New York Community leans on CEO's connections as it revamps leadership


Joseph Otting, the CEO of New York Community Bancorp, continues to build his leadership team. The company said that it's added nine additional senior executives, including several former colleagues of Otting during his previous jobs.Patrick T. Fallon/Bloomberg Joseph Otting, who was hired this spring to turn around New York Community Bancorp, continues to lean heavily on his banking and regulatory connections to fill out the embattled bank's leadership team.Nine senior executives joined the Long Island-based bank this week, including three longtime Office of the Comptroller of the Currency staffers whose tenures overlapped with Otting's stint atop the agency. Four other hires previously worked at either U.S. Bancorp, where Otting was once a vice chairman, or OneWest Bank, where he served as president and CEO.Of the nine new hires, three are now members of New York Community's 18-person executive management team. Those hires are: Kris Gagnon, a former chief credit officer at OneWest and later CIT Group, who's now in the same role at New York Community; Richard Raffetto, New York Community's new head of commercial and private banking, who previously oversaw corporate banking at U.S. Bancorp; and Don Howard, most recently of Citigroup, who has been hired as director of regulatory governance, risk and controls.New York Community, which has faced exceptional challenges this year, largely stemming from its rapid growth and its outsize exposure to the rent-regulated apartment loan market in New York City, has been rebuilding its leadership team. Most of the top executives who were running the company early this year have departed.New York Community, the parent company of Flagstar Bank, is set to release its second-quarter earnings report on Thursday. As of Wednesday afternoon, analysts surveyed by FactSet Research Systems predicted a net loss of 40 cents per share. For the first quarter, the company reported a net loss of 45 cents per share.Ahead of Thursday's earnings report, Piper Sandler analyst Mark Fitzgibbon wrote in a research report that he expects New York Community's balance sheet to shrink by about 2% from the first quarter. He's also forecasting a loan-loss provision of $200 million, versus $315 million in the prior quarter. The company's stock price fell 5% on Wednesday and is down 65% since the start of the year.Earlier this week, New York Community completed its previously announced sale of $5.9 billion of mortgage warehouse loans to JPMorganChase. That deal will be followed by the sale of another $200 million of mortgage warehouse loans, the company said in a press release.Five of the hires announced by New York Community on Tuesday — including Gagnon, Raffetto and Howard, who was Citi's head of global compliance transformation — will report directly to CEO Otting.So, too, will Bryan Hubbard, the new senior regulatory program manager, and Robert Phelps, who will serve as special advisor to the CEO.Hubbard was most recently the deputy comptroller for public affairs at the OCC. Phelps is a 30-year OCC veteran, having worked in roles including deputy comptroller of supervision risk management.Also on the list of new hires is William Fitzgerald, head of workout/commercial, who most recently was the head of commercial real estate resolution at First Citizens Bancshares. Adam Feit, who joins the company from U.S. Bancorp, is head of specialized industries banking and capital markets.Sydney Menefee, a former senior deputy comptroller at the OCC, is the new senior director of strategic financial and capital management. And Tom Lyons, who was senior vice president of operations' financial and data risks at U.S. Bancorp, joins NYCB as the director of finance business risk and controls.Trouble at the $112.9-billion asset bank first came to light in January when it reported a quarterly loss, a significant reserve build and a massive dividend cut. That was about nine months after New York Community acquired much of the failed Signature Bank, and just over a year after it acquired Flagstar Bancorp. The pair of deals pushed the regional bank above $100 billion of assets.Following the January update, New York Community's stock price plunged, sparking fears of a possible deposit run. The company disclosed "material weaknesses" in its internal controls and fired former CEO Thomas Cangemi.In March, an investment group led by former Treasury Secretary Steven Mnuchin — who had previously worked with Otting to turn around OneWest, which emerged from the failure of IndyMac Bank — rescued the beleaguered company with a surprise $1.05 billion capital injection. In May, the revamped executive management team laid out a path to improve profitability, but also warned that there was more near-term pain ahead as the company needed to root out troubled loans.

New York Community leans on CEO's connections as it revamps leadership2024-07-24T22:18:32+00:00

FDIC's Hill pushes Basel reproposal, expanded brokered deposits


"For just one agency to repropose — but with an expectation that a future final rule will be issued jointly by the three agencies — would be unprecedented, sow confusion and lead to a number of practical and legal questions," Hill said. "For example, under such a scenario, if the final rule were challenged, and a court determined the final rule lacked logical outgrowth from the original proposal, would the court strike down the FDIC and OCC rules but uphold the Federal Reserve rule?"Amanda Andrade-Rhoades/Bloomberg WASHINGTON — Federal Deposit Insurance Corp. Vice Chair Travis Hill Wednesday joined a chorus of banking industry allies calling for the three major federal banking agencies to repropose the Basel III endgame capital standards and solicit further feedback on changes they've since made to the draft.In the remarks at the American Enterprise Institute Wednesday afternoon, Hill stressed that any such reproposal must be advanced jointly by all three agencies and allow for an additional comment period when the industry and other interested parties may weigh in. "For just one agency to repropose — but with an expectation that a future final rule will be issued jointly by the three agencies — would be unprecedented, sow confusion and lead to a number of practical and legal questions," Hill said. "For example, under such a scenario, if the final rule were challenged, and a court determined the final rule lacked logical outgrowth from the original proposal, would the court strike down the FDIC and OCC rules but uphold the Federal Reserve rule?"As FDIC board member, Hill voted against issuing the proposal, which would have drastic implications — for the way regulators calculate banks' capital requirements and the amount of nonborrowed money they must put up alongside borrowed assets to fund their lending activities.Hill's call comes after similar calls from various other top bank regulators, including Federal Reserve Chair Jerome Powell, who said last week that reproposal is "essential." Hill and other industry allies argue the broad materiality of likely changes to the rule warrant a full reproposal.Fellow Republican member of the FDIC board Jonathan McKernan called generally for a reproposal, but has not specified what portion he wants reproposed. Ian Katz, managing director at Capital Alpha Partners, noted an additional comment period seems likely, but that regulators could devise a half measure to avoid going back to the drawing board completely. "The Fed may put out something that basically looks like a reproposal but is called something else and allows the public to comment without starting the process from scratch," said Katz in June. "If the Fed were to do that in the fall — before the elections — it could finalize the Basel endgame rule next year, probably in the first half."Also echoing other Basel skeptics, Hill focused much of his ire on a proposal to reform capital treatment of operational risk. The first proposed draft of Basel endgame requires banks to base their capital requirements on business volume and historical operational losses, and shifts to using a standardized approach instead of banks' internal models.Along with reforms to capital treatment of market risk, Hill noted the frameworks "rest on a complicated set of formulas and metrics that would be challenging to amend in a broad, material and rational way without receiving additional feedback."Hill also said he believes regulation of brokered deposits is out of date. Unlike traditional deposits, brokered deposits — sometimes known as "hot money" — move from bank to bank in search of higher returns while maximizing deposit insurance coverage. Banks favor these deposits because they can quickly attract large sums of money in times of distress, but such sums can be less reliable than traditional retail deposits, particularly if brokers find better deals elsewhere and withdraw en masse. Skeptics of brokered deposits argue they lead to increased interest rate sensitivity, liquidity risk and asset-liability mismatches.Congress passed laws governing brokered deposits with the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 in response to the savings and loan crisis of the 1980s. The law prohibited undercapitalized banks from accepting brokered deposits and limited the interest rates that banks could offer on brokered deposits.Former FDIC Chair Jelena McWilliams and Hill — who served as one of her top deputies when she was in office — developed and finalized an FDIC rule on brokered deposits in 2020. The Trump FDIC's rationale for the revision was in part to acknowledge that certain arrangements conventionally considered brokered deposits may pose less flight risk. Exclusive deposit-taking arrangements between fintechs and banks, for example, often hinge less on maximizing deposit returns, they argued, and thus should not be regulated in the same way as traditional brokered deposits. Critics of the rule say it created loopholes in the definition of deposit broker and brokered deposits. The rule limited the definition of someone facilitating a brokered deposit arrangement and exempted the activities of agents whose "primary purpose" is not the placement of deposits with banks and credit unions as long as agents or money managers deposit no more than 25% of the money they manage for customers.Hill defended the rule and argued that brokered deposits are not inherently risky, pointing to the fact that other risks like lack of insurance are the real root causes of such deposit risk. He noted that prior to the 2020 rule, the FDIC evaluated the compliance of new brokered deposit arrangements "on a one-off basis, resulting in an unwieldy, opaque regime inconsistently applied across the industry." Hill said while he would not equate the risks posed by a bank that heavily relies on traditional brokered deposits to that of a firm which relies on retail deposits from a diverse branch network, he argued regulators should think "holistically" about how to regulate deposits at modern banks."[While] some types of brokered deposits raise safety and soundness concerns … traditional brokered deposits present the opposite concern — the deposits have no franchise value because the depositors have no relationship with the bank, earn high rates, are fully insured, generally cannot withdraw before maturity, and thus are generally indifferent to the condition of the bank, but are incredibly stable," he said. "I would also consider retiring the use of the term 'brokered deposits' to refer to deposits beyond traditional brokered certificates of deposit."

FDIC's Hill pushes Basel reproposal, expanded brokered deposits2024-07-24T22:18:46+00:00

Homebuilders see profits grow amid sluggish existing-home sales


Leading homebuilders collectively reported quarterly earnings that were on the upside over the past week, with the industry maintaining much of its momentum in an otherwise sluggish purchase market. As sales for existing homes slowed in an environment marked by higher rates and limited inventory over the past several months, builders benefited, consistently finishing in the black as aspiring buyers considered new construction options. The trend continued in the most recent quarter based on earnings data. Recent indicators raise some questions about subsequent earnings, though, with single-family housing starts and homebuilder sentiment both recently declining. On Wednesday, the government also reported new-home sales dropping to a seven-month low.With expectations of lower rates coming in the second half of the year, the outlook for the homebuilding industry still looks promising, at least in the eyes of investors. Builder stocks rallied in mid July following recent inflation and jobs reports. The S&P Composite Homebuilding index is also up by almost 22% since July 1.The following are some key earnings numbers from some public homebuilders.

Homebuilders see profits grow amid sluggish existing-home sales2024-07-24T21:17:19+00:00

Overabundance of multifamily supply to impact rent, occupancy


Multifamily performance might face some challenges throughout the second half of the year as the market works its way through a historically high supply of new units, Freddie Mac's midyear outlook said Wednesday.Because supply is outpacing demand in some markets, the government-sponsored enterprise forecasts below-average rent growth and downward pressure on occupancy rates for the remainder of the year.Rent growth will likely teeter-totter around 2.7%, while the vacancy rate will increase to 6%, per Freddie. New-unit deliveries are currently concentrated in the Sun Belt and Mountain West regions of the country, where demand grew since the pandemic, the mid-year outlook said. This is contributing to a year-over-year rent decline of 2.2% in the Sun Belt and 0.6% in the Mountain West.Sara Hoffman, senior director of multifamily research at Freddie Mac, explains that despite new supply being at a nearly 40-year high, it will be short-lived because these housing units are located in areas with high demand."That will cause multifamily performance to remain subdued this year, but over the longer term, the multifamily market appears primed for growth due to an overall shortage of housing, an expensive for-sale housing market and favorable demographic tailwinds," Hoffman added in a press release.Compared to a few years ago, the pace of rent growth has decelerated from the prior 12 months. This is specifically impacting markets where rents increased rapidly during the pandemic boom, followed by a high churning-out of supply.The GSE notes Austin, Texas; Jacksonville, Florida; Atlanta; San Antonio and Raleigh, North Carolina — all markets that saw booming rent growth during the pandemic — are now seeing the rate of increases slow and trend lower than last year.Regarding the state of multifamily construction, the GSE notes that permits and starts peaked in 2022, but as of the first quarter of 2024 are down 33% and 37%, respectively. Due to construction timelines, the bulk of the units started in 2022 are expected to be delivered from 2024 through 2026, the housing agency said.Freddie forecasts that due to elevated interest rates and volatility the multifamily market could show a modest recovery from the estimated 2023 levels to about $320 billion if market conditions get better in the next six months.

Overabundance of multifamily supply to impact rent, occupancy2024-07-24T21:17:25+00:00

Mortgages play big part in new Pennsylvania bank merger


Mortgages will be a key companion piece to other business lines in ACNB's newly-announced agreement to buy Traditions Bancorp through an in-market acquisition.Traditions is based in York, approximately 30 miles away from the acquiring company. Post-merger closures will include two Traditions branches and one ACNB loan production office."Traditions' mortgage banking unit complements ACNB's existing insurance and wealth management sources of non-interest income, providing future revenue and loan growth," an investor presentation included in a Securities and Exchange Commission filing said.Traditions shareholders will receive 0.73 shares of ACNB common stock for each share they own. The deal is valued at $73.5 million based on the volume weighted average price of ACNB on July 19.The deal will build on ACNB's presence in York County and help it expand into nearby Lancaster County, James Helt, president and CEO, said in a press release.On the same day the deal was announced, both banks announced earnings that shed light on the role housing finance could play in the combined company."Mortgage banking income has rebounded for the quarter, with gains on the sale of mortgages bolstering earnings as rising funding costs continue to inhibit net interest income," Eugene Draganosky, Traditions chairman and CEO, said in the earnings release. "We remain optimistic and look forward to the normalization of the interest rate yield curve in the future."Second quarter GOS was $1.5 million, versus $1 million in the fourth quarter and $1.2 million one year prior.Its mortgage pipeline increased to $25.8 million from $17.4 million compared with the end of the first quarter and from $15.6 million on June 30, 2023.However, mortgages drove an increase in its nonaccrual loan portfolio to $4.4 million in the second quarter from $3.8 million for the first quarter. The mortgage portion increased by $0.9 million.Traditions reported net income of $1.8 million for the quarter, compared with $1.4 million for the prior period and $1.3 million in the same quarter of 2023.ACNB's net income for the second quarter was $11.3 million, compared with $6.8 million three months earlier and $9.5 million for the period ended June 30, 2023."We continued to experience strong loan demand through the first half of the year combined with stellar asset quality metrics," Helt said in the ACNB earnings release. "Our ongoing efforts to diversify our revenue streams with ACNB Insurance Services and our wealth management teams continue to show positive momentum."

Mortgages play big part in new Pennsylvania bank merger2024-07-24T19:16:30+00:00

Technology that will make loan officers happy


When it comes to technology, thinking like a loan officer — and borrower — might drive mortgage companies to make choices that will bring in heftier profits and happier customers, leading originators say.   With customers' heightened expectations of faster service across the entire borrowing process, loan officers and brokers are likely to be most appreciative of lenders and vendors that support speed and ease of use. As companies decide how best to budget their resources for 2025, choices on software spend that keep those needs in mind may lead to better production numbers for the year ahead. "The president of our company used to be a loan officer. The management understands the importance of us being able to get back to consumers and back to Realtors quickly," said Joseph Bigelman, a top-producing Michigan branch manager and loan consultant at John Adams Mortgage.  Research released earlier this year by point-of-sale software provider Floify supports what many originators say about the importance of quality technology for their success. Nearly 90% of top producers cited it as a leading factor in choosing which lender to partner with. Lenders looking to upgrade technology infrastructure don't necessarily need to aim for a complete overhaul or see it as a complicated or costly exercise. "Modern technology does allow older technologies to talk to newer technologies more easily. You don't always have to go replace things from the ground up," said Sridhar Sharma, chief information officer at Mr. Cooper. "There might be good reasons to do that. But you also have modern technology that allows you to integrate systems much more seamlessly than ever before," Sharma added.As impressive as the newest software can be, simplicity may also be as big a selling point for technology purchases as any other feature to some originators."We're not experts in IT," said California-based Kathleen Beck, lender at Open Mortgage. "It has to be simple. It has to be usable."Below we share the software functionalities that are of greatest importance to some of the most critical figures in your business. Connecting to the sourcesAs all parties in a transaction increasingly have the option to send their forms electronically, loan officers are viewing secure document collection more and more as a must-have. In Floify's survey, 93% of producers signaled a secure document portal was high on their wish lists. Having loan origination systems integrated with platforms where clients can submit documents electronically is "one of the biggest helps to my business," Beck said. The security within the platforms also gives her peace of mind that personal information won't be compromised. Technology platforms offered by the likes of Floify, Ncino and Maxwell all facilitate document upload."They can upload documents after hours. They can do all kinds of stuff," Beck said. "It's been wonderful."Coming onto the scene are systems allowing the loan officer to verify information and assets directly through access to the original sources, whether they be employment, payroll or tax data, and bypass the need for form submission. Such tools, including those offered by The Work Number, Truv, Argyle and Halcyon, have been valuable to Bigelman's business. (Bigelman did not disclose which tools his firm uses). But the ability to submit forms and information at any time of the day is also at the loan officer's disposal, thanks to technology like phone apps. With questions and requests now coming in around the clock, being able to serve a customer the moment the need arises increases the chances of turning leads into sales. "Being mobile with your cell phone is probably what I appreciate the most," Bigelman said. "Twenty years ago when I had to send a preapproval, I had to stop what I was doing, go to my office or my house and fax a preapproval over. Now I can do it from my phone. I can access my system. I can access the customer's information. I can send a preapproval in a PDF right from my phone wherever I am in the world," he added.Stepping into the borrower's shoesWhile making the mortgage process easier for the originator may pave the way for more sales, don't ignore the most important stakeholder in a transaction — the borrower, originators say. In particular, home buyers are likely encountering unfamiliar terms and new companies for the first time. Technology that serves the borrower, as well as the originator, will provide a less daunting experience for all involved. "We're not dealing with professional home buyers always. We're not dealing with professional borrowers," said Shadi Kamran, national business development and market growth executive at Certainty Home Lending."With technology, you're able to immediately communicate these aspects of the loan that they need to make a decision on, so that they can make that decision," he said. Tools with proper transparency to inform clients of the progress of a loan application will help them meet milestones necessary for a home purchase, he said. Kamran also originates loans primarily in Southern California. "It makes it move quicker, not because we're trying to push it along, but because they're able to understand the information, and they can make a decision quicker, which allows them the time to do the rest of the due diligence that they need for the purchase."Having transparent tools that also alerts loan officers of any possible problems to enable better communication as well. "It gives me more touch points, too," Beck said.Building more transparency into the technology becomes even more important when lenders are working with more complicated products, such as non-QM or bank statement loans, according to Kamran. With more instances of nontraditional income streams today, "Technology has to keep up with these, and I think we do a great job of ensuring that our technology recognizes these different paths of applying for a mortgage," he said. Don't forget the marketing While the value of digital technology from originations through closing and servicing are often the focus of attention at mortgage businesses, originators also appreciate when marketing tools in their tech stacks can bring the borrower to the table. Easy-to-use customer-relationship management systems are paramount. At the same time, tools offered by the likes of Bombbomb, Storyy and Idomoo that help a loan officer build social media campaigns through video and find leads are growing in importance in a digital consumer marketplace."I'm doing a lot to push technology that way," Bigelman said. I think people love those," he said of the videos he creates, noting they help build his reputation as a credible resource."You need to establish the relationships. That's where the tech, in that regard, is to me."

Technology that will make loan officers happy2024-07-24T17:17:56+00:00

Mortgage performance indicators change gears in two reports


Unusual upticks in loan stress indicators surfaced in two June reports released this week, raising questions about the future direction of mortgage performance.Forbearance tracked in the Mortgage Bankers Association's Loan Monitoring Report rose for the first time since October 2022. Also, delinquencies jumped notably to their second highest point in 18 months in Intercontinental Exchange's earlier First Look report.Experts had mixed opinions on how much to read into what was a historically significant but numerically small rise overall in the low level of forbearance by 2 basis points to 0.23%, and the more marked 45 basis point jump in the mortgage delinquency rate to 3.49%.Both reports noted June reporting ended on a Sunday which can artificially inflate numbers. However, reports from both the association and an analysis of the numbers released by DLS Servicing on Tuesday indicated there are broader signs of performance concerns."An educated guess is that the delinquencies are up due to the inflationary pressures with lack of wage growth, added to increased credit debt that is catching up with many households," said Donna Schmidt, managing director of DLS Servicing, in an emailed press statement.Schmidt indicated that the recent mild uptick in the unemployment rate also could be contributing."We have seen a significant increase in the number of borrowers requesting forbearance due to a loss of jobs," she said.In addition, an increase in natural disasters may be driving some of the performance concerns, Marina Walsh, vice president of industry analysis at the association, said in a press release."There were several factors that impacted homeowners, including the uptick of severe weather events that hit multiple areas of the country," she said.The MBA found that the bulk or 75.9% of forbearance resulted from events that included job loss, death, divorce or disability; and 16.2% stemmed from the impact of disasters. The remainder or 7.9% of people in forbearance are in it due to COVID-19.The uptick in forbearance was concentrated in mortgages sold into Ginnie Mae-guaranteed securitizations, which other government entities back at the loan level, according to the MBA. The forbearance share for these loans rose 5 basis points to 0.44%.In comparison, loans sold to government-sponsored enterprises Fannie Mae and Freddie back experience were only up by a single basis point at 0.11%. The forbearance rates for mortgages in the private market's bank portfolios or securitizations was unchanged at 0.31%."The performance of both loan workouts and overall servicing portfolios weakened, particularly for government loans," Walsh said.Loans in Ginnie securitizations tend to be made to borrowers with income constraints and less of a financial buffer against unexpected hardships, so they're more sensitive to performance issues and can be an early indicator of broader concerns in the market.Foreclosure numbers remain relatively low in multiple reports. That is in part because foreclosures can have relatively long timelines, which have been normalizing somewhat since the pandemic but still vary widely by state, according to a recent report by property data provider Attom.Out of 143.4 million homes in the United States, 46,237 are vacant due to foreclosure, according to a recent report by LendingTree."One of the main reasons why foreclosures aren't common is because most homeowners are sitting on mortgage rates below 5% and thus have very manageable monthly payments," Jacob Channel, LendingTree's senior economist and report author said in an emailed statement."On top of that, strict lending standards implemented in the wake of the Great Recession help to ensure that, even if their rates and payments are high, people who get mortgages aren't likely to default on them," he added.An additional reason foreclosures have been low has been innovation that has occurred in foreclosure prevention programs since the pandemic. These give more borrowers easier access to options but raise the question of what happens when they fail to return loans to paying status"Foreclosure can be avoided more easily. However, at what point is there an accountability for those borrowers who simply cannot afford the properties?" Schmidt asked.

Mortgage performance indicators change gears in two reports2024-07-24T16:16:47+00:00

New-home sales unexpectedly decline to a seven-month low


Sales of new U.S. homes unexpectedly declined for a second month in June as the mix of stubbornly high mortgage rates and prices deterred prospective buyers. Contract signings on new single-family homes decreased 0.6% to a 617,000 annual pace, the slowest since November, according to government data released Wednesday. The figure compared with a 640,000 median estimate in a Bloomberg survey of economists.RELATED: How mortgage lenders and home builders form partnershipsThe latest figures follow a topsy-turvy first half of the year, with sales gaining ground throughout the spring before slumping in May by the most in nearly a year. Thirty-year mortgage rates have dipped below 7% in recent weeks, but remain double what they were at the end of 2021, encouraging many builders to offer sales incentives such as buying down customers' mortgages.Meantime, builders have continued to add supply, with inventory edging up to 476,000 homes in June, still the most since 2008. At the current rate of sales, that inventory would last 9.3 months, the longest since October 2022. While builders would ordinarily limit production once the supply-sales ratio exceeds 7.5 months, a lack of available previously owned homes is allowing them to keep up the pace, Robert Dietz, chief economist at the National Association of Home Builders, said last week.An elevated inventory has, however, helped keep price growth in check. In June, the median sales price of a new home was little changed from a year ago at $417,300. After rapid growth in 2021 and 2022, price changes have been relatively muted in recent months.Despite some "choppiness" in demand throughout its recently finished third quarter, DR Horton Inc., one of the biggest U.S. builders, reported a gross profit margin that beat analysts' expectations. DR Horton cut its average house size by 2% over the past year in response to affordability challenges, and it's considering boosting construction of townhouses in some markets, Chief Operating Officer Michael Murray said last week on an earnings call.The government report showed new-home sales declined in the Midwest. Purchases fell in Northeast to the lowest level in nearly a decade, while rising slightly in the South and West.While inventory in the resale market remains relatively low, builders are taking up the slack. The number of completed new homes that were for sale rose to 102,000 in June, remaining at the highest level since 2009.New-home sales are seen as a more timely measurement than purchases of previously-owned homes, which are calculated when contracts close. However, the data are volatile. The government report showed 90% confidence that the change in new-home sales ranged from a 15.2% decline to a 14% gain.

New-home sales unexpectedly decline to a seven-month low2024-07-24T15:17:30+00:00

Affordability concerns suppressing mortgage activity


Mortgage application volumes retreated last week, even as lower interest rates managed to sustain refinance interest, according to the industry's leading trade group. The MBA's Market Composite Index, a measure of application volumes based on surveys of the trade group's members, pulled back a seasonally adjusted 2.2% for the period ending July 12. Loan activity decreased after the index accelerated 3.9% seven days earlier. Compared to a year ago, however, activity came in 1.2% higher.Volumes declined despite interest rates falling to their lowest point in five months. The 30-year conforming fixed rate averaged 6.82%, down 5 basis points from 6.87% a week earlier.  Points used to buy down the rate inched up to 0.59 from 0.57 for 80% loan-to-value ratio transactions.While downwardly trending rates kept refinances near their same level in the prior survey, they failed to provide momentum in the purchase market, pushing the composite index lower for the third time in four weeksThe seasonally adjusted Purchase Index ended up 4% lower week over week. Volume also came in 15.3% under its mark from one year ago. "Purchase applications decreased, as ongoing affordability challenges persist with rates at their current levels and with home-price appreciation still strong in many markets," said Joel Kan, MBA vice president and deputy chief economist, in a press release.A challenging purchase environment still stands in the way of homeownership for many buyers, even as supply improves and rates head lower, according to several housing researchers. Evidence of such trends came in the latest existing-home sales data, which showed purchases  at their slowest pace in over a decade in June despite the greatest amount of inventory since late 2020. At the same time, though, enough pent-up demand exists to continue pushing prices to new record highs.The MBA Refinance Index helped offset some of the decline in purchase loans, rising 0.3% from the previous survey period, as borrowers in conventional and Federal Housing Administration-backed segments drove growth for a second consecutive week. "The conventional refi index was at its highest level since September 2022," Kan said.Refinance activity slowed from the previous survey's 15.2% surge, though, as the Department of Veterans Affairs segment accounted for fewer loans. Compared to 12 months earlier, overall refi numbers were up 38.3%. The share of refinance applications relative to total activity also grew to 39.7% from 38.9% week over week. Government-sponsored lending saw a larger dropoff than the overall market, shrinking its share of volume as a result. FHA-backed mortgages nabbed a 13.4% slice of activity, edging back from 13.5% one week earlier. Applications coming from the Department of Veterans Affairs represented a 14.8% share of the market down from 15.2%. U.S. Department of Agriculture-guaranteed loans made up the same 0.4% share from the prior week. In tandem with the conforming average, other rates tracked by the MBA headed downward last week with one exception. The 30-year fixed jumbo average inched up 2 basis points to 7.09% from 7.07% seven days earlier. Borrower points decreased to 0.54 from 0.57.Meanwhile, the 30-year FHA-backed fixed mortgage came in at a mean rate of 6.71%, slipping 4 basis points from 6.75% in the previous survey. Points for 80% LTV-loans increased to 0.86 from 0.81.The average 15-year fixed contract rate plunged 28 basis points to 6.21% from 6.49% week over week. Points inched back at a more muted pace, with borrowers using, on average, 0.50, down from 0.51. The 5/1 adjustable-rate mortgage saw an average of 6.19% compared to 6.33% seven days prior. Points pulled back to 0.52 from 0.58. The share of ARMs, which start with various fixed terms that later become variable, remained at 5.8%, the same as one week earlier. 

Affordability concerns suppressing mortgage activity2024-07-24T11:16:41+00:00

Pennymac posts steady profits, adds brokers in 2Q


Pennymac Financial Services reported gains across the board in the second quarter, and claims it's now working with about a quarter of the mortgage broker population.The mortgage giant ended the recent period with $98.3 million in net income, according to its earnings published Tuesday afternoon. That was a leap from a $39.8 million profit last quarter weakened by hedging losses, and a $58.3 million net income result the same time a year ago. The company generated higher volumes in each of its three channels, led by its dominant correspondent line responsible for $23.7 billion in lock volume ending June. Its broker direct and consumer direct channels also delivered $4.3 billion and $2.7 billion in lock volume, respectively, over the quarter.The channels' performance led to a $41.3 million in production segment pretax income, a 15% quarterly jump and 69% year-over-year gain. Pennymac had 4,274 approved brokers as of June 30, a roster that's also grown 31% annually. The company assumes a 3.7% broker direct market share, a figure calculated without second lien originations. In all, the lender and servicer amassed $27.2 billion in unpaid principal balance in total loan acquisitions and originations over the quarter, up 25% from the end of March. The growth was dampened however by a flat gain-on-sale margin in the broker channel, and decreasing margins in correspondent and consumer direct lines. The company blamed lower margins in correspondent production, which dipped 5 bps quarterly to 30 bps this spring, on highly competitive pricing from unspecified competitors. That competition influences correspondent margins more so than today's incremental interest rate movements, said Daniel Perotti, senior managing director and chief financial officer, during Tuesday's earnings call. "One of the great things that's come out in the last two or three years has really been the maintaining of rational pricing on the production side, in absence of these one-offs of irrational pricing of people who have money to burn," said Spector, following Perotti's comments.The Southern California-based firm also reported $88.5 million in servicing segment pretax income, massive quarterly and annual gains executives attributed to their proprietary servicing technology. That platform will also be the first in the industry to incorporate requirements for the Department of Veterans Affairs Service Purchase program, Spector claimed."Our strength in technology development, combined with the operational scale we have achieved has driven our cost to service to among the lowest in the industry," he said.Servicing income was net of a $60 million loss stemming from fair value changes in mortgage servicing rights, hedging and non-recurring items. The company's portfolio stood at $632.7 billion in unpaid principal balance at the end of the quarter, up 10% year-over-year. About $176 billion of that UPB carries a note rate greater than 5%, according to its investor presentation. Pennymac in May issued $650 million of senior unsecured notes at 7.125% due in late 2030, one of several major players to position themselves during the quiet market. The business stated cash and available amounts to withdraw totalling $3.4 billion at the end of the second quarter.

Pennymac posts steady profits, adds brokers in 2Q2024-07-24T01:16:35+00:00
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