DS News - U.S. Bank

52 FANNIE MAE PREDICTS ECONOMIC GROWTH IN Q3 Despite the lackluster economic growth experienced in the first half of this year (1.0 GDP growth), Fannie Mae's Economic and Research Group (ESR) is predicting economic growth to accelerate up to 2.6 percent in the second half, according to the ESR's Economic & Housing Outlook for September 2016 released Monday. e ESR Group's full-year forecast for 2016 is 1.8 percent, consistent with the prior month's forecast. Recent stagnant wage growth and a jobs report that failed to meet expectations in August might not be the indication of a trend, according to Fannie Mae. e drivers of the accelerated growth for the remainder of the year are expected to be consumer and government spending, despite a cool down in consumer activity to date in Q 3, according to Fannie Mae. "Consumers continue to carry the economy and the earnings slowdown in the August jobs report may be an aberration in the recently improving personal income growth trend," Fannie Mae Chief Economist Doug Duncan said. "However, the declining trend in business productivity has negative implications for businesses' profit outlook, as low productivity tends to boost labor costs, which could act as a headwind for hiring and investment. Corporate profits are down 4.9 percent from one year ago, extending their streak of annual declines. We expect nonresidential fixed investment to post a modest increase in the third quarter following three consecutive quarterly declines, while residential investment is likely to decline for the second consecutive quarter." In housing, existing-home sales slowed in July down to an annual rate of 5.39 million as inventory concerns persist; however, the HUD/ Census Bureau new home sales report covering July provided some encouragement for the industry, as sales totaled 585,000, an increase of 12 percent over-the-month and 31 percent over-the-year. "A bright spot for housing market activity is the strengthening of new home sales, which is significantly outperforming activity in recent years," said Duncan. "e share of new home sales that are under construction or not started has climbed to nearly 70 percent, improving the outlook for single-family homebuilding. Existing home sales underperformed 2015 for the first time in July, however year-to-date sales are still 2.6 percent higher than during the same period last year. Additionally, the share of for-rent multifamily building starts has trended up with recent trends in homebuilding activity favoring the rental market." RISK OF FRAUD COULD INCREASE IN YEARS TO COME CoreLogic recently released its latest Mortgage Fraud Report, and, as of the end of the second quarter of 2016, the report shows a 3.9 percent year-over-year increase in fraud risk. is is measured by the CoreLogic Mortgage Application Fraud Risk Index. According to CoreLogic, this analysis found that during the second quarter of 2016, an estimated 12,718 mortgage applications, or 0.70 percent of all mortgage applications, contained indications of fraud. is is compared to the number of applications reported in the second quarter of 2015 of 12,814, or 0.67 percent. "Mortgage application fraud risk will likely rise over the next few years if current trends of higher LTV purchases and increased credit availability continue," said Bridget Berg, senior director, Fraud Solutions Strategy for CoreLogic. "Because post-fund quality control findings are biased to specific types of fraud that are easy to detect shortly after closing, lenders should not rely only on those results to measure fraud risk." e report states that Florida continues to be the riskiest state for mortgage application fraud. Despite this, the report notes that Florida also has the largest year-over-year decline in application fraud risk at 19 percent. e states that are reported as having the greatest year-over-year growth in risk, according to CoreLogic include Kansas, Maine, Wisconsin, Nebraska, and Arkansas. e report states that, although they have the highest growth in risk, it has been shown that their overall rankings are all below the top 15. CoreLogic does acknowledge that risk appears to be less geographically concentrated than what was shown in the last annual report. Specifically, CoreLogic reports that high- LTV purchase loans are the segment showing the greatest fraud risk increase by loan type, and income, transaction, and occupancy fraud types showed increases year-over-year. e report shows that particularly the greatest increase was found in the income fraud risk sector which hit 12.5 percent. In the release from the company, CoreLogic states that the CoreLogic Mortgage Fraud Report analyzes the collective level of loan application fraud risk the mortgage industry is experiencing each quarter. Additionally, they state that CoreLogic develops the index based on residential mortgage loan applications processed by CoreLogic LoanSafe Fraud Manager, a predictive scoring technology. In the full report, CoreLogic includes detailed data for six fraud type indicators that complement the national index: identity, income, occupancy, property, transaction, and undisclosed real estate debt. The number of states that have an inventory of foreclosed homes lower than the national rate in July. Source: CoreLogic STAT INSIGHT 29

• Cover