Uncategorized

The rich got richer in the mortgage industry, as lender exits and consolidation resulted in a higher concentration of origination activity at the biggest nonbanks in 2023. Trends are likely to further favor the leading independent mortgage banks when origination activity increases, according to a report from Fitch Ratings this week. Interest rate headwinds and a subdued lending environment over the past two years led several lenders, including both banks and IMBs, to shed origination channels as they restructured, effectively driving increased volumes to the leaders. Meanwhile some "smaller, sub-scale players" also left the mortgage business altogether. "Continued consolidation will further benefit the largest originators, which have strengthened their franchises and will be able to take advantage of their competitive positions once origination volumes resume," the ratings agency's researchers wrote. With interest rates diminishing refinance activity, companies focused on the purchase market bolstered their positions last year, particularly in the wholesale and correspondent channels, Fitch said. As the top companies in those respective channels, United Wholesale Mortgage and Pennymac Financial came in as the overall number one and two originators by volume, even without retail operations.Both companies saw their share of originations increase amid consolidation and downsizing. In early 2023, Wells Fargo announced it would leave correspondent lending. In wholesale, several companies have exited the channel since 2022, including Loandepot and Guaranteed Rate. Last year's industry slowdown also saw wholesaler Homepoint cease operations altogether, and in the past few months, Citizens Bank and Fairway Independent Mortgage both also left the channel.UWM dominated the wholesale origination market, with a 48% share in 2023, rising from 37% a year earlier. The second largest originator, Rocket Mortgage, trailed at 12%. But between 2021 and 2023 wholesale originations overall fell 68%.Within correspondent, Pennymac nabbed 22% of originations last year, up from 15% in 2022. But the segment saw a 62% decrease in volume from 2021 to 2023. Retail lending, which tends to see a higher share of refinances compared to the other two channels, saw the biggest dropoff in volumes during that period, with a 72% decrease. In 2023, Rocket finished as the country's number one retail lender.Companies managing to withstand the challenges of the past three years to put themselves in a strong position going forward tend to possess the capability to scale with technology, gain profits from servicing segments and stand well capitalized with ready access to liquidity, Fitch said."While many originators suffered operating losses amid rapidly rising rates, scaled lenders were better equipped to navigate rate hikes and maintain operational flexibility, as cost-saving initiatives were implemented," its report said.From a record high of $4.4 trillion in volume for 2021, originations fell in 2022 to $2.2 trillion and $1.6 trillion in 2023, according to data from the Mortgage Bankers Association. While the MBA sees signs of business returning this year, volumes are only expected to rise to approximately $2 trillion.Despite improving prospects observed by some over the coming months, Fitch sees a "deteriorating sector outlook" for nonbanks in the near term due to current interest rates and a slowing economy. Unlike counterparts elsewhere in home finance, Fitch predicts interest rates to stay within a higher range throughout much of 2024 — between 6.5% and 7.5% — near current levels. But the firm also noted "​​right-sized cost structures will benefit profitability once incremental volume improvement materializes."

The Congressional Budget Office issued a report last week estimating the value of the government's subsidy to the Federal Home Loan Bank System at $7.3 billion, $6.9 billion of which was in the form of favorable bond ratings conferred by an implicit backstop of the federal government.Bloomberg News The Congressional Budget Office has estimated that the government subsidy provided to the Federal Home Loan banks amounts to $7.3 billion — $6.9 billion of which is in the form of the Federal Home Loan banks' "implied guarantee" of its bonds. The bipartisan CBO said in a report released last week that the Home Loan banks' so-called "implied guarantee" — the perception among bond investors that the federal government will back the system's debt in the event of a default — is the largest component of the federal subsidy, pegging its value at $6.9 billion to the government-sponsored enterprise.The Home Loan banks also are exempt from federal, state and local taxes, and from registration requirements with the Securities and Exchange Commission, which reduces the system's operating costs by another $900 million, the CBO said. In addition, each of the 11 regional Home Loan banks is required by statute to give 10% of earnings to affordable housing, which amounted to $350 million last year. The report provides fodder for critics that claim the little-known system, created in 1932 to support mortgage lending after the Great Depression, receives billions in subsidies and generates outsize profits for its members while providing far less support for its mission of affordable housing. "There is a very real government subsidy backing this system," said Kathryn Judge, a law professor and vice dean at Columbia Law School. "Even if the cost doesn't come out of the federal budget, the size and nature of the subsidy is a clear sign that what we're dealing with here is not a truly private organization but a government-sponsored enterprise, and it's important to repeat that because the subsidy tells us that."Ryan Donovan, president and CEO of the Council of Federal Home Loan Banks, the system's trade group and lobbying arm, said the CBO report confirmed that the government subsidy is paid for by bond investors."The report is confirmation of the valuable role the Home Loan Bank System plays in providing liquidity to our members particularly in times of stress, and that the benefits of our system accrue not only to our members but to the broader public and the broader financial system," Donovan said. "It also makes clear that we pose very little risk to the taxpayers, and to the extent that there is a subsidy, private investors — not taxpayers — bear the cost of the subsidy to the system." Last year, the Home Loan banks earned $6.7 billion and paid a record $3.4 billion in dividends to its members. The system expects to provide $752 million this year to its Affordable Housing Program, which could reach an estimated $1 billion when voluntary programs are included, a spokesman for the system said.The CBO report comes on the heels of a 100-year review of the Federal Home Loan Bank System by its regulator the Federal Housing Finance Agency. FHFA Director Sandra Thompson is expected to take further steps to more closely tie the system's mission of promoting housing to the liquidity provided to its 6,500 member-financial institutions.The FHFA's report last year stated that "based on its additional research and analysis, FHFA may propose regulatory changes to correct imbalances in the relative value of the public and private benefits provided by the FHLBank System."Meanwhile, the CBO report for the first time in more than two decades sought to put a value on the implied government guarantee and explain how it works. If the Home Loan Bank System was private instead of public, it would carry a credit rating in the range of AA to A instead of its current rating of AA+, the CBO said."The FHLB system's status as a GSE creates the perception among investors that its debt is protected by an implied federal guarantee," the CBO report states. "That implied guarantee lowers the interest rates that FHLBs pay on their debt and reduces their costs compared with those of fully private financial institutions." The CBO seemed to hedge whether any of the subsidies trickle down to real borrowers, stating throughout its report that members "may" pass some of the profits they receive in the form of dividends on to their customers. "FHLBs' advances may therefore lead to lower interest rates for borrowers on loans made by member institutions, including lower interest rates on single-family residential mortgages," the report said. "That effect on rates is difficult to quantify because members can use the advances to fund any type of loan or investment."Donovan said the CBO should have gone further by putting a value not just on the government subsidy but also on the benefits he said the system provides in the form of lower mortgage rates. "CBO should take that extra step and finish the work," Donovan said. "They talk about the costs, but then they also need to talk about the value that we provide."Cornelius Hurley, an adjunct professor at Boston University School of Law, who served 14 years as an independent director of the Federal Home Loan Bank of Boston, said the $7.3 billion subsidy and the $350 million set aside for affordable housing are the most important numbers cited by the CBO. "If there was ever an example of a sh[oddy] deal, this is it," said Hurley, who is one of the system's harshest critics and helped found the Coalition of FHLB Reform. "Hold those two numbers in your mind side-by-side and you know there's something wrong with this picture. The CBO has practically declared that the Federal Home Loan banks are a bad investment for the taxpayers." Sharon Cornelissen, director of housing at the Consumer Federation of America and chair of the Coalition of FHLBank Reform, a group of academics, housing advocates, regulators and Home Loan bank alumni seeking to reform the 91-year-old system, said consumers deserve more of the subsidy."The new CBO report put a number — to the tune of $7.3 billion a year — to the public subsidies that FHLBanks receive as a GSE," she said. "Billions in public funds subsidize corporate profits rather than Americans' ability to afford a house."Last week, the Biden administration called on the Federal Home Loan banks to double their annual Affordable Housing Program contribution to 20% of net income, up from 10% currently mandated by statute. Sen. Catherine Cortez Masto, D-Nev., has sponsored legislation to double the system's investments in affordable housing. The CBO said the central estimate of the net government subsidy has a plausible range of between $5.3 billion to $8.5 billion.  The report also mentioned that the Home Loan banks maintain a super-lien position ahead of the Federal Deposit Insurance Corporation, and therefore the system has never experienced any losses because if a member institution fails, the system gets paid before the FDIC does. "The FDIC is thus exposed to more losses, whereas FHLBs are fully protected," the CBO stated. "Such risk is highlighted by the recent failures of several regional banks whose use of advances increased sharply as they experienced financial stress."Judge said she hopes the CBO's assessment of the implied government guarantee will spark more conversations about how the system should be reformed. "The implied backstop creates a real value transfer from the government to the FHLBs that is quantifiable and reflects a policy decision made in a very different era that should be revisited," Judge said. "It helps to trigger the overdue conversation about the nature of the FHLB system and who is benefiting from that system." 

The Congressional Budget Office issued a report last week estimating the value of the government's subsidy to the Federal Home Loan Bank System at $7.3 billion, $6.9 billion of which was in the form of favorable bond ratings conferred by an implicit backstop of the federal government.Bloomberg News The Congressional Budget Office has estimated that the government subsidy provided to the Federal Home Loan banks amounts to $7.3 billion — $6.9 billion of which is in the form of the Federal Home Loan banks' "implied guarantee" of its bonds. The bipartisan CBO said in a report released last week that the Home Loan banks' so-called "implied guarantee" — the perception among bond investors that the federal government will back the system's debt in the event of a default — is the largest component of the federal subsidy, pegging its value at $6.9 billion to the government-sponsored enterprise.The Home Loan banks also are exempt from federal, state and local taxes, and from registration requirements with the Securities and Exchange Commission, which reduces the system's operating costs by another $900 million, the CBO said. In addition, each of the 11 regional Home Loan banks is required by statute to give 10% of earnings to affordable housing, which amounted to $350 million last year. The report provides fodder for critics that claim the little-known system, created in 1932 to support mortgage lending after the Great Depression, receives billions in subsidies and generates outsize profits for its members while providing far less support for its mission of affordable housing. "There is a very real government subsidy backing this system," said Kathryn Judge, a law professor and vice dean at Columbia Law School. "Even if the cost doesn't come out of the federal budget, the size and nature of the subsidy is a clear sign that what we're dealing with here is not a truly private organization but a government-sponsored enterprise, and it's important to repeat that because the subsidy tells us that."Ryan Donovan, president and CEO of the Council of Federal Home Loan Banks, the system's trade group and lobbying arm, said the CBO report confirmed that the government subsidy is paid for by bond investors."The report is confirmation of the valuable role the Home Loan Bank System plays in providing liquidity to our members particularly in times of stress, and that the benefits of our system accrue not only to our members but to the broader public and the broader financial system," Donovan said. "It also makes clear that we pose very little risk to the taxpayers, and to the extent that there is a subsidy, private investors — not taxpayers — bear the cost of the subsidy to the system." Last year, the Home Loan banks earned $6.7 billion and paid a record $3.4 billion in dividends to its members. The system expects to provide $752 million this year to its Affordable Housing Program, which could reach an estimated $1 billion when voluntary programs are included, a spokesman for the system said.The CBO report comes on the heels of a 100-year review of the Federal Home Loan Bank System by its regulator the Federal Housing Finance Agency. FHFA Director Sandra Thompson is expected to take further steps to more closely tie the system's mission of promoting housing to the liquidity provided to its 6,500 member-financial institutions.The FHFA's report last year stated that "based on its additional research and analysis, FHFA may propose regulatory changes to correct imbalances in the relative value of the public and private benefits provided by the FHLBank System."Meanwhile, the CBO report for the first time in more than two decades sought to put a value on the implied government guarantee and explain how it works. If the Home Loan Bank System was private instead of public, it would carry a credit rating in the range of AA to A instead of its current rating of AA+, the CBO said."The FHLB system's status as a GSE creates the perception among investors that its debt is protected by an implied federal guarantee," the CBO report states. "That implied guarantee lowers the interest rates that FHLBs pay on their debt and reduces their costs compared with those of fully private financial institutions." The CBO seemed to hedge whether any of the subsidies trickle down to real borrowers, stating throughout its report that members "may" pass some of the profits they receive in the form of dividends on to their customers. "FHLBs' advances may therefore lead to lower interest rates for borrowers on loans made by member institutions, including lower interest rates on single-family residential mortgages," the report said. "That effect on rates is difficult to quantify because members can use the advances to fund any type of loan or investment."Donovan said the CBO should have gone further by putting a value not just on the government subsidy but also on the benefits he said the system provides in the form of lower mortgage rates. "CBO should take that extra step and finish the work," Donovan said. "They talk about the costs, but then they also need to talk about the value that we provide."Cornelius Hurley, an adjunct professor at Boston University School of Law, who served 14 years as an independent director of the Federal Home Loan Bank of Boston, said the $7.3 billion subsidy and the $350 million set aside for affordable housing are the most important numbers cited by the CBO. "If there was ever an example of a sh[oddy] deal, this is it," said Hurley, who is one of the system's harshest critics and helped found the Coalition of FHLB Reform. "Hold those two numbers in your mind side-by-side and you know there's something wrong with this picture. The CBO has practically declared that the Federal Home Loan banks are a bad investment for the taxpayers." Sharon Cornelissen, director of housing at the Consumer Federation of America and chair of the Coalition of FHLBank Reform, a group of academics, housing advocates, regulators and Home Loan bank alumni seeking to reform the 91-year-old system, said consumers deserve more of the subsidy."The new CBO report put a number — to the tune of $7.3 billion a year — to the public subsidies that FHLBanks receive as a GSE," she said. "Billions in public funds subsidize corporate profits rather than Americans' ability to afford a house."Last week, the Biden administration called on the Federal Home Loan banks to double their annual Affordable Housing Program contribution to 20% of net income, up from 10% currently mandated by statute. Sen. Catherine Cortez Masto, D-Nev., has sponsored legislation to double the system's investments in affordable housing. The CBO said the central estimate of the net government subsidy has a plausible range of between $5.3 billion to $8.5 billion.  The report also mentioned that the Home Loan banks maintain a super-lien position ahead of the Federal Deposit Insurance Corporation, and therefore the system has never experienced any losses because if a member institution fails, the system gets paid before the FDIC does. "The FDIC is thus exposed to more losses, whereas FHLBs are fully protected," the CBO stated. "Such risk is highlighted by the recent failures of several regional banks whose use of advances increased sharply as they experienced financial stress."Judge said she hopes the CBO's assessment of the implied government guarantee will spark more conversations about how the system should be reformed. "The implied backstop creates a real value transfer from the government to the FHLBs that is quantifiable and reflects a policy decision made in a very different era that should be revisited," Judge said. "It helps to trigger the overdue conversation about the nature of the FHLB system and who is benefiting from that system." 

The number of homes owned by Hispanic households just had its biggest documented jump in nearly two decades.The annual change in the number of housing units increased by 377,000 to 9,555,000 in 2023, and the homeownership rate for the demographic inched up from 48.7% to 49.5% last year, according to the National Association of Hispanic Real Estate Professionals' report.These numbers, based on the study NAHREP conducted with research partners Corelogic, Freddie Mac and Realtor.com, and jointly published with the Hispanic Wealth Project, appear to be the most significant increases since the Great Recession.Hispanic ownership was last this high in 2007, when it was 49.7% and the study, which is derived from the U.S. Census Bureau's current population survey, also suggests the annual change hasn't been this big since 2005's addition of 404,000 household units.(The association omitted numbers for 2000, noting that data was "likely overestimated due to methodological changes in data collection during the peak of pandemic." A gain of 668,000 reported between 2019 and 2021, suggests an estimated one-year jump of 334,000 for 2021.)The 2023 increase was notable given elevated housing finance costs, limited inventory, and the lower homeownership rate Hispanics have compared to the total market's 65.7%."Despite facing unprecedented market conditions, Latinos have shown an unwavering commitment to homeownership," said Nuria Rivera, president of NAHREP, in a press release.(NAHREP uses the terms Hispanic and Latino interchangeably to refer to people from Spanish-speaking countries, including but not limited to Mexico, Puerto Rico, Cuba, the Dominican Republic and Spain.)The association found a strategy like moving to low-cost areas when work arrangements or a job change made it possible helped fuel the gain in homeownership during the year. Georgia, Pennsylvania and Texas in particular drew buyers.Increased co-borrowing also contributed, according to findings from NAHREP's practitioner study."In some cases, co-borrowers choose to buy and live together, while others offer support with the intention of coming off the loan at some point in the future," the association said in its report.In addition to co-borrowing, strategies that helped buyers surmount affordability hurdles included rate buydowns, down payment assistance, and ITIN loans. Anecdotally, the practitioner study found that in most areas over the past year, there was increasing interest in making loans to borrowers with low down payment based on individual taxpayer identification numbers rather than Social Security numbers. However, there was one instance of a countertrend."When all of these volatility interest rate hikes and liquidity issues the banking institutions or credit unions [ITIN loans] were the first thing to go because most of them have to be in-house," Junior Ibarra, a practitioner in Des Moines, Iowa said in the report.Even with the market's affordability constraints, Hispanic homeowners tended to be younger than those in other groups by around 10 years or more, with a median age of 30.7. Based on the latest Home Mortgage Disclosure Act data available at the time of the report's writing, which reflects numbers from 2022, the share of home purchase originations made to Hispanics generally skewed younger.Among those 35 to 44, the Hispanic share was 28.5% compared to 26.5% for other demographics. For ages 25 to 34, the respective numbers were 34.1% vs. 30.8%; and for below 25, they were 7.1% and 5.7%.

A poaching suit lodged by Caliber Home Loans against a former veteran executive in 2022 continues to unfold, with a most recent filing arguing a previous merger in 2013 did not negate outstanding contracts, such as non-solicitation agreements.The suit, filed in a Texas federal court against Lee Cove, a former divisional vice president, centers around him jumping to competitor Cardinal Financial in October 2022 and allegedly prompting others to join him at his new place of employment. A few months prior, Caliber was acquired by Newrez.Caliber has accused Cove of soliciting employees to transition to Cardinal en masse (at least 150 employees), thereby breaking a non-solicitation agreement the former executive signed on July 18, 2013, prior to Caliber merging with Caliber Funding LLC. The agreement put a one-year stipulation on Cove, preventing him from urging any Caliber employees to discontinue their employment for 12 months after his own departure from the company.Cove in turn has argued that since Caliber Funding LLC, a retail operation, was merged with Caliber Home Loans, Inc., a servicing shop, a decade ago, the non-solicitation agreement he signed with the former company was dissolved. He also requested for Caliber to cough up alleged outstanding compensation owed.Cove and Cardinal have attempted to dismiss the case a handful of times, but have failed to do so. Cardinal declined to comment. Attorneys representing Caliber and Cove did not immediately respond to a request for comment.In February 2023, Cove, who as of late was vice president of retail at Academy Mortgage, filed a motion for partial summary judgment, arguing that the court should dismiss the allegation that he breached a contract because it is no longer valid.A response from Caliber, filed March 6, states the executive "unabashedly breached his duty to not solicit employees of Caliber" and that the obligations set forth "remain valid and effective."Cove remained obligated "not to solicit employees hired after the merger or information obtained after Caliber Funding LLC merged into Caliber because Caliber stepped into the shoes of Caliber Funding LLC for all purposes," the lender argues.Poaching suits are incredibly cash intensive and can take a long time to play out, with most settling out of court, industry stakeholders say.Caliber's acquirer, Newrez, has also recently filed a suit accusing a former executive of departing to a competitor and orchestrating a ruse to move others. James Hecht, former head of its retail operations, allegedly staged a plan in which he abruptly left to a direct competitor and brought his colleagues, a handful of divisional managers, along with him.According to the suit, prior to departing to OneTrust Home Loans on Feb. 1, where Hecht is now CEO, he fired the Newrez managers and later rehired them at his new place of employment. It is alleged that the scheme took place shortly after Newrez announced a recommitment to its retail business when plans to sell didn't materialize.

New home loan applications increased for the second week in a row, with refinances seeing a notable bump upward thanks to a decline in rates, the Mortgage Bankers Association said.The MBA's Market Composite Index, a measure of application activity based on surveys of the trade group's members, rose a seasonally adjusted 7.1% for the seven days ending March 8. A week earlier, it jumped 9.7% after a month-long slide. On a year-over-year basis, though, current levels still ran 6.1% lower. Fixed interest rates decreased across the board among association lenders, driving borrower interest, particularly in the refinance market, the MBA said. The average fixed-contract rate for the 30-year conforming mortgage with balance below $766,550 in most markets fell back under the 7% mark, landing at 6.84%. A week earlier, the average came in at 7.02%. Points to buy down the rate decreased 2 basis points to 0.65 from 0.67 for 80% loan-to-value ratio mortgages.Rates dipped after February's jobs data showed a less robust market in previous months than originally reported, said Mike Fratatoni, MBA's senior vice president and chief economist. The downward trend boosted the Refinance Index 12.2%, with government-backed transactions leaping 23.6% week over week. Compared to the same survey period in 2023, the index was up 4.7%. "While these percentage increases are large, the level of refinance activity remains quite low," Fratantoni said in a press release. "We expect that most of this activity reflects borrowers who took out a loan at or near the peak of rates in the past two years."The surge in refinances helped them garner a 31.6% share relative to total volume, increasing from 30.2% seven days earlier. Elevated activity also came after the MBA reported growth in refinance products offered by lenders last month.At the same time, the MBA's seasonally adjusted Purchase Index saw a 4.7% week-over-week rise. But volumes fell 10.8% annually, with limited inventory and high housing costs suppressing activity. Still, some relief may be on the way this spring based on the pace of new listings coming to market, according to Redfin. New listings over the previous four weeks grew by their largest in almost three years, according to the real estate brokerage's data. At the same time, the total number of home listings increased annually for the first time in nine months, inching up 1.7%."Buyers who can afford today's mortgage rates may have better luck finding a home now than they have in the past several months, and they also may be less likely to face competition because inventory is improving," said Chen Zhao, Redfin economic research lead.But competition for the limited supply of homes currently on the market may also be driving up prices, when the average purchase-loan amount reported by the MBA are taken into account. The mean size jumped up to its highest value in over a year to $444,300, edging up from $442,500 in the prior weekly survey.The percentage of federally sponsored applications saw only a small rate of growth, despite the surge in refinances, as purchases in the government market slowed. Mortgages guaranteed by the Federal Housing Administration dropped to 12% of activity compared to 12.7% a week earlier. The decrease was offset by a rise in loans from the Department of Veterans Affairs to 12.2% from 11.4%. Applications coming through the U.S. Department of Agriculture remained at the same 0.5% weekly share. Similar to the conforming rate, other fixed averages reported by the trade group pulled back from the prior week. The mean fixed rate for 30-year jumbo loans with balances exceeding conforming amounts fell 17 basis points to 7.04% from 7.21%. Points increased to 0.38 from 0.36.Thirty-year FHA-backed fixed contract mortgages came in at an average of  6.77%, dropping 9 basis points from 6.86%. Borrower points for 80% LTV-ratio mortgage climbed up 5 basis points to 0.95 from 0.9.The 15-year fixed rate plunged the furthest landing at an average 6.37%, 29 basis points lower from 6.66% the previous week. Points came in at 0.77, rising from 0.66.Meanwhile, the 5/1 adjustable rate mortgage flattened over the seven-day period, remaining at 6.38%. Points, though, fell 15 basis points to 0.52 from 0.67 the previous week for the loans, which start with an introductory five-year fixed rate. The share of ARMs relative to total activity was also unchanged at 7.7%.

Innovation and bipartisanship are essential components toward achieving the president's goals at opening homeownership opportunities and lowering nationwide housing costs, his key advisor said on Tuesday.Following President Biden's State of the Union address last week, where he made housing costs a key talking point, Lael Brainard, the White House's director of the National Economic Council, discussed the reasons behind his emphasis on this specific part of the economy in an address at the Urban Institute on Tuesday.  "Every place that we go around the country — whether it's red or blue or purple — everybody has a shared interest in being able to afford quality housing for their families," said Lael Brainard, director of the White House's National Economic Council.The White House's current focus on the topic might also point to the significance the Biden administration places on housing issues in this year's election. Redfin research conducted prior to the State of the Union showed a majority of households saying home affordability might play a part in who they vote for president. Biden continued to opine on the same themes Monday in a speech at the National League of Cities annual conference, saying the country needed to "build, build, build" to reduce housing costs.In her remarks, Brainard said underbuilding in the years since the start of the Great Financial Crisis, coupled with current interest rates and prices, created the sluggish market conditions and inventory shortage seen today. Construction has "never fully recovered." "The most populous generation in American history was aging into the housing market with demand outstripping supply construction skewed to the higher end, rather than starter homes needed for first-time home buyers and workforce housing," she noted. The president claims his plan would help create two million more affordable homes across the country. Brainard said pandemic-era innovations achieved at the local level in several states and smaller jurisdictions, such as New Hampshire and Jackson, Michigan, could provide impetus for development. A proposed $20 billion in innovation grants are featured in the president's initiative. "That fund reflects lessons we learned from the American Rescue Plan. States, cities and tribes committed over $18 billion to housing initiatives, with about $6 billion of that going towards housing production and preservation."Brainard also emphasized how tax credits benefitting both buyers and sellers would help to unlock the housing market. While down-payment assistance and up to $10,000 of mortgage relief credit would be available to some buyers, Brainard said supply can only grow if a similar offer was made to sellers."We can't wait for mortgage rates to come down further. We need to provide relief to homeowners and home sellers today in order to get that inventory of starter homes on the market," she said.Within housing related industries, the president's plans have been met with a range of reactions. While stakeholders have welcomed the new focus on affordable housing and issues affecting their businesses, many also openly criticized some parts of his proposal they found detrimental. Among the issues receiving pushback is a pilot waiver program that would eliminate the requirement for title insurance in some refinances. The American Land Title Association has publicly voiced opposition to the idea multiple times in the days since, including at a press briefing Wednesday. Brainard said Tuesday that the pilot was part of a larger conversation needed on how to make housing more affordable. "Good questions are being asked about very low-risk transactions," she said. "Our broader goal here is to try to find ways to introduce competition into closing costs more generally, because those closing costs have gotten quite high and are a real deterrent, particularly to first-time home buyers." 

The IRS says it heard the objections raised by small-business lenders to its plan to block access to loan applicants' income and other tax-related data. "We ... are assessing our ability to provide return information when necessary while keeping taxpayer information confidential and protected from disclosure," the agency says.Al Drago/Bloomberg For banks, credit unions and other small-business lenders, this is an IRS-related story with a happy ending — kind of.Responding to a determined lobbying campaign by a broad consortium of financial services trade groups, the U.S. tax-collection agency has agreed to suspend a policy change that would have blocked small-business lenders from accessing borrowers' income data through its Income Verification Express Service."We acknowledge the concerns raised and are assessing our ability to provide return information when necessary while keeping taxpayer information confidential and protected from disclosure," the IRS wrote in a March 6 policy update statement. "Although IRS announced the policy change on January 2, 2024, we are suspending that change as we seek input from you and other stakeholders on possible changes and impacts to the program."Scott Stewart, CEO of the Innovative Lending Platform Association, acknowledged that the IRS could revert to its original policy stance after its review. At the same time, even a temporary respite represents a major achievement, Stewart said. "Federal agencies don't do this," Stewart said in an interview. "To get a federal agency of any kind, let alone the IRS, [to acknowledge  a misstep] is really exceptionally rare. I don't know if I've ever seen a reversal like this. The IRS deserves credit for realizing this policy requires further review."The Innovative Lending Platform Association was one of 11 financial services industry trade groups, including the Independent Community Bankers of America, American Bankers Association, America's Credit Unions and the Mortgage Bankers Association, that endorsed a Jan. 24 comment letter opposing the IVES policy change. IVES is the platform that lets taxpayers give third parties — like lenders — permission to see tax return or wage information.Under the IRS' original concept, it would have delivered tax data only to lenders making mortgages. In all other instances, the agency would have delivered the data directly to individual taxpayers to protect their privacy. Lenders value the ability to obtain tax returns from the IRS as a critical tool in underwriting and preventing fraud. They were concerned the policy change would add complexity, time and cost to applications while at the same time making it easier for bad actors to game the system.  "You could see how fraudsters might just digitally alter their tax returns and they could send it off to the lender," Stewart said. "I hope they're going to move toward [opening] the system in an [application programming interface] fashion so that everyone can get access and overall lower the cost of credit and capital for small businesses, consumers, people looking for insurance — everybody."An application programming interface, or API, is software code that allows a website, application or program to more easily share information with other websites, applications or programs. In their announcement last week, IRS officials "said they were suspending the decision indefinitely," Ryan Metcalf, head of public affairs for Funding Circle US, said in an interview. "I'm not concerned it's coming back. It seems like the IRS has backed off. … This is a huge win for American consumers and small businesses."It's far from game over, though. "It's good news [the IRS] has returned to the status quo," Metcalf said. "We still have issues to resolve. We still have to work out how we resolve the authentication issue, can we have private API access to log in, can we expand the data in the transcript — all of those things we're still seeking are outstanding."Beyond access to tax data, lenders and borrowers want the IRS to make it easier to use IVES. Currently, borrowers have to create IRS accounts and verify their identities with the agency before they can request that a transcript be delivered to a lender. That route is time-consuming and redundant, since the lenders themselves are required to verify identity under know-your-customer requirements, Metcalf said."The [optimal] outcome is we want a borrower to be able to submit a [transcript request] to the lender, the lender hands that to the IRS and we get the tax return in real time," Metcalf said. "Or, if the lender has an account with the IRS already, they should just be able to log in to that account in our application. That's the API access. … That's what we want. We want that optionality of either/or."Bipartisan legislation introduced in the House of Representatives in May 2023 would address the authentication issue by enabling taxpayers to designate a financial institution or other service provider to receive tax data. The bill, introduced by North Carolina Republican Patrick McHenry, chairman of the House Financial Services Committee; California Democratic Rep. Jimmy Panetta; and Colorado Democratic Rep. Brittany Petterson, is currently under consideration by the Ways and Means Committee. Funding Circle backs the legislation as it is currently written and is hoping to strengthen its language in the wake of the IRS' action. "We're getting ready to update that bill to address additional issues. … We would probably add on to it to make sure the IRS doesn't revisit this policy decision," Metcalf said.  The IRS didn't respond to a request for comment at deadline. Stewart attributed the IRS' initial policy restricting IVES access to a desire to protect taxpayer information. "Their duty is paramount," Stewart said, but he was quick to add that allowing API interface with IVES could be accomplished without compromising data integrity. "We don't think creating this API is going to do anything to endanger the taxpayer, as long as you have them making the request directly through the lender or the insurance company or the bank."

Guild Mortgage reported a $93.1 million net loss in the fourth quarter, pushing its full-year financials into the red. But company heads think the mortgage lender's growth strategy will pay off in the long run.The San Diego-based company experienced an overall net loss of $39.1 million in 2023, a notable dip from the $328.6 million net profit reported in 2022. A higher interest rate environment and tight housing inventory contributed to Guild's results, company representatives said. Despite a rocky origination climate, the mortgage lender finished off 2023 with four acquisitions under its belt, which the company hopes will allow it "to create meaningful value for stockholders over time.""We continue to grow our market share," said Terry Schmidt, Guild's CEO, during the company's earnings call Tuesday. "We prioritize being integrated members of the communities we serve and the foundation of our approach is our relationship based loan sourcing strategy in being able to provide our customers with innovative products that serve their needs.""While we anticipate the current headwinds will continue much of 2024, we are encouraged by our market share growth, and disciplined approach should deliver results when sentiment improved, and the rate environment eases," she added.The company's net revenue for the fourth quarter was $93.1 million, down from $257.3 million the prior quarter. At years end, Guild's revenue was $700 million, a notable dip from the $1.2 billion reported the year prior, its earnings show.Origination activity fell in 2023, with the mortgage lender disclosing it originated $15 billion worth of loans, down from the $19.1 billion in 2022. The final three months of the year saw $3.5 billion in originations, while the first two months of 2024 resulted in $2.2 billion worth of originations.The company's servicing segment incurred a net loss of $72.1 million in the fourth quarter, down from a net income of $84 million the prior quarter, earnings show. Fair value adjustments had a negative impact on the company's MSRs, executives said during the company's earnings call. The unpaid principal balance of the lender's servicing portfolio grew by 2% from the prior quarter to $85.0 billion as of Dec. 31, 2023. At year end, Guild's servicing portfolio grew by 8% compared to $78.9 billion a year prior."On the servicing side, we're solid, our cash flows are really solid," Schmidt added. "I know we had an impairment this past quarter, but in reality our prepayments continue to go down, so we feel like from the cash flow perspective, the value of servicing is very strong. We feel that  having origination and servicing still works well for us." The company head added 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 its acquisition of Academy Mortgage, Guild has almost 3,000 sponsored loan officers on board, according to the Nationwide Mortgage Licensing System. The integration of Academy loan originators will have a short-term earnings impact, executives forecasted.Apart from taking on Academy, the lender was on a buying spree last year, acquiring First Centennial Mortgage, reverse mortgage 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."

Loandepot sank deeper into the red in the final quarter of 2023 but said greater servicing income and better gain-on-sale margins mitigated the impact of fewer originations.The lender and servicer posted a $59.7 million net loss in the fourth quarter, down 71% quarterly, it said Tuesday. The recent performance was significantly better however than the $157.7 million net loss Loandepot had over the fourth quarter in 2022. Pull-through weighted lock volume of $4.4 billion between October and December was 22% less than the prior quarter. Its gain-on-sale margin ticked up to 296 basis points, rising from 221 bps at the same time last year."Our higher gain-on-sale margin was primarily due to an increase in volume and profit margins of our HELOC product and wider profit margins on conforming and (Federal Housing Administration) production," said David Hayes, the firm's chief financial officer. The GOS number was partially offset by a seasonally larger proportional contribution from Loandepot's joint venture channel with Realtors and builders, he added. The recent quarter bumped the annual PTW GOS figure to 275 bps for 2023, compared to 194 bps in 2022.Concerning home loan activity, the lender reported $21.5 billion in lock volume for the year against $45 billion in 2022.Meanwhile a quarterly servicing income bump, from $120.9 million ending September to $132.4 million ending December, was aided by slower prepayments, Hayes said. Loandepot exited the year with a $235.5 million net loss, 61% better than its 2022 performance. That was helped by the lender's efforts in its Vision 2025 cost-cutting plan; it shaved $693 million in expenses last year. The company will continue to improve on its $1.25 billion in expenses recorded by year's end, as executives Tuesday announced another plan to slash expenses by another $120 million.The firm's adjusted annual loss was $142.2 million; its quarterly adjusted figure was flat with a $26.6 million loss in the fourth quarter. It posted $974 million in net revenue for 2023, down 22% from 2022. A recent hack exposing the data of nearly 17 million customers will cost the lender between $12 million to $17 million this quarter. Executives declined to take analyst questions on the topic, but Chief Risk Officer Joe Grassi spoke briefly on his company's incident response."We did regain our ability to operate fairly quickly and did a good job of hanging on to our pipeline and pulling through the loans that we had," he said. Those data breach expenses will dampen gains the firm anticipates in fewer marketing expenses and less restructuring costs to begin the year. Loandepot's borrowing power remained steady at $1.94 billion in warehouse and other lines of credit. It also counted $661 million in cash and cash equivalents moving forward. Its large servicing portfolio has an unpaid principal balance of $145 billion. The business is projecting volume between $3.5 billion and $5.5 billion this quarter and PTW GOS between 275 and 300 bps. President and CEO Frank Martell told analysts his organization continuing to downsize is poised to handle an expected volume increase this year. He referenced melloNow, the lender's automated underwriting engine it released in December which it says can deliver loan approvals in minutes rather than hours or days. "A lot of what we've done the last two years is really invest in fundamental systems and automation," said Martell. "So we feel pretty good about our ability to leverage those and drive the benefits of productivity operating leverage as the market does rebound."