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Unemployment figures in the Oklahoma City area increased in May

Despite May increase in unemployment, U.S. Census Bureau positions helped keep Oklahoma City’s jobless numbers from looking worse.

BY SUSAN SIMPSON Oklahoman    14

Published: July 1, 2010
Modified: June 30, 2010 at 10:36 pm

The Oklahoma City area unemployment rate crept up to 6.5 percent in May, compared with 5.9 percent in April and 6.1 percent in May 2009, the Oklahoma Employment Securities Commission said.

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Unemployment figures in the Oklahoma City area increased in May

While the jobless rate in the Oklahoma City area increased in May, the rise was mitigated by hundreds of temporary jobs that were filled with the U.S. Census Bureau, officials said.

Many sectors lost jobs, including manufacturing and business support services, but the number of federal jobs in the metro area rose by about 900 last month.

Many of those can be attributed to census hiring.

The Oklahoma City census office hired about 1,000 people in the spring, including droves of workers who traveled door to door last month taking census information.

“It does help the economy over this period,” said Sydnee Chattin-Reynolds, deputy regional director for the U.S. Census Bureau.

Applicants were exceptionally qualified, she said, and even included out-of-work professionals with doctoral degrees.

However, census operations are coming to a close and the Oklahoma City office now has only one-quarter of its work force left, she said.

Unemployment elsewhere

The May jobless rate was 6.2 percent in the Lawton area and 7.7 percent in the Tulsa area, both increases from the previous month.

John Carpenter, spokesman for the OESC, said Oklahoma cities continue to have lower jobless rates than most metropolitan areas in the nation.

The Washington, D.C., area had the lowest May rate, 6 percent, while the highest at 14.1 percent was in Las Vegas.

The state unemployment rate for May was 6.9 percent.

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Related Topics: Business, Economic Indicators, Labor Market, Unemployment Rate, Government and Politics, U.S. Census

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Ma, Oklahoma City 2 hours ago

Of course the unemployment rate is going up. We have the most corrupt and incompetent administration in our nation’s history in charge of the economy.

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IamStinkerpants, Purgatory 1 hour ago in reply to Ma, Oklahoma City

Kevin, Oklahoma City liked this

In Oklahoma City? The story is about Oklahoma City, idiot.

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jake, okc 2 hours ago

Jeff, Norman liked this

No one in my family is unemployed… Of course we all stayed in school and will actually work…

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Jeff, Norman 3 hours ago

Terry, Norman and 1 more liked this

CHANGE you can believe in. Higher unemployment, higher taxes. Yup, that is change.

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C, Mustang 3 hours ago in reply to Jeff, Norman

Yeah, cause nobody was getting laid off until Obama was sworn into office.

This is not a party issue, quit trying to make it one.

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Tony, Tulsa 4 hours ago

Oklahoma’s republican controlled govt, has let the people down. Instead of job bills, you got abortion control, gun deregulation, and NO enforcement of HB1804

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joe, oklahoma city 56 minutes ago in reply to Tony, Tulsa

It is the end result of pure greed starting back to the late 70′s, companies buying each other, loans made to buy things that could not be paid for. The endless consumption, which finally got to a breaking point. At that point it did not matter which party was in control when the cycle broke, it just broke.

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Jack, Gotebo 1 hour ago in reply to Tony, Tulsa

Nice, try, Just the Facts, but no cigar. The Democrats did not cause Wall Street and the financial sector to use “financial innovation” to create the Great Recession. Neither did Republicans, but their bias against enforcing the law (which is what regulation is) sure didn’t help.

And to all conservatives, please disabuse yourself of your party’s propaganda that poor people, minorities and Democrats caused the meltdown. McClatchy newspapers took the facts (link below), which showed that the private sector made more than 80 percent of the risky sub-prime loans. Only 20 percent of these high-profit, high-risk loans were held by Fannie and others.

It’s pretty much this simple: I loan Joe $100,000 for a house without making him prove his income. I make him put $5,000 down, so that’s cash for me. As he pays me 12 percent interest a month, I earn 3 times what the stock market could. When he defaults, I get the house back and sell it again for $100,000 or more. That worked beautifully for years.

The failure was due to the fact that the private sector (including big players like the now-defunct Washington Mutual) put too many of these bad loans on the market. They did it because they made short-term huge green on these high-profit bad loans. When the defaults piled up to the tipping point, the housing mkt flooded and prices plunged.

P.S. Fannie and Freddie don’t make loans to poor people. They buy the loans that the private sector makes to them. Prosecutions are ongoing against the private firms who lied to F and F about the quality of the loans. By prosecuting, the American public will get its money back from the private-sector crooks.

http://www.mcclatchydc.com/2008/10/12/53802/pri…

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Just the Facts 2 hours ago in reply to Tony, Tulsa

1 person liked this.

Last time I checked, 6.5 percent is a heck of a lot better than then national average of 9.7 percent. Remember here that Democrats are in control in Washington – completely in control.

But, let me guess – it is all Bush’s fault, right? Well, he certainly deserves some of the blame, but looking at these charts from the Bureau of Labor Statistics, I would say the Democrats own this baby (notice recession begins after Democrats take control of House and Senate):

http://data.bls.gov/PDQ/servlet/SurveyOutputSer…

They are also in control of California which is bankrupt and has an average unemployment of 12.4 percent and an unemployment of around 18 percent in more liberal cities like LA.

Considering what the Oklahoma Republicans are fighting against with the Democrats I would say they are doing a pretty darn good job.

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mike 4 hours ago

AS I SEE IT, by Mainer Mike Brown

No matter how bad the jobless rate gets, there’s always the crummy jobs out there, such as dishwashing or janitorial positions, to help you get by until better occupations return when the economy springs back.

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Tony, Tulsa 4 hours ago in reply to mike

In the 80′s, that was still true, and I did quite a few double shifts scrubbing off dirty plates back then.
Now–illegal labor has taken many of those positions.

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paul, yukon 5 hours ago

Not to fear, okies.

The worst of this recession hasn’t hit you yet, but it will.

We’ll see how “all y’alls” are talking up how wonderful you’ve been baffled into believing this stinkhole is a bit down the line….

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Jeff, Norman 3 hours ago in reply to paul, yukon

Terry, Norman liked this

Well, we will have the NBA to ease our minds. Too bad Seattle doesn’t have that.

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C, Mustang 3 hours ago in reply to paul, yukon

Terry, Norman and 1 more liked this

I once lived in a city I didn’t like. I moved. I’m much happier now. You have that same option as well Paul. Unless you just like being a miserable SOB.

Hey Oklahoman, please bring back the ignore feature. Thanks.

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Although this is not great news it is not unexpected. Temporary jobs like wiht the census helped lower the unemployment statistic. It took this country years of bad economic practices and too much leverage to get to this crisis, so we will have these bumps as we try to get to a continued recovery mode. With Las Vegas at 14.1% Oklahoma City citizens could have it worse.

Bill Bridwell, a real estate agent in the desert south of Phoenix, is among the thousands of agents hired nationwide by the companies to sell those foreclosures, recouping some of the money that borrowers failed to repay. In a good week, he sells 20 homes and Fannie sends another 20 listings his way.

“We’re all working for the government now,” said Mr. Bridwell on a recent sun-baked morning, steering a Hummer through subdivisions laid out like circuit boards on the desert floor.

For all the focus on the historic federal rescue of the banking industry, it is the government’s decision to seize Fannie Mae and Freddie Mac in September 2008 that is likely to cost taxpayers the most money. So far the tab stands at $145.9 billion, and it grows with every foreclosure of a three-bedroom home with a two-car garage one hour from Phoenix. The Congressional Budget Office predicts that the final bill could reach $389 billion.

Fannie and Freddie increased American home ownership over the last half-century by persuading investors to provide money for mortgage loans. The sales pitch amounted to a money-back guarantee: If borrowers defaulted, the companies promised to repay the investors.

Rather than actually making loans, the two companies — Fannie older and larger, Freddie created to provide competition — bought loans from banks and other originators, providing money for more lending and helping to hold down interest rates.

“Our business is the American dream of home ownership,” Fannie Mae declared in its mission statement, and in 2001 the company set a target of helping to create six million new homeowners by 2014. Here in Arizona, during a housing boom fueled by cheap land, cheap money and population growth, Fannie Mae executives trumpeted that the company would invest $15 billion to help families buy homes.

As it turns out, Fannie and Freddie increasingly were channeling money into loans that borrowers could not afford. As defaults mounted, the companies quickly ran low on money to honor their guarantees. The federal government, fearing that investors would stop providing money for new loans, placed the companies in conservatorship and took a 79.9 percent ownership stake, adding its own guarantee that investors would be repaid.

The huge and continually rising cost of that decision has spurred national debate about federal subsidies for mortgage lending. Republicans want to sever ties with Fannie and Freddie once the crisis abates. The Obama administration and Congressional Democrats have insisted on postponing the argument until after the midterm elections.

In the meantime, Fannie and Freddie are, at public expense, removing owners who cannot afford their homes, reselling the houses at much lower prices and financing mortgage loans for the new owners.

The two companies together accounted for 17 percent of real estate sales in Arizona during the first four months of the year, almost three times their share of the market during the same period last year, according to an analysis by MDA DataQuick.

Valarie Ross, who lives in the Phoenix suburb of Avondale, has watched six of the nine homes visible from her lawn chair emptied by moving trucks during the last year. Four have been resold by the government. “One by one,” she said. “Just amazing.”

The population of Pinal County, where Mr. Bridwell lives and works, roughly doubled to 340,000 over the last decade. Developers built an entirely new city called Maricopa on land assembled from farmers. Buyers camped outside new developments, waiting to purchase homes. One builder laid out a 300-lot subdivision at the end of a three-mile dirt road and still managed to sell 30 of the homes.

Mr. Bridwell sold plenty of those houses during the boom, then cut workers as prices crashed. Now his firm, Golden Touch Realty, again employs as many people as at the height of the boom, all working exclusively for Fannie Mae. The payroll now includes a locksmith to secure foreclosed homes and two clerks devoted to federal paperwork.

Golden Touch gets more listings from Fannie Mae than any other firm in Pinal County. Mr. Bridwell said he was ready to jump because he remembered the last time the government ended up owning thousands of Arizona houses, after the late-1980s collapse of the savings and loan industry.

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This is an excellent article about the foreclosure problem in America. Oklahoma has not had the woes of Florida, Arizona, and nevade but we still have rising foreclosures and the cost for this is increasing. This is why short sales where we keep a homeowner out of foreclosure is a good thing for the taxpayer because it does two things valuable. First it limits the loss to less than what foreclosure ultimately cost. Second, it helps limit the credit rating hit of the homeowner where a foreclosure can destroy the ability to even get a decent car loan. If you are a distressed homeowner having a hardship that keeps you from making house payments, contact me at joe@joepryor.com for a consultation.

Exacting buyers are upending the battered real estate market, agents and other experts say, leading to last-minute demands for multiple concessions, bruised feelings on all sides and many more collapsed deals than usual.

It is a reversal of roles from the boom, when competing buyers were sometimes reduced to writing heartfelt letters saying how much they loved the house and how they promised to eternally worship the memory of the previous owners. These days, it is the buyers who are coldly seeking the absolute best deal while the sellers are left in emotional turmoil.

“We see buyers who must have learned their moves from the World Wrestling Federation,” said Glenn Kelman, chief executive of the online broker Redfin. “They think the final smack-down occurs at the inspection, where the seller will be reluctant to refuse any demand because the alternative is putting the house back on the market as damaged goods.”

Everyone expected the housing market to suffer at least a temporary hangover after the government’s $8,000 tax credit expired, but not necessarily this much. Preliminary data from around the country indicates that the housing market began swooning last month immediately after the credit was no longer available. In some places, sales dropped more than 20 percent from May 2009, when the worst of the financial crisis had subsided.

Builders have been affected too. Construction of new homes in May dropped 17.2 percent from April, the Commerce Department said Wednesday, significantly lower than forecast. Permits for future construction dropped 10 percent, suggesting a cruel summer.

Even the lowest home mortgage rates in decades are not doing much to invite deals. The Mortgage Bankers Association said Wednesday that applications for loans to buy houses were down by a third compared with last year. Applications are back to the level of the mid-1990s, when the country’s housing market was smaller.

Against such a backdrop of misery, buyers are empowered — and are taking full advantage.

John Porter Simons, a Seattle software engineer, thought he had a couple willing to pay $340,000 for his house. But they asked for $24,000 worth of work, most of which involved waterproofing the basement. “It was totally irrational,” said Mr. Simons. “My basement has never flooded. I live on a hill.”

He made a counteroffer to their offer, and the buyers walked. The house is now under contract to a new set of buyers, who got a cut in price and $2,500 in electrical work thrown in.

Buyers, of course, say they are merely being smart.

Chris Dunn, an economic consultant in Chicago, saw a house he liked last month for $539,000. He offered $500,000, but then his inspector told him that he would eventually have to replace the windows. The sellers were persuaded to kick in $10,000 more to pay for the work.

“We didn’t feel we were being that aggressive,” said Mr. Dunn. “We had the position, ‘If the seller is willing to come down enough, we will buy this home.’ If they weren’t willing, we would have just moved on. In this market, you have a lot of options.”

In some cases, agents say, sellers literally cannot afford to make concessions. Another $10,000 will push them underwater, which means they will have to arrange the sale through the bank.

“People cashed in on their houses to get money to go on vacation, for a new roof, to send the kids to college,” said Roberta Baldwin, an agent in Montclair, N.J. “They thought it was always going to be worth more.”

Even when a sale can be worked out, it is not uncommon for everyone to walk away feeling more aggrieved than celebratory.

“Buyers feel they’re not appreciated for simply making an offer,” Ms. Baldwin said. “And sellers feel humiliated and even angry. They expected to do better.”

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I have been checking the days on market and price reductions in various parts of Oklahoma City and it would confirm this analysis even in our market which is deemed by many as stable. The company I use for detailed market statistics, Altos Research confirms this also. priceing for sellers is crucial, in fact it is more important than it has ever been in the last decade.

By The Wall Street Journal

Congress is considering an extension for would-be homebuyers who are racing to close home sales in order to receive a federal tax credit

.

The real-estate industry has warned that tens of thousands of buyers who rushed to buy homes to qualify might not close before the deadline imposed by Congress

, meaning they could miss out on receiving credits worth thousands of dollars if lawmakers don’t act.

Congress last fall extended an $8,000 tax credit for first-time homebuyers

and added a smaller $6,500 credit for current homeowners who were buying a primary residence. To qualify for the credit, buyers had to sign purchase contracts by April 30 and must close on the transaction by June 30.

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But there are so many transactions in the pipeline that the companies responsible for handling the sales, including mortgage lenders, appraisers and title insurers and real-estate brokers, say the last-minute homebuying rush in April has created bottlenecks.

Senate Majority Leader Harry Reid (D., Nev.) last week said he would back a measure to extend the June 30 closing date to Sept. 30 for buyers who had met the April contract deadline.

The National Association of Realtors

estimates that from 55,000 to 75,000 homebuyers who are under contract won’t be able to close in time to claim the tax credit. The trade group is lobbying Congress to extend the June 30 deadline only for those buyers who met the April deadline.

“Everybody who got under contract at the end of April deserves to get the tax credit,” says Stephen Adamo, the president of Weichert Financial Services, a division of real-estate brokerage Weichert Realtors. “For reasons out of their control, they’re in jeopardy of losing it.”

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That is causing heartburn for buyers like Alan Nickelson, a first-time homebuyer who went into contract on a three-bedroom home in Kent, Wash., days before the tax-credit deadline in April. While he was pre-approved for a loan and will make a 20% down payment on the $275,000 home, he says the transaction has been held up because of home inspections and repairs required by the appraiser.

Nickelson says it is “entirely possible” that he will miss out on the tax credit. He says he would have bought the home anyway but that he planned to use the $8,000 credit to offset repair costs. “It was icing on the cake, but it was really sweet icing,” says the 52-year-old machinist.

Homebuyer tax credit extension?

One particular worry is that short sales, where a lender allows a home to sell for less than the amount owed, won’t receive requisite approvals in time to meet the closing deadline. Unlike normal sales, in which only two parties — the buyer and the seller — negotiate the price, short sales are more time-consuming affairs because they require note-holders to agree on price.

“From February on, I told people, you have no chance” of finishing a short sale by June 30, says Steve Capen, a real-estate agent in St. Petersburg, Fla. But he says clients who began pursuing deals even before that could still miss the deadline.

Real-estate agents say that even “plain-vanilla” transactions are increasingly at risk. Response times from loan officers and appraisers have doubled over the past month, says Kailee Rainey, who works for real-estate brokerage in Seattle.

Lee Barrett, the president of Century 21 Barrett, a real-estate company in Las Vegas, spent part of the week in Washington meeting with his congressional delegation about the need to extend the closing deadline. “The lenders are overwhelmed. The title companies are overwhelmed,” he says. “It’s just a mad surge of everybody trying to close deals.”

At Wells Fargo, employees from other sales divisions are being brought in to handle mortgages, and staff members are working weekends and nights to process higher volumes. “It’s all hands on deck,” says Greg Gwizdz, an executive vice president at Wells Fargo Home Mortgage. He says the bank has prioritized “every customer who qualified for the tax credit.”

A 23% boost

A spokeswoman for Bank of America says the lender is also placing “increased priority” on loan applications submitted before the April 30 deadline. Luke Hayden, the president of PHH Mortgage, a lender in Mount Laurel, N.J., says consumers can help speed the process along by being “very responsive to requests for documentation” from lenders.

Some of the delay reflects new rules related to disclosure and appraisal requirements enacted to correct the excesses of the bubble years. The new regulations have prompted lenders to take extra caution at every step, stretching closing timelines.

The tax incentive was credited with boosting existing-home sales in April by 23% from year-earlier levels, according to the NAR, while new-home sales gained by 47.8% from one year ago, according to government figures.

It is unclear how many sales would fall through for those who miss out on the tax credit. Buyers could be hard-pressed to void sales contracts unless they have made their closing contingent on receiving the tax credit or are willing to forgo any deposits.

This article was reported by Nick Timiraos for The Wall Street Journal.

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I have some short sales that could benefit from an extension. Although I am for the market going back to a non-stimulus situation, in this case mortgage copmpanies are much slower in processing loans becasue of the tax crredit volume, and of course being required to get full documentation.

By Darren Currin Darren Currin –>
Columnist Darren Currin writes the blog “Oklahoma per Square Foot.” See his and all our blogs at journalrecord.com/blog-hub.
Posted: 12:08 PM Tuesday, June 8, 2010

Bricktown Hampton Inn

I must admit I was quite surprised to read about the $32 million acquisition of the Hampton Inn in Bricktown that occurred last week. This deal comes at a time when large commercial real estate transactions are just not occurring in Oklahoma City thanks largely to a lack of available product coupled with a lack of available credit for buyers to finance deals. This deal is not only the largest commercial real estate transaction of the year thus far, but it also signals the high value that is being placed on downtown hotels.

Without question, the Oklahoma City hotel market has been impacted by the downturn in the national economy as average occupancies and average daily room rates have declined. The good news is that the decline in Oklahoma City has not been as dramatic when compared to most other markets. As a result, the city’s hotel market can best be described as stable. Moreover, downtown Oklahoma City hotels boast some of the highest average daily rates in the entire metro area. These high rates result in higher net operating incomes, which also fuel higher purchase prices.

This stability coupled with the increased value of downtown Oklahoma City properties and hotels most likely were two of the primary factors behind such a high purchase price for the 200-room hotel located at 300 E. Sheridan. Furthermore, downtown Oklahoma City hotels have benefitted throughout the recent national economic downturn by boasting strong occupancies. The steady flow of events in downtown Oklahoma City over the past two years has been instrumental in bringing more downtown hotel guests. In fact, there is rarely a week now when there is not some sort of convention, business meeting, festival or sporting event occurring in or near the city’s central business district. Plus, the Oklahoma City Thunder have also had a tremendous impact on downtown hotels thanks to the high number of out-of-town fans that stay overnight for games and the visiting players, coaches and media that typically stay at least one night in the city.

Does this deal represent a trend of escalating hotel values all over the metro area? It may be a little early to make that determination. Even though the downtown hotels have done well, most of the occupancy decrease has occurred in the suburban areas of Oklahoma City. Additionally, there remains some concern that Oklahoma City may be overbuilding hotels especially in Edmond and in the Memorial Road area where new hotels are continuing to be built. These factors might keep hotel prices in the suburban areas of the city from jumping to the high level that what was seen with the Hampton deal in Bricktown.

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The continued success of downtown is a tribute to the foresight of our leaders and the public in support of the MAPS projects including the last one. Let’s hope that this has some legs and the suburban areas will follow through despite the concerns of the author.

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Oklahoma No. 1 in home equity

Although millions of people owe more on their homes than they’re worth, Oklahoma has the lowest percentage of upside-down mortgages in the country.

BY ROBERT EVATT – Tulsa World Oklahoman    0 Comments

Published: May 12, 2010

Although millions of people owe more on their homes than they’re worth, Oklahoma has the lowest percentage of upside-down mortgages in the country.

Council of Neighborhoods house at 2420 SE 10th, Friday, April 2, 2010. Photo by David McDaniel

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Also …

Lowest negative equity

1. Oklahoma…5.9 percent

2. New York…7 percent

3. Montana…7.3 percent

4. Pennsylvania…7.4 percent

5. North Dakota…8 percent

Source: CoreLogic

Also …

Highest negative equity

1. Nevada…69.9 percent

2. Arizona…51.2 percent

3. Florida…47. 7 percent

4. Michigan…38.6 percent

5. California…34.1 percent

Source: CoreLogic

Just 5.9 percent of Oklahoma homeowners, or 23,724 mortgage holders out of a total of 402,187 recorded, have negative equity on their homes, according to a survey released Tuesday by business data company CoreLogic.

The state’s number is well below the national average of 23.7 percent.

John Hausam, president of ERA John Hausam Realtors in Tulsa, said the low rate is likely the result of Oklahoma skipping the last decade’s housing bubble, when prices in many regions skyrocketed, only to plunge.

Click here to read the complete article at Tulsaworld.com

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Oklahoma continues to be an oasis in the housing market. This does not mean that prices are still going up over the state, it means something more important. People who bought homes in Oklahoma during the bubble, were buying at real versus inflated values. Is this a great state, or what!

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Oklahoma’s jobless rate declines
National numbers also show some improvement, especially in largest metropolitan areas

BY SUSAN SIMPSON    3 Comments

Published: April 29, 2010

Jobless rates in all 77 Oklahoma counties dipped in March, a sign of economic recovery in the state, according to the Oklahoma Employment Security Commission.

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The Oklahoma City area unemployment rate dipped to 6.1 percent in March, with 34,910 jobless people. That’s down from 6.7 percent in February.

The unemployment rate in the Tulsa area decreased to 7.5 percent from 8.1 percent in February. Lawton’s joblessness fell to 5.4 percent in March, down from February’s 6 percent.

“It’s definitely what we’d want to see as we move forward,” said OESC spokesman John Carpenter. “It looks like we are headed in the right direction now.”

Unemployment rates fell or remained level in three-quarters of the 372 largest metropolitan areas, a sign that the recovery is widespread, the U.S. Labor Department said.

The Oklahoma City area gained 4,400 jobs from February to March, with most growth seen in retail, leisure and hospitality, and local government jobs.

The state unemployment rate was 6.6 percent in March, the lowest recorded in 10 months.

Unemployment was highest in Latimer, McCurtain, Sequoyah and Hughes counties. It was lowest in Beaver, Harper and Woods counties.

The Labor Department said Wednesday the jobless rate dropped in 69 percent of metro areas last month from February. It rose in 24 percent of large cities and remained the same in the rest. That’s an improvement from February, when the unemployment rate decreased in 51 percent of metro areas and increased in one-third.

CONTRIBUTING: The Associated Press

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R, Seattle via OKC 3 hours ago

I wonder if the declines have anything to do with the census?

Im not sure when the massive hiring began, but I’d hope that they would have adjusted for those temporary jobs and not include them in the actual employment counts. …

if it is adjusted, then this IS good news!

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sharifa, oakpark 6 hours ago

Need a job? With new Obama Health Care Plan, we are going to insure additional 33 Million people. There is going to be huge demand for Medical Assistants, Medical Billing, Medical Coding, Pharmacy Assistant & Pharmacy Technician across the nation. We can help you get a training during weekends and evenings and get a degree in few months. With the degree finding a job will be easy, contact for more information at http://bit.ly/bk6tp8 this is your chance

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R, Seattle via OKC 3 hours ago in reply to sharifa, oakpark

in all fairness sharifa, those health care jobs you quoted have always been in high demand – regardless of a public health care option. Im not sure if your post was serious or if you were just intending to troll. …

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It is great to not only see that Oklahoma City dropped in unemployment, but that it dropped around the country. Any recovery in the overall housing market will be aided more by people having jobs than anything else. The tax credit stimulus worked to create a brdige, now we just need to keep creating jobs to sustain the momentum.

Private mortgage insurance companies return to market

As the FHA tightens its requirements for borrowers with small down payments, independent insurers are back in the game and offering competitive rates.

Lew Sichelman

April 25, 2010

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Reporting from Washington

The low-down payment mortgage landscape is changing.

The Federal Housing Administration, which insures lenders for losses incurred should a borrower not make his payments as promised, is pulling in its horns in an effort to remain solvent in the face of a rising number of delinquencies and foreclosures.

At the same time, though, some of the half a dozen private companies that provide lenders with similar protection against defaults are quietly reentering the market, a market they all but vacated when the housing sector tanked.

“Private mortgage insurers are coming back,” says Mark Goldhaber, senior vice president for affordable housing at Genworth Mortgage Insurance in Raleigh, N.C.

Created in 1934, the FHA was intended to open homeownership to those with low and moderate incomes. It has a countercyclical role, too, and often expands its market share when housing hits the doldrums. But last year, the agency insured nearly 30% of all single-family loans, a portion even government officials believe is way too large. A 10% share is considered optimal.

“We have stretched to the limit to help stabilize the housing market,” FHA Commissioner David Stevens said in a recent speech in Orlando, Fla. “But we need to stay ahead of any potential problems.”

To better manage risk, increase capital reserves and ensure the long-term viability of the FHA insurance program, the agency has taken several steps that will, as Stevens bluntly put it, require “more skin in the game from borrowers.”

Beginning this month, down payment requirements on FHA-insured loans have been increased. Although borrowers with credit scores of 580 or above will still be able to make the traditional 3.5% down payment, those with lower scores will need 10% down.

In addition, the upfront mortgage insurance premium has been raised from 1.75% to 2.25%. The premium can be financed as part of the mortgage. But the change nevertheless adds $1,000 to what otherwise would be a $200,000 loan.

At the same time, the FHA has asked Congress for authority to increase the maximum monthly insurance fee from the current 0.5% level. The agency is seeking permission to hike the monthly charge to 1.55%, but has said it needs to raise it to only 0.9% at this time.

Finally, the agency is reducing permissible seller concessions from 6% of the loan amount to 3%. This change conforms to industry standards, and means that even if a seller were to agree to, say, pay all of the borrower’s closing costs, the borrower could count only that portion equal to up to 3% of the loan amount as if it were his own money.

These modifications in the FHA’s rules will result in fewer borrowers qualifying for government-insured mortgages. But while Uncle Sam is pulling back, private mortgage insurers have made some subtle changes that signify their belief that the housing market has reached some semblance of stability.

Without fanfare, for example, Genworth has rewritten its underwriting guidelines so that it will now back 5% down payment loans to borrowers anywhere in the country. Previously, such mortgages were not available to borrowers in so-called “declining markets,” which in Genworth’s case were California, Arizona, Nevada, Michigan and Florida.

Madison, Wis.-based MGIC, the nation’s largest private mortgage insurer, also has tweaked its guidelines. The changes aren’t broad, company representative Katie Monfre says, but they are meaningful. Among other things, it has removed some markets from its restricted list and reduced the minimum FICO score required for a loan with a 5% down payment to 660.

Radian Guaranty in Philadelphia went away from the declining-markets concept altogether “at least a year ago,” says President Teresa Bryce. Instead, it now backs 95% loans anywhere as long as trusted lenders with low delinquency rates underwrite them.

To the average borrower, there isn’t a whole lot of difference between a government-insured FHA loan and one that’s backed by a private company. Premiums for each are tax deductible, and the coverage can be canceled when the borrower’s equity reaches 20% of the original loan amount.

For most lenders, 20% is the magic cutoff point at which they no longer demand insurance. You can build up equity both by paying off principal and by appreciation in the property’s value.

However, while FHA loans are generally considered to be the less expensive alternative, that’s not always the case. Savvy borrowers would be wise to consider both before jumping to a decision.

Private mortgage insurers have implemented their own price increases, but that was two years ago. And their premium structures are quite competitive with the government’s.

Generally, PMI pricing is more affordable for borrowers making a down payment of 10% or more. And the private firms now can pretty much match the FHA on loans with just 5% down. “We can be competitive,” says Radian’s Bryce.

Yes, the FHA requires as little as 3.5% down, but you now need a FICO score of 580 or better to qualify. But private insurers will go as low as 3% on so-called affordable housing loans offered through state housing finance agencies.

Here’s how the two line up on a $200,000 mortgage at 5.5% with three down-payment scenarios based on Genworth’s pricing model:

At 5% down, the principal and interest on an FHA-insured loan of $190,000 would be $1,103 a month. Add in the $79 monthly charge for insurance, and the payout would be $1,182. Rolled into the loan amount as paid as part of your monthly payment, private insurance is $46 more.

But with 10% down, the numbers favor PMI: $1,120 a month for an FHA loan, $1,115 for private insurance paid monthly and $1,043 a month when the coverage is paid at closing.

At 15% down, the FHA payment is $1,474 versus $1,436 for private coverage paid monthly and $1,394 if paid all at once.

Private mortgage insurers bring other benefits to the table, too. Through Genworth, for example, Flagstar Bank in Troy, Mich., is offering job loss protection at no extra cost to borrowers who were laid off involuntarily. The insurance will cover the borrower’s house payment, including taxes and insurance, for up to $2,000 a month for six months.

And Radian will advance up to $15,000 to lenders to be applied to troubled borrowers’ accounts to facilitate a mortgage-retention workout plan and ultimately reinstate the loan. Better yet, the money does not have to be paid back.

“Nobody expected the PMIs to step up to the plate, but we have an alignment of interest with homeowners,” Bryce says. “We want them to remain in their homes as much as they do.”

lsichelman@aol.com Distributed by United Feature Syndicate

Copyright 2010, The Los Angeles Times

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Excellent article about the return of 5% down conventional mortgages backed by a private mortgage insurer, that can include job loss protection. With the changes in FHA this should be seen as an alternative. FYI, I know of no lender in Oklahoma that will do a 580 credit score FHA loan even at 10% down. You need 640 still.

Amtrak starts yearlong test of beef-based biodiesel on passenger line between Oklahoma, Texas

By Kelly P. Kissel, AP

April 20th, 2010

Cattle-based fuel runs Okla.-Texas passenger train

ABOARD THE HEARTLAND FLYER — Amtrak began an experiment Tuesday to let cows produce horsepower.

Officials from the railroad and the Oklahoma and Texas transportation departments launched a yearlong test to see whether beef-based biodiesel can efficiently run the Heartland Flyer passenger train between Oklahoma City and Fort Worth, Texas, and also reduce emissions.

“We can join energy (and) agriculture and protect the environment,” Oklahoma Agriculture Secretary Terry Peach said.

Tallow from Texas cattle — fat often used in soap or animal feed — is supplying 20 percent of the fuel for the 3,200-horsepower engine, the rest is standard diesel. Previous engine tests showed that those running the B20 mixture produced less carbon monoxide and fewer particulates and sulfates.

Biodiesel can react with rubber, however, so checks must be made for unusual wear that could damage the engine.

“At the end of this 12-month trial we’ll go back and look at the engine assemblies and gaskets and valves and make sure there’s no impact,” said Roy Deitchman, Amtrak’s vice president for environmental, health and safety issues. The railroad also will collect exhaust data.

In ceremonies at the Sante Fe station in downtown Oklahoma City, government and railroad officials announced the test as part of this week’s Earth Day events. A number of officials then boarded the train for a similar announcement later Tuesday at Fort Worth.

The Federal Railroad Administration gave Amtrak $274,000 to conduct the test with Oklahoma transportation officials. State governments help fund daily service to Oklahoma City, Norman, Purcell, Pauls Valley and Ardmore in Oklahoma and to Gainesville and Fort Worth in Texas.

“We use about 100,000 gallons of diesel fuel a year to move 84,000 people on the Heartland Flyer,” Deitchman said. “Twenty percent of that is now biodiesel.”

Biodiesel can be more expensive than traditional fuel but it reduces demand for oil and can result in lower carbon emissions.

Filed under Environment, Government | Tags: Aboard The Heartland Flyer, Energy And The Environment, Environmental Concerns, Fort Worth, Municipal Governments, North America, Oklahoma, Oklahoma City, Texas, United States | Comment Below

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I hope that the experiment works becasue anything that cuts emissions and lessens dependence on foreign oil is good. I am glad that Oklahoma and Texas are involved and i wish that the Heartland Flyer test is a success. Now Congress needs to restore the tax credit for biofuel is they are serius about ending our energy dependence.

Data released Wednesday by the Treasury Department and the Housing and Urban Development Department showed that 2,879 modified loans had been ended since the program’s inception in the fall, up from 1,499 in February and 1,005 in January.

The Treasury Department said it could not explain the growing number of what it called cancellations, almost all of which were apparently prompted by the borrower’s being unable to make the new payment. A scant number — 37 — were because the loan had been paid off, presumably because the borrower sold the house.

About seven million households are behind on their mortgage payments.

The Obama administration’s modification program has been widely criticized for doing little to help them. The program received another bad review on Wednesday with the release of a report from the Congressional Oversight Panel.

The Treasury’s stated goal is for the modification program to help as many as four million households, the oversight report said, “but only some of these offers will result in temporary modifications, and only some of those modifications will convert to final, five-year status.”

The report continued: “Even among borrowers who receive five-year modifications, some will eventually fall behind on their payments and once again face foreclosure. In the final reckoning, the goal itself seems small in comparison to the magnitude of the problem.”

The Treasury took issue with the report and said the pace of modifications was picking up. The number of active permanent modifications in March was 227,922, an increase of 35 percent from those in February. An additional 108,212 permanent modifications are awaiting borrower approval.

Shaun Donovan, secretary of Housing and Urban Development, said in an interview that those were the important numbers to focus on.

“One percent of these loans defaulting is a tiny fraction,” Mr. Donovan said. “Given how stressed these borrowers are, even in the best situation, there will be redefaults. But I don’t think there is any evidence that would cause us to worry at this point.”

Julia R. Gordon, senior policy counsel for the Center for Responsible Lending in Washington, said she expected the number of post-modification defaults to continue to rise.

“It’s definitely alarming to look at those statistics,” she said. “The current model for modifications doesn’t necessarily produce sustainable results.”

While the program is too new to predict its long-term success, the data on previous modification efforts is not encouraging.

Sixty percent of modifications undertaken by banks in late 2008 were in default a year later, according to the latest Mortgage Metrics Report compiled by the Office of Thrift Supervision and the comptroller of the currency.

Many of these private plans either kept the payments the same or increased them. Inevitably, those mortgages suffered the highest failure rate: about two-thirds of the borrowers defaulted again.

Loans for which the payments were decreased by at least 20 percent failed at a slower but still significant rate of about 40 percent.

The government program takes a more aggressive approach, lowering the interest rates for all loans. On many loans, terms are also extended or principal payments put off for years. Treasury data shows that the median savings for borrowers receiving permanent modifications is $512 a month.

Many borrowers remain deeply indebted, however. They owe not only on the house, but on homeowner association fees, home equity loans, car loans, alimony and credit card interest.

Even after modification, $61 out of every $100 earned by the borrower goes to servicing debt, government figures show. For increasing numbers of modification recipients, mortgage relief is apparently not enough to stave off financial collapse.

“If you can help 60 percent, and 40 percent have to fall back, is that worthwhile?” asked John Courson, president of the Mortgage Bankers Association. “Clearly for the 60 percent it was, and the 40 percent weren’t going to make it anyway.”

The Treasury said on Wednesday that it had always anticipated that some homeowners would not sustain a modification, which was one reason the program had been greatly expanded. New elements focus on allowing distressed homeowners to sell their properties for less than they owe and on shaving the principal owed by borrowers.

The notion of cutting principal, however, has already run into some resistance from the big banks, which do not want borrowers to get the idea that their mortgage can be chopped on a whim.

I trust these numbers and reports more than NAR. Unless the jobless rate can be cut in half, and until we can get meaningful principal reduction on qwualified homeowners, we are going to pay for foreclosures with our taxes anyway. Since 1 in 4 American homeowners have negative equity, this is a ticking financial time bomb that can be swept under the carpet.