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Under President-elect Donald Trump, the government's conservatorship of Fannie Mae and Freddie Mac could become a thing of the past. The question is if the 30-year fixed rate mortgage would be, too.Earlier this month, Brian Brooks, former Comptroller of the Currency and current Trump transition advisor, said it was "highly likely" that the incoming government would move to privatize the mortgage market makers, noting that it was the "last piece of unfinished business" from the 2008 financial crisis.But some economists and lenders say such a move could have devastating consequences for the mortgage market. Specifically, they worry that if the government relinquishes its ownership stake in Fannie and Freddie, investors would no longer treat debt and securities issued by the entities as fully backstopped by the public. "We haven't had bank market mortgages in this country in 100 years," said R. Christopher Whalen, a risk analyst and former investment banker. "The only way you have 30-year mortgages with the current amortization that we have today is with government backing."Meanwhile, proponents of a swift end to conservatorship argue that little will change upon the release of the government-sponsored enterprises. Former Federal Housing Finance Agency Director Mark Calabria, who sought to end the conservatorship during the first Trump administration, pointed out that the government has never explicitly guaranteed the mortgage-backed securities, also known as MBS, issued by Fannie and Freddie. Still, he noted, market participants treated those assets as guaranteed both before and during the conservatorship. He predicts the same will be true once it ends."The implied guarantee is just created by marketing participants," Calabria said. "These very same people, post-conservatorship, will tell you that implied guarantee still exists."The American standardThe enterprises buy and guarantee principal and interest payments of mortgages that conform to certain standards. In doing so, they reduce risk for originators, expand the availability of credit and reduce costs faced by mortgage borrowers. Because their standards allow for 30-year fixed rate mortgages — a product scarcely offered elsewhere in the world — some economists and market participants credit them with enabling the structure to become ubiquitous among U.S. homeowners. "A true privatization is probably not in anyone's best interest at this point," said Stuart Boesky, founder and CEO of the real estate private equity group Pembrook Capital Management. "Unfortunately, we've grown to love fixed-rate, 30-year mortgages. Our whole housing market is built around it, and I'm not quite sure a real privatization would sustain a 30-year fixed rate mortgage."But Calabria said the enterprises are not the sole reason for this distinctly American home loan, arguing that they do nothing to mitigate the duration or interest rate risks that come with such long-dated instruments. That risk is assumed by MBS investors, including banks."The primary reason that we have longer term financing on mortgages than other countries is because we have less of a history of inflation," he said. "What's so special about a 30-year fixed mortgage? The interest rate risk. Are you going to make a 30-year fixed rate loan if it's an average of 10% inflation every year?"Ultimately, it's really an inflation question, not a credit question, because Fannie and Freddie do not guarantee interest rate risk. They guarantee credit risk," he added.Yet, such nuances could be lost once the process of privatization enters the public sphere. Whalen said he expects strong opposition to the move to arise on both sides of the political aisle."The moment they start this conversation, the moment the Secretary of the Treasury starts talking about this in front of Congress, the opposition is going to explode — not just from Democrats but Republicans, too," Whalen said. "They're going to start asking a lot of questions that they're not asking now."Getting into (and out of) conservatorshipFannie Mae, known formally as the Federal National Mortgage Association, was created by Congress during the Great Depression to bolster the secondary market for bank-originated mortgages and thus provide liquidity to lenders. The Federal Home Loan Mortgage Corp., or Freddie Mac, was created in 1970 to do the same for thrifts and smaller banks. Both entities were chartered as private companies but with government-appointed directors, lines of credit with the Treasury Department and certain benefits such as tax exempt statuses and the ability to classify their issuances as government securities. Fannie and Freddie have been under conservatorship with the FHFA since 2008, when losses from the subprime mortgage crisis pushed them to the brink of bankruptcy. The arrangement was intended to be a temporary stopgap to safeguard the mortgage market while the enterprises recapitalized. As part of the conservatorship, the Treasury Department owns preferred shares and warrants that could be converted into a 79.9% stake in the companies.To be released from conservatorship, the enterprises must build up a capital buffer of at least 3% of their assets, which currently total roughly $8 trillion. They also must raise enough equity through a public offering to repurchase preferred shares from the Treasury at a cost of roughly $190 billion. The total price tag of the public issuance could be offset by the enterprises retaining earnings over a several year period, but will also be influenced by the expected returns of investors. Some are skeptical about the feasibility of such a public offering, especially if the purchase would be taking on the risk of roughly half the U.S. mortgage market."I'm not quite sure there's enough capital in the capital market system to privatize it and, if there is, I'm not sure the return on equity is going to be attractive enough to draw in that capital," Boesky said. "It begs the question of whether it is possible to capitalize it the way it should be for it to be truly privatized."Calabria acknowledged that privatization would be no small feat, but argued that the process could be relatively simple. That's because the enterprises are not large holding companies, they are not structurally complex and they do not require organizational changes. He added that they would have the benefit of being included in index funds immediately simply because of their size.A recent report by the Congressional Budget Office noted that privatization is both possible and more viable today than it was when Calabria was in office. The CBO found that 60% of the 250 potential scenarios it analyzed this year would raise sufficient funds for privatization, compared to just 12% in 2020.A worthy tradeoff?Still, even if it can be done, some wonder whether it should, particularly given the unknown implications on mortgage costs and availability.Mark Zandi, chief economist with analytics firm Moody's, said there are a range of potential outcomes, including privatization with a government guarantee, either explicit or implicit; privatization without a guarantee; and a return to being government corporations, as Fannie was before 1968. Most of these options would increase mortgage costs at least slightly, Zandi said, adding that the most likely outcome is for the status quo to continue.Zandi noted that the enterprises have taken steps to shield taxpayers from losses by offloading the interest rate risk for their nonsecuritized holdings to the private sector in the form of credit risk transfers. With this pseudo-privatization in place and the mortgage industry functioning well, he sees no reason to take on the risks associated with privatization."It's a bad idea. I think it's a solution looking for a problem," Zandi said. "The housing finance system is functioning marvelously well and the housing finance ecosystem is in good shape. I mean, look at mortgage credit quality. It's about as good as it gets."Brooks, now the CEO of the nonbank commercial real estate lender Meridian Capital Group, argued that the move would allow the government-sponsored entities to buy more commercial mortgages and spark more competition in the real estate finance space. "In shareholder-owned structures at the agencies, you will draw much more capital into the real estate sector, generally, much more animal spirits, much more activity, and that is because those businesses themselves will be able to innovate," Brooks said onstage during a commercial real estate event. "People will build companies to try to compete with them. The amount of global capital flowing into the U.S. real estate sector generally, will go up, not down."For Calabria — who said he does not intend to join the new Trump administration next year — the issue is a matter of enforcing the law on the books, which directs the government to release the GSEs once they are stable enough to stand on their own."My argument is simply, as a basic principle, government should follow the law, whether we like it or not," he said. "Because Congress debated those trade offs and made the decision."

New-home sales in the U.S. rebounded last month as builders and consumers sealed deals that had been delayed by storms in the South, and buyers took advantage of heavy sales incentives.Sales of new single-family homes increased 5.9% last month to a 664,000 annualized rate, according to government data issued Monday. That was in line with the median estimate of economists surveyed by Bloomberg, who expected 669,000.Builders last month played catchup especially in the South, the nation's biggest homebuilding region, where hurricanes in the fall sank October sales. In November, sales in the South recovered nearly 14%. Meantime, they increased in the Midwest to the fastest pace since 2021. Sales in the Northeast and West declined.Potential buyers also have more to choose from. Last month, the supply of new homes for sale increased to the highest since the end of 2007.That's offering some help on the affordability side. The median sale price of a new single-family home decreased 6.3% last month from a year ago, and is now $402,600.Contractors are also helping by offering customers so-called mortgage buydowns, or making payments on their behalf to lower their rates, and occasionally cutting prices. And builders have felt more confident since Donald Trump won last month's election, hoping the incoming administration will cut red tape and allow for easier development.Still, Wall Street is losing interest in the sector, leery that builders' sales incentives are eating into their profit margins and concerned about high borrowing costs. Shares of the iShares U.S. Home Construction exchange-traded fund hit an all-time in mid October, but have since shed 20% of their value.And mortgage rates — which are approaching 7% again — may stay elevated for some time after briefly falling to a two-year low in September. Last week, updated projections from the Federal Reserve showed fewer interest-rate cuts in 2025, with policymakers firmly set on quashing inflation.In the existing-homes market, house hunters are starting to accept this new reality, as sales increased last month to the fastest pace since March.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 12.7% decline to a 24.5% gain.The report, along with another on durable goods orders, was originally scheduled for release Tuesday, but both were moved up a day by the Census Bureau following President Joe Biden's executive order excusing federal-government workers from duty on Dec. 24

This past year saw numerous brow-raising conflicts erupt within the mortgage industry. Rival mortgage lenders sent litigation flying against one another with accusations being made of loan officer poaching and of trade secrets theft. Some of these suits were settled before year-end, while others remain pending in federal courts.Former employees sued former mortgage lenders for alleged unfair practices and a top loan officer and his assistant got dinged for alleged large scale mortgage fraud.Additionally, an expose from a start-up publication outlining alleged practices by the top lender in the nation sent the industry into a tizzy.Here's a breakdown of the most high profile legal battles between lenders and other entities over the past year.

Online reviews are one of the most important ways for mortgage loan officers to advertise their business and those not ensuring their past customers leave reviews are dropping the ball, LOs say.Just like any type of service, customers will look up their mortgage professional, noted Alex Margulis, loan officer at CrossCountry Mortgage. Margulis has over 199 customer reviews and has almost five stars on platforms used to find originators."I've had very good reviews with my past clients, so it shoots me up at a much higher ranking based on not just these organic reviews, but also because of the volume of the reviews being positive," he saidThe CrossCountry LO notes he proactively follows up with clients to ask for reviews following the closing of a loan. "It would be my advice for other LOs to have reviews be more top of mind for their clients because ultimately it does help with SEO," he said.Alex Naumovych, loan officer at First Alliance Home Mortgage, thinks online borrower feedback is "even more important than having knowledge about the mortgage process." "Borrowers don't ask you if you know the mortgage guidelines, but if mortgage reviews are very good from previous customers, then that will help get more business through the door," the Washington D.C.-based LO said. "It's also a good way for customers to see if an LO actually knows what they're doing and if they care about the client."Naumovych notes that if newbie loan officers are not prioritizing asking customers for reviews, it will be hard for them to establish themselves in the business. Most mortgage companies, such as CrossCountry Mortgage and First Alliance Home Mortgage, rely on Experience.com to aggregate customer reviews for loan officers from different platforms. However, usually originators have to put in their own effort into creating Google review pages and Yelp pages, which the platform Experience aggregates from.LOs say their lender CRM systems usually ping borrowers numerous times with reminders to leave reviews, but that can be seen as a nuisance by some. That's when a personalized touch is key.Andrew Dort, who runs brokerage shop Pride Lending, sends his customers videos thanking them for business and asking for a review. According to Dort, that has worked well in empowering borrowers to leave online commentary."I'll leave [borrowers] a video message after closing just thanking them and then asking them to leave the review right there on the video message, and then dropping a link, and that seems to have the highest engagement for me," he said.Dort says he'll ask customers one or two times, but no more. "I feel like after that point, it could just become a chore for them, and I'd rather not sour their experience," he said.While all professionals who rely on reviews hope for accolades and five stars, sometimes that doesn't happen.The best thing to do when you receive a rating that is less than favorable is to get in front of it, a handful of LOs said."You have to be responding to the good and the bad reviews," added Dort. " If you do, you have more authority to respond to those negative reviews with a constructive kind of feedback. Oftentimes for business owners it's setting the record straight, because there's always two sides to a story."Margulis echoed similar sentiments underpinning the "importance of taking a proactive approach in managing reviews." "[If it's a bad review] it's important to always respond and explain what went wrong that way anytime you see the review and read through the comments of that particular review from the consumer, they can see my reaction or my response to that review outlining my side of the story."

Hometown Lenders' bankruptcy proceedings have hit a snag in recent weeks, as many creditors have disagreed with a proposal for how the company will be unwound.This came after the now-defunct Hometown Lenders, which, after struggling with rising interest rates, filed for Chapter 11 bankruptcy and submitted an amended liquidation plan on Nov. 11, detailing how its assets would be distributed.The 27-page proposal includes details such as plans to pay more than $200,000 to Flagstar Bank to settle a previous contract breach lawsuit. In exchange, the bank will return 49 of the lender's loans, held as collateral, to the lender. Proceeds from the sale of these loans will be used to pay off outstanding debts.Additionally, the liquidation plan notes that Hometown's "management" will be in charge of making sure the plan is implemented. Parties affected by the proceedings, including the Department of Housing and Urban Development, Anthony Perri Sr. and Jr., Bank of Frankenwig, the Internal Revenue Service (IRS), and Nevada's Department of Taxation, filed objections to the liquidation plan in mid-December.In its objection filing, HUD noted that neither it nor the Federal Housing Administration were listed as creditors, even though its data shows Hometown holds at least six FHA loans, for which it should be paying mortgage insurance premiums. Numerous legal filings from 2023 claimed that instead of paying MIP on FHA loans to HUD, Hometown was allegedly pocketing those sums.Meanwhile, the IRS wrote in its objection that the liquidation plan inadequately addresses a substantial tax debt of over $12 million, failing to provide for the payments of both secured and unsecured priority text debts. The agency's objection further argues that the plan doesn't comply with several sections of the U.S. Bankruptcy Code.The Perri's, who ran the top-performing Hometown branch and sued Hometown for nonpayment, wrote in their objection that the plan is not in the best interest of creditors because it allows the existing management (Billy Taylor) to oversee the liquidation, which is a conflict of interest. The father and son duo are creditors with priority claims in the bankruptcy.Hometown anticipates its liquidation fund will reach approximately $23 million, which will be divided up to stakeholders impacted by the company's nonpayments and breaches of contract. However, this amount is dependent upon the success of Hometown's efforts in settling with Flagstar and litigation efforts involving an insurance company, it wrote.The defunct lender has left a trail of companies and former employees that it has outstanding debts to.A recent article notes that in Oklahoma, Hometown Lenders ranks second in owing payments to employees. Nine former Hometown employees residing in Oklahoma are owed over $500,000 in unpaid wages, The Frontier, an Oklahoma non-profit publication wrote.Shelby Weston, former branch manager at Hometown, is quoted in the article saying he and other workers in his Oklahoma-based branch stopped being paid by the company and had some customer mortgage applications almost fall through the cracks."It was a bad situation," Weston said in his interview with the Oklahoma-based publication. "'Hey, you're not getting paid. See you later.' According to Weston, the mortgage applications were ultimately rerouted to other lenders. He also said in the interview that many former employees have "not been made whole" and that Hometown's bankruptcy case has stalled the process."They owed us a lot of money, still owe us a lot of money. They owe so many people, they let it get way too bad, " Weston said. It is uncertain whether those owed unpaid wages will somehow be compensated through Hometown's final liquidation plan. Billy Taylor, the CEO of Hometown, could not be reached. Attorneys representing Hometown did not respond to a request for comment.

Enjoy complimentary access to top ideas and insights — selected by our editors. 2024 was an eventful year in the mortgage industry, with mortgage interest rates tipping down from recent highs, numerous court battles involving the likes of NAR and UWM against other entities, the passing of Mortgage Bankers Association leader David Stevens and Fannie Mae and Freddie Mac undergoing significant changes. Learn more about the top items for the year below. Andrew Harrer/Bloomberg David Stevens, mortgage icon, dead at 66Article by Brad FinkelsteinDavid Stevens, a mortgage industry figure who held a wide range of positions during his career, passed away at 66 in January.A statement from the Mortgage Bankers Association, the industry trade group he headed up for seven years, said Stevens' death was unexpected.However, it was well-known that he had been battling cancer for many years, although at the time he announced his retirement from the MBA in August 2018, he added he was in remission.Click here to read the full article. Fake Dictionary, definition of the word fraud.Devon Yu/Feng Yu - stock.adobe.com Top producer and assistant charged in "large-scale" mortgage schemeArticle by Maria VolkovaA top loan originator and his aide are facing up to 30 years in prison after the Department of Justice indicted the pair for a "large-scale" mortgage fraud scheme in April.Christopher J. Gallo, a former top loan officer at NJ Lenders Corp., and his assistant, Mehmet A. Elmas, are accused of orchestrating a ploy in which the two mortgage professionals falsified loan origination documents, while they both worked at the New Jersey-based company.Specifically, from 2018 through last October, the originators did not disclose to their employer and other lenders when a borrower was buying a second property, thereby securing lower mortgage rates for consumers. In reality, some of these properties were being bought to be used as rental or investment properties, a complaint by the DOJ reads.Click here to read the full article. UWM files suit against creator of Facebook group for brokersArticle by Maria VolkovaUnited Wholesale Mortgage is sued Ramon Walker, owner of brokerage Client Direct Mortgage and creator of a Facebook group dubbed "Rocket Pro TPO vs. UWM," for trademark infringement and not paying an outstanding early payout balance of $124,011.37.In December 2023, UWM sent a cease-and-desist, warning Walker that it was closely monitoring the Facebook group he created and asking the broker to remove all improper use of the wholesale lender's intellectual property. Simultaneously, UWM demanded that Walker pay the amount due.The wholesale lender followed up with a suit filed Feb. 14 in Michigan federal court accusing Walker of using its logo in the Facebook group's banner. Doing so has intentionally caused confusion in the mortgage marketplace and among customers of UWM's products and services, the wholesale lender claims. (The group removed it as of Jan. 5.) Click here to read the full article. designer491 - stock.adobe.com FHA makes long-awaited changes to 203(k) programArticle by Brad FinkelsteinA long-awaited upgrade for the Federal Housing Administration's 203(k) program finally hit the books in July, as its parent agency issued a mortgagee letter detailing changes designed to increase use."The changes we are announcing today for the 203(k) program are long overdue and will support greater use of this program where it is needed most – in neighborhoods where homes are affordable but need repair," said Federal Housing Commissioner Julia Gordon in a July 9 press release. "Increased use of 203(k) mortgages will help modernize and revitalize homes, which supports affordable housing supply and strengthens neighborhoods."Gordon was speaking during a Philadelphia event at a home rehabbed using the loan.Click here to read the full article. Dennis - stock.adobe.com Judge finds UWM employment contract violated workers' rightsArticle by Andrew MartinezAn employment contract United Wholesale Mortgage made employees sign in the past few years violates numerous labor laws, a judge with the National Labor Relations Board found. Administrative Law Judge Susannah Merritt ordered UWM to rescind unlawful portions of the contract and distribute a revised version to current and former workers in a Jan. 11 decision. The ruling, still pending final approval by the 4-member NLRB board, would apply to the lender's contracts in effect any time since Dec. 21, 2021.Merritt agreed with federal prosecutors that large portions of the contract were "overly broad, ambiguous and/or discriminatory." Employees would read many of UWM's terms as unlawfully prohibiting them from discussing workplace conditions, disputes, wages, union efforts and more, the decision said. The judge also found language around arbitration, social media use and media contact in violation of labor laws.Click here to read the full article. Freedomz - stock.adobe.com UWM slams investigative report, racketeering lawsuitArticle by Andrew MartinezUnited Wholesale Mortgage is defending itself from explosive allegations in a media investigation and class action suit that the lender defrauded borrowers by billions of dollars. The first-ever report by Hunterbrook, a venture capital-backed outlet, claims UWM holds independent brokers captive and overcharged borrowers by hundreds of millions of dollars. The publication's editorial board suggests the wholesale giant is at risk of wide-ranging consequences, and shared its findings with regulators and a law firm that filed a class action suit. The lengthy article and its attached research pointed to over 8,000 independent mortgage brokers who sent 99% or more of their loans to UWM, volume that powered the company to the top of the industry. The lawsuit accused "corrupt UWM loyalist" brokers of breaching their fiduciary duty to home buyers, part of racketeering charges against the firm in a new Michigan lawsuit. Click here to read the full article. Bloomberg/Photographer: Bloomberg/Bloomber NAR settlement might lead to more dual agents, but LOs are skepticalArticle by Maria VolkovaDuring the Mortgage Bankers Association's advocacy conference in March, Bob Broeksmit, the trade group's president, floated the idea that the recent National Association of Realtors settlement, which will change the commission structure for real estate agents, may result in more dual licensed agents. What came after was a loud groan from the crowd. "There will be market reactions to the settlement and it will create openings for other business models where we want the buyer represented, but the seller may not want to pay 3% for a buyer's agent," he said. "One of those models could be that you, as lenders, license your loan officers as real estate agents and offer the buying agent service for less than 3% fixed fee."He admitted it would not appeal to all. "Some of you will say 'I want nothing to do with that.' Others of you will say that is a great retention opportunity for my loan officers and the market will figure all this out."Click here to read the full article. Al Drago/Bloomberg How Project 2025 would change U.S. mortgage policyArticle by Maria VolkovaThe conservative Heritage Foundation has rolled out a proposed blueprint for federal change that includes some drastic housing items, and some think it reveals more details of Trump campaign goals not necessarily in its official Agenda 47.The think tank's plan, dubbed Project 2025, overhauls and shrinks many federal agencies, while simultaneously eliminating swaths of career support staff, reprising some ideas previously floated during Trump's first term. The foundation estimates Trump's actions have been in line with its agenda about two-thirds of the time.These hypothetical initiatives impact all agencies that govern the financial services space, including the Department of Housing and Urban Development, the Federal Housing Administration and the Consumer Financial Protection Bureau. Ben Carson, who headed HUD during Trump's first term, contributed to the report.Click here to read the full article. Condos, HOAs set to grow as Fannie, Freddie add transparencyArticle by Bonnie SinnockCondominium and homeowner associations are on track to grow in 2024, adding to a constrained supply of housing, and making financing for units increasingly important.The number is set to increase from 365,000 in 2023 to as much as 370,000 this in 2024, and they account for almost one-third of U.S. home inventory, according to a recent Foundation for Community Association Research study and forecast.Community associations also account for a significant share of the new homes that have become a key part of total for-sale inventory given that many existing owners loath to sell homes that many of them financed at relatively low rates.Click here to read the full article. Congress must act to fix Fannie Mae and Freddie Mac, FHFA saysArticle by Brad FinkelsteinCongress must act in order to ensure the secondary mortgage market is safe, sound and equitable, the government-sponsored enterprises regulator said in its annual report to Congress.Apart from imposing capital requirements on Fannie Mae and Freddie Mac, the Federal Housing Finance Agency does not possess such authority, it noted in the report that primarily addresses activities it undertook in 2023 to, among other things, improve the GSEs' financial health.The FHFA highlighted specific issues that only Congress has the power to alter, including "changes to the Enterprises' charter acts, adjustments to their statutory business model, the nature of any government guarantee and the creation of reserves funded by Enterprise guarantee fees to be accessed in the case of losses" and other structural reforms.Click here to read the full article.

President Joe Biden signed funding legislation to keep the US government operating until mid-March, avoiding a year-end shutdown and kicking future spending decisions into Donald Trump's presidency. The legislation went to Biden early Saturday morning after the Senate voted 85 to 11 to approve the measure, which sailed through the House hours earlier. READ MORE: What bankers need to know about a government shutdownThe last-minute events — the government was taking initial steps to shut down this weekend — capped a tumultuous few days in which two earlier plans pursued by House Speaker Mike Johnson collapsed under pressure from President-elect Trump and Elon Musk.Biden's signature extends government funding through March 14 and includes more than $100 billion in aid for natural disaster victims and farmers, the White House said in a statement. As the US government teetered on the brink of a holiday shutdown, federal agencies moved ahead with preparations, notifying workers Friday that they might be furloughed. While key services such as law enforcement, air traffic control and airport screening would continue during a shutdown, the workers would temporarily go without pay.The late turmoil over a short-term spending package that had been expected to be relatively free of drama vividly demonstrated both Trump's power over fellow Republicans and its limits. Republican lawmakers quickly abandoned a bipartisan deal Johnson had negotiated after Trump and his billionaire ally Musk attacked it in social media posts on Wednesday. But then a new funding package tailored to meet Trump's demand that the national debt limit be waived or raised before he takes office failed when 38 Republican conservatives refused to go along.Musk publicly backed the funding package as the House began voting, giving a boost to both the legislation and the embattled speaker. The House will vote for a new speaker on Jan. 3 and restive ultra-conservatives could threaten to unseat Johnson. "The Speaker did a good job here, given the circumstances," Musk said on his social media platform X. "It went from a bill that weighed pounds to a bill that weighed ounces."

Even as the market overlap for low down payment loans has diminished between conforming and government executions, the private mortgage insurance industry has marketed that its product is cancellable.But a bipartisan bill introduced during the lame duck session in the House of Representatives seeks to change the Federal Housing Association's rule that required life-of-loan premiums for its mortgage insurance coverage.While the bill's opportunities for passage any time soon is unlikely, it is still a slight negative for the private mortgage insurers because if it does come to fruition, it would make the FHA program "a little more competitive," said Bose George, an analyst at Keefe Bruyette & Woods. Borrowers pay an upfront premium for the FHA coverage, as well as an annual one.However, when the FHA annual mortgage insurance premium was reduced in February 2023 to 55 basis points, while some loans opted for the government program, the shift was not huge, largely because of tighter conforming underwriting rules.The share of borrowers taking FHA over conventional has been growing, according to rate lock data from Optimal Blue.FHA was the only entity to gain market share on a month-to-month basis, rising 73 basis points from October to 20.4% of all loans originated during November.Conforming slipped to 52.7%, a loss of 10 basis points and nonconforming was at 14.9%, down 21 basis points. Of the other government product types, Veterans Affairs' share of 11.4% was 35 basis points lower, while the U.S. Department of Agriculture loan locks were 6 basis points lower at 0.6%.Right now, FHA is picking up some business from the conforming market, primarily cash-out refinancings, George said, as that particular product " is hard to do with the GSEs for that cohort of borrowers. About half the FHA cash-out refi activity is coming from the conventional market."Approximately one-quarter of the FHA volume is refis, and half of that is coming over from the conforming market.Furthermore, the FHA program also gets strong use from the homebuilder community."Obviously, the builder share has grown during this downturn, and so I think that's probably one of the drivers of the shift as well," George said.But as the housing market recovers, the private mortgage insurers be better positioned competitively than FHA, he continued.The life-of-loan rule went into effect in June 2013, at a time when the FHA's Mutual Mortgage Insurance Fund was financially distressed because of the housing crisis.Previously, the FHA policy, which it introduced in 2000, automatically canceled mortgage insurance once the loan-to-value ratio reached 78%.Private MI companies are required by the Homeowners Protection Act of 1998 (and implemented the following year) to cancel the coverage at a 78% LTV; borrowers can request it be eliminated when it reaches 80%.Since then, the MIs have marketed this as a competitive advantage, even as the consumer market between two products has diverged.If passed, the change will make homeownership more affordable and save borrowers hundreds of dollars annually, Rep. Gregory Meeks, D.-New York, one of the co-sponsors, said in a press release."This legislation is designed to help Americans keep more of their hard-earned money in their pocket and make home ownership more affordable," Meeks said. "The Mortgage Insurance Freedom Act will empower first-time buyers and young families to get ahead by reducing monthly payments and encourage faster equity accumulation."Working with Meeks is Rep. Pete Sessions, R.-Texas."By addressing a key inequity in the FHA system, this bill rewards financial responsibility and empowers homeowners across the country," Sessions said in the Meeks release.Others quoted in the release are Brendan McKay, chief advocacy officer at the Broker Action Coalition, Patrice Willoughby, NAACP chief of policy and legislative affairs, and Anneliese Lederer, senior policy counsel at the Center for Responsible Lending.McKay posted the release on LinkedIn and also thanked Meeks for introducing the bill.In a follow up statement to National Mortgage News, McKay added "It is our hope that this bill will receive full industry support."As stewards of the industry, it is the BAC's obligation to advocate for any legislation that positively impacts homeowners in a significant manner. The Mortgage Insurance Freedom Act checks that box and has our full support."The organization now known as the Community Home Lenders of America has been arguing for the life-of-loan policy to be repealed almost since when HUD first put it in place, Scott Olson, executive director said.While that won't have the same impact on the program as the MIP reduction, which affected underwriting, a change in this area will benefit both lenders and consumers when it comes to product competition."We find that people are marketing against FHA," Olson said. "They say you don't want to do FHA because you're going to pay the premiums for the rest of your loan term."Fannie Mae and Freddie Mac already have a competitive advantage in the marketplace because their offerings are typically priced better, even on low down payment loans."You're always going to have that difference, but this attribute will no longer be in play that works adversely against FHA," Olson noted.It's also a matter of fairness. Several years ago, CHLA did some calculations that found FHA borrowers repaid over what their risk profile showed at least three or four times more, Olson said. "So to charge them for another 20 years seems unconscionable, because you're just way overcharging them, and so this interferes with their ability to build equity and build wealth."He did point to the counterargument that the loans have default risk, but responded that by that point the borrower has overpaid for that looking at things on an actuarial basis.The Mortgage Bankers Association pointed to comments from CEO and President Bob Broeksmit following release of the MMIF actuarial report in November that showed the fund's capital ratio was a rather healthy 11.47% for fiscal year 2024.This compared with 2.1% for fiscal year 2015."In addition to pursuing more program enhancements to boost housing supply and affordability, such as this year's 203(k) program updates, borrowers would see meaningful payment relief from FHA eliminating its life of loan premium requirement and making another reasonable cut to the MIP," Broeksmit said in November."MBA will work with the Trump administration and Congress in 2025 on policies and program enhancements to increase housing supply and lower costs for consumers while protecting taxpayers."US Mortgage Insurers, the group representing most of the private underwriters, had not responded to a request for comment by press time.

A slowdown in real estate investment purchases over the past year looks unlikely to turn around in 2025, but smaller businesses will help maintain activity, according to new research from Corelogic.  Housing forecasts show continued obstacles ahead for the real estate investment community. After starting the year with a nearly 30% share of the housing market in January, the investor share of purchases dropped to 23% by June before rising in the third quarter to 25% by the end of September. The September share shrank from approximately 28% one year earlier, according to Corelogic's data.  While some of the pullback follows traditional seasonal patterns, "all signs point to investor share remaining around 25% of total sales for the foreseeable future as mortgage rates and home prices remain high," said Corelogic economist Thomas Malone. Approaching summer, investor activity typically decreases but picks up again in the fall and winter. September's muted activity compared to the prior two years suggests near-term sluggishness, though. "It's not just the share of investors that is shrinking. The number of purchases that they are making is also less," Malone wrote in a research post. In the third quarter, average monthly investor purchase volume declined to 85,000 compared to 106,000 over the same three months in 2023. The pullback was even more pronounced from the third quarters of 2022 and 2021 when average purchases came in at 120,000 and 140,000. The challenging conditions laid out in recent rate and housing price forecasts, as well as potential inflationary pressures, may be making property investment less attractive, Malone said. "Faced with these headwinds, it is not clear what may draw investors back into the market at previous levels," he said.Corelogic's research corresponds to findings of similar 2024 investor patterns from Redfin, with the latter company suggesting late year trends point to "balance" returning to the market after more volatile swings post pandemic. Similarly, in a fourth quarter report looking at home flipping investors specifically, real estate data provider Attom said the latest economic trends may throw cold water on buyer interest and impede future growth."As interest rates remain double what they were a few years ago and inflation keeps raising renovation costs, investors continue to have a tough time making the kind of profits that would lure more into the game," Attom CEO Rob Barber said.While the public spotlight on real estate investments often lands on institutional buyers, smaller mom-and-pop businesses account for 60% of the purchases, according to Corelogic's report. Among the 20 largest markets, the share of purchases made by the largest investors owning more than 1,000 properties never exceeded 5%.  Activity from investors propped up demand in a slowing housing market in some areas, helping to keep prices from declining, but their influence might be less significant than the public perceives, though, Malone said. "Historical trends from mid-2022 to early 2024 show no consistent correlation between investor share and price movements, cautioning against oversimplified narratives about their market impact." The pullback in investor purchase activity was widespread, but Oregon, the District of Columbia and South Dakota were exceptions with their year-over-year shares increasing by 0.2%, 0.49% and 3.39%, respectively.On the other end, Alaska, Idaho and Maryland recorded the biggest falls in investor-purchase shares with drops of 6.9%, 5.7% and 5.5%. Several other states saw declines greater than 4%.

If you’ve scanned the headlines lately, you probably saw that mortgage rates went up yet again.And they did so despite another Fed rate cut, which has a lot of folks pretty confused.I already touched on that strange relationship, but today I wanted to talk actual numbers.Yes, mortgage rates jumped up over 7% again this week, and yes, they moved up by a sizable 25 basis points (0.25%).But how does that affect the typical monthly mortgage payment? You might be surprised.Mortgage Rates Climbed Back Into the 7s This WeekIt’s no secret this week has been rough for mortgage rates.They were actually trending lower post-Thanksgiving and into early December before jumping back up on Wednesday.The 30-year fixed had approached 6.625% before an abrupt about-face to 7.125%.What prompted the move was a new dot plot from the Fed, which detailed fewer rate cuts in 2025.Fed chair Powell also indicated that inflation was stickier than they originally thought back in September, and that unemployment wasn’t quite so bad.Translation: the economy is performing better than expected, so additional rate cuts might not be necessary.And higher inflation could still rear its ugly head again if economic growth continues at a hotter clip.Of course, this flip-flopping is super common in all financial markets. It’s why you see stocks go up one day and down the next. Then rinse and repeat.New economic data is released pretty much daily, all of which can impact the direction of mortgage rates.So what was said a few days ago might be countered by new information released today. And speaking of, the Fed’s preferred inflation gauge, the PCE report, came in cooler-than-expected.As such, the 10-year bond yield (which correlates really well with mortgage rates) has fallen back below 4.50.This means mortgage rates will come down today and reverse some of those painful increases seen since Wednesday.But even so, how big of a difference does a mortgage rate a quarter-point higher actually make?Let’s Look at the Difference in Rate on a Typical Home PurchaseSince Wednesday, mortgage rates climbed from around 6.875% to 7.125%, or about 25 basis points (0.25%).The median home price for an existing single-family home was $406,000 in November, per the National Association of Realtors.If we assume a buyer comes in with a 10% down payment, which is typical for a first-time home buyer these days, the loan amount would be $365,400.Now let’s compare the principal and interest portion of the monthly payment based on those different mortgage rates.6.875%: $2,400.427.125%: $2,461.77Despite the big rate jump this week, your typical FTHB would only be out another $60 each month.Doesn’t seem like a material amount of money for a monthly mortgage payment. Sure, it’s higher, but not by a lot.Even a full half-point difference, in the case of a rate of 6.625% vs. 7.125%, would only be about $120 per month.Yes, still more money, but again, $120. We all know $120 doesn’t go very far these days, and could simply amount to a meal out with the family.If a Small Change in Mortgage Rate Makes or Breaks You, Maybe It Wasn’t Right to Begin WithNow there are more costs that go into a home purchase beyond the mortgage itself. There are property taxes, which have increased a lot in recent years, especially in certain states.And there is homeowners insurance, which has also surged in price as insurers has lifted premiums due to increased risks related to climate challenges.Lastly, there is the change in home price, which has also gone up considerably over the past several years.But those rising costs are all pretty old news at this point. The only thing that really changed this week was mortgage rates.And if you are/were weighing a home purchase, a difference in rate of 0.25% shouldn’t make or break that decision.If it does, maybe it wasn’t the right call to begin with. Perhaps you’re better off renting than buying a home.The point here is an additional $60-100 per month isn’t a lot of money in the grand scheme of things when we’re dealing in thousands of dollars.It’s basically a 2.5% increase in monthly outlay, which is pretty negligible.However, I do understand that it could be a psychological hit to see mortgage rates rise yet again. And when struggling with all other expenses, it could push folks over the edge.Still, if you’re in the market to buy a home, and can’t absorb a quarter-to-half point increase in rate, it might indicate that it’s not the right move.Read on: 2025 Mortgage Rate Predictions Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 18 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on Twitter for hot takes.Latest posts by Colin Robertson (see all)