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Auto-loan balances race to all-time high: Equifax

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ATLANTA (7/28/14)--Halfway through 2014, auto-loan balances have surged to $902.2 billion, an all-time high, according to the Equifax National Consumer Trends Report, released last week.

Total loan balances have jumped 10% since this time last year, while the total number of auto-loans outstanding climbed by 8.1 million to 64 million over that same stretch.

Meanwhile, serious delinquencies continue to hover near all-time lows, making up less than 1% of total outstanding balances for the third straight month.

"Auto lending continues to thrive, accounting for more than 50% of all new non-mortgage lending through April," said Dennis Carlson, Equifax deputy chief economist. "Lenders are responding to record-low delinquencies by offering great rates and terms, while consumers are responding to the improving economic conditions by making the decision to purchase newer vehicles."

Subprime lending also has swelled across all sectors this year, Carlson said, which could signal prosperous times ahead as a "fully functioning second-chance market is essential for a healthy economy."

Subprime borrowers, or those with credit scores of 640 or lower, made up 32% of all new auto loans originated over the last 12 months.

The total balance of subprime auto loans sits at $46.2 billion, an 8-year high and 28.2% of all new auto-loan balances.

New-home sales sink to 3-month low in June

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WASHINGTON (7/25/14)--Sales of new single-family homes fell 8.1% in June to 406,000 annualized units, according to numbers released by the Commerce Department Thursday.

Sales are down 11.5% year-over-year, and the weak month means a second straight quarter of decline for new homes after an abysmal first quarter ( Economy.com July 24).

The Census Bureau also revised new-home sales in May substantially lower than the 504,000 annualized units that were initially reported by 12%, further undercutting the second-quarter's new-home sales performance.

"The June new-home report is unexpectedly weak," said Celia Chen, Moody's analyst ( Economy.com ). "Sales are down again in the second quarter and slack is creeping back into the market."

All U.S. regions witnessed a drop in sales in June, with the Northeast and South experiencing the steepest declines.

Meanwhile, inventory outpaced demand, as the number of new homes for sale climbed 3% in June. Median prices for new homes fell $3,100 as well, but prices still sit 5.3% higher than prices in June 2013. 

Spike in refis lifts up mortgage app. survey

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WASHINGTON (7/24/14)--After a sharp drop earlier in the month, mortgage application activity has gained back some ground, as the composite index in the Mortgage Bankers Association's weekly survey gained 2.4% during the week that ended July 18 ( Economy.com July 23).

The rebound was driven in large part by refinance activity, which jumped 4.1% for the week, while purchase activity inched up 0.3%, redirecting a 7.6% stumble during the prior week.

Despite the modest gains, however, mortgage application activity has much work to do, as the four-week moving average for purchases has declined 3% and refinances have fallen 3.6%.

Further, refinancing activity sits 45% lower than levels seen at this time last year, while purchase activity is down 14.6% year-over-year.

"Despite last week's uptick, mortgage application activity remains quite subdued," said Gregory Bird, Moody's analyst ( Economy.com ), who added that because mortgage rates have been held down for so long, many consumers likely already have refinanced, "meaning the potential pool for further activity is probably small."

The contract rate for 30-year fixed-rate mortgages remained at 4.33% for the week; the 30-year fixed rate for jumbo mortgages dropped by 2 basis points; and the rate for five-year adjustable-rate mortgages climbed 4 basis points.

While purchase mortgage activity still hovers near a cyclical low, existing-home sales did tick up, according to numbers released Tuesday by the National Association of Realtors, which reported a 2.6% increase in sales in June.

But the slack in the market may be being picked up by those able to pay cash for homes, as now one-third of all home sales are paid for in cash.

"All-cash transactions ... are providing the impetus for overall sales activity to head higher, while first-time buyers remain on the sidelines for the most part," Bird said.

News of the Competition (07/23/2014)

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  • ATLANTA (7/23/14)--Finding bitcoins can be tricky, but a new and perhaps easier way to give and receive the digital currency recently has been developed: through Facebook. BitPay, a Bitcoin-based payment gateway, recently launched the "Get Bits" Facebook app that will allow users to give or receive bitcoins to or from "friends" on the social networking site ( The Paypers July 22). To gain access to bitcoin via Facebook, users must sign into their accounts and activate the application. Once logged in, users will be able to view which of their friends on Facebook also have activated the app and whether they are willing to help procure bitcoin by trade, gift or otherwise. "Because Bitcoin is one of the only forms of payment which cannot be fraudulently reversed, selling bitcoin usually requires some level of trust in the buyer," BitPay wrote on its online blog. "To deal with this, Get Bits (now) leverages the world's largest "web of trust," Facebook ...

Decades-high number of VA loans boost housing market

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NEW YORK (7/23/14)--National housing market numbers may have underwhelmed lately, but one bright spot has been mortgages approved by the U.S. Department of Veterans Affairs (VA), which offer attractive home loans to current and former military servicemembers.

Accounting for 8.1%, or $19.5 billion, of all mortgages issued in the first quarter, according to Inside Mortgage Finance , after jumping more than 25% in the last two years, VA mortgage loans' share of the market has reached a 20-year high ( Bloomberg.com July 22).

"On Facebook, my friends have started posting: 'I got my VA loan, I got my house," Staff Sgt. Claude Hunter, told Bloomberg.com . "Everybody is just ready. A lot of them have done their jobs overseas and are coming home."

VA mortgage benefits can be accessed by veterans, their surviving spouses, active military members and reservists who have served at least six years or who have been called up for 90 days.

The loans pose less risk to lenders, as the government promises to cover a portion of any losses, normally up to 25% of the loan amount.

Unlike the Federal Housing Administration, which will allow down payments of as little as 3.5%, the VA also doesn't levy monthly insurance premiums, and upfront cost can be combined with loan balances.

Hunter, for example, paid $219,000 for a four-bedroom home in May with VA mortgage financing, and he didn't have to make a down payment, according to Bloomberg.com .

About 90% of VA mortgages don't require down payments.

Michael Litzner, real estate broker for Century 21 Homes, told Bloomberg.com: "It's really the only avenue out there for people who are completely cash-strapped to be able to get into a home."

Survey: Mortgage lenders look closer at DTI than credit score

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WASHINGTON (7/22/14)--More than a high credit score or sizeable down payment, boasting a safe debt-to-income (DTI) ratio best positions a consumer for success when applying for a mortgage, a FICO survey has found ( The Washington Post July 18).

Nearly 60% of risk managers polled for the study said that when assessing a mortgage applicant, excessive DTI was their No. 1 concern. Having multiple credit applications out and poor credit scores came in second and third respectively, though DTI came in five times higher than any other response.

DTI ratios first compare a consumer's gross income with potential housing expenses, including principal payments, interest, taxes and insurance. The second piece of the ratio, called the back-end ratio, measures income against all other recurring monthly debt, such as housing expenses, credit cards, student loans and other personal loans.

Together, DTI helps elucidate whether the prospective home-buyer will have enough cash available, given other debt, to make mortgage payments each month.

Lenders prefer to see a housing-expense ratio, the first component, fall under 28%, according to The Washington Post . In May, the average borrower to obtain a mortgage through Freddie Mac and Fannie Mae held a housing-expense ratio of 22%.

Under federal qualified mortgage standards, the highest acceptable income-to-recurring debt ratio, or the back-end ratio, is about 43%.

The average back-end ratio for borrowers who secured a mortgage in May was 34%, according to Ellie Mae. The Federal Housing Administration reported the average denied applicant had a 47% back-end ratio.

A qualified mortgage is a type of loan that carries stable terms that are geared to ensure the borrower can afford pay off the loan.

News of the Competition (07/21/2014)

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  • NEW YORK (7/21/14)-- After a sharp increase in value, the price of bitcoin plummeted last year, and a recent Bloomberg Global Poll of financial professionals found that the slide may only continue. Of the 562 investors, analysts and traders polled, 55% said Bitcoin's virtual currency trades at unsustainable and bubble-like prices ( Bloomberg.com July 17). Fourteen percent said the currency is on the verge of another bubble, while 6% said no bubble is on the horizon. The bubble talk likely stems from yet another recent surge in the ever-volatile value of bitcoin. At the start of the year, the currency traded at $13, but has since risen to $625, according to Bloomberg . Much of the gains were driven by companies who announced they will begin accepting the currency, such as Expedia Inc., Dish Network Corp. and Overstock.com Inc. of late. But finance-industry leaders continue to doubt the currency's longevity, with Jamie Dimon, CEO of JPMorgan Chase, and Warren Buffett, famed billionaire investor, both saying publicly that bitcoin won't last. . .