Why Home Buyers Are Cautious About Housing

While home buyers confidence in the economy is growing, they remain hesitant about the housing market, according to Fannie Mae’s December 2014 National Housing Survey of 1,000 respondents.                                    home buyers

One piece of good news is that more potential home buyers believe it’s getting easier to qualify for a mortgage, with the share of those surveyed rising to 52 percent in December and tying an all-time survey high. On the other hand, their confidence in their household incomes remain shaky. The share of Americans who say their household income is significantly higher than it was 12 months ago has mostly remained flat at 25 percent, the survey shows.

“Despite consistent and robust job growth in recent months, consumer attitudes toward housing remained cautious in the final month of 2014,” says Doug Duncan, Fannie Mae’s chief economist. “Our survey results show that consumer housing sentiment has, on average, been moving sideways amid some improvement in the general view of the economy. It is not surprising that the housing sector continues to lag behind the rest of the economy, given the long-term financial commitment that getting a mortgage represents. Many prospective home buyers want to be certain that their personal finances can withstand potential downside risks to the economy.”

Some additional findings from Fannie Mae’s December survey include:

  • Forty-six percent of those surveyed believe home prices will rise in the next 12 months, while only 8 percent say they believe prices will fall.
  • The number of home buyers who say now is a good time to buy a house fell to 64 percent, a drop in December month-over-month.
  • The number of home buers who say now is a good time to sell rose by 1 percentage point to 40 percent.
  • The number of adults surveyed who say they would purchase a home if they were going to move dropped to 61 percent, an all-time survey low. On the other hand, the share who say they would rent rose 3 percentage points to 34 percent.
  • The percentage of those surveyed who say they expect their personal financial situation to improve over the next 12 months fell to 45 percent.

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Source: Fannie Mae

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Challenges Facing The Real Estate Market 2015

Industry analysts and economists largely believe the real estate market will gain traction this year , but they acknowledge several challenges that pose a potential derailment to the ongoing recovery. CNNMoney recently highlighted several of those challenges:

Investors exit the market: Institutional investors accounted for 15 percent of all sales in October, a drop from 20 percent in January, according to National Association of REALTORS® housing data. “Rising home values are causing more investors to retreat from the market,” says Lawrence Yun, NAR’s chief economist. Institutional investors purchased thousands of properties during the onset of the housing recovery, helping to propel the market in many areas across the country. But now with higher home prices, they may be looking to cash out. “Home price appreciation has given those investors a good opportunity — and motivation — to sell and realize a solid return on many of their properties in many markets,” according to a report by RealtyTrac looking at institutional investor activity. In that report, RealtyTrac found that institutional investors who bought in 2012 could potentially earn returns of 38 percent to 43 percent if they sold in the current market. But as investors lessen their stake in the market, first-time buyers, whose presence has been at 30-year lows, may be more poised to step in their place. real estate market

Lending criteria still tight. REALTORS® still say tight credit is holding many of their would-be buyers back and derailing transactions as buyers continue to struggle to qualify for a mortgage (although REALTORS® surveyed say they have seen a slight improvement in lending recently), according to the latest REALTOR® Confidence Index.

“The increase in mortgage insurance premium payments for FHA-insured loans continued to be reported as an added financial strain for first-time buyers,” the report notes. “Obtaining FHA financing for condominiums (typically the entry points for home ownership) continued as a major issue; many condominiums were reported as not meeting FHA eligibility requirements.”

In December, mortgage financing giants Fannie Mae and Freddie Mac announced they were easing lending standards, most notably with a 3% down payment offering for qualified borrowers. But that doesn’t mean all lenders will ease up on credit, Mark Zandi of Moody’s Analytics told CNNMoney. Some lenders may continue to be uneasy about lending to borrowers with sub-par credit or who are unable to make large cash down payments.

Rising mortgage rates: Mortgage rates are sitting near historical lows at the moment, under 4 % for the 30% fixed rate mortgage,, but don’t expect that to last. Many economists are predicting rates will push up to 5 percent by the end of this year. “If [the Fed] pushes rates up, it could have a big impact on the market,” says Fannie Mae’s Chief Economist Doug Duncan. Home buyers particularly in high-priced markets, such as San Francisco and Los Angeles, who are already paying large portions of their incomes to housing could face a further chip in affordability, economists say.

Foreign buyers buying less in U.S.: Foreign buyers helped fuel the housing market recovery, but there are signs they’re presence is receding. “As the dollar has strengthened, it made U.S. housing more expensive,” Dunchan says. Chinese buyers continue to have a strong presence in the U.S. market, but buyers from Europe and Russia – where their economies are starting to soften – are beginning to lessen their stake in U.S. real estate, says Lawrence Yun, NAR’s chief economist. For example, in California alone, sales to international clients has plunged about 25 percent in the past year, according to the California Association of REALTORS® .

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Source: CNNMoney 01/02/2015

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Your New Year’s Resolution: Save For A Home

For many Americans, the jump into the new year marks an important step forward toward achieving a New Year’s resolution, and saving for a down payment to buy a home may be among them.

But that goal can take some time, and lots of savings commitment. Thirty-seven percent of recent home buyers say it took them six months or less to save for a down payment to buy a home; 15 percent saved for six to 12 months; and 10 percent say they saved for 12 to 18 months for a down payment, according to the 2014 Profile of Home Buyers and Sellers survey, published by the National Association of REALTORS®.                    resolution

Saving for home ownership often requires some sacrifices too, recent buyers reported. Seventy-two percent of home buyers say they cut spending on luxury or non-essential items in order to save for a down payment, 56 percent reduced their spending on entertainment, and 45 percent trimmed their clothing budget in order to save more.

But there is hope: Many buyers often find out they may not need as much down payment as they originally thought to purchase a home. For first-time home buyers, the median down payment is 6 percent, and 13 percent for repeat buyers.

“There’s still misperception out there that a much higher down payment is needed, while that’s not the reality,” said Lawrence Yun, NAR’s chief economist, in a recent statement based on pending-home sales contracts inching up.

What’s more, for Americans who are able to save for a down payment to purchase a home, they often find meeting this New Year’s resolution has a big payoff in the end.

“Seventy-nine percent of recent buyers believe their home is a good financial investment, and many believe it is a better financial investment then stocks,” Yun notes about NAR’s survey findings at a recent blog post at NAR’s Economists’ Outlook blog. “Aside from the financial investment, buyers were able to successfully complete their goal which was just to own a home of their own.”

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Source: NAR Economist Outlook Blog 12/31/2014



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Resolutions For Home Buyers 2015

Potential home buyers who have put getting into the housing market at the top of their to-do list next year may not realize how many steps it takes to make it to the finish line. As a real estate pro, now may be the perfect time to share a few planning tips for where they can begin this January.

“Roughly 45 percent of Americans make New Year’s resolutions each January, with many of their pledges being financial in nature,” says Raz Daraban, communications manager for personal finance site WalletHub. He says his company engaged a panel of financial and consumer psychology experts to create 15 resolutions “in order to help progress-minded people improve their money management in the New Year.”     home buyers

  1. Get Reacquainted with Your Finances: Check the status of all your financial accounts and evaluate your monthly cash flow.
  2. Make a Budget: According to survey data from the National Foundation for Credit Counseling, only 39 percent of adults have a budget. The best way to tackle this task is to gather together all of your bills from the past few months and then make a list of your recurring expenses in order of importance. You can then compare the cost of these expenses against your monthly income and eliminate any outlays that would outpace your spending power. Later, compare your ensuing monthly spending to your planned budget to make sure you’re abiding by it.
  3. Implement the Island Approach: This is a personal finance technique based on the theory of compartmentalization that encourages consumers to isolate different financial needs on different financial products as if they were a chain of related islands. The approach might entail getting one credit card for everyday purchases that you can pay off in full by the end of the month and another for revolving debt.
  4. Automate as Much as Possible: One of the most easily avoidable mistakes that people make in regards to their finances is missing due dates. Late payments can have serious ramifications on your financial life, but avoiding them is as simple as setting up recurring monthly payments from a checking account. Remember to review your monthly statements in order to avoid being overcharged or missing a sign of fraud.
  5. Build an Emergency Fund: Roughly 56 percent of Americans do not have a rainy day fund, according to the Financial Industry Regulatory Authority’s National Financial Capability Study. WalletHub recommends ultimately building a fund with about 12-18 months’ take-home income, though that won’t happen overnight, so they suggest you chip away at it over time. Timing-wise, they recommend actually creating a 6-month safety net before beginning to pay down debts in earnest.
  6. Get Out of Debt: Some of the steps mentioned above will reduce future reliance on debt, but you should also focus on eliminating existing balances in 2015. WalletHub suggests transferring current debt to a 0% balance transfer credit card and using a credit card calculator to find the best method to pay down your debt.
  7. Improve Your Credit Score: WalletHub says the difference between good and bad credit is roughly $650 in credit card payments, $1,400 on your auto loan and $2,300 on a mortgage each year. But they also note that good credit extends well beyond that, impacting insurance premiums, your ability to buy, and the types of loans you’re eligible for. The best way to improve your credit score is to maintain an open credit card account that is in good standing. You don’t even need to make purchases with your card. If you don’t have the credit standing necessary to qualify for a normal credit card, you can always place a refundable deposit on a secured credit card and benefit from what’s tantamount to guaranteed approval.
  8. Increase All Savings by 15 Percent: The best approach to meeting all of your various savings needs is to establish separate accounts for each, which you fill with automatic monthly contributions from a bank account. This provides useful perspective on each of your goals and enables you to better track progress.
  9. Give Back to Charity: Charitable giving is beneficial in terms of self-perception, tax liability, and community building. It’s a laudable goal for each of us in 2015.
  10. Do Your Taxes Early: Procrastination breeds costly mistakes, as well as filing late and underpaying, both of which will incur expensive penalties.
  11. Set a Good Financial Example: Children tend to learn by example, which means the young people in your life are likely internalizing how you handle money – information that will serve as the foundation for their future relationships with finance. Improve your own financial performance in order to impart beneficial lessons to them.
  12. Take Commonsense Steps to Fight Fraud: Identity theft has become a major theme for both the modern consumer and corporate America, with a number of notable banks, retailers and entertainment companies getting hacked in 2014. While there is only so much you can do if your credit card information get pilfered from a store, there are some steps you can take to reduce your overall risk. Shred sensitive financial documents before throwing them away and put a lock on your mailbox when you’re out of town. Making a credit card your primary spending vehicle and only signing for debit card purchases (rather than entering your PIN) will confer the most robust fraud liability benefits on you. Checking your credit report regularly will also enable you to spot fraud early on.
  13. Mind Your Overall Health: There is a clear connection between physical, emotional, and financial health. Not only are health care expenses the leading cause of bankruptcy in the United States, but they also comprise a great deal of our annual spending between insurance premiums, out-of-pocket costs, gym memberships, and more. Regular exercise and healthy eating will help keep such costs low and may lead you to make wiser financial decisions that focus on the long term.
  14. Help Other Consumers by Sharing Your Experiences: One of the best ways to aid others in the pursuit of financial responsibility is to share your experiences with different financial products, companies, and professionals. Reviews have the power to drastically improve transparency in the personal finance space, enabling people to avoid the bad apples, gravitate to the best deals, and ultimately save money.
  15. Stress Test Your Finances: Prepare for worst-case scenarios by putting your personal finances through the paces – much like banks and other financial institutions are required to do in order to verify their stability. Are your finances equipped to handle the job loss of the family’s breadwinner?

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Source: WalletHub 12/29/2014

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Loan Demand Picked Up Before the Holidays

Loan demand picked up before the holidays. Mortgage applications were on the rise last week after posting several weeks of declines. Applications for home purchases, viewed as a leading gauge of future home buying activity, increased by 1.3 percent in the week ending Dec. 19, the Mortgage Bankers Association reported Wednesday in its weekly mortgage market survey, which reflects more than 75 percent of U.S. retail residential mortgage applications.                   loan demand

“Purchase application volume was up slightly for the week,” says Mike Fratantoni, the MBA’s chief economist. “Conventional purchase application volume was also up on a year-over-year basis for the first time in 2014; total purchase volume was only 0.9 percent below last year’s level. This makes sense in light of the continuing stream of very positive data regarding the broader economy and the job market.”

Overall, mortgage applications, including both for refinancing and home purchase, rose 0.9 percent last week. Refinancing applications increased 1.1 percent.

Mortgage rates also continued to fall last week. The 30-year fixed-rate mortgage fell from 4.06 percent to 4.02 percent, reaching the lowest average since May 2013, the MBA reports.

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Source: CNBC 12/24/2014

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Will the Housing Market be Steadier in 2015?

Will the housing market be steadier in 2015 ? After all, the housing market this year has been on a roller coaster. According to the National Association of REALTORS®, existing-home sales are expected to fall short of 2013’s total, and price gains have slowed significantly. However, builder confidence in the new-home market has been on the rise, even as new-home sales have barely budged — at just a 1.8 percent increase in October compared to a year earlier.

Economists say the housing market is showing mixed signals because it’s normalizing, leveling off after a much more rapid recovery last year that was unsustainable.    housing market

Forbes.com recently highlighted several 2015 predictions from housing experts:

  1. Home appreciation will continue to slow. Prices didn’t increase as fast this year, and they are expected to stick to that trend into the new year. “Easing housing inventory levels and the exit of investors from the market are helping to put the brakes on home-price escalation,” Forbes.com reports. “At a deeper level, this change represents a fundamental shift in the market: We’ve moved out of rapid recovery phase and into a new normal.” Gone are the double-digit gains of 2013. Realtor.com® predicts an annual gain in home prices of 4 percent to 5 percent next year.
  2. Buying frenzy becomes more muted. The home-buying process is expected to be less chaotic in the new year, with for-sale inventories easing and credit loosening, which could make it easier for first time buyers to enter the market. Investors have also pulled back in many markets. NAR statistics from October show that individual investors purchased 15 percent of homes, a drop from 19 percent year-over-year. Also, as more homes come on the market, buyers will have more choices and sellers may face more of the competitive pressure. Housing analysts note that this can help create a more balanced market for everyone: buyers in search of a competitive advantage and sellers who turn around and become buyers themselves.
  3. Mortgage interest rates will finally be on the rise. The Mortgage Bankers Association still predicts that mortgage rates will increase to 5 percent by the end of 2015. Freddie Mac expects a 4.5 percent average in 2015. However, in 2013, economists had predicted mortgage rates to reach 5 percent by the end of this year. The 30-year fixed-rate mortgage has averaged below 4 percent in recent weeks. But with the end of the Federal Reserve’s quantitative easing, MBA believes that a short-term fund rate hike is more likely by mid-2015, which would then push interest rates up.
  4. Rent rises will outpace home value growth. Rents likely will continue to keep rising in the new year, and many housing analysts predict that an increase in rental costs in 2015 will outpace annual home-price gains. The rental market will likely remain a “landlord’s market” in 2015, with vacancy rates expected to stay below 5 percent in the new year, according to NAR forecasts. That should lead to demand pushing rents up even higher and keeping them above inflation, NAR Chief Economist Lawrence Yun notes. Apartment rents are projected to increase 4 percent in 2014 and 4.1 percent in 2015. The rise in rents could push more Millennial renters to become home owners. Realtor.com® analysts predict that households headed by Millennials will drive household formations in the new year. Millennials are expected to drive two-thirds of household formations over the next five years, according to realtor.com®’s predictions. “Next year’s addition of 2.75 million jobs and increased household formation will be the two key factors driving first-time buyer sales,” realtor.com® notes.
  5. Builders shift to building less expensive homes. In the last few years, builders have been building fewer, more expensive homes. But that trend may change in the new year, as more builders look to target less-expensive markets. New-home sales are expected to top the 500,000 mark in 2015, but in order to do that, builders may have to sell less expensive homes, housing analysts note. Earlier this year, representatives from D.R. Horton, the nation’s largest home builder, said they planned to capture more of the entry-level market with its newly launched brand called Express Homes. The properties will be priced between $120,000 and $150,000, and they will be concentrated in Texas, Georgia, and Florida. “We wouldn’t be getting into Express Homes if we didn’t think it was the next segment of the market to recover,” D.R. Horton CEO Donald Tomnitz told CNBC in April.
  6. Foreclosures fall back to pre-recession levels. Foreclosure filings have been on the decline this year and are expected to continue their descent well into 2015. From January through November, foreclosure filings fell about 172 percent compared to the same period one year prior, according to RealtyTrac. “Every month so far this year, we’ve been down from a year ago,” says Daren Blomquist, vice president of RealtyTrac. The only uptick has been in foreclosure auctions, which are up 5 percent in November compared to one year earlier. Foreclosures will likely fall to pre-crisis levels in 2015, Blomquist predicts.

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Source: Forbes.com 12/18/2014

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Rents Jump to Highest Point in 6 Years

Warn your renting prospects: Landlords are quickly raising their rents as the national vacancy rate dips to the lowest level in two decades. Rents are rising at the fastest pace in six years, according to newly released data from the Bureau of Labor Statistics this week.

The annual rent inflation reached 3.5 percent in November, the highest growth since November 2008, and up from 3.3 percent in October, according to the government’s rentsreport.

“Rental vacancy rates have fallen to 20-year lows,” notes Ted Wiesman, an economist at Morgan Stanley. The vacancy rate plunged to 7.4 percent in the third quarter, the slimmest margin since early 1995, according to a U.S. Census Bureau report.

Builders are increasing construction of apartments, but are still playing catch up to the rising demand.

The National Association of REALTORS® recently forecast that 2015 will continue to be a “landlord’s market” as rent growth continues to run higher than overall inflation. However, NAR does project that rent growth will start to cool — though only slightly — next year: Rent growth is expected to reach 3.9 percent in 2015 compared with 4 percent this year.

“Low housing inventory and the sizable demand for rentals will continue to spur multifamily construction as well as keep rents rising above inflation through next year,” Lawrence Yun, NAR’s chief economist, said in a recent statement.

Vacancy rates for rental apartments is expected to remain low for at least two more years, NAR says. The vacancy rate for rental apartments in the fourth quarter is expected to be at 4 percent, and inch up to 4.1 percent in 2015 and 4.2 percent in 2016.  Vacancy rates under 5 percent often are considered by housing analysts to be a “landlord’s market” and ripe conditions for landlords to continue upping rents.

The following metros saw the lowest vacancy rates for rental apartments in the fourth quarter, according to NAR:

  • Orange County, Calif.: 2.2%
  • Sacramento, Calif.: 2.2%
  • Providence, R.I.: 2.3%
  • New Haven, Conn.: 2.3%
  • Hartford, Conn.: 2.4%

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Source: MarketWatch 11/24/2104

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Mortgage Debt Forgiveness Approved By Senate

The Senate approved an extension of the Mortgage Debt Forgiveness Act by a wide margin this week, bringing home owners who did a short sale this year one step closer to tax relief. The bill, which passed the House of Representatives two weeks ago, is expected to be signed by President Barack Obama.

The Senate approved the bill in a 76-16 vote.                     mortgage debt forgiveness

The Mortgage Debt Forgiveness Act expired at the end of 2013, making distressed home owners responsible for paying taxes on “phantom income” from the forgiven debt once their properties are sold. The tax on a 2014 short sale or workout would have been due this coming April 15 had Congress not extended the measure.

The average short sale has a mortgage forgiveness of about $75,000.

The National Association of REALTORS® issued a call to action earlier this month, urging REALTORS® to submit letters to their Congressional representatives in support of extending the Mortgage Debt Forgiveness Act.

“NAR applauds Congressional leaders in both chambers for their effort to pass this legislation before adjournment,” NAR President Chris Polychron said in a statement. “REALTORS® strongly supported the bipartisan Mortgage Forgiveness Tax Relief Act, which was included in the package to prevent underwater borrowers from paying taxes on any mortgage debt forgiven or canceled by a lender in a workout, or after their home was sold for less money than was owed.”

The extension will only apply to short sales conducted in 2014. Any further extensions will have to be considered by the new Congress, which begins its 2015 session in January.

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Source: HousingWire 12/17/2014

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Ways To Reduce Closing Costs

Closing costs can add a lot to home buyers’ final price, particularly depending on which lender a buyer uses, what state they live in, the price of the home, and sometimes even the day of the month the closing occurs, The Wall Street Journal reports. But comparison shopping among lenders may help buyers to reduce their closing costs.

Borrowers can reduce their closing costs in several ways:                 closing costs

  • Comparison shop. By applying for a mortgage with more than one lender, buyers then will be able to compare origination fees quoted in the good-faith estimates, Greg McBride, chief financial analyst of Bankrate.com, told The Wall Street Journal. Federal law requires lenders to provide such a statement within three days of a loan application. The origination fees cannot be changed. But lenders are given a 10 percent cushion in estimating third-party charges, such as for the appraisal, survey, inspection, and title services, Peggy Lawlor, mortgage strategy executive with Bank of America told The Wall Street Journal.
  • Watch the day of your closing. The day of the month of the closing can even have an influence on costs. “If you close on Nov. 5, you have to pay the per diem interest from the 5th to the 30th, but if you close on Nov. 28, it’s only three days,” says John Walsh, president of Total Mortgage, based in Milford, Conn.
  • Seek out relationship discounts. Sometimes lenders offer lower origination fees to loyal customers. For example, Bank of America offers a program called “Preferred Rewards.” The program offers up to $600 in reduced rates on a mortgage depending on the customers’ dollar amount of deposits at the bank.
  • Lump closing costs into the loan. For buyers who just can’t afford to bring anymore to closing, they may look into reducing their out-of-pocket expenditures by rolling the closing costs into the total loan amount. However, lenders will likely charge a slightly interest rate so buyers need to weigh carefully if that’s the best choice, Lawlor says.
  • Look into title insurance discounts. The cost of title insurance can vary greatly among states and even by the type of home. Some states mandate the rate that title insurance providers charge. However, not all do — so find out whether your state does, McBride says.MLS List your home $175 information: Click Here

    Source: The Wall Street Journal 12/10/2014

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Americans Are Net Worth 40% Poorer Today

The net worth of American families has plunged 40 percent since 2007, right before the financial crisis struck, dipping to an average of $81,400 per household, according to a new report from the Pew Research Center. That’s down from $135,700 in 2007. Pew measures net worth as the difference between the values of a household’s assets, including homes, investments, and liabilities.

“The Great Recession, fueled by the crises in the housing and financial markets, was universally hard on the net worth of American families,” the report says.  net worth

The average weekly wage has mostly stayed stagnant in recent years: $853 last month compared to $833 in November 2013, according to the Bureau of Labor Statistics.

The drop in net worth is particularly acute along racial lines. The gap between blacks and whites has reached its highest point since 1989, with the wealth of white households 13 times greater than that of black households in 2013, according to Pew research. The median net worth of white households was $141,900 in 2013, dropping 26 percent since 2007; for Hispanic households, net worth in that time fell by 42 percent to $13,700, and for African-American households, it dropped 43 percent to $11,000.

The Pew report partially attributes the wealth gap among the races to the fact that white households are more likely to own stocks directly or indirectly through retirement accounts. Financial assets such as stocks have recovered value more quickly than housing since the recession ended, according to Pew.

However, the housing picture has improved and may help lift many household’s finances. Fewer borrowers are underwater, which means they no longer owe more on their mortgage than their home is worth. Eight percent of borrowers, or 4 million, were underwater in October compared to the peak of 35 percent, or 18 million homes, in February 2011, according to data from Black Knight Financial Services, which tracks mortgage performance.

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Source: MarketWatch 12/13/2014


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