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Real estate brokerage stocks tumbled Thursday on waning expectations for Federal Reserve interest-rate cuts, and as a disappointing earnings release raised concern about the sector's outlook.Shares of Anywhere Real Estate Inc. sank 7%, and are now down 38% this year, after the real estate services company reported first-quarter results that were weaker than consensus estimates. Industry peers including Opendoor Technologies Inc. and Redfin Corp. dropped as well. Real estate was among the day's weakest sectors in the S&P 500 Index after data showed the economy slowed last quarter while inflation jumped. Treasury yields surged to the highest levels this year, signaling that homebuyers aren't about to get a reprieve from elevated borrowing costs.While analysts said that Anywhere's results showed a return to overall transaction growth for the first time two years, investors were more fixated on the firm's misses when it came to earnings and revenue. It helps set the tone for a slew of announcements ahead: Peers including Zillow Group Inc. and Opendoor are slated to report in the coming weeks. "It's less about what they print this quarter and more about how they talk about the future," John Campbell, an analyst at Stephens Inc., said of real estate brokerages this earnings season. Analysts are bearish on Anywhere's stock, with none calling it a buy, three saying hold and three recommending to sell, data compiled by Bloomberg show. On top of high borrowing costs, there's another force weighing on the sector: questions around commission rates after the National Association of Realtors got preliminary approval for its $418 million settlement with home sellers over commission rules for real estate agents.The industry is also seeing a bifurcation between traditional and technology-centered brokers, according to Campbell. Digital real estate players like Zillow are gaining market share, positioning them to outperform.

The Federal Trade Commission on Thursday filed a complaint in federal district court against the charges and practices of Doxo, an intermediary payment-services provider in consumer finance.Doxo promises to provide secure payments, tracking, custom reminders and mobile services for customers with linked bank accounts, and the FTC indicated its concern about the company lies in the way it represents its role relative to billing entities that consumers pay."Doxo intercepted consumers trying to reach their billers and tricked them into paying millions of dollars in junk fees," Samuel Levin, director of the FTC's Bureau of Consumer Protection,  said in line with the complaint alleging violations of the Gramm-Leach-Bliley Act and other rules.The company indicated that it plans to fight the complaint "on behalf of all consumers and billers who deserve a better bill pay experience," calling the FTC's action "inaccurate, and unjust," and reflecting "a fundamental misunderstanding of the existing bill-pay market."While the complaint references issues with "car loans, utilities and medical bills," there have also been signs of confusion about its mortgage payments. It also follows closely on the heels of a separate Consumer Financial Protection Bureau report about servicing fees.Doxo lists bill payment services for various mortgage firms on its website, but also notes it "is not an affiliate of or endorsed by" any of the businesses.At least one mortgage servicer has had a clarifying alert about Doxo posted on its website that advises borrowers not to remit payments through the vendor."BSI Financial Services does not accept credit/debit card payments and this company is not affiliated," the company said in an online notice.The FTC filed its complaint in the Western District of Washington, where Doxo is headquartered.

A majority of U.S. residents say they've faced some form of housing discrimination, but less than half think laws addressing it might apply to them, according to new research from Zillow.Approximately 57% of people in 26 cities nationwide said they had faced housing bias in the brokerage's recent survey, with the share rising to as high as 79% in the LGBTQ community. Among the other different population segments Zillow surveyed, 69% of Black consumers said they were impacted, followed by Hispanics, with 64%. Across all nonwhite groups, 63% mentioned they had felt the effect of discrimination. "This research shows how far we have to go to make housing fair and accessible for all," said Manny Garcia, senior population scientist at Zillow, in a press release.Renters were also more likely than homeowners to feel unfairly denied based on their status. A 61% share of renters expressed that view, as opposed to 53% of homeowners.But while the issue appears widespread across the country, less than half of the respondents — just 42% — that Zillow surveyed thought fair housing rules impacted them or their families. The findings indicate work is still needed to properly inform people of their rights under fair housing laws, the company said. "Fair housing issues are more likely to be top of mind for younger generations, likely attributable to their higher likelihood of moving, renting and buying a home more frequently than older generations, given their current stage of life," Garcia noted. Sixty-one percent of the LGBTQ community said they understood how fair housing laws might apply to them, the largest share among all groups surveyed. Black residents came in at 57%. Half of all renters, meanwhile, suggested they knew of such laws to protect them. Addressing fair housing is essential to narrowing the homeownership gap between whites and previously underserved populations, leaders in the industry regularly emphasize. U.S. Census Bureau data shows the homeownership rate among white households in the country at 74%, while only 46% of Black and 49% of Hispanic households own property, due in part to exclusionary housing practices.Although housing groups and lenders continue to make concerted efforts to open up homeownership to more families, rising interest rates and prices, still stand in the way of narrowing the racial gap. But several banks and lenders have introduced down payment assistance or other first-time homebuyer programs over the past year, and changes in some underwriting policies now factor in rent payments and newer credit scoring models. While Zillow's data shows more education might be in order when it comes to understanding fair housing policies, most respondents in its survey recognize the role homeownership has in achieving financial wellness. Close to 78% said owning a home is critical to building and passing on generational wealth, and the opinion was shared almost equally across all population segments.  

Loan officers are among the industry's most sought-after employees, but current business practices mean it's the ripple effects of the federal ban on noncompete clauses that's more likely to affect them than the direct impact.The Federal Trade Commission's final rule announced this week would bar new noncompete agreements by employers and render existing clauses unenforceable. It wouldn't apply to senior executives, defined as those in policymaking positions earning more than $151,164.Mortgage lawyers suggest the rule isn't likely to go into effect by its three month deadline, amid legal challenges from business trade groups. If it does however, the rule won't affect the wide range of mortgage roles that are more commonly subject to non-solicitation and non-disclosure agreements."Rarely at this point do I see noncompete agreements either in employment contracts for loan officers, or in litigation," said Ari Karen, partner and head of litigation, labor and employment at Mitchell Sandler. Karen, who often represents mortgage companies in poaching disputes, said noncompete enforceability has come under massive legal scrutiny, making the agreements largely ineffective for loan officers. A high-earning loan officer wouldn't be considered a senior executive because of the policy-making specification in the rule and may be subject to other restrictions, but not noncompetes, Peter Idziak, a senior associate with Polunsky Beitel Green, clarified. "If you're an employer, you should still have NDAs and non-solicitation agreements," said Idziak. Noncompetes at the senior level are meant for company executives to let information become "stale" before reentering the market, such as knowledge of a new loan product, the mortgage attorney explained.More common in poaching disputes are issues like a breach of contract, a competitor allegedly encouraging employees to solicit colleagues in leaving, or theft of trade secrets in transferring confidential loan pipeline information. The FTC in pursuing a Biden Administration goal claims the final rule will increase wages by almost $500 billion over the next decade, and increase individual earnings to $524 per year. It's also expected to lower healthcare costs by almost $200 billion over that same time, and empower more innovation by leading to tens of thousands of more patents each year.Around 30 million workers are subject to noncompetes, or 18% of the nation's workforce, the FTC estimates. Idziak noted there's likely an "overuse" of the clauses for hourly-wage and low-skill positions. The 570-page decree is the culmination of a proposal in January 2023 that drew over 26,000 comments, the majority in favor of the rule. The U.S. Chamber of Commerce and others immediately sued the FTC this week, arguing the feds' move is an unlawful power grab that will harm competition. The Mortgage Bankers Association, when reached for comment, referred to a letter it signed last February in which it argued that the FTC "lacks the constitutional authority to issue such a rule."The pending noncompete ban could prompt other ripple effects within the home loan business.It may, for example, ban employee handbooks, overly-broad NDAs and non-solicitations that function as noncompetes, Idziak said. The FTC's lack of authority over banks and federal credit unions could also even the playing field between those lenders and mortgage bankers.Companies may also be less willing to train employees out of concern the investment may not be worth it if they're more likely to subsequently jump to another. This could lead to a market with less adequate training but more compensation. "Reimbursement of training programs could also be prohibited if they were overly-broad and considered a noncompete," said Idziak. Attorneys expect federal courts to stay the final rule pending a decision. The U.S. Chamber of Commerce's lawsuit was filed in a Texas federal court, and any appeal would go before the U.S. Court of Appeals for the Fifth Circuit, which has previously ruled against the Biden Administration. While the mortgage business will have to reckon first with the direct impact of any rule in this area, the aftershocks are what may hurt lenders as employers more. "As you know, when industry gets disrupted, mortgage gets disrupted, as we're part of the larger economy," said Karen.

A 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 Wednesday.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.During this time, Gallo originated more than $1.4 billion in loans and was on National Mortgage News' top mortgage producers list for calendar years 2016 through 2020.Stakeholders in the mortgage industry responded with confusion to the allegations, questioning why it took so long to catch the purported scheme. "A fortune was spent on third-party vendors after 2008 to prevent quality control issues," said one industry veteran who requested not to be identified. "What happened?"It is unclear how many of the loans originated during this time period were actually falsified, but some were likely Fannie Mae and Freddie Mac loans.The DOJ has charged the pair with one count each of committing bank fraud, which carries a maximum penalty of 30 years in prison and a $1 million fine. The misrepresentation of facts in loan applications helped "Gallo and Elmas secure and profit from mortgage loans that were approved," the U.S. Attorney's Office, District of New Jersey said.Apart from withholding information, the pair also purportedly conjured up property records, including building safety and financial information of prospective borrowers to facilitate mortgage loan approvals, the DOJ said.According to the complaint, in 2022 Gallo fabricated documents to approve a borrower for a Fannie Mae loan to purchase a condo property by "falsely stating that the [homeowners association] had the necessary capital reserve for loan approval," when in reality that wasn't true. NJ Lenders wrote the company is "fully cooperating with law enforcement and the ongoing investigation of two former employees.""The actions of these former employees appear to have been coordinated to benefit them financially while taking advantage of the reputation and trust of the firm," said Mark Tabakin, attorney for NJ Lenders. "NJ Lenders' work will continue uninterrupted as we provide the highest level of service to our clients."CrossCountry Mortgage, which employed Gallo after he left NJ Lenders Corp. late last year, said the loan officer is no longer with the company. FBI agent James E. Dennehy and agents of the Federal Housing Finance Agency, Office of Inspector General led the investigation. FHFA's OIG declined to comment on how many of the fraudulent loans originated were Fannie or Freddie loans.Gallo and Elmas appeared before U.S. Magistrate Judge André M. Espinosa in Newark federal court Wednesday and were each released on a $200,000 unsecured bond.Gallo had not returned a request for comment at the time of publication. Attempts to reach Elmas were not successful.

Mortgage rates rose by another 7 basis points this week, and in the near-term, further increases are likely as the markets react to a weak gross domestic product report, Freddie Mac said.Yields on the 10-year Treasury rose to over 4.7% mid-morning on Thursday, following the news that the U.S. economy grew by just 1.6%, while inflation was up by 3.7%.The 30-year fixed rate mortgage rose 7 basis points to 7.17% on April 25, up from 7.1% the prior week and 6.43% for the same time last year, the Freddie Mac Primary Mortgage Market Survey found.Meanwhile, the 15-year FRM rose to 6.44% from 6.39% for the week of April 18. For the same week in 2023, the average for this loan product was 5.71%."Despite rates increasing more than half a percent since the first week of the year, purchase demand remains steady," Sam Khater, Freddie Mac's chief economist, said in a press release. "With rates staying higher for longer, many homebuyers are adjusting, as evidenced by this week's report that sales of newly built homes saw the biggest increase since December 2022."Freddie Mac's April 14 housing outlook posting claimed housing demand is making a healthy recovery compared to last year, with purchase applications for 30-year FRMs up 8% from the same period last year, even as the median mortgage rate and median sales price have increased, according to Loan Product Advisor data."First-time homebuyers continue to carry demand so far this year as they make up almost 6 out of 10 purchase applications," the post said. "Nonetheless, the median payment (principal and interest) is up 7% from the same period last year, and that continues to be a significant headwind as affordability remains near historic lows."As of late morning on Thursday, the 30-year FRM was at 7.457%, according to information from LenderPrice posted on the National Mortgage News website. Last week, it was 39 basis points lower, at 7.067%.While the mean rate on Zillow's tracker was up by 1 basis point mid-morning Thursday, to 6.96%, compared with Wednesday, it was down 5 basis points from the previous week's average of 7.01%.Because of speeches by Federal Reserve officials last week, financial market participants adjusted their expectations for economic growth, inflation and policy, said Orphe Divounguy, senior macroeconomist at Zillow Home Loans, in a statement issued Wednesday night."Expect more rate volatility ahead as the Fed and investors wait for more conclusive evidence of a return to low, stable and more predictable inflation," Divounguy said. "The [personal consumption expenditures] inflation report this week will likely cause some major repricing activity."Fannie Mae's April mortgage forecast now calls for mortgage rates to average 6.6% in 2024, and 6.1% in 2025. "However, interest rates remain volatile, particularly given changes in Fed policy expectations, which adds risk to our outlook," a blog posting noted.Due in particular to its more optimistic home price growth expectations and somewhat lower mortgage rate path, Fannie Mae now expects 2024 purchase volume to total just under $1.4 trillion, representing a $31 billion upward revision from March's forecast and 14% growth from 2023. In 2025, purchase originations should grow a further 15% to $1.6 trillion, a further upgrade of $52 billion from the prior forecast.Refinance volume should end this year at $415 billion and $657 billion in 2025.The Mortgage Bankers Association on the other hand, cut its 2024 forecast to $1.82 trillion, the 2025 outlook to $2.13 trillion and the 2026 projection to $2.33 trillion earlier this month.In fact, the PCE report "was surprisingly strong," Joel Kan, the MBA's deputy chief economist, said in a statement issued following the GDP release."However, this persistence in higher than desired inflation will leave the Fed in no hurry to cut rates," Kan said. "As indicated in our April forecast, we expect potentially two rate cuts in the latter part of this year."

Driven by a record three-month loss in the fourth quarter, independent mortgage bankers last year had their worst year ever in terms of per loan results, their industry association said.These lenders, along with bank mortgage subsidiaries, lost an average of $1,056 on each loan they originated in 2023, compared with an average loss of $301 per loan the prior year.In all four quarters last year, IMBs lost money on their production, including a $2,109 per loss during the last fiscal period of the year.Expenses rose to $11,258 per loan, which is also the most since the MBA started its study 15 years ago. For 2022, expenses averaged $10,624 per loan.On average, lenders lost 37 basis points per loan in 2023 compared to 13 basis points in 2022."Mortgage market conditions were challenging last year because of higher mortgage rates, low housing inventory, and weaker housing affordability," Marina Walsh, the MBA's vice president of industry analysis, said in a press release. "These factors resulted in a further decline in volume, compounding the precipitous drop in 2022."Many firms pursued cost-containment strategies during the year, including personnel reductions, to try to counter this."Some companies were able to weather the storm through cash reserves built up in the second half of 2019 through 2021," Walsh continued. "Companies also benefited from mortgage servicing cash flows that remained strong in an environment of low delinquencies and low prepayments."However, mortgage servicing rights valuation markups taken during 2022 ended up hurting sector income last year.Net servicing financial income — made up of operational income, MSR amortization, plus gains and losses on MSR valuations — was $263 per loan in 2023, down from $586 per loan in 2022.Since the report started in 2008, annual net production-income by year has averaged 49 basis points or $1,117 per loan.Inclusive of all segments, 36% of the companies that participated in the MBA's study posted pre-tax net financial profits in 2023, down from 53% in 2022.

Pending sales of existing U.S. homes in March reached their highest levels in a year in spite of persistently high borrowing costs and a low supply.An index of contract signings from the National Association of Realtors climbed 3.4% to 78.2 last month, the highest since February 2023. The median estimate of economists surveyed by Bloomberg called for 0.4% growth.The gains were led by monthly gains at or near 7% in the South and West, and, to a lesser extent, the Northeast. The Midwest was the only region where pending sales fell.While the pending-sales index reached a high point, "it still remains in a fairly narrow range over the last 12 months without a measurable breakout,' NAR Chief Economist Lawrence Yun said in a statement. "Meaningful gains will only occur with declining mortgage rates and rising inventory.'Sales of previously-owned homes have lagged new-home sales recently, as the nation's home builders bought down customers' interest rates or offered other sweeteners to complete deals. The supply in the home resale market, meantime, is well below prepandemic levels. Many in the existing-home industry are eager for the Federal Reserve to trim interest rates, which Yun last week blamed for causing the market to remain "stuck." The contract rate on a 30-year fixed mortgage rose to 7.24% in the week ended April 19, its highest level in five months, Mortgage Bankers Association data show.The pending-sales report tends to be a leading indicator of sales of previously owned homes, because houses typically go under contract a month or two before they're sold.NAR sees median home prices rising 1.8% both this year and next, climbing to a record $396,800 in 2024 and $403,800 in 2025. Prices of new houses may dip slightly to $426,100 this year, NAR predicts, because developers are building smaller — thus less costly — homes. But they're seen snapping back up next year."Job gains, steady mortgage rates and the release of inventory from pent-up home sellers will lead to more sales," Yun said. "Given the lingering housing shortage, home prices will march higher, albeit much more slowly than in the past."

Rokas - stock.adobe.com The number of fraud attempts on mortgage companies leaped by more than one-third between 2022 and 2023, with old methods becoming new again when it came to how the crimes were committed.Although companies are more vigilant of growing risk and focused on prevention, perpetrators are finding new ways to commit their crimes, leading to the higher number of threats, a new report from Lexisnexis found.  "New forms of fraud elevate the risk of loss for both financial institutions and their customers," said Kimberly Sutherland, vice president, fraud and identity strategy at Lexisnexis Risk Solutions, in a press release. "Our study shows that organizations are facing challenges in combating fraud from international transactions and scams, despite efforts to educate consumers."Within the home lending segment specifically, businesses saw an average of 2,619 monthly fraud attempts last year, increasing 34.6% from 1,946 in 2022. Of the total average, a 54% share, or 1,417, proved successful, while 1,202 were prevented. The pace of growth exceeded the rate at banks and investment firms, but trailed other credit lenders, which saw both the fastest rate of growth and highest number of attempts at 3,271. Every dollar of fraud loss ended up costing mortgage firms $4.36 on average to address and fix the problem. In 2022, the cost of fraud came in at $4.20. Banks saw a more muted uptick from $4.36 to $4.40.While they occurred at all stages of customer interaction, mortgage fraud coming through new account creation accounted for 43% of all losses, compared to 34% in 2022. Fraud attempts in the account login process made up a 31% share, and the funds-distribution stage 26%.Perpetrators returned to old methods last year, as phone fraud spiked across businesses. Successful attempts made by telephone led to 28% of losses at mortgage lenders, accelerating from 11% a year earlier. Similarly, at banks the share rose to 26% from 12%."Nearly two-thirds (65%) of U.S. financial institutions ranked 'phone calls' as the channel fraudsters use most often to perpetrate scams," according to the report. Online fraudulent activity was tied to 29% of associated losses, up from 28%. At the same time, threats coming via mobile channels represented 20% of lost funds, down from 36% in 2022, "reflecting financial firms' successful response," according to Lexisnexis. Despite the progress made in fraud detection and prevention, though, the surge in attempts illustrate how criminals are remaining a step ahead and pivoting strategies to find weaknesses at businesses. Declines in lending industry profits caused some businesses to reduce security spending, while new artificial-intelligence backed technology also could make the act of committing fraud easier.Increased phone fraud activity coincided with a jump in incidents where the criminal assumed the identity of their victim. Known as synthetic-identity fraud, it led to a 36% share of losses during funds disbursement at mortgage lenders. Over two-thirds of mortgage companies also ranked it as one of the most common methods used by fraudsters during the customer communication stage. International mortgage fraud also surged to a 46% share in 2023 from 16%, aligning with widespread challenges assessing risk by country or region and a lack of specialized prevention tools, according to the report. Organized scams continue to contribute to widespread losses, in spite of efforts to educate consumers. Scam attempts were observed most frequently during account opening, 67% of mortgage lenders said. Losses coming through organized scams involving mortgages represented 38% of the segment's total, outpacing the banking rate of 32%. Overall, across North America, such scams accounted for 35% of fraud cost at all financial businesses, with six out of 10 institutions reporting increased scam attempts in 2023. Mortgage lenders recognize the threats organized scams pose and implement measures to reduce risk more commonly today than they did a few years ago. Across mortgage businesses, an approximately 50% share of companies equally used consumer education, internal staff training and artificial intelligence modeling in their scam-prevention practices. 

U.S. economic growth slid to an almost two-year low last quarter while inflation jumped to uncomfortable levels, interrupting a run of strong demand and muted price pressures that had fueled optimism for a soft landing.Gross domestic product increased at a 1.6% annualized rate, below all economists' forecasts, the government's initial estimate showed. The economy's main growth engine — personal spending — rose at a slower-than-forecast 2.5% pace. A wider trade deficit subtracted the most from growth since 2022. A closely watched measure of underlying inflation advanced at a greater-than-expected 3.7% clip, the first quarterly acceleration in a year, the Bureau of Economic Analysis report showed Thursday.The figures represent a notable loss of momentum at the start of 2024 after the economy wrapped up a surprisingly strong year. With the inflation pickup, Federal Reserve policymakers — who were already expected to hold interest rates at a two-decade high when they meet next week — may face renewed pressure to further delay any cuts and even to consider whether borrowing costs are high enough.Treasuries slid and the S&P 500 opened lower, with traders pushing out the expected timing of the Fed's first interest-rate cut to later this year."The hot inflation print is the real story in this report," Olu Sonola, head of US economic research at Fitch Ratings, said in a note. "If growth continues to slowly decelerate, but inflation strongly takes off again in the wrong direction, the expectation of a Fed interest rate cut in 2024 is starting to look increasingly more out of reach." The first-quarter pickup in inflation was driven by a 5.1% jump in service-sector inflation that excludes housing and energy, nearly double the prior quarter's pace. March figures on inflation, consumer spending and income are due Friday.Federal government spending subtracted from GDP for the first time in two years. Business inventories dragged for a second straight quarter.Stripping out inventories, government spending and trade, inflation-adjusted final sales to private domestic purchasers — a key gauge of underlying demand — rose at a 3.1% rate.The GDP report showed outlays for services rose by the most since the third quarter of 2021, fueled by health care and financial services. Spending on goods decreased for the first time in more than a year, restrained by motor vehicles and gasoline.Residential investment jumped at a nearly 14% annual rate, the fastest since the end of 2020 and underscoring builder efforts to boost inventory."The economy continued to expand at an above-trend pace when excluding volatile categories. In addition, strong imports are an indication of continued solid demand which is not what the Fed wants," said Eliza Winger, Bloomberg economist.At next week's Fed meeting, traders will parse Chair Jerome Powell's comments for clues about the latest thinking around easing policy. He's previously said that growth can run at a faster rate without stoking inflation thanks to supply-side improvements like immigration, which is boosting the size of the workforce.Separate data out Thursday showed initial applications for unemployment benefits fell to 207,000 last week, the lowest level in two months. Continuing claims also decreased.The GDP and inflation figures represent more hurdles for President Joe Biden, who has been trying to convince Americans he's been doing a good job on the economy. Consumer sentiment has moved sideways in recent months, and voters in key swing states are pessimistic about the outlook.