Winter 2020
Featured Articles

Travis Rowe
NMLS #489764
Mortgage Loan Officer
100 N Tampa Street
Tampa, FL 33602
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A Once-Popular Loan Option Is on the Decline

More than a decade has passed since the Great Recession, yet its impact can still be felt in the U.S. housing market. Many housing experts believe the financial crisis is to blame for the waning demand for a once-popular loan option: the home equity line of credit (or HELOC).

Here are the numbers:
  • According to Black Knight, Inc., in the final quarter of 2018, the lowest share of available equity was withdrawn since 2012. Additionally, HELOC withdrawals were down 10% compared with the same period the year before. Cash-out refinances were down 21% year-over-year.1
  • Based on a 2017 benchmark, Black Knight estimated that more than 600,000 homeowners may have chosen not to tap into equity: 300,000 HELOC borrowers and 330,000 cash-out refinancers.1
  • Freddie Mac estimated that $14.8 billion (adjusted for inflation) in net equity was cashed-out during the final quarter of last year—down from $20.4 billion a year earlier. This total was dramatically below the $104.8 billion in the second quarter of 2006, which was near the peak of the boom.1
  • According to data from the New York Federal Reserve, the number of HELOCs has fallen by nearly half over the past decade. In 2016‚ just 4% of homes had an open home equity line; that number was 10% during the 2000s.2
Many housing experts believe low mortgage rates and access to different types of personal loans are contributing to the wane in popularity of HELOCs. But the most influential factor may be the Great Recession. Said Sam Khater, chief economist at Freddie Mac, “I think it’s the legacy and the impacts [of the recession] that are still fresh in many people’s minds.”

The good news (according to Khater)? Homeowners will have a “much bigger cushion” in the event of another financial crisis.

1Kenneth R. Harney, “Cash-out refinancings, HELOCs are down. Economists aren’t totally sure why,” Washington Post, last modified April 17, 2019.

2“HELOCs’ lost luster,” The MReport, last modified October 29, 2019.

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New Report Details a Potential Rare Interest Rate Environment

The end of October brought the announcement of another rate cut by the Federal Reserve. As with previous cuts, the expectation was that mortgage rates would drop. But just how low will rates go?

A new analysis from the Urban Institute detailed a rate scenario that has never occurred in the U.S.: negative interest rates. Check it out:
  • How do interest rates go negative? The short answer: when the supply of investment capital exceeds demand.
  • Negative mortgage rates would require a rate decrease of more than 350 basis points. There is a precedent for a drop of this size: Rates declined by 300 basis points between 2007 and 2012.
  • Mortgage rates in Denmark have been around -0.50%. Several other countries, including Japan and Germany, have had negative nominal interest rates.
So what would negative rates mean for borrowers? As the Urban Institute report explained, “A negative mortgage rate on a 30-year fixed-rate mortgage does not mean the homeowner receives a payment. Rather, the homeowner still makes a payment each month, but the balance owed decreases by an amount greater than the mortgage payment.” Additionally, the report said negative rates would likely spur a significant rise in refinances.

However, the report also stated that while negative rates would cause minimal disruption to the mortgage finance system (and possibly an increase in housing affordability), it’s highly unlikely a negative rate environment would occur here in the U.S.

Click here for the full report.

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Younger Veterans, Service Members Driving a VA Loan Increase

The number of mortgages backed by the Department of Veterans Affairs (VA) continues to climb—and it’s younger veterans and service members who are driving this increase. VA loans jumped 2.30% in the 12 months through September, led by a 14% gain in the number of mortgages for Millennials.1

Here are the numbers:
  • Millennials and Generation Z veterans and service members accounted for 45% of the VA purchase loans in fiscal year 2019 (which ended September 30). Overall, VA purchase loans experienced their eighth consecutive year of growth.1
  • Millennials (in this case, those aged 23 to 38) accounted for 211,276 loans, which was a 34% share of the 624,332 mortgages backed by the VA during the 12-month period. This number is up 30% from a year earlier.2
  • Millennials and Generation Z were the only groups to post year-over-year growth in purchase lending.1
  • The VA delinquency rate was 4.24% in the second quarter—lower than the delinquency rate of 9.22% for borrowers with FHA-backed loans.2
  • Veterans United Home Loans compiled a list of the most popular cities for Millennials and Generation Z veterans using VA loans. Cities were ranked by their percentage increase in VA purchase loan volume. The top five were: Jacksonville, N.C.; Killeen-Temple-Fort Hood MSA, Texas; Oklahoma City, Okla.; El Paso, Texas; and Fort Walton Beach-Crestview-Destin MSA, Fla.1
Numbers such as these make it clear that VA loans remain a great option for today’s buyers.

1Steve Randall, “Young veterans and service members are driving VA purchase loans,” MPA Mag, last modified October 23, 2019.

2Kathleen Howley, “VA mortgage lending increased 2.3% led by Millennials,” HousingWire, last modified October 23, 2019.

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  1. Where do icicles most often form?
    1. The north side of buildings
    2. The south side of buildings
    3. The east side of buildings
    4. The west side of buildings

  2. What city is home to the Winter Palace?
    1. St. Petersburg
    2. Quebec City
    3. Reykjavík
    4. Copenhagen

  3. What is the name of the Grinch’s dog?
    1. Pete
    2. Max
    3. Sam
    4. Pal

  4. In 1939‚ Rudolph was created as a promotional figure for which department store?
    1. Montgomery Ward
    2. Macy’s
    3. J.C. Penney’s
    4. Sears

  5. What is the highest grossing holiday movie of all time?
    1. The Polar Express
    2. Elf
    3. How the Grinch Stole Christmas
    4. Home Alone

Answers: 1) B;   2) A;   3) B;   4) A;   5) D

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