council. “We anticipate steady demand through the rest of the year as household formations continue to grow.”
Read more: MPA Magazine
An Insider’s View of Brooklyn’s Affordable Housing Crisis
Brooklyn continues to be one of the least affordable markets in the country. According to Yardi Matrix data, the median home price increased rapidly in 2017, reaching $753,886, second only to Manhattan. Average rent takes up approximately 60 percent of the area’s median income, while the monthly rate for working-class assets reached $1,992 as of March. Consequently, many renters are being priced out of Kings County.
Despite new supply in the affordable sector, occupancy exceeded 99 percent as of February, highlighting the strong demand in the segment. In an effort to ease the crisis, local authorities have come up with several solutions. Mayor Bill de Blasio’s ambitious Housing New York 2.0 plan — aiming to create at least 25,000 affordable homes per year during the next decade — is one of the most well-known.
Also, Gov. Andrew Cuomo started the Vital Brooklyn plan, serving the same purpose. Last month, Cuomo launched the second phase of the $4 billion initiative and announced five requests for proposals to build roughly 2,000 affordable homes (out of the total 3,000 units planned) on land owned by the state or by Brookdale University Hospital and the Brooklyn Developmental Center.
Read more: Multihousing News
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