Monthly Archives: February 2018

Update on Fair Lending & the CFPB

Nestled inside the Consumer Financial Protection Bureau is an office that goes after financial companies whenever they discriminate against Americans.

That office just lost its teeth.

Mick Mulvaney, who was appointed by President Trump as the agency’s interim director two months ago, is moving a powerful division of the bureau, the Office of Fair Lending and Equal Opportunity, under his own direct oversight and stripping the office of its enforcement authority.

That means the office won’t be able to go after lenders that charge higher interest rates to minorities than to whites or otherwise discriminate. Instead, staff will now focus on “advocacy, coordination and education,” according to a memo emailed to employees Tuesday.

Related: Trump official: Regulators don’t have a ‘blank check’

Those responsibilities — while not completely wiped out at the agency — will be part of a broader division that oversees financial companies. The change was reported earlier by The Wall Street Journal.

Alan Kaplinsky, a co-leader of the consumer financial services practice at the law firm Ballard Spahr, said the move is the latest illustration that Mulvaney is keeping his word that the agency will not overreach its powers.

“They won’t be ‘pushing the envelope’ in the fair lending area to go after companies where they are not on very solid ground,” Kaplinksy said. “Those days are over now.”

Under former Director Richard Cordray, an appointee of President Barack Obama, the office aggressively pursued discriminatory practices by auto dealers even though automakers fell outside the CFPB’s jurisdiction.

Consumer advocates argue the restructuring will weaken the office’s ability to pursue lawsuits.

Related: Trump consumer protection chief requests $0 in funding

Mulvaney’s changes “send a troubling message about the enforcement of civil rights laws and will harm people — especially in communities of color — who are wronged by payday lenders, debt collectors, or auto dealers, among others,” Vanita Gupta, president and CEO of The Leadership Conference on Civil and Human Rights and former acting head of the Civil Rights Division at the Justice Department, said in a statement.

A spokesman for the agency disputed those claims, arguing Mulvaney’s goal was to increase efficiency and combine efforts under one roof.

“It never made sense to have two separate and duplicative supervision and enforcement functions within the same agency — one for all cases except fair lending, and the other only for fair lending cases,” said John Czwartacki, a CFPB spokesman.

But progressive Democratic Senator Elizabeth Warren of Massachusetts said Mulvaney has long opposed the agency’s efforts to fight discrimination — and the latest step was a way to undermine those efforts.

Related: CFPB says it will reconsider its rule on payday lending

“Mulvaney is putting the Office of Fair Lending under his control so that he can weaken it — leaving neighborhoods and consumers across the country more vulnerable to bias,” Warren saidin a statement to CNNMoney.

The consumer bureau has already begun rethinking Obama-era rules since Mulvaney took over. Last month, it said would reconsider rules to protect consumers from payday-lending traps. It also launched a formal review of how the agency investigates and enforces rules on big banks and predatory lenders.

And most recently the agency said mortgage lenders would not need to comply with new rules that would have forced them to provide detailed information about consumers, like their credit score or age. Regulators use that information to ensure that lenders are not discriminating against minorities.

 

Source: http://money.cnn.com/2018/02/01/news/economy/cfpb-mulvaney-enforcement-office/index.html

State Compliance Updates

Arizona

Notary Fees – The Arizona Office of the Secretary of State adopted provisions relating to notary public fees. These provisions are effective on March 5, 2018 (R2-12-1102).

Colorado

Fair Debt Collection Practices Act – The state of Colorado modified its provisions concerning the continuation of regulations for collection agencies under its Fair Debt Collection Practices Act (FDCPA). Provisions in this bill range from effective immediately to effective on January 1, 2018 (SB 216).

Illinois

Foreclosures – Effective January 1, 2018, the state of Illinois modified its provisions relating to foreclosure that include, but is not limited to, changes to the homeowner notice, report of sale and confirmation of sale, and right to possession (HB 3359).

Indiana

Notaries – The state of Indiana amended its provisions regarding notaries. Provisions in this bill range from effective on January 1, 2018 to effective on July 1, 2018 (SB 539).

New Jersey

Appraiser Fees – Effective immediately, the New Jersey Department of Banking and Insurance, Division of Banking, adopted provisions regarding appraisal fees charged to borrowers (NJAC 3:1-16.2).

New Mexico

Uniform Fiduciary Access To Digital Assets Act – Effective January 1, 2018, the state of New Mexico enacted provisions regarding its Revised Uniform Fiduciary Access to Digital Assets Act (SB 60).

North Carolina

Uniform Power of Attorney Act – Effective January 1, 2018, the state of North Carolina enacted provisions to establish its Uniform Power of Attorney Act (SB 569).

Ohio

2018 Prepayment Penalty – The Ohio Department of Commerce announced its annual loan prepayment penalty adjustment for 2018 (ORC 1343).

Residential Mortgage Lending Act – Ohio House Bill 199 amended multiple sections of the Ohio Revised Code to create the Ohio Residential Mortgage Lending Act (HB 199).

Oregon

Escrow Agent Licensing – Effective January 1, 2018, the state of Oregon amended its provisions relating to escrow agent licensing fees (SB 68).

Reverse Mortgages – The state of Oregon revised its provisions regarding notices required from lenders with contracts for reverse mortgages. These provisions are effective on January 1, 2018 (HB 2562).

Beneficiary in Trust Deed – Effective January 1, 2018, the state of Oregon revised its provisions relating to beneficiary notice requirements (HB 2359).

Pennsylvania

Mortgage Loan Licensing – The state of Pennsylvania modified its provisions relating to mortgage loan licensing that include specific licensing requirements for mortgage servicers. Some provisions are effective immediately and the remaining provisions are effective upon the promulgation of regulations by the Department (SB 751).

“Base Figure” Definition – The Pennsylvania Department of Banking and Securities has updated its definition of “base figure.” (Pa.B. 7054)

Texas

Pre-Licensing Education Requirements – The state of Texas modified its provisions relating to residential mortgage loan originator (RMLO) pre-licensing education requirements. These provisions are effective on January 1, 2018 (HB 3342).

Home Equity Loans – The state of Texas approved revisions to home equity loans effective January 1, 2018 (SJR 60).

Virginia

Third Party Verification Requirements – The Department of Veterans Affairs (VA) policy was clarified regarding third-party verification requirements for loan underwriting (CIRC 26-17-43).

VALERI (VA Loan Electronic Reporting Interface) Newsflash – Provides information on appraisal fee changes and announces on Sunday, January 14, 2018, VALERI Manifest 17.4 BI was released (VALERI).

Washington

Licensing – The Washington Department of Financial Institutions, Consumer Services Division, adopted provisions under its Consumer Loan Act that include surety bond requirements as well as capital requirements for a non-depository residential mortgage loan servicer. These provisions are effective on January 1, 2018 (WAC 208-620).

Uniform Electronic Legal Material Act – Effective January 1, 2018, the state of Washington enacted provisions regarding its Uniform Electronic Legal Material Act (SB 5039).

Wisconsin

Recording Information – The state of Wisconsin recently amended various provisions relating to the identification and location of information assigned to documents filed or recorded in the county register of deeds office, effective immediately (SB 131).

Wyoming

Uniform Power of Attorney Act – Effective January 1, 2018, the state of Wyoming enacted provisions creating its Uniform Power of Attorney Act that includes providing for applicability, sample forms and the repeal of provisions relating to durable powers of attorney (SF 105).

Source : http://www.mortgagecompliancemagazine.com/regulatory/monthly-state-regulatory-update-february-2018/

Top 10 Whiskeys of 2017

There have been plenty of reasons to drink plenty of whisky in 2017, and I’ve done my best to honor all occasions. For the new year, I’ve resolved to drink more whiskies in my tireless quest to make as many new discoveries as one fan can responsibly and humanly do.

But the memories of the 2017 finds linger, and I’d like to share the best of them with you.

I’ve had the good fortune to sample many whiskies as one of my job duties, so what follows is a list of the standouts I had last year. (I did the same in 2016).

Some of these have graced this blog before, and some haven’t. Like last time, my only two selection criteria for these choices is that I tried them in 2017 (even if they were released before then), and that they were able to be bought by the bottle.

I’ve split this list into two parts. Part one, Accessible Whiskies, are bottles that you can still get hold of either online or in specialist shops, and shouldn’t present a challenge to find and buy. Part two, Tricky Whiskies, are are rare, limited or expensive drams (sometimes all three) that I’ve had the opportunity to enjoy.

And so, in alphabetical order, here they are:

Bruichladdich Octomore 8.3

The Octomore range from Bruichladdich comprises some of the peatiest whiskies in the world, but this particular release may be the record holder, at 309.1 ppm (parts per million) of peat. To compare, a heavily peated whisky like Laphroaig tends to clock in at 50-60 ppm. This whisky was a deeply meaty, monstrous pleasure and I feel privileged to have tried it.

Paul John – Classic Select Cask

Paul John is an Indian whisky distillery that deserves to be considered as seriously as the most well-known scotches, and all its whiskies are excellent. I think this one is the best from its core range, though. It’s crisp, creamy, and nutty. Vanilla and bananas are bursting out, complemented by a citrus zing.

Lost Distillery Company – Jericho Archivist

The LDC uses historical research to unravel the taste of whiskies from now-closed distilleries, and then creates blends that match that reconstructed taste profile. To me, this one is their very best release. It’s what us geeks call a “sherry bomb,” comprised of whiskies aged in Spanish sherry casks that deliver deep rich flavours. Caramel, toffee, plums and prunes all shine through with a little ginger tang.

Rabbit Hole Distillery – Straight bourbon whisky finished in PX casks

I’ve heard of a couple distilleries in the U.S. starting to age their bourbon in sherry casks to give extra fruity flavours. This is the first and only one I’ve had of its kind so far. I find it’s superbly balanced. The sweetness of the bourbon is given a lovely depth by the sherry casks where it’s been aged. I really enjoyed trying to pick out elements of each.

Royal Salute – 21 years old

As I wrote previously about this bottle of blended whisky, whatever you may imagine delicious old whisky to taste like, this ticks the box. The perfect choice of drink while surrounded by leather bound books in an apartment that smells like rich mahogany. Bow before royalty.

Tricky Whiskies:

Golden Decanters – The Tight Line

An independent bottler that sells a high-end, four-bottle collection consisting of single cask whiskies, Golden Decanters has bottled one of the best bourbon cask whiskies – a Glenlivet – that I’ve ever had. Extremely sugary and full of citrus.

Laphroaig 10 Cask Strength batch 9

Laphroaig 10 is one of the great standard scotch whiskies out there. Its cask strength version is phenomenal. The 9th batch is my favorite of the lot so far, and beats some other amazing and older Laphroaigs I’ve had the pleasure of tasting. A perfect combination of sea breeze and smoked meat. There’s a few specialist stores that still have it available. Make a quick google search and snatch up a bottle before they’re gone for good.

Bunnahabhain Eich Bhanna Lir

As more distilleries are looking to enter the ultra-luxury whisky market, Bunnahabhain has dipped its toe in the water by releasing its oldest-ever whisky, a 46-year-old single cask beauty. It’s thick, creamy and full of orchard fruit. It also avoids the strong oak often present in really old whisky and that can sometimes be a bit overwhelming.

  1. Compass Box No Name

Compass Box has made a name as one of the top artisanal whisky blenders. Its No Name release is a limited edition from this year, and it’s a rare peated release. Compass Box should do these more often because it’s absolutely delicious. Thick yogurt, meat and tar all through.

  1. Scotch Malt Whisky Society 66.36

One of my all-time favorite whiskies. I bought several bottles when it was released in 2012 and a precious half bottle remains. The Scotch Malt Whisky Society is an independent bottler that bottles almost exclusively limited edition single casks. It’s had a busy year, opening many new clubhouses (or working with partner bars to serve their special whiskies) around the world. The 66.36 is an Ardmore aged in a sherry cask that is described on the label as “Milano sausage with a tropical fruit kebab.” That’s pretty accurate.

To keep up with more whisky posts and news, follow me on Twitter at @schriebergfr

Source: https://www.forbes.com/sites/felipeschrieberg/2018/01/21/my-top-10-whiskies-of-2017/amp/

Beware of This Sneaky New Mortgage Scam

We’ve heard of scams that often cost victims hundreds or thousands of dollars, which is bad enough.

But a mortgage title scam that almost victimized an Akron-area man could have cost him what could have been a life savings for many — tens of thousands of dollars, in the high five figures.

Luckily, he and his credit union mortgage specialist realized what was happening before the money was wired.

This scam apparently has been around for a few years, but may just be hitting the Akron area.

The Akron man is no stranger to buying houses. He’s bought two other houses in his lifetime.

He asked for anonymity and didn’t want to publicize the exact amount he could have lost since he felt violated by the potential scam.

Nationally, the scam has victimized others, including a couple who lost $1.5 million, according to an August Associated Press story.

Here’s what happened to our local homebuyer, and it’s very similar to the national scam:

He was going to close on an Akron-area house on a recent Monday. On the Friday before, he went into Towpath Credit Union to meet with Amanda Sibera, his mortgage specialist, to go over paperwork.

He needed to wire money to a bank in California. Federal rules require any payments over $10,000 to be wired.

As the homebuyer was sitting with Sibera on that Friday morning a few weeks ago, the two were reviewing the wiring instructions that Sibera had from previous transactions. All they needed was to confirm the loan number and bank routing numbers.

“It’s good to have another set of eyes on this. This is a lot of money,” the homebuyer told me. “We literally touched each letter and number with a pen.”

Here’s where it gets weird and scary.

They were on the phone with the title company representative. She said she would email the wire instructions within two minutes.

When the buyer opened his email, he already had a message that appeared to be from the title company representative. He did not immediately notice that the email had actually come a few hours earlier.

“This had the correct dollar amount to the loan to the penny. Even though I had opened it, Gmail had flagged it as suspicious,” he said.

Sibera said the email also instructed the homebuyer to wire the money on Friday “to not cause a delay in the closing. That was the trigger word. It was Friday. He wasn’t closing until Monday. The title company didn’t technically need the funds until Monday.”

When the homebuyer and Sibera phoned the title agent back, they asked if she had sent her email. She said no, she was working on it.

When they looked more closely, they noticed though the email appeared to come from the title agent, the reply message was to a random Gmail account. The listed bank also was in a different state than the actual bank he was using.

The homebuyer “was obviously very afraid of what was happening. He felt like his whole life could have just been gone,” Sibera said.

According to other news reports and warnings from the Federal Trade Commission and the National Association of Realtors, the scammers are likely hacking into email systems of those associated with home closings and consumers’ emails in order to see in real time names and exact amounts of down payments in order to send what looks like a legitimate email.

The American Land Title Association, the national association for title companies, has been trying for two years to educate its members and consumers about the fraud, association spokesman Jeremy Yohe said.

“These hackers interject themselves at the moment when it seems legit. As the buyer, the person just wants to get the keys to their house,” Yohe told me. “We are hoping consumers become aware that this hacking is possible and could steal the funds for their home.”

The title company used in the local homebuyer’s case, First American Title, referred questions to its corporate headquarters. The corporate headquarters, in turn, referred me to Yohe’s organization.

“Our members — attorneys and title companies — have taken many steps to try to combat this problem … but these criminals are smart and are constantly altering their tactics to steal the money,” Yohe said. “Fortunately in this case, [the homebuyers] didn’t lose the money.”

First American Title has a fact sheet on its website warning its agents of the growing wire fraud scam at closing. It suggests agents use a safe phone number to contact the homebuyer, not to rely solely on emails. In some cases, agents have begun requiring an in-person meeting to finish the wiring instructions.

Additionally, the national organization said to be wary when wiring information changes at the last minute.

The homebuyer continued to get emails from the would-be scammer.

“I did get two other follow-up emails on late Saturday or Friday asking “Did you send it? You’re in danger of jeopardizing your closing,’ ” the homebuyer said.

In the end, he successfully closed on the house and wired the money to the right bank by the deadline.

He and the folks at Towpath Credit Union hope by sharing his story, it will prevent anyone else in our area from losing tens of thousands of dollars in this scam.

Said Sibera: “I hope this is the only time. [Closing is] never a fun process.… This should be one of the best days of their lives, not one of the worst.”

SCO update

Now for some housekeeping items. In Friday’s business section, I wrote a short story saying Dominion Energy Ohio’s annual auction to determine the formula for the monthly Standard Choice Offer (SCO), which I continue to recommend, came in at a low rate. It wasn’t as low as the previous year, which was 0 cents, but the new “adder” price to determine the monthly rate came in at 7 cents per thousand cubic feet (mcf). That translates to a $7 yearly increase since the average homeowner uses 100 mcf a year, and is much better than some years, when that adder was several dollars. You can read more about it at http://www.ohio.com/betty.

Also, I have been getting questions about a letter from the NOPEC aggregation that many residents have received. I wrote a column two weeks ago about that aggregation. You can read it in the Jan. 27 newspaper or online.

Beacon Journal consumer columnist and medical reporter Betty Lin-Fisher can be reached at 330-996-3724 or blinfisher@thebeaconjournal.com. Follow her @blinfisherABJ on Twitter or http://www.facebook.com/BettyLinFisherABJ and see all her stories at http://www.ohio.com/betty.

 

Source :https://www.ohio.com/akron/business/taking-action/mortgage-title-scam-almost-costs-homebuyer-tens-of-thousands-of-dollars

Originate VA Loans – There May Be Trouble on the Horizon

WASHINGTON — The U.S. government sent notices to nine lenders this week, warning them that they would be penalized for pressuring veterans into costly home loan refinancing.

The lenders were told they will be kicked out of Ginnie Mae’s mortgage program unless they prove they can correct their actions.

The notices are part of an effort between Ginnie Mae, formally known as the Government National Mortgage Association, and the Department of Veterans Affairs to stop predatory lenders from targeting veterans who use the VA home loan guarantee program.

The occurrence of rapidly and unnecessarily refinancing loans, known as “loan churning,” creates costly fees for veterans, lengthens their debt repayment and threatens the overall VA program, said Ginnie Mae Executive Vice President Michael Bright.

“We need to take these lenders who appear to be operating in a way that doesn’t make sense and put them into this penalty box,” he said.

Ginnie Mae amended its guidelines at the end of January, stating it would be investigating lenders whose actions appear to be out-of-step with other lenders without a logical reason. Regulators said the bad actors accounted for only a handful of outliers.

Removing those outliers is likely to have the effect of lowering borrowing rates for veterans and others who use Ginnie Mae-backed securities by as much as .5 percent, according to Ginnie Mae.

Ginnie Mae did not name the targeted lenders. Bloomberg Politics, citing a source familiar with the matter, reported NewDay Financial, Nations Lending Corp., Freedom Mortgage Corp., LoanDepot.com LLC and Flagstar Bank were among those notified.

“We expect issuers receiving these notices to respond quickly, produce a corrective action plan and come into compliance with our program,” Bright said.

Because of loan-churning, companies that provide capital for the VA program are increasingly weary of lenders taking advantage of veterans who use it, Bright said. Penalizing lenders for churning is likely to improve their confidence.

“People who are backing this program are mad at how these loans are performing,” Bright said. “When we actually do this, my hope is those people who were skeptical see that Ginnie Mae really means it, and that they come back to the program.”

The action could be just the first step in removing predatory lenders that target the VA program, which offers veterans a low-cost mortgage option.

Jeffrey London, director of the VA loan guaranty service, told lawmakers last month that the VA will soon propose rule changes to the program. The regulations could include a requirement for a lender’s refinancing proposal to meet a certain tangible net benefit for veterans, as the Federal Housing Administration already compels lenders to prove before refinancing loans that it insures.

But the process to implement new regulations could be lengthy. The VA must adhere to the federal rulemaking process, which includes a public comment period. London didn’t tell lawmakers an expected timeline and said only the VA would propose new regulations sometime in 2018.

Sens. Elizabeth Warren, D-Mass., and Thom Tillis, R-N.C., introduced legislation in January requiring lenders to demonstrate a benefit to veterans when refinancing their mortgage.

While reviewing VA data in recent months, Ginnie Mae found a fixed-rate refinance of a VA home loan cost veterans an average $6,000 in fees. Their average savings were $90 each month, meaning it would take veterans more than five years to break even on refinancing.

“The American Legion stands with Ginnie Mae and Senators Warren and Tillis as they work to protect veterans from predatory home lending and ensure veterans have an affordable pathway to home ownership,” Denise Rohan, national commander of the American Legion, said in a written statement. “Our veterans didn’t serve their country around the globe in order to be taken advantage of by unscrupulous lenders at home.”

Source: https://www.stripes.com/news/ginnie-mae-penalizes-9-lenders-for-targeting-veterans-1.510746

Housing Prices – Current Red Flags You Need to Know

When real estate investors get this confident, money manager James Stack gets nervous.

U.S. home prices are surging to new records. Homebuilder stocks last year outperformed all other groups. And bears? They’re now an endangered species.

Stack, 66, who manages $1.3 billion for people with a high net worth, predicted the housing crash in 2005, just before prices reached their peak. Now, from his perch in Whitefish, Montana, he says his “Housing Bubble Bellwether Barometer” of homebuilder and mortgage company stocks, which jumped 80 percent in the past year, once again is flashing red.

“It is 2005 all over again in terms of the valuation extreme, the psychological excess and the denial,” said Stack, whose fireproof files of newspaper articles on bear markets date back to 1929. “People don’t believe housing is in a bubble and don’t want to hear talk about prices being a little bit bubblish.”

Bubble? What Bubble?

As the housing market approaches its key spring selling season, Stack is practically alone in his wariness. While price gains may slow, most analysts see no end in sight for the six-year-old recovery.

There are plenty of reasons to be optimistic. The housing needs of two massive generations — millennials aging into homeownership and baby boomers getting ready for retirement — are expected to fuel demand for years to come if employment remains strong. Sales in master-planned communities, many of which target buyers who are at least 55, reached a record last year, according to John Burns Real Estate Consulting. Last month, a gauge of confidence from the National Association of Home Builders/Wells Fargo rose to the highest level in 18 years, and starts of single-family homes in November were the strongest in a decade.

“As soon as homes are finished, they’re flying off the shelf,” said Matthew Pointon, Capital Economics Ltd.’s U.S. property economist.

Homebuilders, which have focused on pricier homes since the market bottomed in 2012, are now getting ready for a wave of first-time buyers left with little to choose from on the existing-home market. Investors are rushing to builders of starter homes, because lower-priced homes in the U.S. are in the shortest supply. Shares of LGI Homes Inc., which targets renters with ads that trumpet monthly payments instead of prices, rose 161 percent last year. D.R. Horton Inc., the biggest builder, powered by its fast-selling Express entry-level brand, gained 87 percent.

Overall, the S&P 500’s index of homebuilders increased 75 percent last year, about four times as much as the stock market as a whole. A subset that includes just the three largest builders was the best performer of the 158 S&P groups.

“Over the past year, we’ve really seen a pickup in the first-time buyer, and that’s what’s driving a lot of the stocks,” said Samantha McLemore, who co-manages Bill Miller’s Miller Opportunity Trust, which has stakes in PulteGroup Inc. and Lennar Corp. “In the long term, we continue to see strong earnings growth for years to come.”

‘Rot in the Woodwork’

Stack has a different perspective. While the market might gradually correct itself, history shows that it’s more likely to “come down hard” with the next recession, he said. He described the pattern as a steep run-up in housing prices spurred by low interest rates. The last downturn came about when economic growth slowed after a series of rate increases, exposing the “rot in the woodwork” and prompting loan defaults, Stack said.

He noted that the Fed has projected three rate increases for this year, and said that “raises the risk that today’s highly inflated housing market will again end badly.” He’s watching homebuilder stocks closely because they’re a leading indicator, peaking in 2005, the year he called the crash — and the year before home prices themselves hit a top.

Stack has been studying median home prices, too, which typically track long-term inflation as measured by the Consumer Price Index. Last summer, they were as high as 32 percent above the measure; in 2006, just before the housing bust, values were about 35 percent higher, according to data from the National Association of Realtors. Half of the 50 largest metropolitan areas were overvalued relative to incomes in November, compared with 36 percent two years earlier, according to an analysis by data provider CoreLogic.

“If we see mortgage rates at more historical levels, house prices can’t stay where they are,” Stack said. Corp

A rate rise from 4 to 5 percent for a 30-year loan would drive up monthly mortgage costs by 12 percent. For buyers, that’s on top of the annual median price gain — 7 percent for existing homes in November, according to CoreLogic. By comparison, disposable income, or earnings adjusted for taxes and inflation, increased just 1.9 percent, according to data from the Bureau of Economic Analysis.

Bill McBride, who runs the Calculated Risk blog and also called the crash, doesn’t think home prices are inflated this time around. Unlike in 2005, lenders are acting responsibly and the Wild West of real estate speculation hasn’t returned, he said. There is less to speculate on, too. Compared with the overbuilding that preceded the bust, today’s pace of construction isn’t fast enough, he said.

“Lending standards are still pretty good,” McBride said, and he doesn’t expect mortgage rates to “take off” in the short term.

The Tax Twist

One wild card is the U.S. tax overhaul, which could cut both ways for homebuilders. They got a lower corporate rate, and many of their consumers will benefit from the doubling of the standard deduction. But it also caps the mortgage deduction at $750,000 instead of $1 million and limits deductions of property taxes, which mighthurt expensive markets such as New York, New Jersey and California.

As a result of the tax plan and an expected gradual rise in mortgage rates, existing-home sales will be flat this year and prices will rise only 1 or 2 percent, said Lawrence Yun, the chief economist for the National Association of Realtors, which opposed the tax bill.

“The housing market has been doing relatively well during the recovery,” Yun said. “But 2018 will be a year where we begin to see some change.”

Homebuilders have a lot going for them, said Carl Reichardt, an analyst for BTIG LLC. Still, he has a hold rating on most of them, a sell on KB Home and a buy only on Lennar and D.R. Horton. That’s because many of those positives are already baked into the share prices, he said, and home construction can grow only so much, given the tight supply of skilled laborers and finished lots.

Slow and Steady

“It’s almost better for the stocks if the general consensus is for moderate growth rather than supercharged growth,” Reichardt said. “It’s the sense that a slow and steady recovery creates more predictability.”

New-home sales will probably increase 8 to 12 percent this year after rising about 11 percent in 2017, said analyst Alex Barron with the Housing Research Center in El Paso, Texas. At 675,000 to 700,000 sales, that’s still almost 50 percent below peak levels in 2005.

“Ever since Trump took over, the mood has been incrementally positive,” Barron said. “Now that tax reform went through, people will have more money in their pockets.”

Bill Smead, whose Smead Capital Management has 11 percent of its $2.4 billion portfolio in NVR Inc. and Lennar, said stocks in general could fall in the short run and that will provide an opening for investors to buy homebuilder shares.

“Nobody wants to take their gains now,” Smead said. “There are no sellers.”

— With assistance by Charles Stein, and Vince Golle

 

Source : https://www.bloomberg.com/news/articles/2018-01-22/housing-bears-hibernate-as-u-s-homebuilders-swagger-into-2018

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