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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. . .

Future conditions worry consumers, sentiment drops

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WASHINGTON (7/21/14)--Concerned over what the future holds, consumer confidence dipped in July, as the overall index for Friday's University of Michigan consumer sentiment survey fell 1.2 points to 81.3.

While feelings over current financial situations slightly improved for consumers, pessimistic expectations for the next 12 months largely fueled the drop in the overall index with a 2.4-point pull back to 71.1.

"Respondents' assessment of their future financial prospects hit a four-month low, possibly reflecting worries that escalating conflicts in Ukraine and the Middle East could send shock waves through the U.S. economy in coming months," said Nate Kelley, Moody's analyst ( Economy.com July 18).

Consumers also forecasted a 3.3% increase in prices over the next 12 months, which is a slightly higher pace than was estimated in June. Shoppers believe prices over the next five years will climb 2.6% on average, which is 0.3% slower than last month's expectation.

Meanwhile, despite the survey, Moody's analysts believe sentiment may bounce back in future months, as upward pressure on wages appears to be mounting as the labor market tightens.

The National Federation of Independent Business' Small Business Optimism Index, Moody's reported, revealed that an increasingly larger share of firms expect they will boost compensation in the coming months, which should bolster confidence in personal finances, and subsequently overall sentiment ( Economy.com ).

Residential construction steps back in June

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WASHINGTON (7/18/14)--Residential construction stumbled in June, as housing starts plummeted 9.3% from the prior month to their slowest pace in nine months, according to data released Thursday by the U.S. Commerce Department ( Economy.com July 17).

Single-family home starts dropped 9% to their lowest rate since late 2012, and multifamily construction starts dropped 10%, the second straight double-digit decline after a promising start to the year.

Overall, total housing starts sit 7.5% higher than levels seen a year ago at this time, but multifamily construction has almost entirely fueled those gains.

"The residential construction numbers are disappointing," said Celia Chen, Moody's analyst ( Economy.com ). "The April rebound has fast faded."

However, the step back in housing starts was concentrated in the South, the nation's largest region, with a 30% drop off month-over-month. Starts actually climbed in the Midwest and Northeast and gained modestly in the West.

Year-over-year, housing starts have swelled in the Midwest and Northeast by 80% and 22% respectively, with modest declines in the West and South.

The report perhaps also reveals the potential for the housing market to rebound in the coming months, as single-family housing permits jumped 2.6% in June, which is its second straight month of ascent.

On the heels of Wednesday's report from the National Association of Home Builders that home builder confidence is improving, rising permit numbers, which often mirror future construction conditions, could signal healthier times ahead.

Housing market still flat, but builder outlook improving

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WASHINGTON (7/17/14)--Mortgage applications fell during the week ending July 11, driven by a sizable drop in purchase applications, according to the Mortgage Bankers Association's (MBA) mortgage applications survey, released Wednesday.

Purchase applications sank 7.6% from the prior week to their slowest pace since February and sit 9.9% below levels seen last year at this time.

The MBA's composite index declined 3.6% and has reached its lowest mark since December 2000. Mortgage rates climbed narrowly by 1 basis point to 4.33%, but remain 3 points lower than rates seen a month ago.

"Housing demand from traditional homebuyers who purchase homes with credit remains weak on a historical basis," said Brent Campbell, Moody's analyst ( Economy.com July 16). "Memories of the recent housing crash have encouraged more households to rent their dwellings instead of buy."

Perhaps reflecting a trend that consumers have become more mindful of debt, the mortgage default rate dropped for the eighth consecutive month in June, slipping to 0.89% from 0.92% in May, and 1.24% year-over-year, according to the S&P Experian Consumer Credit Default Indices ( Housingwire . com July 15). Second-mortgage default rates remained at .57%.

A drop in purchase activity also seems in line with recent data from Veros Real Estate Solutions, which found that 80% of real estate markets throughout the United States are experiencing price appreciation, potentially signaling a still-tight supply of homes on the market.

But the housing tide could be changing.

Veros also reported that nationwide appreciation has slowed in recent months, based on the company's VeroFORECAST tool that predicts real estate trends for more than 1,000 counties and 340 metro areas.

Further, homebuilder confidence rebounded strongly this month, as the National Association of Home Builders composite index from Wednesday climbed 4 points to 53 from 49 in July, the highest it's been since January.

The future sales index in particular showed promising gains with a 6-point surge. All four regions in the United States saw improvements for future purchases this month, with confidence above 50 in all regions except the Northeast.

The government will release data on new housing construction today.