Wells Fargo Lowers Credit Requirements for FHA Loans

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Wells Fargo has announced that it will accept lower credit scores for loans backed by the Federal Housing Administration.

“We have dropped our FICO minimum for FHA from 640 to 600,” says Wells Fargo Executive Vice President Franklin Codel, adding that the move is a way for the bank to start “opening up our credit box more.”

Codel says the bank is looking to expand mortgage-credit availability now that it has significantly reduced its repurchase risk. Wells Fargo was among several banks that had to pay millions to Fannie Mae and Freddie Mac to resolve repurchase claims from loans that were bought by the GSEs and then went sour during the housing bust.

Codel says that Wells Fargo also implemented the qualified mortgage underwriting requirements a month before the Jan. 10 deadline.

Codel says Wells Fargo was “monitoring the production flows” to determine which loans would be rejected under the new QM rules. “We found very, very few,” he adds.

Home Sales in 2013 Rise to Strongest Level in 7 Years

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The housing market has been experiencing a “healthy recovery” over the past two years, with home sales last year rising to the highest level since 2006, according to the National Association of REALTORS®’ latest housing report.

“Existing-home sales have risen nearly 20 percent since 2011, with job growth, record low mortgage interest rates, and a large pent-up demand driving the market,” says Lawrence Yun, NAR’s chief economist. “We lost some momentum toward the end of 2013 from disappointing job growth and limited inventory, but we ended with a year that was close to normal given the size of our population.”

Existing-home sales rose 1 percent in December 2013 compared to November and reached a seasonally adjusted annual rate of 4.87 million.

Existing-home sales for all of 2013 reached 5.02 million sales, 9.1 percent higher than 2012, and the largest rise since 2006 when sales were at 6.48 million at the close of the housing boom, NAR reports.

Home prices were also on the rise in 2013, up 11.5 percent over 2012, with a median existing-home price of $197,100 last year compared to $176,800 in 2012. It was the strongest gain in home prices in a year since 2005, when home prices rose 12.4 percent, NAR reports.

NAR President Steve Brown says that with job growth expected this year, home sales should hold despite rising home prices and higher mortgage rates.

“The only factors holding us back from a stronger recovery are the ongoing issues of restrictive mortgage credit and constrained inventory,” Brown says. “With strict new mortgage rules in place, we will be monitoring the lending environment to ensure that financially qualified buyers can access the credit they need to purchase a home.”

Housing Recovery Regional Snapshot

Here’s a look at how existing-home sales fared in December and for the year across the country:

  • Northeast: Existing-home sales fell 1.5 percent in December but remain 3.2 percent higher than December 2012. Median price: $239,300, up 3.6 percent from year ago levels
  • Midwest: Existing-home sales dropped 4.3 percent in December and are 0.9 percent below year ago levels. Median price: $150,700, 7 percent higher than December 2012.
  • South: Existing-home sales rose 3 percent in December and are 4.6 percent higher than December 2012. Median price: $173,200, up 8.9 percent from a year ago.
  • West: Existing-home sales increased 4.8 percent, but are 10.7 percent below a year ago. Median price: $285,000, up 16.0 percent from December 2012.

Condo Revival Slowly Emerging

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The condo market is on an upswing, but sales are still more than 30 percent short from its peak.

From 2009 to 2013, condo sales increased more than 55 percent, while total existing home sales rose by 29 percent during that time period, according to National Association of REALTORS® data. In comparison, during the boom years between 2001 and 2005, condo sales rose more than 50 percent and existing-home sales increased by 37 percent.

While the share of condo sales to total existing-home sales is nearing pre-recession levels, the number of sales is still not at its peak, the CoStar Group notes.

“Today’s condo market does not involve the irrational speculation of the mid-2000s, when renters fled apartments to get a share of the expanding home price pie,” CoStar Group reports. “A portion of the current sales are often to foreign investors in condo-rich markets like South Florida and to current home owners looking to downsize.”

In its latest existing-sales housing report, NAR reports that the median existing condo price was $198,600 in December, up 10.9 percent over year-ago levels.