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LLOYD MARTIN PLC
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Burke, Virginia 22015-4285
703-584-7744
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[A Virginia Professional Limited Liability Company]

    April 24, 2018

    MOVE OVER MILLENNIALS, GEN Z IS ALREADY BUYING HOMES

    By Jann Swanson, Mortgage News Daily -- Who's afraid of growing up? Apparently not Generation Z. The post-Millennial crops of
    kids, those born in 1995 and later, are already moving into homeownership.

    Maria Lamagna, writing for MarketWatch says just shy of 100,000 members of Gen Z, whose ages top out at 23, have a mortgage.
    Their average loan balance is $140,000.

    Millennials have been notorious late bloomers, lagging earlier generations in marrying, starting families, and buying homes. For Gen
    Z it is very early in the traditional homebuying cycle, but TransUnion reports they already held 99,000 mortgages in the 4th quarter of
    2017. This was dwarfed of course by the 12 million Millennials, but members of the much smaller Generation X had 24 million
    mortgages, as did nearly 27 million baby boomers and 5.1 million members of the Silent Generation.

    Lamagna quotes Rob Dietz, chief economist of the National Association of Home Builders who said he was a little surprised to see the
    ownership numbers for Gen Z as large as they are. "The traditional life cycle is to rent, especially for younger consumers who might
    have student loans," he said.

    Dietz continued, "It's all the more impressive given the strong housing market. The existing home inventory is "tight, and the cost of
    single-family homes is rising faster than incomes. Given those conditions, it's possible even more members of Generation Z could own
    homes, but the prices might be too high at this moment," he said.

    They might be young, but these buyers seem to take homeownership seriously. Just 1.2 percent are more than 60 days past due on
    their mortgages while the average for Millennials is 1.6 percent. Mortgages held by Generation Xers are running 2.3 percent non-
    current and baby boomers have a 60-day delinquency rate of 1.6 percent.



    April 10, 2018

    Inventory Shortage Continues to Trouble the Housing Market

    By Radhika Ojha, MReport --How is the housing market poised at the end of the first quarter of 2018 and what can one expect in the
    near and long-term future? A webinar about The State of the U.S. Housing Market by Carrington Mortgage Holdings hosted by Rick
    Sharga, EVP, Carrington Mortgage Holdings looked at the various indicators that are affecting the housing market today and how
    they would impact it in the future.

    Starting off with an overview of the overall U.S. economy, Sharga said, “Inflation is something that people are watching more closely.”
    The solid numbers posted by the economy have meant that the Fed is now watching for inflation to get to a certain level and put
    brakes on the economic stimulus to keep it there. The strong job numbers have also helped boost the overall economic indicators as
    more workers are re-entering the workforce.

    Moving on to the housing market, Sharga pointed out that existing home sales were off to a weak start in 2018. “Existing home sales
    are still well away from the record numbers we saw during the housing boom of 2006,” Sharga said. While existing home sales
    stagnated at 5.4 million by the end of 2017, we should be closer to 6 million existing home sales by the end of 2018.

    The culprit? Inventory shortage. According to Sharga, existing home sales inventory was a little under four months’ supply at present.
    “A significant percentage of existing home sales inventory is not for sale right now, which is driving inventory shortage,” Sharga said,
    citing various factors such as a psychological hangover where people were afraid to put their homes on the market because they
    wouldn’t be able to sell it for enough to buy a new home, and the fact that homeowners were staying in a home for a longer period of
    time, with the average being 10-11 years today, compared to 6-7 years in the previous years.

    This scarcity was also driving prices higher, with Black Knight’s HPI estimating a 6.6 percent home price appreciation in 2017 and a
    median home price of around $283,000. Despite these price increases, Sharga said that affordability was better than what people
    thought. “The prior peak was reached in 2006, and since then we’ve had 12 years of wage appreciation and even with the higher
    interest rates today, we still have lower mortgage rates than we had in 2006 which was in the 6-7 percent range,” Sharga said.

    While the inventory crisis is not as acute for new homes, sales for these were also lagging in the first quarter of 2018 according to the
    report, as labor, capital issues, and regulatory constraints continued to restrict builder activity leading to weak housing starts.

    The market might be finally putting the foreclosure crisis behind it according to the report. “We are seeing foreclosure activity falling
    rapidly with the activity concentrated only in a handful of states,” Sharga said.

    Citing data from Black Knight’s recent Mortgage Monitor Report the report said that delinquencies and foreclosures starts were
    declining with total U.S. delinquency rates at 4.3 percent and total U.S. foreclosure inventory rate falling to around 0.65 percent. The
    total delinquency rates were a little higher than expected due to the natural disasters of 2017 but they were showing a decline on a
    month-over-month basis. “There simply won’t be many distressed properties going around by this time next year,” Sharga said. “You
    won’t see many people in foreclosure until late 2019 or early 2020.”


    March 27, 2018

    High Home Prices Are Here to Stay

    By Radhika Ojha, MReport -- Home prices continued to rise in January reporting an annual growth of 6.2 percent according to the
    latest S&P CoreLogic Case-Shiller Home Price Index that was released by S&P Indices on Tuesday. The index, which consists of the
    National Home Price NSA Index, A 10-City Composite Index, and a 20-City Composite Index, reported price growth on all these indices.

    While the 10-City Composite recorded an annual increase of 6 percent, the 20-City Composite posted a 6.4 percent year-over-year
    growth.

    “The home price surge continues,” said David M. Blitzer, Managing Director and Chairman of the Index Committee at the S&P Dow
    Jones Indices. “Since the market bottom in December 2012, the S&P CoreLogic Case-Shiller National Home Price index has climbed
    at a 4.7 percent real—inflation-adjusted—annual rate.”

    “Our first glimpse into Case Shiller home price data in 2018 confirms high prices are here to stay,” said Danielle Hale, Chief
    Economist at Realtor.com. “In fact, if we continue to see a steady stream of buyers and owners remain largely uninterested in selling,
    we can expect prices to continue to rise.”

    The City Composite indices were once again dominated by some of the hottest markets in the country with Seattle, Las Vegas, and
    San Francisco recording the highest price appreciation at 12.9 percent, 11.1 percent, and 10.2 percent respectively.

    “The hottest housing markets are once again dominated by the West, led by double-digit annual growth in Seattle, Las Vegas, and
    San Francisco,” said Cheryl Young, Senior Economist at Trulia. “Seattle shows no signs of cooling anytime soon as it recorded its
    25th consecutive month of double-digit year-over-year price growth. This is the first time since January 2016 that San Francisco is
    back into double-digit price growth territory, sounding alarm-bells in a city where median home prices hover around $1.3 million.”

    “Despite the high prices, homes don’t sit long before being snatched up in these areas, which suggests these markets remain tipped
    in favor of sellers as we head into spring,” Hale said.

    A low inventory and a low vacancy rate among owner-occupied housing are two factors supporting these price increases according to
    Blitzer. “The current months-supply—how many months at the current sales rate would be needed to absorb homes currently for
    sale—is 3.4; the average since 2000 is 6 months, and the high in July 2010 was 11.9. Currently, the homeowner vacancy rate is 1.6
    percent compared to an average of 2.1 percent since 2000; it peaked in 2010 at 2.7 percent,” Blitzer said.

    Tian Liu, Chief Economist at Genworth Mortgage Insurance agreed. “The Case-Shiller Home Price Index continues to support our
    view that today’s housing market is driven by a mismatch of demand and supply. There is a robust demand by first-time homebuyers
    for affordable homes, and equally robust supply for higher-end homes,” he said.

    For those citing affordability issues in housing, Blitzer said that despite limited supplies, rising prices, and higher mortgage rates,
    affordability is not a concern. “Affordability measures published by the National Association of Realtors show that a family with a
    median income could comfortably afford a mortgage for a median-priced home,” he said.

    But where are those homes? “First-time home buyers, however, will continue to struggle to find homes within their price range as
    prices climb higher amid low inventory,” Young said. “Starter buyers continue to shoulder the greatest burden of unaffordability as low
    inventory and escalating prices grip the housing market.”


    March 21, 2018

    After Fed Hike, Mortgage Rates Could Rise Again

    By Radhika Ojha, MReport -- On Wednesday, after Jerome Powell's first Federal Open Market Committee (FOMC) meeting as Fed
    Chair, the Federal Reserve announced that it had increased the Fed funds rate by a quarter point at a target of 1.5 percent to 1.75
    percent.

    Powell had provided an upbeat assessment of the economy and inflationary trends during his Congressional testimony in the run-up
    to the meeting and the statement released by the Fed shortly after the meeting reflected the central bank's positive stance on the
    economy.

    "In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal
    funds rate to 1-1/2 to 1-3/4 percent. The stance of monetary policy remains accommodative, thereby supporting strong labor market
    conditions and a sustained return to 2 percent inflation," the bank said in its statement.

    These rate hikes impact the housing market as mortgage rates, which have been rising steadily since the beginning of the year are
    expected to surge further on the back of this hike. The Fed has also been missing on its targets for mortgage holdings which could be
    another blow for mortgage rates.

    “The Fed has been meeting its target on the treasuries but missing on the mortgage holdings,” said Tendayi Kapfidze, Chief
    Economist at LendingTree. “Treasuries are down $41.2 billion since October but mortgages are actually up $2.0 billion. Thus the Fed
    has actually been detrimental to mortgage rates on the one hand by reducing its holdings of treasuries, but providing some support
    given that its mortgage holdings are not declining.”

    “In today’s competitive housing market, rising rates are another hurdle for first-time buyers who don’t have a lot of cash to work with.
    To date, realtor.com has found the impact of higher home prices has so far dwarfed the impact of higher mortgage rates from a year
    ago. But with today’s announcement, it looks like this may be changing. As rates move higher, we expect to see their direct impact on
    buyers grow,” said Danielle Hale, Chief Economist at Realtor.com.

    According to Kapfidze the Fed’s balance sheet normalization plan is set to have its second increase in April, which could raise the
    treasury security target to $18 billion a month and the MBS target to $12 billion a month. “Upward pressure on treasuries should
    increase and mortgage rates could see more upside in Q2 following the recent leveling off in rates. If the Fed begins to meet its MBS
    target, that would result in a further upward pressure,” he said.


    February 22, 2018

    IRS: Interest paid on home equity loans is still deductible under new tax plan

    But not in every case

    By Ben Lane, Housing Wire -- The country’s new tax laws, ushered in by President Donald Trump and his Republican counterparts
    late last year, will bring many changes to the mortgage industry.

    Namely, the Tax Cuts and Jobs Act reduces the available mortgage interest deduction from $1 million to $750,000.

    But what’s the impact of the tax plan on home equity loans, home equity lines of credit, and second mortgages?

    Citing the “many” questions it’s received from taxpayers and tax professionals, the Internal Revenue Service issued a bulletin this
    week that sheds some light on how home equity loans, HELOCs, and second mortgages will be treated under the new tax plan.

    The headline news: The interest paid by borrowers on home equity loans, HELOCs, and second mortgages will still be deductible
    moving forward, but not in every case.

    According to the IRS, the Tax Cuts and Jobs Act states that interest paid on home equity loans and lines of credit is still deductible, as
    long as they money is used to “buy, build or substantially improve” the taxpayer’s home that secures the loan in question.

    But if the money is used to pay other expenses, the interest is not deductible.

    The IRS explains further: “Under the new law, for example, interest on a home equity loan used to build an addition to an existing
    home is typically deductible, while interest on the same loan used to pay personal living expenses, such as credit card debts, is not,”
    the IRS stated. “As under prior law, the loan must be secured by the taxpayer’s main home or second home (known as a qualified
    residence), not exceed the cost of the home and meet other requirements.”

    Besides being required to use the money for home improvements and the like, there are other limits on the home equity loan interest
    deduction

    As stated above, beginning this year, taxpayers are only allowed to deduct interest on $750,000 of “qualified residence loans.
    Additionally, the mortgage interest deduction limit for a married taxpayer filing a separate return is $375,000.

    As the IRS notes, these figures are down from the previous limits of $1 million, or $500,000 for a married taxpayer filing a separate
    return.

    The limits apply to the combined amount of loans used to buy, build or improve the taxpayer’s main home and second home, meaning
    a borrower may only deduct the mortgage interest on a total of $750,000 in loans, whether the loans are first mortgages, second
    mortgages, or home equity loans.

    The IRS bulletin provides three examples to further demonstrate how the mortgage interest deduction works now:

    Example 1: In January 2018, a taxpayer takes out a $500,000 mortgage to purchase a main home with a fair market value of
    $800,000. In February 2018, the taxpayer takes out a $250,000 home equity loan to put an addition on the main home. Both
    loans are secured by the main home and the total does not exceed the cost of the home. Because the total amount of both
    loans does not exceed $750,000, all of the interest paid on the loans is deductible. However, if the taxpayer used the home
    equity loan proceeds for personal expenses, such as paying off student loans and credit cards, then the interest on the home
    equity loan would not be deductible.
     
    Example 2: In January 2018, a taxpayer takes out a $500,000 mortgage to purchase a main home. The loan is secured by the
    main home. In February 2018, the taxpayer takes out a $250,000 loan to purchase a vacation home. The loan is secured by
    the vacation home. Because the total amount of both mortgages does not exceed $750,000, all of the interest paid on both
    mortgages is deductible. However, if the taxpayer took out a $250,000 home equity loan on the main home to purchase the
    vacation home, then the interest on the home equity loan would not be deductible.

    Example 3: In January 2018, a taxpayer takes out a $500,000 mortgage to purchase a main home. The loan is secured by the
    main home. In February 2018, the taxpayer takes out a $500,000 loan to purchase a vacation home. The loan is secured by
    the vacation home. Because the total amount of both mortgages exceeds $750,000, not all of the interest paid on the
    mortgages is deductible. A percentage of the total interest paid is deductible.



    January 8, 2018

    Zombie Homes: The Problem That Just Won’t Die

    By David Wharton, Housing Wire -- The issue of so-called “zombie homes” is a problem for any major city. “Zombie homes” is a
    colorful name for an old problem, and one that continues to be widespread as the nation gains more distance from the housing crisis
    and the Great Recession. Zombie homes are created when the foreclosure process begins, the homeowner moves out, but then the
    foreclosure is canceled for one reason or another, leaving the home unoccupied—and often falling into disrepair. The issue—and
    misunderstandings surrounded it—is highlighted in a new story about how Portland, Oregon, is tackling the problem.

    The Portland Tribune reported recently that Portland Mayor Ted Wheeler has reversed a policy put in place by his predecessor that
    was designed to crack down on zombie homes, threatening foreclosure on the properties in order either to force landlords to attend
    to the homes’ upkeep or get them into different hands. However, while former Mayor Charlie Hales pushed the Portland City Council
    to crack down on zombie properties, Wheeler considers the problem less of a priority.

    Wheeler told the Tribune, "The obstacles for government to take away someone's property are formidable. It's a very expensive, multi-
    year process. I'm not sure that's the best use of our resources."

    Of course, the problem with typical zombie properties is that there isn’t anyone in the house to be forced out. With the properties
    trapped in something like limbo, it’s hard to find a good solution for any of the parties involved, from the bank or mortgage company
    left holding the property, to the city governments tasked with fighting urban blight. As evidenced in Portland, even when one party
    comes up with a plan to address the issue, that plan can crumble in the wake of budget cuts or political change.

    Would Hales' plan have worked in the longer term? According to the Tribune, Portland only used the threat of foreclosure to force
    landlords to take care of their derelict properties in 10 cases during the previous 18 months. Of those 10 properties, the Tribune
    reports that “Landlords for eight of them paid off the liens before the auctions were set. The ninth was paid off just before the auction.
    The 10th was paid off after it failed to sell at the first auction but before the second auction was held.”

    With Wheeler reversing course on Hales’ policy, the city is now effectively back where it was before that policy was put in place ... and
    the city's zombie homes still remain.

    Several American cities have been trying to fast-track foreclosures in recent years as a means of combating blight and zombie
    properties. Fast-track foreclosure laws are already on the books in Ohio and Maryland, with states such as Illinois, Pennsylvania, and
    New York possibly following suit. Some municipalities are also trying to combat the individual symptoms of blight, such as in the case
    of Ohio’s banning of the use of plywood on vacant properties. In November 2016, Fannie Mae announced it would allow mortgage
    servicers to use clearboarding on vacant homes in pre-foreclosure, striking another blow against one of the tell-tale visual signs of
    zombie homes and urban blight.

    In part three of a three-part series earlier this year, Robert Klein, Founder and Chairman of Safeguard Properties and SecureView,
    told DS News, "It’s all about keeping people in their homes as long as possible, but, once abandoned, a house becomes a liability.
    Fast-tracking enables the mortgage servicer to get possession of the property before it deteriorates. This directly leads to on-time
    conveyance and faster rehab and sale.”

    Fast-tracking foreclosures—or even threatening to do so—can be one effective way to combat the zombie home plague, but
    evidenced by Portland’s problems, it isn’t always a politically popular approach.


    January 3, 2018

    Tax reform could cause Fed to speed up rate hikes

    Fed minutes show most on board with raising federal funds rate

    By Kelsey Ramírez, Housing Wire

    Minutes released Wednesday by the Federal Reserve showed that the Federal Open Markets Committee could move at a quicker
    pace due to tax reform.

    Just before Christmas, President Donald Trump signed the tax reform bill into law which some economist predict could spur economic
    growth over the next few years.

    While the Fed forecasts a median growth of 2.5% in 2018, the minutes showed most members will raise their expectations due to tax
    reform, according to an article by Akin Ayedele for Business Insider.

    From the article:


    Lower taxes means Americans will extra cash to spend, which would be good for the economy. Just how much more they decide
    to spend is still uncertain for the Fed. On the corporate side, business owners who were surveyed said some companies would
    use the extra cash to expand their businesses, but most would likely use it to pay down debt or buy back their stock.

    The Fed announced its final rate hike of 2017 on Wednesday at the end of its December FOMC meeting, but implied more rate hikes
    are still to come in 2018 and beyond. After increasing the federal funds rate 25 basis points to a target rate of 1.25% to 1.5%, the
    Fed projected it would raise rates three times in 2018.

    However, experts then predicted the Fed will later revise its rate hike forecast from three times in 2018 to four after they increased
    their GDP estimates.

    One expert confirmed he continues to expect the Fed to increase its forecast for rate hikes in 2018.

    “Overall, Fed officials re-affirmed at this meeting that they anticipate raising interest rates three times in 2018, matching the tightening
    in 2017, but we still anticipate that a slightly faster than expected rebound in core inflation will mean we eventually see four rate hikes
    in 2018,” Capital Economics Chief Economist Paul Ashworth said.