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The home arena of the Los Angeles Lakers and other sports teams is suing Equity Prime Mortgage, naming the lender in a lawsuit over unpaid licensing fees.The Crypto.com Arena claims EPM, N2 Funding and another defendant owe $293,125 from a three-year contract to license a table in an arena lounge. The contract signed in 2020 includes four tickets to every regular season and playoff game for the Lakers, Clippers and Kings hockey team at the venue formerly known as the Staples Center.The lawsuit filed last month in Los Angeles Superior Court was first revealed on LinkedIn by Alex Greer, a loan officer and co-owner of The Mortgage Outlet. Neither party nor attorneys in the lawsuit responded to requests for comment this week. It's the second sports-related breach of contract lawsuit EPM is named in. NASCAR team Jesse Iwuji Motorsports is also suing the lender for allegedly failing to pay millions of dollars in a sponsorship deal; that case is slated to go to trial in May. The arena's complaint in Los Angeles Superior Court includes a letter showing EPM transferred the licensing contract to N2 Funding and its president and CEO Shabi Asghar in 2021. The relationship between EPM and N2 Funding is unclear; the parties also entered into an agreement to sponsor a professional golfer in 2021. N2 Funding, based in Southern California, is also listed under EPM's trade names in consumer Nationwide Multistate Licensing System records. Asghar meanwhile is listed on LinkedIn as the president and CEO of Brokers First Funding since last May.L.A. Arena Company, owner of the venue, said the defendants failed to make a contract payment in September 2022, and throughout 2023 failed to settle the claim in arbitration.A status conference in the Los Angeles case is scheduled for July. EPM meanwhile is gearing for its trial versus Jesse Iwuji Motorsports at a Miami federal courthouse beginning May 20, according to court records. The racing team claims EPM in late 2022 pulled out of millions of dollars in sponsorship obligations because of a margin call during then-interest rate hikes. The NASCAR team, co-owned by NFL Hall of Famer Emmitt Smith, is seeking $4.1 million from the mortgage firm. Depositions in that case are due by the end of April. The company last year was also accused of not paying rent in two separate lawsuits in Florida and Missouri. It settled the Florida complaint, which accused it of owing $30,000 for a space the lender leased since 2019, according to state court records. The Missouri case was also marked as resolved last April. The Atlanta-based EPM originated $2.9 billion in mortgage volume through December, according to S&P Global data. The firm exited retail operations last year to focus on wholesale lending, HousingWire reported last year.Founder and CEO Eddy Perez earlier this month also pledged to donate $1 million over 10 years to the Mortgage Bankers Association's Open Doors Foundation in honor of industry giant Dave Stevens, who died in January.

Baltimore plans to sell boarded-up houses for $1 each in an attempt to revive neighborhoods that have been plagued by crime and disrepair.The program backed by Mayor Brandon Scott will offer more than 200 city-owned vacant properties to residents who commit to repairing and living in them. A city board approved the measure on Wednesday.Vacant homes are a decades-long problem in the Maryland city, which has one of the highest crime rates in the U.S. concentrated within a few high-poverty neighborhoods. The measure evokes Baltimore's "dollar house" program from the 1970s, which offered properties for a buck to homesteaders if they fixed them up. A similar effort has also been attempted in Newark, New Jersey. Nathan Howard/Bloomberg The Baltimore program is meant to prioritize individual buyers over developers, who will have to pay $3,000 per home. Home repair grants of $50,000 are available to help with renovations, but recipients have to be pre-approved for a construction loan, according to Governing.com. Some non-profits urged the city to put up guardrails against having most of the homes go to developers, which could drive up prices and push out poor residents.While the housing program targets a few hundred homes, there were close to 15,000 abandoned properties across Baltimore as of 2022, according to the city. More properties may eventually be included.

Well, so much for mortgage rates falling just in time for the spring home buying season.While many expected interest rates to be lower by now, they’ve proven to be pretty sticky at current levels.At last glance, the 30-year fixed is still hovering close to 7%, albeit better than October 2023 when it was around 8%.But there was hope we’d see rates in the 6% range by now and maybe even lower if the Fed had cut rates earlier.Instead, rates are actually pretty well aligned with the 2024 mortgage rate predictions made at the end of last year.The likes of Fannie Mae and the Mortgage Bankers Association pegged the popular loan program at 7% for the first quarter of 2024. And that’s pretty much where we stand today.The bad news is they’ve now indicated that it could take longer for rates to fall to more agreeable levels.Fannie Mae Has Adjusted Its Mortgage Rate Forecast Higher for 2024 and 2025In Fannie Mae’s March forecast, they noted that their “interest rate forecast has been upgraded.”And not upgraded in a good way. Upgraded as in expect higher mortgage rates for the foreseeable future.Just how bad is it? Well, after making adjustments a month earlier, they’ve since made upgrades of four-tenths and five-tenths, for the years 2024 and 2025, respectively.This puts the 30-year fixed at an average of 6.6% in 2024 and 6.2% in 2025. In other words, no sub-6% mortgage rate for the next two years! Ouch!In January, their forecast called for a 5.8% 30-year fixed in the fourth quarter of 2024, and a relatively low 5.5% by the end of 2025.Freddie Mac Also Expects Mortgage Rates to Stay Above 6.5% in the First Half of 2024Meanwhile, Freddie Mac released a new outlook that calls for mortgage rates to remain high through at least the first half of 2024.They noted that 30-year mortgage rates will stay above 6.5% through the second quarter of 2024.It’s unclear what happens after that, but there’s not a lot of optimism at the moment.This should translate to lower mortgage volume, with rate and term refinance activity hard to come by.And purchase activity also constrained by things like a continued lack of for-sale supply and mortgage rate lock-in.However, they do expect home prices to increase by about 2.5% in 2024 and another 2.1% 2025.Whether this keeps up with inflation is another story…Why Aren’t Mortgage Rates Coming Down?Simply put, the economy continues to run too hot. As a rule of thumb, good economic news leads to higher interest rates. And vice versa.The reason is a strong economy typically results to inflation, which is bad for bond prices and mortgage-backed securities.That price pressure requires higher yields, which translates to higher mortgage rates. So if you want lower rates, you kind of need to root for economic strife.Due to this robust economy, the Federal Reserve has maintained its restrictive monetary policy.While there were expectations of a series of rate cuts in 2024, including one as early as this March, the Fed balked today.And there’s a chance rate cuts will remain elusive for the time being.Ultimately, inflation continues to run high and unemployment remains low. Until that changes, the Fed won’t “pivot” and cut rates. They’ll simply stay the course.While the Fed doesn’t directly control mortgage rates, their long-term policy decisions can dictate the direction of 10-year treasury yields and also 30-year mortgage rates.Until economic conditions worsen, don’t expect the Fed to pivot and begin cutting its own federal funds rate.Perhaps It’s Better to Say Mortgage Rates Will Be Elevated for LongerThere’s a popular phrase “higher for longer,” in reference to the Fed’s monetary policy needing to remain restrictive for a longer period of time to reach its goals.When it comes to mortgage rates, perhaps it’s more accurate to say “elevated for longer.” That is to say they won’t necessarily go higher from their current levels.But they may remain at these higher levels for longer than originally anticipated. So it’s not like we’ll necessarily see mortgage rates move up from here.Or that they’ll go back to those scary 8% rates seen in October 2023. But they could linger in this unpleasant range throughout 2024. And maybe even into 2025.This may make that date the rate, marry the house thing hard to achieveIf you recall when mortgage rates were super low, many forecasts called for higher rates year in and year out.Yet each year, the forecasts proved to be incorrect as rates reached new all-time lows and stayed at/near those levels for much longer than expected.Sadly, the same thing is possible now, just the other way around. So instead of rates doing what the forecasters expect, they’ll continue to remain sticky high.The funny part is the economists will be wrong in both instances. Wrong about them rising for many years. And possibly wrong again about them falling back down to earth.Go figure.

ICE Mortgage Technology has rolled out a new interface with the six private mortgage insurers in its Encompass loan origination system.The product, Encompass Mortgage Insurance Center, among other things, offers rate quote comparisons with a single click."And this is done in a very intuitive [user interface], where the lender has the ability to change how that data is presented to it," said William Stephens, senior director of product, at ICE Mortgage Technology. The information, he continued, "can be presented in a product by product perspective, or it can be presented in a partner by partner perspective."A standalone company, PMI Rate Pro, offers lenders the ability to obtain quotes from all six active private mortgage insurance underwriters.Since last October, Encompass' competitor Mortgage Cadence also has been offering integrations with all of the mortgage insurers, through its legacy Loan Fulfillment Center LOS; it previously achieved this with its Mortgage Cadence Platform offering.While Encompass had interfaces with all six mortgage insurers prior to today's announcement, lenders had to access the information with individual clicks. And typically, the lender would only click through to one or two MIs to obtain quotes and that might not necessarily get the lowest price."I think lenders as a whole are always going to be cost conscious in terms of what the consumers are going to have to pay as part of the loan process," Stephens said.Besides obtaining quotes, the new product allows data to be transferred seamlessly between the systems."They've always been wanting to have better quoting capabilities that are more integrated within their workflows," Stephens said. "And so this is a gap that we were able to solve for them."ICE meets with the six MIs as a group on a regular basis to get their feedback and input, he added.Price is one, but not necessarily the only, reason why mortgage lenders opt to work with a particular private mortgage insurer — or if applicable, opt for Federal Housing Administration insurance.And as of late, the six active private mortgage insurers have been losing market share to the FHA, likely because of the Biden Administration's 30 basis point premium cut, Bose George, an analyst at Keefe, Bruyette & Woods wrote in a March 6 report.Of all the new insurance written, both government and private, during the fourth quarter, FHA had a 47% share. In comparison, for the same three-month period in 2020, the FHA share was 32%.The use of private mortgage insurance has also been affected by a much larger share of new home sales where the FHA share has always been higher, George said, who added that high levels of conventional-to-FHA cash-out refinance activity have been taking place as of late.Over 20% of FHA volume in the fourth quarter was refis, 94% of that being cash-out and half of which, 51%, came from borrowers who previously held conventional mortgages (43% were FHA-to-FHA cash-out refis). Among the five MIs (all but Arch) mentioned in George's report, Enact had the largest share of refi NIW, just 3%, in the fourth quarter."These are generally debt consolidation loans, and we believe this volume is moving to the FHA because the combination of MI risk-based pricing and GSE fees (loan level price adjustments) likely make it meaningfully cheaper to do these loans at the FHA," George said.On the March 20 anniversary of the announcement, outgoing Department of Housing and Urban Development Secretary Marcia Fudge called the premium cut "one of the crowning achievements of my tenure."The cut saved more than 682,000 borrowers an average of $876 annually, a HUD press release said.On March 14, George put out a flash note regarding investor meetings with MGIC's executives Tim Mattke, CEO, and Nathan Colson, chief financial officer.When it comes to picking an MI provider, MGIC's management said they believe less than half of their lenders (as measured by volume) currently make their choice for any given loan solely based on best pricing execution. They do expect that percentage to trend upward going forward, George wrote.Intercontinental Exchange acquired Encompass in its purchase of Ellie Mae in August 2020. Last September, it completed the purchase of Black Knight and its MSP servicing platform, but Black Knight had to sell the Empower LOS and Optimal Blue in separate transactions to Constellation Software to obtain federal government approval.This Encompass announcement follows other news about integrations at the company's annual user conference this week.

Guild Mortgage acquired Academy Mortgage's branches and loan originators for $13.4 million in cash, the mortgage lender disclosed in a filing with the Securities and Exchange Commission.Apart from the immediate monies, Academy's owners have the opportunity to receive payments based on the performance of the acquired branches in the future, the filing published March 14 said. Though some industry stakeholders were shocked at the seemingly low price tag, most have said Academy's owners walked away with a good deal, while Guild has slightly upped its future risk tolerance.Garth Graham, senior partner at Stratmor Group, pointed out Guild did not pay for the entirety of Academy, just for its branches, which makes a huge difference in understanding the deal."That's a premium that they commanded in the current market and it's right in there based on where companies are trading in the form of a premium to their book value," Graham said. "Now they're not buying the book, but that's the premium they're getting for the branch franchise."Paul Hindman, industry veteran, posits Academy's owners were also likely able to keep their book of business, which further sweetens the deal."I'm sure they were sitting on quite a bit of cash from their servicing sale and a lot of other things, which they got to keep, and that part is not going to be included in the SEC filing, but that's generally how these deals are structured," Hindman said. Additionally, stakeholders who have participated in merger and acquisition deals in the past, point out the potential earn out from future business generated from Academy's branches is another net positive. San Diego-based Guild's purchase hangs on the hope that once the market recovers, more origination volume will be brought in by the additional branches, which can benefit Academy's owners. If this does not happen, however, and the market continues to be under pressure, there can be risk involved for both parties."The market improves or the division outperforms the original estimate, the seller does better and if the market doesn't improve and gets worse for some reason, the seller might do worse. It's a shared risk. The buyer may pay more long term, but the buyer may pay less depending on what happened," said Graham.Apart from acquiring Academy's branches, Guild also entered into a mortgage servicing rights agreement with the lender on Feb. 12. The agreement is expected to close in the second quarter. The mortgage lender did not disclose the cost of that book of business.The point that most mortgage professionals coalesce around is the industry is going through a rough patch, so the valuation of a company is atypical compared to prices paid years prior. For example, in 2021, Guild purchased Residential Mortgage Services for $196.7 million ,which is significantly more than what it paid for Academy."This is not a typical market, so typical valuation methodology doesn't apply," said Hindman.Brett Ludden, managing director at Sterling Point Advisors, said ultimately this is a "smart move by Academy because there is going to be continued consolidation.""This industry is going to be tough, and it's certainly not going to be the last deal that you hear about," Ludden added. "I think it hopefully helps give smaller companies some awareness that it doesn't matter how big you are, you need to be thinking strategically."During the company's fourth earnings call, Guild CEO Terry Schmidt pointed out the number of loan originators at the mortgage shop has ballooned by 34% since November 2022, illustrating "success at growing and retaining our sales team and positioning them to take full advantage of the next cycle in the housing market." Since the acquisition of Academy Mortgage, Guild has almost 3,000 sponsored loan officers on board, according to the Nationwide Mortgage Licensing System. Apart from taking on Academy, the lender was on a buying spree last year, acquiring First Centennial Mortgage, reverse lender Cherry Creek Mortgage and Legacy Mortgage. And Schmidt hinted that more M&A activity might be in the company's future."There's still some excess capacity in our industry…there's owners that are looking for another home with a company that's a little bit larger," she said. "And same thing with loan originators, they're looking for stability and a company that's growing and investing in their future, so we feel like there's still opportunity out there and our strategy's working."In 2023, Guild experienced an overall net loss of $39.1 million, a notable dip from the $328.6 million net profit reported in 2022. It originated $15 billion of mortgages, down from the $19.1 billion in 2022. A higher interest rate environment and tight housing inventory contributed to Guild's results, company representatives said.

Federal Reserve Chair Jerome Powell said at a Federal Open Market Committee press conference Wednesday that the central bank will begin to slow its balance sheet runoff operations "fairly soon," but said the Fed is keeping an eye toward keeping reserves in the system ample without being excessive.Bloomberg News WASHINGTON — The Federal Reserve will soon begin to taper its balance sheet reduction efforts, but that doesn't mean the runoff campaign is coming to a close.Following this week's Federal Open Market Committee meeting, Fed Chair Jerome Powell said a slower pace of runoff will be coming "fairly soon," noting that the effort will likely center on a lower runoff cap on Treasuries. "While we did not make any decisions today on this, the general sense of the Committee is that it will be appropriate to slow the pace of runoff fairly soon, consistent with the plans we previously issued," Powell said during the opening statement of his post-meeting press conference. "The decision to slow the pace of runoff does not mean that our balance sheet will ultimately shrink by less than it would otherwise, but rather allows us to approach that ultimate level more gradually."Since the summer of 2022, the Fed has allowed $95 billion of assets on its balance sheet to mature each month without purchasing new securities to replace them. Since this exercise began, the Fed has reduced its balance sheet by nearly $1.5 trillion.When the Fed reduces assets on its balance sheet, it mechanically destroys liabilities as well — including reserves, which banks hold at the central bank and use for settling transactions with one another. Powell said the goal of a slower runoff is to make sure the process does not drain reserves too quickly. He noted that there are broadly enough reserves in the system now for it to function smoothly, but said some banks hold a bigger share of those reserves than others."Liquidity is not evenly distributed in the system, and there can be times when, in the aggregate, reserves are ample or even abundant, but not in every part," he said. "In those parts where they're not ample, there can be stress, and that can cause you to prematurely stop the [runoff] process to avoid the stress, and then it would be very hard to restart."The announcement comes as another key Fed liability, the overnight reverse repurchase, or ON RRP, facility — a program through which money market funds and other nonbank entities can park securities at the Fed in exchange for a modest return — has remained below $500 billion since the beginning of the month. The facility, which routinely saw more than $2 trillion of uptake between 2022 and 2023, is regarded as an indication of excess liquidity in the financial system. It has fallen steadily since the runoff effort began."We're going to be monitoring carefully money market conditions and asking ourselves what they're telling us about reserves," Powell said. "Right now, we would characterize them as abundant, and what we're aiming for is ample, which is a little less than that."Powell said the reduction effort would begin with the Treasuries portion of the runoff, which accounts for $60 billion of the monthly cap. The other $35 billion is in mortgage-backed securities, but Powell noted that the Fed is not regularly hitting the cap, as mortgage-backed securities mature less frequently.Powell noted that the FOMC's long-term goal is to have the assets that the Fed holds be primarily Treasury securities, with minimal mortgage-backed securities. This echoes a sentiment expressed regularly by Fed Gov. Christopher Waller, who has called for reducing the central bank's mortgage holdings to zero. "I do expect that once we're through this, we'll come back to the other issues of composition and maturity, and revisit those issues," Powell said. "That's not urgent right now."During this week's meeting, the FOMC voted to hold the target range for the federal funds rate steady at between 5.25% and 5.5%, the same level it has been at since July. The move, which received unanimous support from the committee's 12 voting members, was broadly anticipated by financial market participants.In its policy statement, the FOMC reiterated its stance that the inflation has eased but it will not cut its benchmark rate until it is confident inflation is moving "sustainably" toward its 2% target. The statement also noted that the committee is uncertain about the nation's economic outlook and "attentive to inflation risks." It also noted that the risks associated with the two legs of its dual mandate — maintaining maximum employment and stable prices — were moving into "better balance," meaning that as elevated rates continue to tamp down inflation, they could threaten the labor market.During this week's meeting, members of the Federal Reserve Board and the presidents of the 12 regional reserve banks wrote down their forecasts for the months and years ahead in FOMC's quarterly summary of economic projections. Fifteen of the 19 participants expect the federal funds rate to fall below 5% by the end of the year, with a nine-member plurality writing down a terminal range of between 4.5% and 4.75%. All but one participant said they expect rates to be meaningfully lower in 2025, with most expecting the benchmark rate to drop below 4% by the end of the year. The lone outlier expects the target range to remain at its current level. These views are largely unchanged from the FOMC's last summary of economic projections in December. Further out, more participants are projecting higher long-term rates. Eleven officials said they anticipate rates being 2.75% and 3.25%, compared to eight in December. Similarly, seven members called for longer-run rates of 3% or higher this month, while only four forecasted rates above that level at the end of last year. This shift toward higher rates corresponds with a growing belief among the committee that price growth will remain above the Fed's 2% target for longer than previously expected. Five participants forecasted an inflation rate between 2.1% and 2.2% in 2026, up from just one in December. Over the longer run, all voting members said they expect price growth to return to 2%.

Jerome Powell, chairman of the US Federal Reserve, during a news conference following a Federal Open Market Committee meeting in Washington, D.C., on Wednesday, March 20, 2024. Photographer: Al Drago/BloombergAl Drago/Bloomberg The Federal Open Market Committee held interest rates at a 23-year high Wednesday, causing consternation among experts over the timing of future cuts. "Inflation is still too high, ongoing progress in bringing it down is not assured, and the path forward is uncertain," said Fed Chairman Jerome Powell in a press conference. The chairman cited personal consumption expenditure data rising 2.5% in the past 12 months from February, a statistic excluding volatile food and energy prices. Experts anticipated the Fed's hold Wednesday, after Powell's comments in January dampened expectations of a March cut. About half of Fed officials still project three rate cuts this year, according to the FOMC's "dot plot", and the median participant put the end-of-year federal funds rate at 4.6%. Powell in speaking to media was noncommittal on the Fed's move at its next meeting.The Fed's benchmark interest rate has now sat between 5.25% and 5.5% since last July, unchanged across five consecutive FOMC meetings. Melissa Cohn, regional vice president of William Raveis Mortgage, called on the Fed in a statement Wednesday to move faster on cuts it previously signaled. "This is an election year, and if the Fed is going to begin a campaign of rate cuts, it will have to happen on or before the July meeting," wrote Cohn in a statement. "Time is running out," she says."Wednesday's news means mortgage rates won't fall far enough to drive meaningful origination volume gains this year, said Eric Orenstein, senior director at Fitch Ratings. "Eventually, mortgage loan volumes should normalize with lower rates, though there are likely several more challenging quarters ahead for mortgage companies," wrote Orenstein in a note immediately following the FOMC announcement. The Mortgage Bankers Association said it's forecasting the Fed's first rate cut in June, and for mortgage rates to gradually decline over the year. Fannie Mae this week already projected rates to remain elevated through 2025, citing the same hotter-than-anticipated inflation data the Fed pointed to. As of March 14, the 30-year fixed-rate mortgage averaged 6.74%, relatively unchanged from both the prior week and the same time last year, according to Freddie Mac.The Fed said it will continue to let its holdings of Treasuries securities, agency debt and mortgage-backed securities run off. Its holdings have declined by almost $1.5 trillion since it began the process; Powell said members didn't commit to a slowdown in quantitative tightening. 

Rithm Capital's board has restructured the compensation package for its CEO, downsizing some of the contractual obligations and significantly upsizing the performance component.The company's board voted to reduce Michael Nierenberg's base salary to $1 million from $1.25 million and cut his annual target cash bonus to $4 million from $5 million starting on April 1, according to a recent Securities and Exchange Commission filing. Nierenberg's time-based equity award also has been downsized to $3 million from nearly $4.38 million. But his performance-based equity award, which previously was nearly $4.38 million, is now $9 million.With that change, "75% of the target value of the executive's annual equity grants will now be in the form of performance-based units," according to the filing.He also has received a profit interests award for 276,243 units of derivative securities that can be converted into Rithm stock shares, according to a separate filing issued Tuesday. The units will vest on March 15 each of the next three years, starting in 2025. They will become exchangeable for common stock in line with certain requirements as they do.Profitability at Rithm will likely be contingent on its ability to raise asset management income from the acquisition of Sculptor Capital later this year to offset likely rising costs in the more immediate future, according to a recent report by equity analysts at BTIG."We're looking for Sculptor to contribute a slight increase to EPS in the back half of this year, but near-term it will incur higher expenses," they said in a report published Monday.Spinoffs of the Newrez mortgage origination and servicing components of the business could be used to add fee-paying assets under management, BTIG said in the report. BTIG also speculated earlier that the company could engage in a spinout."We especially think Newrez will be the vehicle servicing Rithm's objective to raise third-party capital for MSR funds," the analysts said in their more recent note.The company's share price was trading near the top of its weekly range, just below $11 per share at midday on Wednesday, and up slightly on the day.Rithm recently reported its first quarterly loss in over a year due to a servicing writedown due to lower fourth-quarter rates. It also has been working to improve its funding profile by issuing longer-term, unsecured debt to that end and paying down some of its other obligations.In addition to investing in the previously contested acquisition of Sculptor, Rithm also has agreed to purchase Computershare Mortgage Services and certain affiliates, including Specialized Loan Servicing.The Computershare deal is set to close in the first half of this year. The acquisition of Sculptor closed in the fourth quarter of last year.Nierenberg has been Rithm's CEO since 2013. He previously was managing director and head of global mortgages and securitized products at Bank of America Merrill Lynch. Prior to that, he was head of global securitized products at JPMorgan Chase.His time on Wall Street goes back to the days of the Great Recession when he had experience managing mortgage-related assets during an extreme boom-and-bust cycle for housing.

Construction at the Willows at Valley Run, an affordable housing development in Coatesville, Pa. The Biden administration's budget proposal lays out several initiatives to boost housing supply, and while many of those proposals enjoy bipartisan support, the odds of congressional action before November's elections is unlikely.Bloomberg News WASHINGTON — Two provisions of President Joe Biden's sweeping proposal to address home affordability could help ease the nation's housing supply woes and benefit banks along the way.Much of the White House's $258 billion affordable housing plan is unlikely to gain momentum on Capitol Hill before Congress shifts fully into campaign mode ahead of this fall's elections. But a pair of tax credits — one tried and true, the other brand new — appear to have broad appeal. The first is the Low-Income Housing Tax Credit, or LIHTC, a nearly 40-year-old program that has become a favorite among apartment developers across the country. The credit is granted in exchange for reserving a portion of their units as affordable rentals for at least 30 years.The second initiative is called the Neighborhood Homes Tax Credit, which would provide a similar tax break for those who build or renovate low-cost single family "starter" homes in areas of need."We have a huge hole in our housing supply that we dug for over 15 years, and we're not going to build that overnight. We're going to get out of it the same way we got into it, which is a shovel at a time," said David Dworkin, head of the housing affordability advocacy group National Housing Conference. "So, the housing supply elements of the president's plan, which have broad bipartisan support, are essential to moving forward."Support for the supply side proposals is broader than just among Democrats and their allies. Real estate industry groups are also heartened by elements of Biden's budget, too."Just a mere mention in his [State of the Union] address about building and preserving an additional 2 million homes, that was awesome," said Lake Coulson, chief lobbyist for the National Association of Home Builders. "Absolutely."LIHTCCreated by the Tax Reform Act of 1986, the LIHTC — colloquially pronounced "lie-tech" — has become an essential financing tool for developers. It has helped finance more than 3.5 million apartments, according to the Department of Housing and Urban Development. The program helps add between 50,000 and 60,000 units to the housing supply annually, according to analysis from the Urban Land Institute.The Biden plan calls for committing $37 billion to the program. It would also slash the minimum amount of tax-exempt bond financing eligible projects must secure from 50% of the total cost to 25%, allowing developers to secure more private funding for their projects. The White House estimates 1.2 million units would be built or preserved as a result of this proposal.Steve Adamo, president of residential and consumer lending at Toms River, N.J.-based OceanFirst Bank, said the LIHTC program plays a critical role in many of the construction projects to which his bank lends."It assists, pretty aggressively, the developers in our commercial lending space," Adamo said. "It's really important that the Low-Income Housing Tax Credit is available and viable for those developers. It's important for the lending industry as a whole."Congressional outlookThe LIHTC reforms endorsed by the White House already feature in pending legislation: the Tax Relief for American Families and Workers Act of 2024. Proposed by Sen. Ron Wyden, D-Ore., and Rep. Jason Smith, R-Mo., the bill also includes an expansion of the Child Tax Credit, research and development spending, and various business-friend reforms.The package enjoys bipartisan support, bolstering the LIHTC expansion as the housing policy most likely to come to fruition. But even that might not be enough to overcome the legislative hurdles that lie ahead, Isaac Boltansky, director of policy research at the investment bank BTIG, said.Debates over the funding of the government, addressing issues at the Mexican border and funding of foreign conflicts in Ukraine and Gaza are all higher profile issues that will take precedence in the months ahead, Boltansky, leaving little bandwidth for housing-related negotiations. "I don't see any reason to be optimistic moving forward that we'll see comprehensive action on housing, given the current legislative calendar," he said. "These guys are struggling to keep the lights on."Still, Boltansky said, a spending bill will eventually be passed and some funds will be committed to housing initiatives. While LIHTC stands a chance of being included in an omnibus package, he said the odds drop off substantially for other elements of the White House proposal.The other "interesting" proposal, Boltansky said, is the Neighborhood Home Tax Credit, which is also part of existing legislation being backed by both Democrats and Republicans — the Neighborhood Homes Improvement Act, which was introduced by Reps. Mike Kelly, R-Pa., and Brian Higgins, D-N.Y., last June. The Biden plan calls for $19 billion to be allocated to the credit over the next 10 years. Mark Zandi, chief economist for the ratings agency Moody's, said the credit would make it financially viable to make existing homes that have fallen into disrepair habitable again. While the program does not have the baked-in support network of the LIHTC, Zandi said he sees it as politically viable, even in a divided Congress."It's a tax credit, so Republicans will be more amenable to it than straight up spending, and I Democrats obviously are on board because it helps to create more supply, particularly in urban areas," he said. "Although, it is broad-based. There are a lot of rural areas with old dilapidated housing that would benefit, as well."Other initiativesThe White House proposal includes a number of grants that would also fund expansion of the housing supply, including $20 billion to local jurisdictions to fund "innovative" development projects — such as commercial to residential conversions. It set aside $1.25 billion for HUD to finance affordable housing projects and called for more funding of public housing projects. These initiatives have been received less warmly by Republicans. Less popular still are various proposals for expanding homeownership, such as providing down payment assistance and providing a $10,000 tax credit to homeowners who sell their starter homes — defined as properties valued below the area median home price — in an attempt to unlock more supply. Edward DeMarco, president of the Housing Policy Council, a trade group representing the mortgage origination and servicing industry, said such efforts would only induce more demand."Introducing additional consumer tax credits to buy a house at a time in which we clearly have demand outstripping supply in most, if not all markets, is simply a path to inflating house prices. That benefit is going to go to the home seller, not to the home buyer," DeMarco, a former acting director of the Federal Housing Finance Agency, said. "The effort to encourage home supply is really where all the action should be."Dworkin, who served as a senior advisor to the Treasury Department on housing and community development during the Obama administration, challenged this characterization. He said the proposal would not create more demand for homes, because the demand is already there."We're not increasing the demand. We're increasing the ability of people to meet the demand," he said. "The idea that housing prices are going to go up even more because a few more people are going to be able to make a down payment, just isn't credible."Still, Dworkin said, the administration will have to pick its battles. Because of this, he encouraged the White House to commit few resources to certain proposals. Specifically, he flagged a proposal that would provide a tax credit for first-time buyers to, effectively, buy a lower interest rate on their mortgages, noting that rates are set to come down in the near-term anyway."I'm reticent to spend that kind of money on a proposal that doesn't have strong congressional support, and that is solving what is likely to be a short-term problem," he said. "The question is where we choose to spend the limited dollars we have, and our biggest priority is around production and ways to help people make a down payment."Thinking localStakeholders on all sides of the housing sector agree that the biggest hindrance to the creation of new supply is at the local level, in the forms of restrictive zoning and arduous entitlement processes. Influencing these policies are largely beyond the reach of the federal government. Still, Adamo said the federal government can facilitate some needed zoning changes by making investments in critical infrastructure."They could assist in public-private partnerships to create more density. Whether it's electrical grids or wastewater management, there's lots of infrastructure at the very local level that needs to be addressed," he said. "There are some good initiatives in the housing credits and tax abatements for first time buyers and sellers, but to get more housing, we need to solve the issues that are taking place more locally."Still, some would rather see the Biden administration do less, not more."The most important thing that the federal government could do is to get out of the way and that is just philosophically at odds with this administration," former FHFA Director Mark Calabria said.Regulatory red tapeBiden's focus on environmental regulation as well as his energy and trade policies are the most frequently cited issues, but current bank regulatory proposals have also been flagged as potentially detrimental to the cause of expanding housing supply.DeMarco said the so-called Basel III endgame proposal from the Federal Reserve, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency includes provisions that would make it harder for banks to engage in various parts of the housing finance system."There were clearly, in the proposed rule, disincentives for bank participation in funding anything having to do with housing," he said. "A reevaluation of that proposal in terms of what it means for banks to be doing both construction lending as well as mortgage lending could be a net positive to bank participation and bank financing in this space."Fed Chair Jerome Powell said the regulators are considering changes to the sweeping risk capital reform package, noting that a full reproposal of the rule could be in the offing. 'Build, build, build'Like all presidential budgets, Biden's $3 trillion spending plan is largely aspirational and serves as a directional indicator for the administration's priorities. Still, housing remains a top concern for many voters, so there are political points to be won and lost. As lawmakers in Washington grapple with the issues, Zandi said the policies focus most squarely on supply on the ones that the administration should emphasize."The president said 'build, build, build,' and I'm fully on board with that," Zandi said. "If you've got limited political capital and you're going to spend it on something, it has to be supply."

Mortgage application volumes dropped for the first time in three weeks as previous predictions of interest rate pullbacks appear to be on hold.The Mortgage Bankers Association's Market Composite Index, a measure of weekly loan application activity based on surveys of the trade group's members, declined by a seasonally adjusted 1.6% for the period ending March 15. The fall comes after two consecutive weeks of increases, including a 7.1% upturn in the last survey. Year over year, volumes were 11.5% lower. "Mortgage applications continued to show sensitivity to rate movements, and both purchase and refinance activity decreased over the week," said Joel Kan, MBA vice president and deputy chief economist, in a press release. February's inflation report came in higher than anticipated, leading to growing uncertainty over when the central bank officials might lower the fed funds rate in 2024, Kan said. Investor activity following the economic data release helped lead mortgage rates higher, with consensus growing that a reduction would not occur until this summer at the earliest. The Federal Open Market Committee meeting this week is expected to result in no cut. The 30-year fixed-rate for conforming balances below $766,550 in most markets surged after three consecutive weekly drops to average 6.97%. Seven days earlier, the average came in at 6.84%. Meanwhile, points used to help buy down the rate inched down to 0.64 from 0.65 for 80% loan-to-value ratio applications. The recent stronger-than-expected economic data led Fannie Mae to raise its interest rate predictions for 2024 on Tuesday. The government-sponsored enterprise's chief economist said rates would likely not fall below 6% until at least the end of 2025, running counter to previous forecasts and dimming hopes among consumers anticipating some relief this year. Last week's higher rates contributed to a 1.2% seasonally adjusted drop in the MBA's Purchase Index. And compared to the same week in 2023, purchases were also down by 13.8%.The elevated rate environment and an ongoing inventory shortage means little price relief and scarce opportunity for buyers in the current market. "With housing supply low and prices high, the average loan size for purchase applications increased to the highest level since May 2022," Kan said. The mean amount on new purchase-applications finished last week at $445,000, rising for the third straight survey period. By comparison, average purchase-loan sizes started 2024 at $402,900.Meanwhile, the Refinance Index fell 2.5% after jumping 12.2% one week earlier. With most borrowers already holding on to rates below current levels, refinance activity remains sluggish and was down 2.9% from year-ago levels. Refinance activity relative to total volume also slid down to 31.2% after nabbing a 31.6% share seven days earlier. The seasonally adjusted Government Market Index also dropped last week by 1.8%, even as purchases saw a tiny uptick. The share of federally-backed loan activity was flat from the previous survey, with Federal Housing Administration-insured applications garnering 12.1% of volume, up from 12%. That increase was offset by a dip in Department of Veterans Affairs-guaranteed mortgages to 12.1% from 12.2% week over week. Loans resulting from the U.S. Department of Agriculture's program saw the same 0.5% share. Alongside the conforming average, fixed mortgage rates fell across the board among MBA lenders, with the 30-year jumbo average leaping 10 basis points to 7.14% from 7.04% one week earlier. Points increased to 0.54 from 0.38 for 80% LTV-ratio loans. The average fixed rate on 30-year FHA-backed mortgage applications rose 12 basis points to 6.89% from 6.77%. Borrowers used 1.04 in points to bring down the rate compared to 0.95 during the prior seven-day period.Meanwhile, the average 15-year fixed-contract rate climbed up to 6.49% from 6.37%. Points saw a 7 basis point decline to 0.7 from 0.77. The 5/1 adjustable-mortgage rate recorded last week's only decline with the MBA, dropping to an average of 6.33% from 6.38%. Points on the loans, which start out fixed for 60 months before adjusting to market levels, increased to 0.55 from 0.52. The ARM Index, which typically sees elevated activity when fixed rates rise, bucked the trend with a 7.3% drop. The share of adjustable-rate mortgages relative to total application volume also slipped to 7.2% from 7.7% seven days earlier.