By: CPExecutive.com - Jeffrey Tesch - October 15, 2015
While Dodd-Frank is putting the squeeze on traditional bank lending, Private Money Lenders are proving to be a much more viable and reliable option.
Lean in. We’re going to let mortgage brokers in on a little secret: There’s a ton of money to be made in private lending, and brokers today have a unique opportunity to cash in on this interesting scenario.
At a time when Dodd-Frank is putting the squeeze on traditional bank lending, private lenders are proving to be a much more viable and reliable option for developers and investors, and those who are tapping this unknown resource are experiencing a boon in taking advantage of a new profitable stream of income.
With limited funding options in today’s real estate market, it’s private lending that’s proving to be the path forward. But rest assured, the broker is always protected, and very well compensated in these transactions.
The key to success, however, is to first establish a relationship with a private lender, before the customer comes in looking for a loan. This can be a real game changer.
While no lending scenario is the same, the mortgage broker is always the liaison. The bottom line is that with every different lending scenario, private lending provides a myriad of options to create an innovative financing solution.
It may be all the same in a residential deal, but in a private lending scenario, for commercial loans on residential homes, every deal is different.
For example, a mortgage broker may have an investor who owns all kinds of properties and wants to buy another property. Or, the broker may have an investor who just wants to buy a property to fix and flip it.
Then there’s how to qualify the borrower: Some have a lot of cash on hand; others have very little, but have great equity. It’s all about working with that borrower to find the right solution for a private loan.
Traditional vs. Private
First, let’s review the differences between traditional bank lending versus private lending:
We begin with the purchase of an owner-occupied house, i.e. homeowner is moving into the house. This of course is not a deal that private lending underwrites. However, if the purchase is a non owner-occupied home, while some banks may like it, private lending lives on it.
And when it comes to the purchase of a home that’s in foreclosure, some banks may approve it, depending on whether the home has a certificate of occupancy; private lenders do these types of deals all day long.
For traditional bank financing on mixed-use properties, it depends on the bank’s appetite. Some banks in more urban areas are comfortable with mixed-use. Private lenders on the other hand covet the opportunity to finance mixed-use properties. It’s a win-win scenario for private lenders, brokers, and developers with rents downstairs of a commercial nature and apartments upstairs for residential living. It’s a perfect situation for the diversity of income.
Even for borrowers who have filed for bankruptcy, while lots of banks are turning these customers away, private lenders are a viable solution, especially if the borrower is coming out of bankruptcy better than ever.
With traditional banks, it’s all about fitting that borrower into a box. Private lenders take into account a series of outside variables. We don’t know exactly how the borrower’s poor credit score is going to impact the loan. However, if the borrower has cash, and is making money, then a private lender will do that loan. If the borrower’s score got beat up because of foreclosures or short sales in 2009, 2010, or 2011, it’s not an issue for private lenders.
We want to know exactly what’s going on today with that borrower – not what happened in the past.
For distressed properties, i.e. if the property is beat up and has the opportunity to be repaired, private lending is exactly where it can help investors succeed.
And for investors with multiple properties, while many banks will place a cap on the amount of properties a borrower can have on their books, private lenders don’t have a cap. It’s all about track record. We want to know that the borrower is churning through those properties and making money.
Advantages of Using a Private Lender
Intelligent Lending Criteria
Private lenders can establish their own lending criteria, which gives an investor a greater opportunity to qualify for a loan. This means there’s nobody in Washington DC telling me what my rate is going to be, or telling me what the credit score has to be on my borrower. It’s our money, so in the commercial world, we’re going to set the rate and we’re going to set the term. So if we don’t get paid, it’s our problem, not the taxpayers’ problem.
A borrower can receive funding for a distressed non-owner occupied property, rehab property and new construction.
When traditional lenders can’t provide investors solutions, private lenders have more room for negotiating and can come up with creative answers. For example, if a borrower owns a home with a lot of equity that they’re renting out, and they don’t have cash, we will be happy to put a mortgage on that existing property, pull out some cash, and put that towards a new home that they would like to purchase.
It’s these creative solutions that private lending does all the time.
Alternative Loan to Value
A private lender may lend a higher Loan to Value than a traditional bank.
Quick Loan Closing Time
Private lenders will typically respond to all loan inquiries within the same day.
Closing in two weeks, no problem.
This is precisely where private lending really shines over traditional bank lending. Most private lenders will provide short-term, bridge financing for Straight Acquisition, Acquisition/Rehab (fix & flip), Refinance, Cash-Out and Lines of Credit.
The flexibility and ability to close quickly can provide borrowers with a clear business advantage and afford them a competitive edge based on speed.
While a traditional loan can take up to ninety days to close, private lenders can often close a loan in as little as two weeks, or even a few days. This can give the borrower a greater sense of security early on in the loan process.
How do brokers make more money?
Some brokers like to have minimal involvement, while others like to have heavy involvement. The amount of compensation earned depends on the broker’s level of involvement and the loan scenario. It’s just that simple.
On the minimal side, maybe a broker’s business is booming and he/she doesn’t have time to deal with a private loan, then he/she would hand it off to the private lender. Once the deal is final and we close, we send the broker a point, and the check gets cut at closing.
If the broker wants to be actively involved in the private loan, and wants to control the deal, we will ask the broker to help collect documents and put the package together, and then split the points at closing.
Compensation
All fees that are earned by the broker are disclosed on the commitment letter up front. Origination fees are charged up front, and private lenders split points with the mortgage broker.
Broker fees are memorialized on the HUD and a transaction-specific agreement is provided. There’s no ambiguity.
A check is sent directly to the broker at closing.
Basic Loan Qualifying Factor
Traditional rules apply in the world of private lending, and the common sense approach works every time when it comes to underwriting. It all comes down to income, credit, and equity. If they have two out of the three, then we’re going to do that deal. If the borrower only has one, then we’re going to have a problem.
Exit strategy is at the top. The first question is how will the borrower pay us back? Since most loans are only 12-18 months, exit strategy is key. We want to know how we’re going to get paid back.
Experience and background are fundamental. We like to know that the people we’re dealing with know what they are doing. As great as the HGTV shows are when it comes to fix and flip, it’s not the real world education that we’re looking for when it comes to making private loans.
Existing leases also help when qualifying a loan. This shows good solid income upfront, and typically comes to play when buying a multifamily home or small apartment complex.
Of course, cash reserves cure all problems. When a borrower with a poor credit rating comes to us after declaring bankruptcy, but has a great track record of fixing and flipping homes, and has $200K in cash, we’re going to make that loan.
Private loans are not for everyone, but can be a financial game-changer for those with poor credit or those who are self-employed. Mortgage brokers have a unique opportunity to grow and expand their own business through this creative funding source as well. Rather than disregard private lending as cumbersome or out of reach, brokers should embrace the chance to make money outside traditional forms of bank financing.
Friday, October 16, 2015
Monday, October 12, 2015
Bank of America (BAC) Citigroup (C): Feeling The Pain Of Rate Hike Delays
By: CNA Finance - October 10, 2015
Big Banks are suffering with the news that the Federal Reserve is actually considering a negative interest rates to avoid future economic complications while private money investors keep gaining higher rates of return despite the Federal Reserve actions.
Bank of America Corp (NYSE: BAC) | Citigroup Inc (NYSE: C) Big banks were looking great about a month ago, just before the Federal Reserve meeting in September. However, after recent comments by the Federal Reserve with regard to the coming rate hike, big banks like Bank of America and Citigroup are having a rough time in the market. Today, we'll talk about how the Federal Reserve's interest rate affects banks, what we heard from the Federal Reserve, and what we can expect from BAC and C moving forward. So, let's get right to it... What Do Big Banks Have To Do With The Federal Reserve Interest Rate? When thinking about profits for banks like Bank of America and Citigroup, what is the first thing that comes to mind? If you're like most, you're thinking about loans. One of the biggest revenue drivers for these banks is the interest that consumers and businesses pay on loans. To borrow this money from the Federal Reserve, the banks have to pay the Federal Reserve's interest rate. So, in order to earn a profit, these banks add a markup to the Federal Reserve's rate; that markup turns into revenue for the banks! This is why big banks and big bank investors want the Federal Reserve to increase its rate. In general, big banks charge a percentage markup on the Federal Reserve's rate. So, the lower the Federal Reserve's interest rate is, the lower the margin for the banks. Adversely, when the Federal Reserve increases its rate, the margin banks earn on loan interest rises leading to higher profits. What We Heard From The Federal Reserve The Federal Reserve has been planning to increase its interest rate by the end of the year 2015. However, that doesn't seem like it's going to happen anymore. In fact, it's possible that the current rate of 0.25% will be reduced sometime soon. The Federal Reserve is concerned that worldwide economic concerns are going to lead to economic problems here in the United States - and for good reason. The reality is that the United States economy, like any other economy around the world, is closely tied to other world economies. That's because of the free trade environment that has created what's known as the global economy. Essentially, if big players in the global economy struggle, consumers in the countries that are struggling aren't going to be as willing to pay for American made products. This will take a heavy toll on the United States economy. While 0.25% is a record low interest rate for the United States, the Federal Reserve is actually considering a negative interest rate to avoid future economic complications. Here's what William Dudley, president of the New York Federal Reserve had to say on Friday...
Big Banks are suffering with the news that the Federal Reserve is actually considering a negative interest rates to avoid future economic complications while private money investors keep gaining higher rates of return despite the Federal Reserve actions.
Bank of America Corp (NYSE: BAC) | Citigroup Inc (NYSE: C) Big banks were looking great about a month ago, just before the Federal Reserve meeting in September. However, after recent comments by the Federal Reserve with regard to the coming rate hike, big banks like Bank of America and Citigroup are having a rough time in the market. Today, we'll talk about how the Federal Reserve's interest rate affects banks, what we heard from the Federal Reserve, and what we can expect from BAC and C moving forward. So, let's get right to it... What Do Big Banks Have To Do With The Federal Reserve Interest Rate? When thinking about profits for banks like Bank of America and Citigroup, what is the first thing that comes to mind? If you're like most, you're thinking about loans. One of the biggest revenue drivers for these banks is the interest that consumers and businesses pay on loans. To borrow this money from the Federal Reserve, the banks have to pay the Federal Reserve's interest rate. So, in order to earn a profit, these banks add a markup to the Federal Reserve's rate; that markup turns into revenue for the banks! This is why big banks and big bank investors want the Federal Reserve to increase its rate. In general, big banks charge a percentage markup on the Federal Reserve's rate. So, the lower the Federal Reserve's interest rate is, the lower the margin for the banks. Adversely, when the Federal Reserve increases its rate, the margin banks earn on loan interest rises leading to higher profits. What We Heard From The Federal Reserve The Federal Reserve has been planning to increase its interest rate by the end of the year 2015. However, that doesn't seem like it's going to happen anymore. In fact, it's possible that the current rate of 0.25% will be reduced sometime soon. The Federal Reserve is concerned that worldwide economic concerns are going to lead to economic problems here in the United States - and for good reason. The reality is that the United States economy, like any other economy around the world, is closely tied to other world economies. That's because of the free trade environment that has created what's known as the global economy. Essentially, if big players in the global economy struggle, consumers in the countries that are struggling aren't going to be as willing to pay for American made products. This will take a heavy toll on the United States economy. While 0.25% is a record low interest rate for the United States, the Federal Reserve is actually considering a negative interest rate to avoid future economic complications. Here's what William Dudley, president of the New York Federal Reserve had to say on Friday...
“We decided – even during the period where the economy was doing the poorest and we were pretty far from our objectives – not to move to negative interest rates because of some concern that the cost might outweigh the benefits... Some of the experiences suggest maybe we can use negative interest rates and the costs aren't as great as you anticipate...”
What This Means For Big Banks Moving Forward
Moving forward, I'm expecting to see more bearish movements out of US bank stocks. The reality is that investors were banking on the idea that the Federal Reserve was going to increase interest rates. Now that the Fed is considering negative interest rates to avert the next economic crisis, those expectations have been thrown out of the window which will likely lead to more declines.
Friday, October 9, 2015
Nonbank Lenders are Growing in Popularity and Capability
By ABA Banking Journal - Ashley Gunn - October 8, 2015
Nonbank Lender's or better known as Private Lenders have escalated their operations and reputations to the point where they attract institutional investors on a global scale.
According to a recent article published in the September issue of the Scotsman Guide, nonbank lenders are growing in popularity, making them more competitive against traditional bank lenders. The article claims that commercial mortgage brokers — who are knowledgeable about private, nonbank lending — will be best positioned to take advantage of this growing industry.
“Private lenders are no longer the questionable hard money lenders of a decade ago, when private money was regarded in a somewhat-negative manner,” the article said. “Today’s nonbank lenders sometimes control billions of dollars of funds that are available for investment…many of them have escalated their operations and reputations to the point where they attract institutional investors on a global scale.”
Initially these private lenders were financing riskier projects that banks were unable to underwrite due to strict regulatory requirements. Successful financing of these projects has propelled private lenders into this niche market, and wider client bases have “led to the gradual evolution of many private lenders into powerful nonbank commercial lending sources,” according to the article.
The article concluded by outlining the similarities between banks and nonbank lenders, including nearly identical transaction processes: “In many ways, qualifying for nonbank financing is as rigorous as qualifying for bank financing.”
Given these similarities, ABA is advocating for the regulatory environment to have a “level playing field” for all types of lenders. ABA recently expressed this opinion in response to the Treasury’s request for information on marketplace lending.
Nonbank Lender's or better known as Private Lenders have escalated their operations and reputations to the point where they attract institutional investors on a global scale.
According to a recent article published in the September issue of the Scotsman Guide, nonbank lenders are growing in popularity, making them more competitive against traditional bank lenders. The article claims that commercial mortgage brokers — who are knowledgeable about private, nonbank lending — will be best positioned to take advantage of this growing industry.
“Private lenders are no longer the questionable hard money lenders of a decade ago, when private money was regarded in a somewhat-negative manner,” the article said. “Today’s nonbank lenders sometimes control billions of dollars of funds that are available for investment…many of them have escalated their operations and reputations to the point where they attract institutional investors on a global scale.”
Initially these private lenders were financing riskier projects that banks were unable to underwrite due to strict regulatory requirements. Successful financing of these projects has propelled private lenders into this niche market, and wider client bases have “led to the gradual evolution of many private lenders into powerful nonbank commercial lending sources,” according to the article.
The article concluded by outlining the similarities between banks and nonbank lenders, including nearly identical transaction processes: “In many ways, qualifying for nonbank financing is as rigorous as qualifying for bank financing.”
Given these similarities, ABA is advocating for the regulatory environment to have a “level playing field” for all types of lenders. ABA recently expressed this opinion in response to the Treasury’s request for information on marketplace lending.
Wednesday, October 7, 2015
What Overregulation? How Regulation Will Increase Over the Next Decade
BY: October 2015 issue of DS News Magazine
Overregulation has led-and will continue to lead-to a dramatic increase in the scope and level of regulation in the financial services industry including private money lenders.
By Neal Doherty
In response to the financial crisis of 2008, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”), the most sweeping and comprehensive financial services legislation since the 1930s. One of the central features of Dodd-Frank was the creation of the Consumer Financial Protection Bureau (CFPB), a single federal agency responsible for all consumer protection functions. More importantly, Dodd-Frank essentially re-defined the existing regulatory structure by changing the roles of the various regulators, the scope of industries they regulate, and the tools they use to identify future problems. This structural change has led—and will continue to lead—to a dramatic increase in the scope and level of regulation in the financial services industry.
Who Regulates? Limitations to Exemptions of State Law
“It is one of the happy incidents of the federal system that a single courageous State may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.”
This concept—with the states operating as laboratories of democracy, experimenting with new laws and policies—was described in 1932 by U.S. Supreme Court Justice Louis Brandeis in the case New State Ice Co. v. Liebmann. Prior to Dodd-Frank, many state laws attempting to regulate the activity of national banks were preempted by federal regulators, who asserted that the state laws overlapped or conflicted with federal law. Dodd-Frank changed this dynamic by raising the standards that must be met before federal regulators can assert preemption. The change fundamentally increased the importance of the role of the states in the regulatory process, and will result in increased legislative and regulatory activity as states are further empowered to act independently to achieve their own policy goals based on local conditions.
Increased Importance of State Attorneys General
As the individuals who enforce and often push for these laws, the state Attorneys General received a regulatory windfall under Dodd-Frank. Specifically, under § 1042, a “State regulator may bring a civil action or other appropriate proceeding to enforce the provisions of this title or regulations issued under this title with respect to any entity that is State-chartered, incorporated, licensed, or otherwise authorized to do business under State law…” State Attorneys General are rarely shy about using the power they have been granted and many have already brought actions by using these new Dodd-Frank powers—for example, the Illinois A.G. suing a predatory lender in Chicago; Connecticut and Florida in a joint lawsuit against a mortgage rescue company; and Mississippi bringing charges against a credit reporting agency.
This power also extends to other state regulators who may have been previously hamstrung by the law of their own states. For example, under New York General Business Law § 349, the Attorney General is the only state official empowered to bring an action for an unfair or deceptive act or practice. Dodd-Frank, however, extended this power such that other state regulators can bring these types of actions. Benjamin Lawsky, the former Superintendent of New York’s Department of Financial Services, was thus empowered, frequently wielding this new authority prior to his departure.
Increased Cooperation between CFPB and States
As a result of this expanded role for state regulators, the relationship between the states and federal regulators—in particular the CFPB—takes on new importance. In order to aid in this relationship, state regulators and the CFPB have entered into agreements to enhance cooperation. For example, in 2011, the CFPB and Conference of State Bank Supervisors signed an agreement to work together to achieve examination efficiencies and to avoid duplication of time and resources. Also in 2011, the National Association of Attorneys General and the CFPB agreed to a Joint Statement of Principles, establishing a framework for regulation of financial products and services. This cooperation has resulted in numerous joint enforcement actions starting with the 2012 National Mortgage Settlement with the country’s five largest mortgage servicers. This cooperative framework will lead to further public and private enforcement actions as the CFPB and states share information and cooperate to achieve common goals and objectives.
Who is Regulated? The Larger Participant Rule
Another major change caused by Dodd-Frank is re-defining the type of companies covered by federal regulation, including many companies that were previously regulated under state law, or perhaps not regulated at all. Dodd-Frank authorizes the Bureau to define by regulation larger participants of certain markets for financial products or services. These “larger participant” rules extend the CFPB’s oversight into markets which may not have been regulated in the past.
Dodd-Frank § 1024 specifically gives the Bureau supervisory authority over all nonbanks offering three specific types of consumer financial products or services: (i) mortgages; (ii) private education loans; and (iii) payday loans. The law also grants CFPB supervisory authority over “larger participants” (as defined by the Bureau) in markets for other consumer financial products or services. While defining a company as a larger participant does not impose new substantive consumer protection requirements, it does subject these companies to the Bureau’s regulatory and enforcement authority.
The Bureau is authorized to supervise these entities for purposes of: (i) assessing compliance with federal consumer financial law; (ii) obtaining information about the companies’ activities and compliance systems or procedures; and (iii) detecting and assessing risks to consumers and consumer financial markets. In order to accomplish this, the Bureau conducts formal examinations of these entities—or it may simply request information from supervised entities without conducting examinations. The Bureau prioritizes its activity among these companies based on, among other things, the size and risk to a particular market, the extent of relevant overlapping state regulation, and any market information that the Bureau has on the company, including, for example, any consumer complaints about the company which have been submitted to the Bureau.
The Bureau has defined larger participants in five markets to date: consumer reporting, consumer debt collection, student loan servicing, international money transfers, and most recently, automobile financing. This regulatory expansion was an intended goal of Dodd-Frank which will continue in the future.
How Regulation Happens
Collection Consumer Complaints
In addition to expanding the scope of what entities and industries are regulated by the CFPB, Dodd-Frank also instructs the Bureau on how it should make those determinations. One of the biggest changes as a result of Dodd-Frank is the reliance on consumer complaints to inform the regulatory agenda. In its 2015 Semi-Annual Report, the CFPB explains that information obtained from consumers “informs every aspect of the Bureau’s work, including research, rule writing, supervision, and enforcement.” Formation of regulatory policy based on the complaints of those who are impacted, without meaningful verification or interpretation as to the causes of the complaints, is a profound change in the way that regulation is formed.
Under Dodd-Frank § 1013, the Bureau is required to receive complaints from consumers, specifically by establishing a unit - the Office of Consumer Response - “whose functions shall include establishing a single, toll-free telephone number, a website, and a database or utilizing an existing database to facilitate the centralized collection of, monitoring of, and response to consumer complaints regarding consumer financial products or services.”
On March 19, 2015, the Bureau announced that it was finalizing rules to allow consumers to add narratives about their complaints. The addition of the consumer narratives will increase the significance and impact of these complaints. According to the Bureau, “consumer narratives provide a first-hand account of the consumer’s experience, and adding the option to share them will greatly enhance the utility of the database. The narratives will provide context to complaints, spotlight specific trends, and help consumers make informed decisions. The narratives may encourage companies to improve the overall quality of their products and services, and more vigorously compete over good customer service.”
In this respect, the CFPB’s function of collecting consumer complaints to inform its regulatory priorities, as required by Dodd-Frank, has morphed into a mechanism to police the quality of companies’ products and customer service, extending the Bureau’s regulatory oversight into the private relationship between a company and its customers. This extension is particularly intrusive—and unnecessary, considering we live in an age of social media which allows real-time feedback by consumers through a multitude of channels.
Data Collection
Another new regulatory tool at the CFPB’s disposal is the requirement that it collect information on the financial markets in order to determine its regulatory priorities. Under Dodd-Frank § 1022, the CFPB is directed to “monitor for risks to consumers in the offering or provision of consumer financial products or services, including developments in markets for such products or services.”
The CFPB performs this monitoring by gathering and compiling information from “variety of sources, including examination reports concerning [companies], consumer complaints, voluntary surveys and voluntary interviews of consumers, surveys and interviews with [companies], and review of available databases.” In addition, the CFPB can gather information by requiring companies to provide other information as necessary for it to “fulfill the monitoring, assessment, and reporting responsibilities imposed by Congress.” This section of the law was enacted because prior to the financial crisis, Congress felt there was a lack of data on consumer financial products and services that hindered federal oversight and regulation.
The CFPB’s data collection regime has been the target of extensive criticism, especially from privacy advocates. In September 2014, the Government Accountability Office (GAO) published a report in which it reviewed the CFPB data collection program. According to the GAO report, the CFPB has conducted large-scale data collections including one where it obtained 173 million mortgage loans from a data aggregator.
While the GAO found that other federal regulators (e.g., the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency), collect similarly large amounts of data, it did determine that the CFPB “lacks written procedures and comprehensive documentation for a number of processes, including data intake and information security risk assessments. The lack of written procedures could result in inconsistent application of the established practices,” including “assessing and managing privacy risks,” “monitoring and auditing privacy controls,” and “documenting results of information security risk-assessments consistently and comprehensively.” The GAO’s finding is ironic, given the CFPB’s continued emphasis on the importance of companies having written policies and procedures in the context of effective compliance programs.
Beyond the obvious privacy and data security risks, the CFPB’s collection of large amounts of consumer data will fundamentally change the way regulators act. To reiterate, this was part of Dodd-Frank’s goal and is not an unintended consequence; its impact, however, will be dramatic as regulators utilize “big data” to more easily spot trends and trouble spots earlier—all of which will lead to increased regulation.
Conclusion
Although viewed by many as an overreaching agency run amuck, the CFPB is largely following the rules as established by Dodd-Frank. As a result, barring a major change in the law, the Bureau will continue to expand its reach, with a corresponding increase in the regulation of the financial services sector. The calls for regulatory reform and amendments to Dodd-Frank do not currently have the necessary political support. Until they do, this expanding regulatory environment will continue unabated.
WALZ Chief Compliance Officer, Maria Moskver, also contributed to this article.
Overregulation has led-and will continue to lead-to a dramatic increase in the scope and level of regulation in the financial services industry including private money lenders.
By Neal Doherty
In response to the financial crisis of 2008, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”), the most sweeping and comprehensive financial services legislation since the 1930s. One of the central features of Dodd-Frank was the creation of the Consumer Financial Protection Bureau (CFPB), a single federal agency responsible for all consumer protection functions. More importantly, Dodd-Frank essentially re-defined the existing regulatory structure by changing the roles of the various regulators, the scope of industries they regulate, and the tools they use to identify future problems. This structural change has led—and will continue to lead—to a dramatic increase in the scope and level of regulation in the financial services industry.
Who Regulates? Limitations to Exemptions of State Law
“It is one of the happy incidents of the federal system that a single courageous State may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.”
This concept—with the states operating as laboratories of democracy, experimenting with new laws and policies—was described in 1932 by U.S. Supreme Court Justice Louis Brandeis in the case New State Ice Co. v. Liebmann. Prior to Dodd-Frank, many state laws attempting to regulate the activity of national banks were preempted by federal regulators, who asserted that the state laws overlapped or conflicted with federal law. Dodd-Frank changed this dynamic by raising the standards that must be met before federal regulators can assert preemption. The change fundamentally increased the importance of the role of the states in the regulatory process, and will result in increased legislative and regulatory activity as states are further empowered to act independently to achieve their own policy goals based on local conditions.
Increased Importance of State Attorneys General
As the individuals who enforce and often push for these laws, the state Attorneys General received a regulatory windfall under Dodd-Frank. Specifically, under § 1042, a “State regulator may bring a civil action or other appropriate proceeding to enforce the provisions of this title or regulations issued under this title with respect to any entity that is State-chartered, incorporated, licensed, or otherwise authorized to do business under State law…” State Attorneys General are rarely shy about using the power they have been granted and many have already brought actions by using these new Dodd-Frank powers—for example, the Illinois A.G. suing a predatory lender in Chicago; Connecticut and Florida in a joint lawsuit against a mortgage rescue company; and Mississippi bringing charges against a credit reporting agency.
This power also extends to other state regulators who may have been previously hamstrung by the law of their own states. For example, under New York General Business Law § 349, the Attorney General is the only state official empowered to bring an action for an unfair or deceptive act or practice. Dodd-Frank, however, extended this power such that other state regulators can bring these types of actions. Benjamin Lawsky, the former Superintendent of New York’s Department of Financial Services, was thus empowered, frequently wielding this new authority prior to his departure.
Increased Cooperation between CFPB and States
As a result of this expanded role for state regulators, the relationship between the states and federal regulators—in particular the CFPB—takes on new importance. In order to aid in this relationship, state regulators and the CFPB have entered into agreements to enhance cooperation. For example, in 2011, the CFPB and Conference of State Bank Supervisors signed an agreement to work together to achieve examination efficiencies and to avoid duplication of time and resources. Also in 2011, the National Association of Attorneys General and the CFPB agreed to a Joint Statement of Principles, establishing a framework for regulation of financial products and services. This cooperation has resulted in numerous joint enforcement actions starting with the 2012 National Mortgage Settlement with the country’s five largest mortgage servicers. This cooperative framework will lead to further public and private enforcement actions as the CFPB and states share information and cooperate to achieve common goals and objectives.
Who is Regulated? The Larger Participant Rule
Another major change caused by Dodd-Frank is re-defining the type of companies covered by federal regulation, including many companies that were previously regulated under state law, or perhaps not regulated at all. Dodd-Frank authorizes the Bureau to define by regulation larger participants of certain markets for financial products or services. These “larger participant” rules extend the CFPB’s oversight into markets which may not have been regulated in the past.
Dodd-Frank § 1024 specifically gives the Bureau supervisory authority over all nonbanks offering three specific types of consumer financial products or services: (i) mortgages; (ii) private education loans; and (iii) payday loans. The law also grants CFPB supervisory authority over “larger participants” (as defined by the Bureau) in markets for other consumer financial products or services. While defining a company as a larger participant does not impose new substantive consumer protection requirements, it does subject these companies to the Bureau’s regulatory and enforcement authority.
The Bureau is authorized to supervise these entities for purposes of: (i) assessing compliance with federal consumer financial law; (ii) obtaining information about the companies’ activities and compliance systems or procedures; and (iii) detecting and assessing risks to consumers and consumer financial markets. In order to accomplish this, the Bureau conducts formal examinations of these entities—or it may simply request information from supervised entities without conducting examinations. The Bureau prioritizes its activity among these companies based on, among other things, the size and risk to a particular market, the extent of relevant overlapping state regulation, and any market information that the Bureau has on the company, including, for example, any consumer complaints about the company which have been submitted to the Bureau.
The Bureau has defined larger participants in five markets to date: consumer reporting, consumer debt collection, student loan servicing, international money transfers, and most recently, automobile financing. This regulatory expansion was an intended goal of Dodd-Frank which will continue in the future.
How Regulation Happens
Collection Consumer Complaints
In addition to expanding the scope of what entities and industries are regulated by the CFPB, Dodd-Frank also instructs the Bureau on how it should make those determinations. One of the biggest changes as a result of Dodd-Frank is the reliance on consumer complaints to inform the regulatory agenda. In its 2015 Semi-Annual Report, the CFPB explains that information obtained from consumers “informs every aspect of the Bureau’s work, including research, rule writing, supervision, and enforcement.” Formation of regulatory policy based on the complaints of those who are impacted, without meaningful verification or interpretation as to the causes of the complaints, is a profound change in the way that regulation is formed.
Under Dodd-Frank § 1013, the Bureau is required to receive complaints from consumers, specifically by establishing a unit - the Office of Consumer Response - “whose functions shall include establishing a single, toll-free telephone number, a website, and a database or utilizing an existing database to facilitate the centralized collection of, monitoring of, and response to consumer complaints regarding consumer financial products or services.”
This extension is particularly intrusive—and unnecessary, considering we live in an age of social media which allows real-time feedback by consumers through a multitude of channels.To facilitate the submission of complaints, the CFPB launched its Consumer Complaint Database on June 19, 2012. It was initially populated with credit card complaint data, but has since been expanded to include other products, including mortgages, bank accounts, student loans, vehicle and other consumer loans, credit reporting, money transfers, debt collection, payday loans, and prepaid cards. As of March 1, 2005, the Bureau has handled nearly 560,000 complaints, with mortgages and debt collection being the most frequently covered areas.
On March 19, 2015, the Bureau announced that it was finalizing rules to allow consumers to add narratives about their complaints. The addition of the consumer narratives will increase the significance and impact of these complaints. According to the Bureau, “consumer narratives provide a first-hand account of the consumer’s experience, and adding the option to share them will greatly enhance the utility of the database. The narratives will provide context to complaints, spotlight specific trends, and help consumers make informed decisions. The narratives may encourage companies to improve the overall quality of their products and services, and more vigorously compete over good customer service.”
In this respect, the CFPB’s function of collecting consumer complaints to inform its regulatory priorities, as required by Dodd-Frank, has morphed into a mechanism to police the quality of companies’ products and customer service, extending the Bureau’s regulatory oversight into the private relationship between a company and its customers. This extension is particularly intrusive—and unnecessary, considering we live in an age of social media which allows real-time feedback by consumers through a multitude of channels.
Data Collection
Another new regulatory tool at the CFPB’s disposal is the requirement that it collect information on the financial markets in order to determine its regulatory priorities. Under Dodd-Frank § 1022, the CFPB is directed to “monitor for risks to consumers in the offering or provision of consumer financial products or services, including developments in markets for such products or services.”
The CFPB performs this monitoring by gathering and compiling information from “variety of sources, including examination reports concerning [companies], consumer complaints, voluntary surveys and voluntary interviews of consumers, surveys and interviews with [companies], and review of available databases.” In addition, the CFPB can gather information by requiring companies to provide other information as necessary for it to “fulfill the monitoring, assessment, and reporting responsibilities imposed by Congress.” This section of the law was enacted because prior to the financial crisis, Congress felt there was a lack of data on consumer financial products and services that hindered federal oversight and regulation.
The CFPB’s data collection regime has been the target of extensive criticism, especially from privacy advocates. In September 2014, the Government Accountability Office (GAO) published a report in which it reviewed the CFPB data collection program. According to the GAO report, the CFPB has conducted large-scale data collections including one where it obtained 173 million mortgage loans from a data aggregator.
While the GAO found that other federal regulators (e.g., the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency), collect similarly large amounts of data, it did determine that the CFPB “lacks written procedures and comprehensive documentation for a number of processes, including data intake and information security risk assessments. The lack of written procedures could result in inconsistent application of the established practices,” including “assessing and managing privacy risks,” “monitoring and auditing privacy controls,” and “documenting results of information security risk-assessments consistently and comprehensively.” The GAO’s finding is ironic, given the CFPB’s continued emphasis on the importance of companies having written policies and procedures in the context of effective compliance programs.
Beyond the obvious privacy and data security risks, the CFPB’s collection of large amounts of consumer data will fundamentally change the way regulators act. To reiterate, this was part of Dodd-Frank’s goal and is not an unintended consequence; its impact, however, will be dramatic as regulators utilize “big data” to more easily spot trends and trouble spots earlier—all of which will lead to increased regulation.
Conclusion
Although viewed by many as an overreaching agency run amuck, the CFPB is largely following the rules as established by Dodd-Frank. As a result, barring a major change in the law, the Bureau will continue to expand its reach, with a corresponding increase in the regulation of the financial services sector. The calls for regulatory reform and amendments to Dodd-Frank do not currently have the necessary political support. Until they do, this expanding regulatory environment will continue unabated.
WALZ Chief Compliance Officer, Maria Moskver, also contributed to this article.
Tuesday, October 6, 2015
As an Anxious World Turns, the Fed Stands Pat
By: USNEWS Andrew Soergel - October 1, 2015
Private Money Lenders do not play by the same rules as the stock market and the Chinese economy. There is no uncertainty and no fear about when - even whether - the Federal Reserve should raise U.S. interest rates.
A lack of interest-rate action – and no firm sign of when to expect it – is playing on nerves at home and abroad.
All eyes are on Federal Reserve Chair Janet Yellen and her colleagues in the Federal Open Market Committee as they navigate uncharted monetary policy waters.
"Uncertainty" is a word that's been floating around a lot recently. It's there in the stock market. It's there in the Chinese economy. And there's certainly uncertainty about when – even whether – the Federal Reserve should raise U.S. interest rates.
In fact, the only certain thing right now seems to be that few analysts are certain about what will happen next month, next year and beyond. Few would have predicted a year ago that recent Chinese stock volatility would shake global markets, or that Beijing's economic interventions and currency devaluations would rock international trade, commodity prices and Chinese demand for imported goods.
A year before that, few would have predicted that the world would be plunged into such a prolonged period of low oil prices, which has been responsible for thousands of job losses and has weighed heavily on the economies of oil-exporting countries.
Drags on the global economy have hit hard and fast, while growth and improvement have been significantly more gradual. And with less-than-positive memories of the Great Recession and the subsequent global slowdown fresh on the minds of millions around the world, the current state of economic uncertainty is giving rise to something even more dire.
"We're in a fear cycle. It's hard to rationally say what happens in a fear cycle," Michael Kelly, managing director and global head of multi-asset at Pinebridge Investments, said in an interview last month with Bloomberg.
Not helping to ease that fear is a Fed that can be seen as, at best, dragging its feet on interest rates out of an abundance of caution. Federal Reserve Chair Janet Yellen, the most powerful figure in a central bank that sets monetary policy for the world's largest economy, specifically cited uncertainty as a deterrent to raising U.S. interest rates in September.
"In light of the heightened uncertainties abroad and the slightly softer expected path for inflation, the committee judged it appropriate to wait for more evidence, including some further improvement in the labor market, to bolster its confidence that inflation will rise to 2 percent in the medium term," Yellen said after last month's Federal Open Market Committee meeting.
But at least part of the problem with these "uncertainties abroad" is that the Fed's interest rate indecisiveness is feeding into international concern, creating a disquieting and static cycle. U.S. monetary policy, with its impacts on variables like currency strength and debt repayment terms, holds global significance. Christine Lagarde, the managing director of the International Monetary Fund, on Wednesday mentioned America's ongoing rate hike saga in the same breath as China's economic turbulence, citing both as hindrances to global stability.
"The prospect of rising interest rates in the United States and China's slowdown are contributing to uncertainty and higher market volatility," Lagarde said during a speech in Washington.
The Fed, subsequently, finds itself in quite a hole: Officials want to hold off on a rate liftoff until the fog of global uncertainty lifts. But Lagarde suggests skies won't meaningfully clear until U.S. monetary policy stops timidly toeing the line and takes its own first step on interest rates.
Lagarde, to be fair, has previously said she thinks the Fed should wait to raise rates until 2016. But she acknowledged the "will they or won't they" saga has generated global confusion and put investors around the world on edge.
"It's hard to know the Fed's mind, and apparently they don't know their mind themselves," Hans Olsen, managing director and global head of investment strategy at Barclays Wealth and Investment Management, said in an interview Monday with CNBC. "You have a picture of the economy that actually is pretty good overall. But if you look at the equity market, the equity market's wheezing a little bit here."
Nowhere has uncertainty been more pronounced than in equity markets. The Dow Jones industrial average has regularly swung by hundreds of points in recent weeks, with investors showing more and more that no one's 100 percent certain what's going on.
"A lot of the traders in the market are saying, 'Look, the uncertainty of not knowing when you're going to move is creating so many ripple effects in the market right now, that it would just be better if [the Fed] gave some definitive direction,'" Bloomberg's Lisa Abramowicz observed earlier this month. "Frankly, people are waiting for what they don't know."
The youthfulness that dominates Wall Street is contributing to market unease, considering the average trader nowadays is only 30 years old. About 30 percent started working on Wall Street within the last five years, according to Bloomberg and salary comparison site Emolument.com, and two-thirds have never seen a full policy tightening cycle before.
That means low interest rates are all many traders know. And they're the ones who will be largely responsible for seeing the market through what is sure to be a long normalization path.
"It's even bigger than just not knowing how to react because you haven't seen it in a while. Nobody's seen [interest rates] come up off of zero before in the U.S. We have no idea," says Tara Sinclair, chief economist at jobs site Indeed.com. "We genuinely don't know. Despite all of the Fed's fantastic simulation models, they've only seen it in simulation."
The Fed has plotted out likely scenarios for what will happen to the economy once interest rates start to rise, but theory is often very different from reality. And the reality of America's current economic condition is that the Fed's goals in the labor market and price growth have not been met. Many thought the employment aspect of the Fed's dual mandate was plugging along smoothly, at least until a disastrous September jobs report threw the labor market's health into question. And core inflation still sits well shy of the central bank's long-term 2 percent objective.
"If you just look at their mandate, there's really no reason to be particularly concerned about moving anytime soon," Sinclair says. "The Fed has been between a rock and a hard place now for many years. They cannot win. They have a mandate that says that they're supposed to be targeting full employment and low and stable inflation, but the data aren't behaving at all in the normal, expected way."
Complicating matters further are the political pressures the Fed faces to provide more clarity on what its officials are thinking. Hawks on Capitol Hill and elsewhere are urging the Federal Open Market Committee to initiate a rate liftoff sooner rather than later, because such a move will give the Fed more monetary policy options in the event of another recession. If interest rates aren't sufficiently elevated in time, the Fed won't be able to meaningfully lower them again to stimulate growth.
"It is really hard for the Fed to forecast what's going to be happening, particularly with inflation and [the] unemployment rate. These things are not easy to forecast a year out," Sinclair says. "At some point, I understand they're going to say, 'We've done what we can do, so we have to normalize.'"
But at the risk of sounding like a broken record – or perhaps an iPod on repeat – precisely when that tipping point will come is still uncertain. The Federal Open Market Committee will next meet in October, but there's not much new data that will come out before then. Most have their eyes set on December, but even that's not set in stone.
In the meantime, the U.S. – along with the world – waits.
Private Money Lenders do not play by the same rules as the stock market and the Chinese economy. There is no uncertainty and no fear about when - even whether - the Federal Reserve should raise U.S. interest rates.
A lack of interest-rate action – and no firm sign of when to expect it – is playing on nerves at home and abroad.
All eyes are on Federal Reserve Chair Janet Yellen and her colleagues in the Federal Open Market Committee as they navigate uncharted monetary policy waters.
"Uncertainty" is a word that's been floating around a lot recently. It's there in the stock market. It's there in the Chinese economy. And there's certainly uncertainty about when – even whether – the Federal Reserve should raise U.S. interest rates.
In fact, the only certain thing right now seems to be that few analysts are certain about what will happen next month, next year and beyond. Few would have predicted a year ago that recent Chinese stock volatility would shake global markets, or that Beijing's economic interventions and currency devaluations would rock international trade, commodity prices and Chinese demand for imported goods.
A year before that, few would have predicted that the world would be plunged into such a prolonged period of low oil prices, which has been responsible for thousands of job losses and has weighed heavily on the economies of oil-exporting countries.
Drags on the global economy have hit hard and fast, while growth and improvement have been significantly more gradual. And with less-than-positive memories of the Great Recession and the subsequent global slowdown fresh on the minds of millions around the world, the current state of economic uncertainty is giving rise to something even more dire.
"We're in a fear cycle. It's hard to rationally say what happens in a fear cycle," Michael Kelly, managing director and global head of multi-asset at Pinebridge Investments, said in an interview last month with Bloomberg.
Not helping to ease that fear is a Fed that can be seen as, at best, dragging its feet on interest rates out of an abundance of caution. Federal Reserve Chair Janet Yellen, the most powerful figure in a central bank that sets monetary policy for the world's largest economy, specifically cited uncertainty as a deterrent to raising U.S. interest rates in September.
"In light of the heightened uncertainties abroad and the slightly softer expected path for inflation, the committee judged it appropriate to wait for more evidence, including some further improvement in the labor market, to bolster its confidence that inflation will rise to 2 percent in the medium term," Yellen said after last month's Federal Open Market Committee meeting.
But at least part of the problem with these "uncertainties abroad" is that the Fed's interest rate indecisiveness is feeding into international concern, creating a disquieting and static cycle. U.S. monetary policy, with its impacts on variables like currency strength and debt repayment terms, holds global significance. Christine Lagarde, the managing director of the International Monetary Fund, on Wednesday mentioned America's ongoing rate hike saga in the same breath as China's economic turbulence, citing both as hindrances to global stability.
"The prospect of rising interest rates in the United States and China's slowdown are contributing to uncertainty and higher market volatility," Lagarde said during a speech in Washington.
The Fed, subsequently, finds itself in quite a hole: Officials want to hold off on a rate liftoff until the fog of global uncertainty lifts. But Lagarde suggests skies won't meaningfully clear until U.S. monetary policy stops timidly toeing the line and takes its own first step on interest rates.
Lagarde, to be fair, has previously said she thinks the Fed should wait to raise rates until 2016. But she acknowledged the "will they or won't they" saga has generated global confusion and put investors around the world on edge.
"It's hard to know the Fed's mind, and apparently they don't know their mind themselves," Hans Olsen, managing director and global head of investment strategy at Barclays Wealth and Investment Management, said in an interview Monday with CNBC. "You have a picture of the economy that actually is pretty good overall. But if you look at the equity market, the equity market's wheezing a little bit here."
Nowhere has uncertainty been more pronounced than in equity markets. The Dow Jones industrial average has regularly swung by hundreds of points in recent weeks, with investors showing more and more that no one's 100 percent certain what's going on.
"A lot of the traders in the market are saying, 'Look, the uncertainty of not knowing when you're going to move is creating so many ripple effects in the market right now, that it would just be better if [the Fed] gave some definitive direction,'" Bloomberg's Lisa Abramowicz observed earlier this month. "Frankly, people are waiting for what they don't know."
The youthfulness that dominates Wall Street is contributing to market unease, considering the average trader nowadays is only 30 years old. About 30 percent started working on Wall Street within the last five years, according to Bloomberg and salary comparison site Emolument.com, and two-thirds have never seen a full policy tightening cycle before.
That means low interest rates are all many traders know. And they're the ones who will be largely responsible for seeing the market through what is sure to be a long normalization path.
"It's even bigger than just not knowing how to react because you haven't seen it in a while. Nobody's seen [interest rates] come up off of zero before in the U.S. We have no idea," says Tara Sinclair, chief economist at jobs site Indeed.com. "We genuinely don't know. Despite all of the Fed's fantastic simulation models, they've only seen it in simulation."
The Fed has plotted out likely scenarios for what will happen to the economy once interest rates start to rise, but theory is often very different from reality. And the reality of America's current economic condition is that the Fed's goals in the labor market and price growth have not been met. Many thought the employment aspect of the Fed's dual mandate was plugging along smoothly, at least until a disastrous September jobs report threw the labor market's health into question. And core inflation still sits well shy of the central bank's long-term 2 percent objective.
"If you just look at their mandate, there's really no reason to be particularly concerned about moving anytime soon," Sinclair says. "The Fed has been between a rock and a hard place now for many years. They cannot win. They have a mandate that says that they're supposed to be targeting full employment and low and stable inflation, but the data aren't behaving at all in the normal, expected way."
Complicating matters further are the political pressures the Fed faces to provide more clarity on what its officials are thinking. Hawks on Capitol Hill and elsewhere are urging the Federal Open Market Committee to initiate a rate liftoff sooner rather than later, because such a move will give the Fed more monetary policy options in the event of another recession. If interest rates aren't sufficiently elevated in time, the Fed won't be able to meaningfully lower them again to stimulate growth.
"It is really hard for the Fed to forecast what's going to be happening, particularly with inflation and [the] unemployment rate. These things are not easy to forecast a year out," Sinclair says. "At some point, I understand they're going to say, 'We've done what we can do, so we have to normalize.'"
But at the risk of sounding like a broken record – or perhaps an iPod on repeat – precisely when that tipping point will come is still uncertain. The Federal Open Market Committee will next meet in October, but there's not much new data that will come out before then. Most have their eyes set on December, but even that's not set in stone.
In the meantime, the U.S. – along with the world – waits.
Friday, October 2, 2015
5 Reasons Home Sales Fall Through
Don't let financing trouble be the sale killer on your next transaction. Private Money Lending will help with a smooth transaction that can close fast before your transaction crumbles.
Nothing is more disappointing than thinking your home sale is a done deal, only to have it crumble in the final stages of the process. A closing may fall through for many reasons, including title-insurance surprises, buyer financing rejections, inspection failures, and lowball appraisals. Even buyer’s remorse can sour a deal.
Luckily, buyers and sellers who are aware of the more common deal breakers can prepare early to either avoid major issues or work around them. Once a buyer and seller agree on the general purchase terms such as price and timing, they still need to settle a slew of details and confirm key stipulations.
The truth is, almost anything can happen in escrow. Here are the five reasons most home sales fall apart.
1. Buyer financing woes
During the housing market boom, buyers rarely struggled with getting loans, and sellers didn’t have to worry as much about a home sale falling through because of buyer financing. But today, buyer financing trouble is among the biggest sale killers. It’s important to brace for this setback in several ways.
First, look for buyers who are preapproved for a loan. Although they can still get rejected in the mortgage approval process, preapproved buyers are more likely to land a loan than those without the initial credit screening. You can also favor cash-only buyers who don’t need financing, but beware that cash buyers often demand a lower price.
Second, check in with agents while the approvals process is underway to ensure the loan is on track. That way, you’re aware of financing concerns well before settlement. Finally, sellers who are really intent on closing the deal can work with the borrower to agree on a more affordable contract price within their financing means.
2. Low appraisals
Appraisals lower than the contract price can cause a deal to fall through. A buyer’s lender will only lend up to the value of the property, so if the home value appraises lower than the agreed amount, the buyer cannot secure the full mortgage.
If buyers can’t pony up the difference from their savings, a lower-than-expected appraisal can be a deal breaker. In these cases, sellers must be ready to negotiate and be willing to lower their price if they want to close immediately. Or sellers can suggest that the buyer secure a second appraisal, which could be higher and help the buyer qualify for the full mortgage. Sellers can also help the buyer supply the appraiser with evidence of comparable home sales in the area to make the case for a higher value.
3. Plan for title insurance and home inspection surprises
The purpose of title insurance is to ensure the owner’s home is fully theirs to sell. Lenders require title insurance to protect the asset — the home — that secures the loan. If a homeowner defaults on the loan and a faulty title reveals that the home is not actually theirs, the bank has no way of recouping the money it lent.
To stave off any surprise loan issues, don’t wait for the buyer’s title report. Get your own report in advance to make sure the property is fully in your possession with no threat of claims.
The same goes for home inspections. Many home sales fail to make it to closing if the buyer’s inspection reveals serious physical faults with the property. If possible, sellers should be aware in advance — before the buyer’s inspection — of any significant flaws in their home that would jeopardize a closing.
4. Watch for signs of buyer’s remorse
For buyers, the entire home purchase process can be very emotional. They’re investing a substantial amount of money in what they hope is their dream home. They have to live with the house and the community every day. And sometimes they just get cold feet. Unfortunately, there is little sellers can do to eliminate buyer’s remorse, but they can be on guard for buyers who seem especially anxious or hesitant about negotiating a deal. When you have the option, favor more enthusiastic, confident buyers.
5. Don’t hinge a deal on the buyer’s home sale
Many buyers need the equity in their current home to purchase a new one, and if your buyer’s home sale falls through, your home sale could fall through too. However, avoiding this pitfall is easy: Don’t allow the sale of a buyer’s home as a contract contingency. Instead, target buyers who have already sold their home, or who aren’t relying on the equity in their current home to help finance yours.
Wednesday, September 30, 2015
Full Price Recovery Reached for More Than Half of U.S. Housing Markets
NORFOLK, Va. (September 28, 2015) – Homes.com®
Markets are recovering, perfect time to get that business loan or private money loan, take advantage of the market.
Leading online real estate destination, has released its July 2015 Local Market Index, a price performance summary of repeat sales in the top 100 markets, and the companion Midsize Markets Report for the next 200 largest markets. Among the nation’s top 300 markets, 166 or 55 percent have now achieved full price recovery — 24 more than the 142 markets reported in June.
By July, 50 of the nation’s 100 largest markets experienced a complete price recovery, one more than the prior month. Additionally, 116 out of 200 midsize markets saw a complete price recovery, 23 more than reported in June.*
July saw 16 of the top 100 markets post a decline in their 3-month averages. The long-term view remains robust though, with all 100 markets continuing to post year-over-year gains.
“We’ve reached an important benchmark in the U.S. housing market with the majority of the nation’s top 300 markets recovering at least their peak prices. Most homeowners in these markets have now regained lost equity from the housing crash, and we’re seeing good progress toward restoring equity to the remainder of the nation,” said David Mele, president of Homes.com.
Southern Markets Lead Recovery; West Remains Dominant in Annual Gains
As of July, 50 out of the top 100 markets had shown a complete price recovery. Richmond, VA rebounded at 100.18 and became the 50th market among the top 100 to achieve that status.
Of the 200 midsize markets, 116 have now achieved a complete price recovery. The most recent midsize markets to reach rebound status include Grand Junction, CO; Hattiesburg, MS; Springfield, MO; Charlottesville, VA; Olympia-Tumwater, WA; Niles-Benton Harbor, MI; Dalton, GA; Tupelo, MS; Dothan, AL; Athens-Clarke County, GA; Muskegon, MI; Montgomery, AL; Duluth, MN-WI; Eugene, OR; and Fayetteville-Springdale-Rogers, AR-MO.
Of the top 100 markets, the markets with minimal price declines from peak prices before the housing crash have achieved an average rebound of 109 percent. The average rebound of the moderate price decline markets was 101 percent of the prior peak price. Of the severe price decline markets, the average rebound was 84 percent.
The South continued to dominate recovery among the top 100 markets in July, with 23 markets recovered, followed by the Midwest with 11 markets fully recovered. Both the West and South had eight markets each that have achieved rebound status.
National Summary – West Continues to Dominate Annual Gains
Boise City, ID edged out Denver-Aurora-Lakewood, CO and San Francisco-Oakland-Hayward, CA in July for the top spot with an annual percentage change of 7.09 percent. Strong progress continues in the West where nine of ten of the top performing markets are located. However, that was one fewer than in June, with Grand Rapids-Wyoming, MI making the list. Within the West, California continued to dominate with four of the ten top markets.
Bridgeport-Stamford-Norwalk, CT posted the largest 3-month average gain in July at 0.59 percent, followed by other markets in the Northeast including Springfield, MA which had the second highest increase at 0.52 percent, and Providence-Warwick, RI-MA and Worcester, MA-CT that occupied the fifth and seventh places, respectively.
From a regional perspective, the market with the largest 3-month average gain of 0.59 percent was located in the Northeast. This was followed by the West at 0.48 percent. The Northeast also had the worst performing market in July at -0.19 percent.
Largest Markets Summary
Western markets continued to lead the recovery among top 100 markets. Markets with the highest rebound percentages were Dallas-Fort Worth-Arlington, TX (115.43 percent); Denver-Aurora-Lakewood, CO (113.41 percent); Austin-Round Rock, TX (113.32 percent); Houston-The Woodlands-Sugar Land, TX (112.84 percent); and San Antonio-New Braunfels, TX (112.76 percent).
Large markets trailing the national rebound were those that suffered large numbers of foreclosures and price declines during the housing crash. The bottom five markets by rebound percentage were Deltona-Daytona Beach-Ormond Beach, FL (72.49 percent); Palm Bay-Melbourne-Titusville, FL (71.72 percent); Cape Coral-Fort Myers, FL (71.21 percent); Stockton-Lodi, CA (70.61 percent); and Las Vegas-Henderson-Paradise, NV (68.47 percent).
On a year-over-year basis, the West also dominated. The top five markets achieving annualized gains were Boise City, ID; Denver-Aurora-Lakewood, CO; San Francisco-Oakland-Hayward, CA; Seattle-Tacoma-Bellevue, WA; and San Jose-Sunnyvale-Santa Clara, CA.
Top performing markets by region were Bridgeport-Stamford-Norwalk, CT; Stockton-Lodi, CA; Toledo, OH; and Augusta-Richmond County, GA-SC.
Western Region Dominates Midsize Markets; Midwest Markets Gaining
The midsize market with the best 3-month average growth in July was Bangor, ME which increased 0.88 percent. It was followed by Gainesville, GA which grew by 0.56 percent. Nearly all of the top-performing midsize markets on a 3-month basis were located in the eastern portion of the U.S., with strength particularly focused in the Northeast.
Though western markets continued to lead the list of midsize markets achieving rebound status on an annualized basis, midwestern markets have begun to move into the top ten. Appleton, WI and Racine, WI, made the Top 10 midsize list in July with year-over-year gains of 7.07 percent and 7.03 percent, respectively.
In July, 164 of 200 midsize markets increased their 3-month averages, down from 197 the prior month. The greatest number of decreasing markets was found in the southern region (16) and the northeast region (10). As was the case with the top 100, all midsize markets continued to show year-over-year gains.
Midsize Markets by Region and Division:
All five of the markets posting the best 3-month gains were eastern: Bangor, ME; Gainesville, GA; Rocky Mount, NC; Manchester-Nashua, NH; and Blacksburg-Christiansburg-Radford, VA.
Short-term strength was seen in the East, with the top performing markets located in the New England and South Atlantic regions.
Short-term weakness was seen in the East South Central division and the Mid-Atlantic division.
To receive a comprehensive data file, including index values in every zip code within a local market, contact LocalMarketReports@Homes.com. To download a copy of the reports, visit press.homes.com.
Markets are recovering, perfect time to get that business loan or private money loan, take advantage of the market.
Leading online real estate destination, has released its July 2015 Local Market Index, a price performance summary of repeat sales in the top 100 markets, and the companion Midsize Markets Report for the next 200 largest markets. Among the nation’s top 300 markets, 166 or 55 percent have now achieved full price recovery — 24 more than the 142 markets reported in June.
By July, 50 of the nation’s 100 largest markets experienced a complete price recovery, one more than the prior month. Additionally, 116 out of 200 midsize markets saw a complete price recovery, 23 more than reported in June.*
July saw 16 of the top 100 markets post a decline in their 3-month averages. The long-term view remains robust though, with all 100 markets continuing to post year-over-year gains.
“We’ve reached an important benchmark in the U.S. housing market with the majority of the nation’s top 300 markets recovering at least their peak prices. Most homeowners in these markets have now regained lost equity from the housing crash, and we’re seeing good progress toward restoring equity to the remainder of the nation,” said David Mele, president of Homes.com.
Southern Markets Lead Recovery; West Remains Dominant in Annual Gains
As of July, 50 out of the top 100 markets had shown a complete price recovery. Richmond, VA rebounded at 100.18 and became the 50th market among the top 100 to achieve that status.
Of the 200 midsize markets, 116 have now achieved a complete price recovery. The most recent midsize markets to reach rebound status include Grand Junction, CO; Hattiesburg, MS; Springfield, MO; Charlottesville, VA; Olympia-Tumwater, WA; Niles-Benton Harbor, MI; Dalton, GA; Tupelo, MS; Dothan, AL; Athens-Clarke County, GA; Muskegon, MI; Montgomery, AL; Duluth, MN-WI; Eugene, OR; and Fayetteville-Springdale-Rogers, AR-MO.
Of the top 100 markets, the markets with minimal price declines from peak prices before the housing crash have achieved an average rebound of 109 percent. The average rebound of the moderate price decline markets was 101 percent of the prior peak price. Of the severe price decline markets, the average rebound was 84 percent.
The South continued to dominate recovery among the top 100 markets in July, with 23 markets recovered, followed by the Midwest with 11 markets fully recovered. Both the West and South had eight markets each that have achieved rebound status.
National Summary – West Continues to Dominate Annual Gains
Boise City, ID edged out Denver-Aurora-Lakewood, CO and San Francisco-Oakland-Hayward, CA in July for the top spot with an annual percentage change of 7.09 percent. Strong progress continues in the West where nine of ten of the top performing markets are located. However, that was one fewer than in June, with Grand Rapids-Wyoming, MI making the list. Within the West, California continued to dominate with four of the ten top markets.
Bridgeport-Stamford-Norwalk, CT posted the largest 3-month average gain in July at 0.59 percent, followed by other markets in the Northeast including Springfield, MA which had the second highest increase at 0.52 percent, and Providence-Warwick, RI-MA and Worcester, MA-CT that occupied the fifth and seventh places, respectively.
From a regional perspective, the market with the largest 3-month average gain of 0.59 percent was located in the Northeast. This was followed by the West at 0.48 percent. The Northeast also had the worst performing market in July at -0.19 percent.
Largest Markets Summary
Western markets continued to lead the recovery among top 100 markets. Markets with the highest rebound percentages were Dallas-Fort Worth-Arlington, TX (115.43 percent); Denver-Aurora-Lakewood, CO (113.41 percent); Austin-Round Rock, TX (113.32 percent); Houston-The Woodlands-Sugar Land, TX (112.84 percent); and San Antonio-New Braunfels, TX (112.76 percent).
Large markets trailing the national rebound were those that suffered large numbers of foreclosures and price declines during the housing crash. The bottom five markets by rebound percentage were Deltona-Daytona Beach-Ormond Beach, FL (72.49 percent); Palm Bay-Melbourne-Titusville, FL (71.72 percent); Cape Coral-Fort Myers, FL (71.21 percent); Stockton-Lodi, CA (70.61 percent); and Las Vegas-Henderson-Paradise, NV (68.47 percent).
On a year-over-year basis, the West also dominated. The top five markets achieving annualized gains were Boise City, ID; Denver-Aurora-Lakewood, CO; San Francisco-Oakland-Hayward, CA; Seattle-Tacoma-Bellevue, WA; and San Jose-Sunnyvale-Santa Clara, CA.
Top performing markets by region were Bridgeport-Stamford-Norwalk, CT; Stockton-Lodi, CA; Toledo, OH; and Augusta-Richmond County, GA-SC.
Western Region Dominates Midsize Markets; Midwest Markets Gaining
The midsize market with the best 3-month average growth in July was Bangor, ME which increased 0.88 percent. It was followed by Gainesville, GA which grew by 0.56 percent. Nearly all of the top-performing midsize markets on a 3-month basis were located in the eastern portion of the U.S., with strength particularly focused in the Northeast.
Though western markets continued to lead the list of midsize markets achieving rebound status on an annualized basis, midwestern markets have begun to move into the top ten. Appleton, WI and Racine, WI, made the Top 10 midsize list in July with year-over-year gains of 7.07 percent and 7.03 percent, respectively.
In July, 164 of 200 midsize markets increased their 3-month averages, down from 197 the prior month. The greatest number of decreasing markets was found in the southern region (16) and the northeast region (10). As was the case with the top 100, all midsize markets continued to show year-over-year gains.
Midsize Markets by Region and Division:
All five of the markets posting the best 3-month gains were eastern: Bangor, ME; Gainesville, GA; Rocky Mount, NC; Manchester-Nashua, NH; and Blacksburg-Christiansburg-Radford, VA.
Short-term strength was seen in the East, with the top performing markets located in the New England and South Atlantic regions.
Short-term weakness was seen in the East South Central division and the Mid-Atlantic division.
To receive a comprehensive data file, including index values in every zip code within a local market, contact LocalMarketReports@Homes.com. To download a copy of the reports, visit press.homes.com.
Subscribe to:
Posts (Atom)