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Total Tappable Equity Falls For First Time Since Housing Recovery Began

The Data & Analytics division of Black Knight, Inc. released its latest Mortgage Monitor Report, based on data as of the end of October 2018. This month, Black Knight looked at full Q3 2018 data to revisit the U.S. home equity landscape, finding that quarterly declines were seen in both total equity and tappable equity, the amount available for homeowners with mortgages to borrow against before hitting a maximum 80 percent combined loan-to-value (LTV) ratio. Ben Graboske, executive vice president of Black Knight’s Data & Analytics division, explained that the decline is being driven by home prices pulling back on a quarterly basis in some of the nation’s most expensive housing markets.


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“After seeing a significant slowdown in its growth from the first to second quarters of 2018, the amount of tappable equity fell by $140 billion in Q3 2018,” said Graboske. “That is the first decline we’ve seen since the housing recovery began, and its cause can be traced directly to softening home prices in some of the nation’s most expensive – and equity- rich – markets. Indeed, tappable equity fell in 60 of the 100 largest markets, including 12 of the top 15. Three markets in California alone – San Jose, San Francisco and Los Angeles – accounted for 55 percent of the total net decline. Add Seattle into the mix, and you see that just four markets were behind two-thirds of the net reduction in tappable equity. All were areas where home price growth has far outpaced the national average in recent years, but in which prices fell in Q3 2018 – from as little as one percent in Los Angeles, to a 4.6 percent drop in San Jose.


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“Of course, there is still $9.8 trillion in total home equity in the market, some $5.9 trillion of which is tappable. That’s $571 billion more than in Q3 2017, and tappable equity remains near an all-time high. It’s also important to remember that in general third quarters are relatively flat as far as home prices are concerned, and that tappable equity is up on an annual basis in 98 percent of major metro areas. But the fact remains that affordability concerns are beginning to have an impact on home prices, particularly in more expensive markets, and as a result, on homeowner equity as well.


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Interestingly enough – although for-sale inventory is up on an annual basis for the first time in four years – an analysis of listings on mortgaged properties suggests that homeowners reluctant to put their current homes on the market due to ‘rate lock’ or ‘affordability lock’ may still be holding down available inventory by about six percent. By constraining the supply of available homes, this in turn may be countering what might otherwise be greater downward pressure on home prices.”

Other results from the quarterly equity data showed that just 1.8 percent of homeowners remain underwater, owing more on their mortgages than their homes are worth. For those with equity, the average homeowner with a mortgage has $191,000 in equity in his or her home. Among those with tappable equity, the average amount available to borrow against is $136,000. In total, over 50 million homeowners with mortgages have some amount of equity in their home, 43.6 million of which have tappable equity – a decline of approximately 272,000 from this time last year.

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Helping Our Vets

NewDay USA, a nationwide VA mortgage lender, has announced Operation Home, a new program designed to help hundreds of thousands of active Servicemembers and military Veterans purchase a home with no down payment and no money out of pocket for closing costs. The official launch of Operation Home coincides with NewDay’s sponsorship of this Saturday’s nationally televised Army-Navy football game.


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While traditional VA mortgages do not require a down payment for qualified borrowers to purchase their homes, Veterans still need to bring money to the settlement table to cover closing costs. Many Veterans, however, would rather have the security of a savings account in the bank, or be able to use savings for the cost of moving or furnishing their new home. NewDay USA’s Operation Home program works with realtors nationwide to understand how to maximize a Veteran’s VA benefits.


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“Veterans and their families have made great sacrifices to protect our freedom, and we want to help them achieve their own share of the American Dream,” said Rear Admiral Thomas Lynch USN (Ret.), Executive Chairman of NewDay USA. “With Operation Home, our Veterans will be able to purchase the home of their dreams without taking one dollar out of their pockets for a down payment or closing costs.”


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NewDay employees come to work each day with the noble purpose of helping a Veteran buy a new home. Located at NewDay USA headquarters, NewDay University develops mortgage bankers to counsel Veterans to understand their valuable VA benefits, and guide them throughout the mortgage process.

“With Operation Home, Veterans and active Servicemembers don’t have to save up to move up,” said Rob Posner, CEO of NewDay USA. “We have 500 employees who come to work every day with the sole mission of serving Veterans.”

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Helping Struggling Miami Homeowners

Ocwen Financial Corp., the National Association for the Advancement of Colored People (NAACP), and NID Housing Counseling Agency (NID) are working together to host an event on Saturday, July 29 for struggling homeowners in the Miami area. This event is part of Ocwen’s “Summer of Help & Hope” series, an initiative to bring responsible mortgage solutions to struggling homeowners across the U.S.

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The event will be held from 9:00a.m. to 3:00p.m. at the Betty T. Ferguson Recreational Complex at 3000 NW 199th Street in Miami Gardens, FL. There is no cost for admission or parking.

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This event will offer Ocwen customers the opportunity to meet with Ocwen Home Retention Agents and NID housing counselors to explore loan modifications and other options to make their homes more affordable.

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“The rate of foreclosure in Florida, specifically Miami-Dade County, is much higher than the national average,” said Jill Showell, Senior Vice President of Government and Community Relations at Ocwen. “Ocwen is committed to helping struggling borrowers in Florida, and across the country, remain in their homes and a part of their communities. Having trusted partners such as the NAACP and NID, organizations that work in some of the nation’s hardest hit communities, allows Ocwen to reach more of its customers who are in need of assistance.”

Ocwen currently services more than 117,000 loans in Florida. From January 1, 2008 through June 30, 2017, Ocwen has provided borrowers in the state more than 85,500 loan modifications. Approximately 38 percent of these modifications included principal forgiveness, as permitted by applicable agreements, totaling more than $2.15 billion. Nationwide, Ocwen has granted over 735,000 loan modifications and provided billions of dollars in principal forgiveness to homeowners at risk of foreclosure.

“Homeownership remains one of the single biggest ways a person can build wealth in America,” commented Marvin Owens, Senior Director of Economic Programs at the NAACP. “Even though the housing market is showing signs of recovery, homeowners in Florida’s minority communities continue to struggle to pay their mortgages and remain in their homes. Ocwen borrower outreach events are crucial to helping homeowners receive assistance and resources on the local level, and hopefully have a chance at a fresh start.”

“NID is a strong advocate of homeownership. One of our goals is to help families facing financial hardship, remain in their homes and avoid foreclosure,” said Ray Carlisle, President of NID. “NID has seen firsthand the value of local homeowner outreach events. We have had significant success collaborating with the NAACP and Ocwen, and together are making a difference in the lives of many low- and moderate-income and minority families throughout the country.”

Survey Reveals The Number One Obstacle For Homebuyers Nationwide

NAMB, The National Association of Mortgage Professionals, announced the results of its monthly member survey. The primary findings include the following:

>>low home inventory was cited by 58.0 percent of respondents nationwide as the number one obstacle for clients looking to buy a home, followed by down payment (18.5 percent) and credit (7.0 percent)

>>according to 57.6 percent of respondents nationwide, the average length of time to receive an appraisal is 10 days or fewer, for 36.8 percent of respondents, turn times average between 10 and 21 days

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Roughly 53 percent of responses the survey came from NAMB members in California, Florida and Texas.

In California, 73.0 percent of respondents cited low home inventory as the number one obstacle for clients looking to buy a home, followed by down payment (9.0 percent) and credit score (3.3 percent). Appraisal turn around times are fairly quick in the Golden State, averaging fewer than 10 days for 79.8 percent of respondents. Of the three states, California was the only one in which appraisal turn times were reported to exceed 21 days, although only 2.2 percent of responses indicated average times between 22 and 30 days.

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In Florida, the reported top obstacles to home buying were more balanced: low inventory was cited most often at 36.4 percent, followed down payment (30.3 percent) and credit score (21.2 percent). The majority of respondents (60.6 percent) reported average appraisal turn times of fewer than 10 days, and the remainder (39.4 percent) stated timeframes between 10 and 21 days.

Texas NAMB members also cited low inventory as the number one obstacle to home buying (58.0 percent), followed by down payment (16.1 percent) and credit score (6.5 percent). The average length of time to get an appraisal back in Texas takes fewer than 10 days for 54.8 percent of respondents, and between 10 and 21 days for the remaining 45.1 percent.

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NAMB surveys its members periodically to determine mortgage activity and trends. For the June 2017 survey, over 65 percent of respondents nationwide reported being employed by mortgage brokerage firms. Slightly more than 30 percent stated that they are licensed in multiple states.

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Which Political Party Is Better For Homeownership?

Homeowners living in Democrat-controlled congressional districts have gained more than twice as much in housing wealth as homeowners living in Republican-controlled districts over the past eight years, according to an analysis by ATTOM Data Solutions.

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Among 2.4 million single family homes purchased eight years ago, those in Democrat-controlled districts have gained an average $59,467 in value since purchase — a 21 percent return — compared to a $22,086 return representing a 10 percent ROI for homes in Republican-controlled districts.

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But homeowners in Republican-controlled districts are paying lower property taxes — $2,514 on average representing a 1.02 effective tax rate compared to $3,659 representing a 1.07 percent tax rate for homeowners in Democrat-controlled districts.

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Counter to the national trend, seven of the 11 battleground states in the 2016 presidential election have produced better ROI for homeowners in Republican-controlled districts.

To come to these conclusions ATTOM Data Solutions looked at home values, appreciation, property taxes and equity for 2.4 million single family homes purchased eight years ago, broken down by congressional district. Those metrics were measured for all homes in congressional districts with a Democrat representative and for all homes in congressional districts with a Republican representative.

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Homeowners Are Getting Optimistic Again

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Nearly half (46%) of all U.S. homeowners with a mortgage expect their equity will increase in 2016, even though three out of five (60%) report equity in their homes has already increased during the last three years of the housing recovery, according to new research conducted for loanDepot.

Of those who expect their equity to change this year, 85 percent expect it to rise as much as 10 percent, with a quarter (27%) expecting it to rise between 6 to 10 percent. More than half (58%) are expecting an equity bump between one and five percent. Industry-wide reports forecast 2016 annual price gains to range between 2.3 and 4.7 percent. Only 3 percent of homeowners expect their equity to fall in 2016, and 27 percent expect it to remain the same.

More than 100 U.S. housing experts forecast home values will reach an average annual growth rate of 3.65 percent through the end of 2016. Today, more than 49 million homeowners – or 66 percent of all homeowners – hold a mortgage on their home.

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The loanDepot research also found that while 57 percent of homeowners believe their home’s value has appreciated in the past three years, the majority (80%) underestimate the amount of value their home has gained throughout the housing recovery. Of those who believe their home’s value has increased since 2013, one in four (27%) believe it increased between one and five percent since 2013. The Case Shiller 20-city index shows prices rose twice that much, in fact 10 percent from Nov 2013 to Nov 2015.

“Homeowners who bought during the housing boom are regaining equity many thought was lost forever, yet too many are not aware of the equity they have gained or they are unclear about how to determine changes in their equity,” said Bryan Sullivan, chief financial officer of loanDepot, LLC. “People who bought after the housing boom when prices were low are realizing homeownership can be a great investment and an asset that they can now leverage through equity to realize many dreams. Whether they choose to leverage their home equity now or reserve it for future needs, millions of homeowners have choices today not available just a few years ago.”

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Homeownership Is Not For Everyone

Back when I was 10 years old, the principal of my elementary school called a student assembly and made a major announcement. In order to foster a degree of responsibility and maturity among the student body, the principal decided to install a suggestion box outside of her office. During the assembly, she beamed with pride over the belief that this suggestion box would create a new environment where the students would have a say in how their school was being run.

A week later, the principal called another student assembly. The beaming pride of her initial announcement was replaced with a scowling anger, and with good reason – the suggestion box was removed because, she claimed, it was overstuffed with ridiculous and offensive ideas. The most egregious suggestion, the principal stated, was the proposal to have all of the girls in the school walk around in the nude. The principal decided to throw the suggestion box into the trash because she felt that the students could not take their newly bestowed responsibility with any trace of seriousness.

While I admit that the Benny Hill-level notion of a clothing-free female student population was not the most helpful suggestion, it was ridiculous for the principal to expect a bunch of 10-year-olds to come up with sophisticated ideas to improve the ebb and flow of school management. Yes, it was noble to believe that students should have a say in how their school should operate, but abruptly opening the promise of equal partnership without properly explaining what was expected of the students was a huge mistake.

In many ways, the moral of this warped story can apply to the concept of contemporary homeownership. For decades, people have been forced to absorb the much-ballyhooed belief that homeownership is some sort of life-fulfilling goal and that every American is deserving of having a house to call their own.

But – and, I know this may sound like apostasy in stating this in a publication being distributed at a Mortgage Bankers Association conference – homeownership is not the ideal goal for many Americans. Indeed, too many people approached homeownership in the Housing Bubble era with the level of puerile immaturity that my elementary school classmates displayed when they stuffed the suggestion box.

The current housing market (and, by extension, the economy as a whole) is still resonating with the consequences of the actions of dum-dum homeowners. And, in many ways, there is evidence that people did not learn from previous mistakes – especially in the rising level of get-rich-quick house flipping activity and in the demands of some self-appointed activists for the weakening of federal guidelines to artificially enable increase homeownership rates.

It is often said that homeownership is the American dream. Oddly enough, the man who popularized the phrase “American dream,” writer James Truslow Adams, did not consider homeownership when the championed that expression. Instead, Adams had a very different idea in mind when that phrase popped up in his 1931 book “The Epic of America.”

“It is not a dream of motor cars and high wages merely, but a dream of social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position,” Adams wrote. Yup, no mention of mortgages there!

When I read about Americans that bypassing homeownership in favor of renting, I am not displeased. It is my belief that most of the individuals choosing that route have an intelligent understanding of their financial and emotional strength. After all, homeownership is a major responsibility, and praise should be given to those who recognize that they current lack the wherewithal to carry the burden of mortgage debt and the expenses associated in owning residential property.

At a time when the economy is stagnant, wages are mostly dismal, the employment picture is not rosy (especially for those just out of college and those in the later stretch of their middle-age period) and the cost of living is going in the wrong direction, it is easy to understand why so many people are saying no to buying a house.

An effort to push the wrong people into homeownership is as reckless and foolish as demanding that an elementary school administration require female students to walk around naked. Sometimes, what we consider to be a good idea is actually quite the opposite.

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Lender Reaches Out To Lower-Income Borrowers

Mortgage Master, a regional mortgage lender and one of the country’s largest privately-owned mortgage companies, has become the first non-depository lender to join the Massachusetts Home Ownership Compact to provide affordable mortgage solutions to lower income first-time home buyers. As a signatory of the Home Ownership Compact, Mortgage Master has committed to make a good faith effort to provide Mass Housing mortgage loans to borrowers below the median household income in 2014.

“Mortgage Master is proud to call Massachusetts its corporate headquarters and we are committed to serving our local state community,” said Paul Anastos, President of Mortgage Master. “The recovery of the housing market, the dream of homeownership and the overall economic success of our local communities are things that are extremely important to us at Mortgage Master. We are excited to support the governor’s initiative and do our part – as a collaborative community member – in helping borrowers and working toward strengthening Massachusetts.”

“The Homeownership Compact is a great example of how government, lenders and non-profit agencies can work together to make affordable mortgages available to first-time homebuyers across the Commonwealth.  We welcome Mortgage Master to the Compact,” added Aaron Gornstein, Undersecretary, Department of Housing and Community Development of Massachusetts.

Governor Deval Patrick announced the Massachusetts Homeownership Compact in 2013 with the goal of providing 10,000 mortgage loans over the next five years to first-time home buyers with household incomes below the area median income. In the second year of the Compact, Mortgage Master is paving the way as the first non-depository mortgage lender to sign on.

“We are pleased to have Mortgage Master join the Compact,” said Esther Maycock-Thorne, President of the non-profit Massachusetts Affordable Housing Alliance. “Mortgage companies play an important role in reaching low-to-moderate income first time borrowers in our Commonwealth and we congratulate Mortgage Master on making this commitment.”

“We hope many more lenders join in by signing the Compact,” continued Mr. Anastos. “We have 10,000 mortgages to originate and no time to waste. Mortgage Master is eager to focus its capabilities towards such an important initiative that will help citizens of Massachusetts by strengthening our communities and keeping young families in the state as a solid economic foundation for the future.”

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Lender Takes Educating Borrowers Seriously

Churchill Mortgage, through its homebuyer workshops, has helped prepare nearly 1,000 borrowers for homeownership. Since the series’ launch seven months ago, the lender has hosted almost 200 events. Churchill is provider of conventional, FHA, VA and USDA residential mortgages across 33 states.

Designed to educate borrowers on the primary steps to homeownership and facilitate a seamless purchase, Churchill hosts the monthly workshops in different cities throughout the country. Attendees receive gainful insight into the end-to-end home buying process, including budgeting tips for home financing, how to complete a mortgage application, tips for selecting the right loan program and locking in an interest rate, and what key mistakes to avoid when shopping for a home. Churchill also presents attendees with a copy of their credit report, provides the opportunity to meet with a home loan specialist and discusses what to look for in a Realtor® and other local experts involved in the home buying process.

“The steady rise of home prices combined with pent-up demand has increased the number of first time buyers entering the market this year,” said Mike Hardwick, president of Churchill Mortgage. “Our Home Buyer Workshops have helped more than 1,000 people across the country to approach the home buying process with confidence. Building on this success, we have scheduled workshops throughout the remainder of the year to empower more borrowers to pursue and achieve the real American dream of debt-free homeownership.”

Minority Homeownership In Obama’s America

For many years, I have been arguing that housing is not a fuel that can be used to drive the U.S. economy. Instead, it is a reflection of a healthy economy. And you cannot have a vibrant job market unless the basic economic foundation is solid.

I believe that my argument is affirmed in a new report issued by Zillow and the National Urban League, which found significant disparity in comparing homeownership rates between whites and nonwhites. To its credit, the report acknowledged the root of the problem is strictly economic: African Americans and Hispanics have a lower average income than whites and, thus, they are more likely to have lower credit scores.

The report was stark in measuring racial differences in the conventional mortgage market. “While blacks make up 12.1 percent of the U.S. population, they filed only 6 percent of all mortgage purchase applications in 2012,” the report stated. “Hispanics make up 17.3 percent of the population and filed 9.4 percent of the applications. In contrast, whites make up 63 percent of the U.S. population and filed 64.8 percent of purchase applications.”

Now, circle back to a report issued in May 2009 by the Pew Research Center, which analyzed the dramatic decline in minority homeownership during the recession. That report noted that homeownership gains for African Americans and Hispanics had nothing to do with a muscular economy and everything to do with loose lending standards and the proliferation of sloppily underwritten subprime loans.

The Pew report, however, failed to mention the role of political pandering from both parties in artificially inflating minority homeownership data without providing for the economic foundation needed to support this financial responsibility. (And lest we forget, homeownership is a responsibility that people earn.) Rather than create a foundation that would benefit all races and allow homeownership rates to rise organically as the result of economic strength, it was quicker and easier to enable reckless lending and encourage irresponsible borrowing as the strategy to inflate minority homeownership numbers. Not surprisingly, nonwhites were disproportionately impacted when the housing bubble burst.

Today, very few sane people can claim the U.S. economy is in good shape. This dreadful economic climate is especially cruel for African Americans – recent data from the Pew Research Center has found that the unemployment rate among African Americans is approximately double that among whites. And in 2011 – supposedly two years after the recession officially ended – 27.6% of African American households were living in poverty. That level is nearly triple the poverty rate for whites.

So what is the answer to this mess? Well, too much talk from the administration and its allies about “income inequality” seems to be centered on raising taxes on successful Americans. It is a silly idea, of course, which does nothing except demonize those who enjoyed a financial reward for their hard work. Even worse, the president’s talk about “income inequality” fails to mention that the situation became more pronounced since he moved into the White House.

If the administration is honest about encouraging minority homeownership, there needs to be a consideration of the bigger picture.  Five years into the Obama presidency, the economy is still stagnant and there is no evidence that 2014 will be the year of the economic turnaround. If nonwhites are going to be equal partners with whites in homeownership rates as well as the wider economy, then a serious economic game plan is needed to make this a reality and to wipe out the lingering disparity between the races. Sadly, after five years, we’re still waiting for this plan to be put forward.

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