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The increase in the number of homes for sale during February is good news going into the spring home purchase season, and that helped to alleviate competitive pressures, Zillow found.Inventory rose 12% year-over-year. The total of over 900,000 homes on the market last month was the highest amount in any February since 2020. New listings rose 20% compared with January and were 21% higher than the same month in 2022.Zillow's surveys as of late have found an elevated number of current owners planning to sell in the next three years."We're finally beginning to see owners who have been putting off moves return to the market," said Skylar Olsen, chief economist at Zillow, in a press release. "For many households with record-high equity, waiting out potentially lower rates later in the year may not be worth it."But the time from listing to contract in February averaged 17 days, not as fast as it was during 2021 and 2022, but still quicker than prior to the pandemic.Homes that are not priced appropriately or lack "curb appeal" have driven average time on the market to 53 days, which Zillow said is longer than normal for that time of year.The share of listings where the seller reduced the price was 20.1%, which Zillow said was higher than usual.The Zillow Home Value Index calculated the typical home being worth $349,216, versus $344,159 in January. This amount is also almost 41% higher than it was prior to the pandemic. Compared to February 2023, the ZHVI was up 4.2% nationwide.A separate report from Redfin issued Thursday found the median monthly housing payment was $2,686 during the four weeks ending March 10. This was only $30 below the record set in October 2023. The combination of still-high mortgage rates and rising prices was responsible.Redfin's own data found new listings increased 13% during the period, the biggest annual increase in nearly three years. Plus, the total number of homes for sale was up 3%, the biggest increase in nine months.However, mortgage rates are likely to stay elevated for a while, especially after this week's Consumer Price Index report, which further solidifies the viewpoint that the Federal Open Market Committee is unlikely to cut short-term rates prior to June, Chen Zhao, Redfin economic research lead, said in a press release."Buyers who can afford to may want to get serious about their home search now, as housing costs are unlikely to fall anytime soon," Zhao said. "The uptick in listings should be another motivator for buyers: There's more to choose from, and improving inventory may bring out more competition from other buyers as we get further into spring."That is already starting to occur with the recent uptick in mortgage application activity, Zhao said.The Mortgage Bankers Association's Weekly Application Survey for the period ended March 8 reported the conforming 30-year fixed rate mortgage at an average of 6.84%, down 18 basis points from the prior week.The purchase index component of the application survey increased 4.7% on a seasonally adjusted basis compared with March 1, but was down 10.8% from the same period in 2023."The decline in rates led to a solid gain in mortgage applications for the second consecutive week," MBA President and CEO Bob Broeksmit said in a Thursday morning statement. "With the spring home buying season underway, lower mortgage rates and more new and existing housing supply should boost mortgage demand."First American Financial expects February existing home sales to rise 1.4% to a seasonally adjusted annualized rate of 4.05 million."The narrowing mortgage rate spread was the largest driver of the projected increase in our February existing home sales outlook," Mark Fleming, First American's chief economist, said in a statement. "Approximately 90% of homeowners are financially disincentivized from selling their home in today's housing market because it would cost more today to borrow the same amount of money they owe on their current mortgage."But the spread between the average rate for a 30-year FRM and the effective interest rate on mortgage debt outstanding in February "fueled a 1.3 percentage point increase in the projected monthly change in existing home sales," Fleming said.

Prices for residential construction headed up for a fourth straight month, with materials running higher compared to last year's average rate of growth but slowing its early-2024 surge, according to the National Association of Home Builders. Building-material costs climbed up a monthly 0.49% between January and February, based off analysis from NAHB of the Producer Price Index. The movement eased off the 1.27% jump in January but still ended up above the 0.15% average monthly pace throughout 2023. Compared to one year ago, February building costs were up 2.18%, excluding food and energy. If trends hold, the December-to-January rise will be the largest of all 12 months, as it was in both 2023 and 2022 when they leaped 1.07% and 4.05% respectively. The index is not seasonally adjusted. Price gains were driven by gypsum materials, ready-mix concrete and steel mill products, while softwood lumber costs declined for the seventh month in a row. Seasonally adjusted lumber prices fell 2.98% in February and are 10.35% lower year over year.The drop in lumber prices likely reflect typical seasonal demand. "Prices for lumber will likely start to creep upwards as single-family home construction enters the spring season and demand for lumber increases," NAHB researchers wrote in its analysis.On the other hand, gypsum materials headed higher for the first time in 11 months, accelerating a nonadjusted 2.95% from January. But after the prolonged period of lower costs, gypsum prices finished February lower by 0.18% on a year-over-year basis. Steel-mill products took a similar-sized 2.86% jump, higher for the third month in a row. Compared to 12 months ago, the cost of steel goods for residential building was up 5%.Ready-mix concrete inched up an adjusted 0.25% in February, after rising 1.76% a month earlier. Prices finished 7.42% higher from a year earlier. The latest data comes after single-family residential construction starts slowed by its greatest pace since 2020 to start the year. But new-home construction is also coming off a 12-month period of elevated consumer interest and improved builder sentiment, as aspiring buyers increasingly turned to the market in the absence of existing inventory. The growth in demand has translated into profits for many of the largest homebuilders.The Producer Price Index for final-demand goods, including food and energy, rose overall by 1.2% on a monthly basis after it edged down 0.12% a month earlier.  

The average price borrowers pay to insure their homes is up by almost 19% in the past year and over 55% since 2019, according to a study by Guaranteed Rate Insurance LLC.That cost rose 18.85% in 2023 alone and 55.47% more than it did in 2019, according to the report from the homeowners insurance subsidiary of mortgage lender Guaranteed Rate, which spans five years of data, including almost 50,000 policies and more than 70 carriers in 2023.The independent agent's study quantifies anecdotal reports of premium increases that can negatively affect mortgage qualification or performance as the cost plays a growing role in boosting debt-to-income ratios. "With the increase in premiums, we are seeing more pressure on DTIs. As a result, we work diligently with our customers and provide a host of solutions to lower their costs," said Jeff Wingate, executive vice president and head of insurance at Guaranteed Rate, in an email.While increases have been seen as far back as 2020, they were initially more gradual, with a rise of just $56 that year when the average premium went from $1,108 to $1,164. It rose another $112 to $1,276 in 2021, by $174 to $1,450 in 2022, and finally by $273 to $1,723 last year.Increases have varied by state. The highest between 2022 and 2023 occurred in Louisiana, where the average jumped by 34.3%. The lowest was in Montana at 6.2%. (Nebraska, New Mexico and West Virginia were excluded due to the lack of statistically meaningful data.)Another finding in the report bore out other research suggesting the take-up of private flood coverage that some homeowners also need or want has grown as the shift to risk-based pricing in the national program has increased some premiums and its funding has become tenuous. Guaranteed Rate's customers increased their use of private coverage by 163% in the past year for zones where it's mandatory because the flood risk is high and for those where it's low or moderate, according to its report. Despite such challenges, consumers are finding ways to cope with their rising insurance costs, through increased comparison shopping, credit monitoring and higher deductibles.The share of consumers opting for homeowners insurance deductibles in the $5,000 to $10,000 range rose by 49% in the past five years, compared to a 17% decline in those with $1,000 to $2,500 deductibles.Where available, bundling with other policies like auto has on average provided homeowner insurance discounts of 5%-20%, according to Guaranteed Rate, while noting that there has been less availability of this in Florida, California, Texas, New York and New Jersey in particular.Lack of availability can stem from particular fire and flood risks in markets like California or Florida where carriers have pulled back or out. It also occurs due to a disconnect between the rate state insurance companies allow and the one a carrier wants to charge, Wingate said.Extreme weather events have become increasingly common and account for 70% of losses, so insurers have seen costs rise in many areas, he noted.Despite this, the Guaranteed Rate report forecasts that soaring premiums could stabilize by 2025. That's because reports like one published last month by Fitch indicate that higher premiums are starting to improve carrier financials to the point where they could ease hikes, said Wingate. Also in some markets new entrants are spurring more competition.Meanwhile, steps consumers can take to improve insurance rates in some cases include investing in home improvements such as fire resistant materials that can mitigate disaster risk.Whether a carrier will adjust rates in response to such measures varies, but some view an improvement like a new roof that will hold up well in a hail storm as favorable, Wingate said.

In a securities filing Thursday, New York Community Bancorp, which is the parent company of Flagstar Bank, described steps that it is taking to fix what it previously described as "material weaknesses" in its internal controls.Bing Guan/Bloomberg Troubled lender New York Community Bancorp on Thursday outlined steps that it's taking to improve its loan review process and make sure it can identify potential problems at a faster clip.Two weeks after disclosing "material weaknesses" in its internal controls, the Long Island-based company described a remediation plan that includes expanding the use of independent credit analyses, providing additional risk-rating process training for internal loan review employees and hiring a new loan review director.The plan was included in New York Community's annual report, which was released Thursday after being delayed for a couple of weeks because new company management was working on a strategy to address the problems.The annual report also includes other measures aimed at fixing the deficiencies, such as ramping up the frequency with which the bank's internal loan review team and first-line business units report to the risk committee of its board of directors.New York Community also said that it will improve its internal loan review team's "ability to independently challenge risk rating scorecard model methodologies and results." And it promised to assess the "adequacy of staffing levels and expertise" in the internal loan review program, "taking into account … the size, complexity, and risk profile of the company's loan portfolio."Those changes are on top of other remediation measures that New York Community, the parent company of Flagstar Bank, has already announced in the past few weeks. The company has overhauled its board of directors to include more members with deep industry experience and backgrounds in risk management. It has also hired a new chief risk officer and a new audit chief, both of whom have worked at larger banks.In its annual report, the $114 billion-asset bank said that it has made some progress in addressing the deficiencies, but warned that it's still in the process of building out a full remediation strategy."We believe our actions will be effective in remediating the material weaknesses, and we continue to devote significant time and attention to these efforts," the company said in its annual report."In addition, the material weaknesses will not be considered remediated until the applicable remedial processes, procedures and controls have been in place for a sufficient period of time and management has concluded, through testing, that these controls are effective," the bank added.Also included in the annual report, commonly known as a 10-K, was a letter from KPMG, the bank's primary auditor since 1993. KPMG said that based on a report it completed Wednesday, it concluded that New York Community's board of directors had not sufficiently overseen activities, leading to ineffective risk assessment and monitoring.But despite those problems, KPMG gave the bank's financial statements from the past three years a clean bill of health.Analysts who cover New York Community had different reactions to the bank's annual report. Peter Winter, an analyst at D.A. Davidson, said the document doesn't do enough to ease worries about whether the bank is going to need to again boost its reserves for souring loans. New York Community's downward spiral began in January, when it reported logging a massive $552 million provision to cover potential loan losses, up sequentially from $62 million."I think if you had questions about whether they have put aside enough reserves and what the outlook will be, this 10-K doesn't … put to rest any of those concerns," Winter said.But Casey Haire, an analyst at Jefferies, said that the reported soundness of the New York Community's financial statements bodes well for the bank's reserve-building, since the updated filing didn't require additional provisions for credit losses.The two analysts were also split about whether the improvements to New York Community's internal controls and risk management will lead to higher expenses this year.Winter said it's possible that the company will revise its expense guidance when it issues its first-quarter earnings report in April, while Haire argued that KPMG's affirmation of the bank's previous financial statements supports the prior expense guidance for 2024.New York Community said in its fourth-quarter earnings report that it expects noninterest expenses of between $2.3 and $2.4 billion in 2024, up from $2.2 billion in 2023, though last year's number excluded a goodwill impairment charge and merger-related expenses. All told, the bank's remediation strategies shouldn't add significantly to expenses, Haire said.New York Community did not respond to a question about how much it expects to spend in aggregate to put all of its remediation plans in place.The bank's first quarter has been tumultuous. Last week, New York Community landed a $1 billion capital investment led by Steven Mnuchin, who served as Treasury secretary during the Trump administration. The new investors are poised to own nearly 40% of the company.(Jefferies acted as the exclusive financial advisor and sole placement agent to New York Community on the capital infusion.)The capital infusion has brought a merry-go-round of managerial changes. Former Comptroller of the Currency Joseph Otting is set to become CEO on April 1, succeeding Alessandro "Sandro" DiNello, the company's executive chairman who was named CEO last month after Thomas Cangemi abruptly left the role. Meanwhile, the board has been massively revamped. For starters, Mnuchin will join the board and serve as the lead independent director.He will be joined by Otting and two representatives from a pair of investment groups that contributed to the $1 billion rescue. DiNello, who formerly led Flagstar Bancorp, which New York Community acquired in December 2022, will remain on the board, as will two legacy Flagstar directors who joined New York Community's board after the acquisition.Haire said that the leadership changes are indicative of the scope of the overhaul. "They're fixing a broken bank," Haire said.In a separate securities filing on Thursday, New York Community disclosed that two current directors — Lawrence Savarese and David Treadwell — will resign from its board. Savarese, who joined the board in 2013, was set to depart after the 10-K was filed, while Treadwell, who joined Flagstar's board in 2009, plans to exit after his successor is found, according to the second filing.New York Community did not respond to questions about whether it will fill those seats. Following Savarese's exit, the only director from pre-Flagstar New York Community will be Marshall Lux, who joined the board in February 2022. The latest report by KPMG comes at a time when the accounting firm's reputation has come under fire. KPMG was also the auditor for the three regional banks that failed last spring: Silicon Valley Bank, First Republic Bank and Signature Bank. In its report on New York Community, KPMG found that the bank's loan review process was flawed, lacking timely assessments, monitoring and controls."Specifically, the company's internal loan review processes lacked an appropriate framework to ensure that ratings were consistently accurate, timely, and appropriately challenged," KPMG's report said, adding that these deficiencies hindered the bank's ability to identify problem loans and allot appropriate credit losses.KPMG expressed an "adverse opinion" regarding New York Community's internal controls for financial monitoring, contradicting its clean assessments from the past several years. In its annual report, New York Community also detailed some of its recent efforts to slim down its balance sheet. This week, the bank sold a $899 million book of consumer loans, it said. And last month, it sold a co-operative loan that had made up more than half of its fourth-quarter charge-offs. The sale reeled in a $26 million gain.Haire said there are still plenty of questions about what the bank will do going forward. Management has said that the bank's next earnings call will provide more detail about its strategic direction."This first-quarter earnings call is essentially going to be an investor day," Haire said. "They're going to give you their business plan for what a new NYCB will look like."

The Department of Housing and Urban Development is accused of failing to issue mortgage insurance premium refunds to borrowers who opted to terminate their FHA-insured mortgages early. As of 2020, almost $400 million is owed to homeowners. A proposed class action lawsuit, filed by borrower Tricia Sarmiento in Florida, blames the department for slow-walking the disbursement of monies owed and for making it bureaucratically complicated to get the process going in the first place.Almost 60,000 borrowers in Florida are owed refunds, totaling $22 million, according to 2020 data from HUD's Office of Inspector General, which was cited in the suit. Meanwhile, nationwide, 754,730 homeowners had unclaimed funds totaling $384.7 million. Of that sum, 200,576 borrowers terminated their mortgage more than 20 years ago.HUD watchdog's audits in 2020 and 2022 rang the alarm on such practices, outlining the department's lack of protocols and adequate procedures relating to reimbursing MIP to borrowers. Sarmiento in her suit is demanding for HUD to pay back overdue refunds to borrowers and is pushing the department to reform "a system which has been plagued by failure." Law360 first reported the story."It is a fight for transparency, accountability and fairness," the suit said. "The federal agency's failure to uphold its duties has deprived thousands of homeowners of substantial refunds. "The Department of Housing and Urban Development declined to comment on pending litigation.Joshua H. Eggnatz, the attorney representing Sarmiento, said this is an important case for all borrowers who have an FHA-backed mortgage."We are seeking return of our client's and class members' unused premiums that should have been refunded to them long ago, and a change at HUD so future buyers are protected," Eggnatz wrote in a statement Wednesday.Per HUD regulations, a termination of an FHA mortgage within seven years of purchase or refinancing triggers an overpayment of the MIP and the department is required to automatically refund the unearned sum.Despite the protocol, the federal agency systematically fails to identify eligible borrowers who qualify and imposes unnecessary bureaucratic hurdles as a means of withholding "hundreds of millions of dollars from homeowners," the suit alleges.The plaintiff terminated her FHA loan in 2001 and was not informed at the time of doing so that she was owed a refund. Furthermore, Sarmiento did not know she had to request a refund application to recover her money. Upon learning that was the case, the plaintiff requested the document on Jan. 31,  2022. Two years later, the plaintiff claims she has not been provided with the refund application. HUD owes her a refund of over $1,000, the suit purports. According to the legal action, for numerous applicants "HUD took a significant, unreasonable, and unjustified length of time, often two to three years, before a refund application was received by the borrower." Instead of automatically issuing a refund, as is promised by law, HUD requires borrowers to affirmatively request a refund application and sends these applications to old addresses despite knowing "the borrower no longer lives at the FHA-insured property address," the proposed class action outlines. Additionally, the agency often fails to provide notice to qualifying borrowers that are owed a refund."Plaintiff seeks to enforce HUD's nondiscretionary, plainly defined, and purely ministerial duties – indeed, there is no dispute that plaintiff and class members are owed MIP refunds," the suit asserts.

Mortgage rates fell again this week, even though a hotter-than-expected inflation report dampened hopes that the Federal Open Market Committee will reduce short-term rates sooner rather than later.The 30-year fixed rate mortgage averaged 6.74% on March 14, down 14 basis points from 6.88% one week earlier but up 14 basis points from 6.6% for the same time last year, the Freddie Mac Primary Mortgage Market Survey reported.Meanwhile, the 15-year FRM averaged 6.16%, compared with 6.22% a week ago and 5.9% a year ago.However, rates might increase going forward as the benchmark 10-year Treasury was at 4.29% at noon on March 14, up substantially from a close of 4.1% on March 10, the day before the CPI came out."Despite the recent dip, mortgage rates remain high as the market contends with the pressure of sticky inflation," Freddie Mac Chief Economist Sam Khater said in a press release. "In this environment, there is a good possibility that rates will stay higher for a longer period of time."Zillow's rate tracker was flat late Thursday morning at 6.46% for the 30-year FRM, down 1 basis point from Wednesday and up 2 basis points from the prior week's average of 6.44%."The yield on the 10-year Treasury note — which mortgage rates tend to follow — reflects expectations about future inflation and future economic growth," Orphe Divounguy, senior macroeconomist at Zillow Home Loans, said in a Wednesday night statement. "Leading indicators of economic activity showed the services sector is slowing."For example, the employment data released last Friday found some loosening of the labor market, with wage growth moderating and unemployment inching higher, Divounguy said. "At the same time, a less tight housing market points to further moderation in price and rent growth," Divounguy continued, adding that a possible economic slowdown overseas may increase demand for U.S. Treasury notes, driving up the price and cutting the yield."Although the Fed's decision to delay any reduction in the Fed Funds Rate has caused mortgage rates to rise slightly, the impact does not seem to phase homebuyers," added David Adamo of Luxury Mortgage. "The buying season is off to a brisk start, even as rates are elevated."The FOMC is unlikely to act before the latter part of this year based on the CPI report, said Ksenia Potapov, an economist at First American Financial."The housing market isn't expecting rate cuts in time for the start of the spring home-buying season, but this spring is still expected to be stronger than last," Potapov said. "However, when the Fed does cut rates, we may see pent-up demand driving an unseasonable uptick in home sales."

The Federal Deposit Insurance Corp. estimated in November that the cost of a special assessment related to two bank failures last year would be $16.3 billion, but it later revised that calculation to $20.4 billion.Nathan Howard/Bloomberg One year after Silicon Valley Bank and Signature Bank failed in the span of three days, big banks are miffed about their growing tab from last March's wild weekend.The gripes stem from decisions made between March 10-12, 2023, when the Federal Deposit Insurance Corp. stopped deposit runs by taking over the two banks and declaring a systemic risk exception to ensure that the vast quantities of uninsured deposits at those failed banks were covered.Bigger banks are largely responsible for paying for the failures under a process that banks say isn't transparent and is turning out to be more expensive than they thought. Last month, the FDIC increased the banks' tab to $20.4 billion, up from a prior estimate of $16.3 billion. Bank lobbying groups say it's the latest sign of the agency seeming not to care about keeping banks' costs low."The full story of what the FDIC has been doing, or failing to do, over the past year is long overdue," the Bank Policy Institute, a trade group that represents large banks, said in a statement last week. The FDIC says the costs tied to the SVB and Signature failures were always subject to change as the agency went through the nitty-gritty of unloading those banks' assets. The agency did not comment on the record. But an FDIC official who spoke on condition of anonymity said the agency has worked to maximize returns on the failed banks' asset sales and that its rapid actions helped avert a broader and costlier bank panic.The debate involves the "special assessment" that the FDIC is charging banks after the agency took the unusual step of covering the two failed banks' uninsured deposits, rather than just their FDIC-insured deposits.The agency invoked a so-called systemic risk exception to cover the uninsured deposits in an effort to ensure that the two banks' corporate customers could make their payrolls the following week and prevent a deeper crisis of confidence in the banking system.The FDIC estimated the cost of covering those deposits and resolving the banks at $16.3 billion when the agency finalized its special assessment in November. The charge was spread between some 114 banks that were selected because they held a certain level of uninsured deposits. This year, however, the FDIC told those same banks that the cost has risen to $20.4 billion.Karen Petrou, the co-founder of the consulting firm Federal Financial Analytics, said the $4 billion difference is a "very significant mistake" that calls into question the FDIC's credibility in gauging the costliness of bank resolutions."When an agency gets something this wrong, it's not unreasonable for those picking up the tab to ask," Petrou said.The agency has been gradually getting rid of certain assets that First Citizens Bank and New York Community Bancorp did not acquire when they bought many of the remnants of the two failed banks. First Citizens bought much of SVB, and New York Community acquired parts of Signature.In the Signature case, the FDIC has sold chunks of the failed bank's rent-controlled multifamily portfolio, as well as other commercial real estate loans. But it has avoided getting rid of the assets quickly, fearing that a fire sale might sharply drive down prices, making the failures more costly to banks and adding to existing stresses in the real estate market.Still, the $4 billion increase in costs to banks may be a sign that the FDIC's asset sales are fetching more discounted prices than the agency once anticipated.Last week, the Bank Policy Institute asked the FDIC to explain whether it's "maximized returns and minimized losses" in its handling of the failed banks.The FDIC's notice that the industrywide cost had risen came as banks were preparing or releasing their annual reports to shareholders, forcing some individual banks to make last-minute disclosures to notify investors of the higher payments.Pittsburgh-based PNC Financial Services Group said last week that it's now due to pay $645 million, up from its prior estimate of $515 million. Fifth Third Bancorp in Cincinnati, Regions Financial in Birmingham, Alabama, and the New York megabank Citigroup also told investors they're due to take bigger hits than they once thought.Individual bank executives haven't been publicly critical of the FDIC, but lobbying groups that represent them have spoken out. It's part of a broader shift among trade groups to be more actively combative with regulators, said Ian Katz, a policy analyst at Capital Alpha Partners."We've seen over time, more and more open, direct, blunt criticism of the regulators," Katz said.Banking trade groups are currently engaged in a high-profile TV ad blitz over regulators' Basel endgame proposal — and they seemingly notched a victory recently, as regulators are weighing major changes. They're also suing regulators over their proposed overhaul of the Community Reinvestment Act. The Consumer Financial Protection Bureau, meanwhile, is facing an industry lawsuit over its slashing of credit card late fees from $32 to $8.Part of the latest run-in centers around loans that two FDIC-run bridge banks, which were established after SVB and Signature failed, took from the Fed. The American Bankers Association said in a recent analysis that those loans may have raised banks' costs by as much as $2.5 billion.The bridge banks had some loans outstanding from the Fed's discount window, a well-established borrowing source that banks can turn to if they come under stress. The loans helped the bridge banks meet the massive amount of deposit outflows they were seeing, even after federal regulators had taken action. But once the bridge banks went into receivership, the Fed started charging a penalty that it has long assessed on entities that default on their obligations or are insolvent. The Fed can charge a penalty of up to 500 basis points.The FDIC official who spoke on condition of anonymity said the agency was able to negotiate a penalty of 100 basis points, thus lowering the potential hit on surviving banks.Rather than switching to a lower-cost loan once conditions in the financial markets settled, the FDIC chose to stick with the Fed loan. The FDIC official said that decision was made partly because much of the Fed loan had already been paid off and because the rates available were similar to the Fed's discount window rate.The ABA is calling on the FDIC to disclose more details about its financing decisions. Banks "deserve an itemized receipt, or at least an explanation, for what appears to be a $2.5 billion penalty fee from the government," the trade group argued in its blog post.

PNC CEO Bill Demchak describes the process of accessing the discount window as "incredibly mechanically difficult." Fed Chairman Jerome Powell says the emergency lending facility "needs to be brought up technologically into the modern age" and that other reforms are needed.Stefani Reynolds/Bloomberg As Washington regulators preach readiness among banks in case they ever need to tap the discount window, some critics say the Federal Reserve has its own work to do to expand use of the emergency lending facility.Bankers, politicians, academics and former Fed staffers say the discount window — through which depository institutions can obtain short-term funding in exchange for high-quality collateral — is outdated and ill-equipped for liquidity crises of today.Last week, Rep. Patrick McHenry, R-N.C., chair of the House Financial Services Committee, equated the process to using "1940s" technology, a nod to the fact that banks initiate the borrowing process by placing a toll-free call to their regional reserve banks. "It should be the push of a button rather than phone calls, and it should be an instant rather than days," McHenry said during an event hosted by the Brookings Institution. "That piece, [the Fed] didn't fix. This is a question of operational competence."At that same event, PNC Financial Services Group CEO Bill Demchak called the process "incredibly mechanically difficult," contrasting it with the Federal Home Loan banks, from which banks can secure collateralized short-term funding with "a few keystrokes."The Fed offers a digitized interface known as Discount Window Direct, through which requests can be made online. Unlike the standard discount window, which closes at 7 p.m. ET weekdays and is closed on the weekends, the online portal is available 24 hours a day. But this option is only available for banks that are eligible for primary credit — meaning they are in sound financial condition — or seasonal credit, which is meant for small institutions with recurring capital needs.During testimony before the Senate Banking Committee last week, Fed Chair Jerome Powell said the lending facility's functionality is not up to snuff with today's digital banking standards.  "There's a lot of work to do on the discount window," Powell said. "It needs to be brought up technologically into the modern age, we need to eliminate the stigma problem, and we need to make sure banks are actually able to use it when they need to use it. That's a broad work program that we're on right now. It's important."The discount window has been a focal point for the Fed and other agencies since the bank failures of last spring. In July, the Fed, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency issued guidance about the importance of pre-pledge assets to the discount window and testing borrowing capabilities regularly.In his report on the failure of Silicon Valley Bank, Fed Vice Chair for Supervision Michael Barr noted that the Santa Clara, California-based bank did not have sufficient assets prepositioned at the discount window and had not tested its borrowing capabilities in more than a year. While a smoother experience likely would not have saved the bank, which saw $40 billion of deposits withdrawn in a single day, Barr said the episode highlighted the role the discount window can play in protecting financial stability."When the system is hit with a shock that results in widespread stress, funding markets are often unable to effectively distribute liquidity," Barr said in an October speech. "In these cases, the discount window can be particularly important both to the institutions that need liquidity and to the Federal Reserve's efforts to stop dysfunction from spreading and restore stability — but, again, only if banks do the work ahead of time and are ready and able to use it.Still, Barr said the Fed is continuing to study the episode. In a February speech, he indicated that such reflections have included a look back at the Fed's emergency lending practices."While banks do their part to get operationally ready, we at the Federal Reserve also need to continue to improve discount window operations," Barr said.Neither Barr nor Powell elaborated on what those additional steps might look like or when improvements might be rolled out. A Fed spokesperson declined to provide additional context this week. For banks, their service providers and other policy experts, automation sits atop their wish list for potential changes, something that allows the Fed to draw on the wealth of financial and supervisory information it has about banks to render lending decisions instantaneously. But such a system could create moral hazards, said David Zaring, a professor of legal studies at the University of Pennsylvania's Wharton School of Business. He notes that the debate about how easy or difficult it should be for commercial banks to borrow from the central banks is as old as the Federal Reserve itself. While the Fed has an obligation to support banks in moments of distress, Zaring said the Fed also must determine whether a bank is going to fail regardless of whether it intervenes. He added that making such a determination takes time. "If a bank is insolvent and the Fed has all its high-quality assets as collateral, that means other creditors can't get that collateral, so the Fed might have to worry about insolvent banks loading up on discount window cash even though there's no hope for the future, in a gambling for redemption arc," Zaring said. "That could make the consequences of the ultimate failure more costly."An overly permissive central bank lending facility could also become a crutch for the banking sector, Zaring said. For this reason, bank supervisors have often chided banks for tapping the discount window and, in turn, such activity tends to draw a negative response from bank directors, shareholders and analysts.Kevin Messina, a risk management specialist at the consulting firm Baringa and a former supervisor for the Federal Reserve Bank of New York, said one reason the discount window is difficult to use today is because the central bank wanted it to be hard. If the Fed is serious about getting banks to turn to the facility more readily, he said, the institution will have to shift its entire approach toward lending."Historically, the Fed didn't want banks to go to the discount window, so they made it difficult to do so," Messina said. "If the Fed really wants banks to use the facility more readily, it needs to do some soul-searching about what the discount window is."

Doma Holdings' management is embracing the White House's title insurance waiver pilot, saying it is one of the only companies in the industry that has the technology to support the initiative.The company is bucking the American Land Title Association, the title industry trade group that opposes the plan because it says the pilot turns the government-sponsored enterprises into "de facto title insurers" even though they lack the expertise in this form of risk management.But Doma's CEO Max Simkoff claimed his company was one of the only title firms that had the proven technology and underwriting capabilities to participate in the Federal Housing Finance Agency pilot."Because our technology operates using a completely automated front end, we can not only provide it as a licensed offering to the GSEs for the majority of refinances that they purchase from lenders… but also provide a seamless and instant integration with any lender who might choose to participate in this program," Simkoff said on the company's earnings call.Simkoff said he was "dismayed" by ALTA representatives' comments that the pilot would not benefit low-income and/or minority home purchasers."Our own data from the past several years has shown that the majority of conforming refinances were completed by individuals who are below 120% of their area median income, the definition of lower moderate income utilized by the GSEs," Simkoff said. "And again, our technology was used to safely underwrite over 75% of these transactions."Doma was the only title underwriter reporting after the State of the Union speech. After the big four players disclosed results, Fitch Ratings in a March 5 report noted that revenues in aggregate for these companies was down 29% last year, because high mortgage rates suppressed transaction volume."Results in 2023 were driven by continued low levels of refinance volumes, which are extremely sensitive to changing mortgage rates, and a decline in demand for purchase orders as rates and affordability concerns affected consumers," the Fitch report said.It noted the cybersecurity incidents at Fidelity National Financial and First American Financial highlighted the ongoing operational risks for title insurers.In the short term, these events should not affect the ratings of either company.  But going forward, "Fitch is continuing to monitor any long-term financial, operational or reputational impacts, as well as potential governance or risk management issues that could arise."Below NMN reviews earnings of the title insurers for the fourth quarter.

Prolific non-qualified mortgage lender Change Lending will become a member of the Federal Home Loan Bank of San Francisco.The firm, owned by Steven Sugarman's The Change Co., expects to buy around $7 million of capital stock in the FHLB to gain membership by the beginning of May, it said Wednesday. The application was granted based on metrics including Change's leverage and operating liquidity ratios and profitability figures. Change Lending is a certified community development financial institution, a government designation which allows it more flexible underwriting as it meets underserved lending thresholds."We welcome a partnership with the FHLB-SF to enhance our strength and reach as America's CDFI," said Sugarman in a press release. The San Francisco home loan bank declined to comment Wednesday. Change Lending was the nation's top non-QM originator last year according to Scotsman Guide, reporting $4.1 billion in non-QM volume. It closed around $2 billion in securitizations in the past two years, including in 2022 the first AAA-rated securitization of CDFI-originated home loans.The U.S. Treasury Department recertified Change's CDFI status in February, a few months after the sides settled a short-lived legal battle. Change sued the CDFI Fund last August after it disputed its origination numbers to underserved borrowers of which its certification relied on. The Southern California-based Change came under scrutiny last June when Sugarman's former chief of staff Adam Levine accused the lender of mischaracterizing its data to achieve CDFI certification. Change fired Levine last March over multiple workplace misconduct accusations and is suing him for allegedly attempting to extort $10 million from the company. That lawsuit in a California court remains pending. The FHLB Bank of San Francisco last month began accepting home loans underwritten using Vantagescore 4.0, one of two hotly debated credit scores. The depository's president and CEO said the move would allow 5.5 million more local residents to be scorable for a home loan application.The Federal Home Loan Banks are required by law to put 10% of their earnings toward affordable housing. That amounted to $350 million of the system's $7.3 billion government subsidy last year, a Congressional Budget Office review found. The CBO's review says it's unclear whether the FHLBank's billions of dollars in dividends to its members led to lower interest rates on mortgages. The FHLBanks' regulator, the Federal Housing Finance Agency, completed a major review of the system last year and is mulling changes to the system. President Biden last week also proposed the banks double their 10% contribution, which could raise nearly $4 billion more for affordable housing over the next decade.