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SURVEY FINDS BUYERS, OWNERS LACK BASIC MORTGAGE KNOWLEDGE According to Zillow, homebuyers participating in its Mortgage Marketplace Survey answered basic questions on mortgage information incorrectly nearly one-third (32.5 percent) of the time. For example, 34 percent of first-time homebuyers are not aware they might be able to get a home loan with a down payment of less than 5 percent. According to Zillow, the number of lenders on the company's Mortgage Marketplace that quote loan requests with a down payment between 3.5 and 5 percent has risen by 570 percent over the past two years. In addition, homebuyers don't seem to understand how to secure the best possible interest rate and loan terms. Twenty-six percent of homebuyer respondents believe— incorrectly—they are obligated to close their loan with the lender that pre-approved them. Separately, 24 percent believe the best interest rates and fees can always be found through the bank with which they currently do business. "All too often buyers focus on renegotiating a lower home price and ignore the importance of finding the right loan," said Erin Lantz, director of mortgages for Zillow. "If homebuyers can lower their interest rate by even half a percentage point, they can not only increase their purchasing power, but also save thousands of dollars over the life of the loan." Prospective buyers aren't the only group that demonstrated a lack of basic mortgage knowledge. According to Zillow, an estimated 14 million homeowners (about one in five) said they do not believe underwater borrowers can refinance their mortgages. According to the latest data from the Federal Housing Finance 18 Administration, nearly 2.4 million underwater borrowers refinanced through the Home Affordable Refinance Program as of the end of February 2013. Separately, Zillow found 47 percent of current homeowners incorrectly believe they must wait at least one year between refinancings. Furthermore, 31 percent of current homeowners incorrectly believe it takes 7 years to qualify for a mortgage again after a short sale or foreclosure. According to Zillow, in most cases, the waiting period is 2-4 years for a short sale, depending on the down payment and the loan type, and ranges from 3-7 years following foreclosure. In an effort to educate potential and current homeowners, Zillow is offering an online Mortgage IQ Quiz that contains detailed information on common mortgage misperceptions. STAT INSIGHT $12.4 Billion New home equity lines of credit extended during first two months of this year, an increase of nearly 16% compared to first two months of 2012. Source: Equifax RATE OF NEW PROBLEM LOANS APPROACHING PRECRISIS LEVELS The rate of new loans that rolled into serious delinquency status fell below 1 percent in March for the first time since 2007, Lender Processing Services (LPS) reported. The new problem loan rate—defined as seriously delinquent mortgages that were current six months earlier—inched down toward pre-crisis levels in March to 0.84 percent. The new problem loan rate averaged 0.55 percent from 2000 to 2004. At its peak in January 2009, the new problem loan rate stood at 2.89 percent. As expected, when categorizing borrowers by equity position, LPS found borrowers with higher levels of negative equity tend to have higher new problem loan rates. "Looking at the March data, we see that borrowers with equity are actually outperforming the national average—at 0.6 percent, this group is quite close to pre-crisis norms," said Herb Blecher, SVP of LPS Applied Analytics. "The further underwater a borrower gets, the higher those problem rates rise." For example, borrowers with loan-to-value (LTV) ratios of 100-110 percent had new default rates that were twice the national average at 1.9 percent, while borrowers with LTVs higher than 150 percent had new default rates of 4 percent. However, as home prices continue to increase more borrowers are rising out of negative equity. LPS reported the share of borrowers in negative equity, or with LTVs greater than 100 percent, fell 41 percent from January 2012 to March 2013. Even the Sand States—Arizona, Florida, Nevada, and California—which tend to have higher levels of loans in negative equity, have seen their share decline by an average of 40 percent since January of last year. At its peak, the number of borrowers in negative equity reached 17 million in 2011 but is now at 9 million, according to data from LPS. Foreclosure sales rose 10.1 percent monthover-month in March, LPS reported, while foreclosure starts decreased 8.2 percent. KNOW THIS More than 400 banks have failed since 2007, according to FDIC records, compared to only 26 bank failures from 2000 through 2007.

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