News2020-11-07T20:14:32+00:00

Recent Articles

Hartford region home sales continue surge in October

November 27th, 2020|

Closed sales of single-family homes in the Hartford region increased 36.31% in October compared to a year ago, the Greater Hartford Association of Realtors reported. The number of sales increasesd from 548 in October 2019 to 747 a year later, GHAR reported, while the median sales price increased 13.33% (from $247,500 to $280,500) and pending sales rose 49.9% (from 509 to 763). New listings increased 4.66% (from 772 to 808), and inventory dropped 35.56%, from 2,610 to 1,682, during this same timeframe. In year-to-date statistics, new listings decreased 9.67%, from 8,642 in 2019 to 7,806 this year. Pending sales increased 12.52% — from 5,608 to 6,310 — and closed sales increased 7.89% (from 5,580 to 6,020). The median sales price increased 9.76% (from $246,000 to $270,000), and the average days spent on market decreased 10.53% (from 57 to 51 days), during this same year to date, year over year, timeframe. Condominium closed sales increased 54.4% (from 136 to 210) and pending sales increased 41.3% (from 138 to 195) over October of 2019. The median sales price for condominiums increased 4.05% (from $173,000 to $180,000) and inventory decreased 20.67% (from 566 to 449). "Our market typically cools with the weather this time of year but continued gains in closed sales are keeping Realtors busy," said GHAR CEO Holly Callanan. "Record-low mortgage rates are attractive but buyers must act quickly in this market," she said. In the national outlook, Lawrence Yun, National Association of Realtors chief economist, stated: "The surge in sales in recent months has now offset the spring market losses. With news that a COVID-19 vaccine will soon be available, and with mortgage rates projected to hover around 3% in 2021, I expect the market's growth to continue into 2021." Yun forecasts existing-home sales to rise by 10% to 6 million in 2021.

People on the move: Nov. 27

November 27th, 2020|

Arizona Phoenix Western Alliance Bank has added Mark Short to its mortgage warehouse lending team to serve as senior vice president and senior loan officer. Short will be based in the Greater Dallas area and will oversee new and existing borrower relationships in Texas, the Midwest and select national customers. Prior to Joining Western Alliance, he was senior vice president of the mortgage finance group at Wells Fargo Securities, where he managed warehouse lending clients nationally. Florida Jacksonville Black Knight Inc. has appointed Ryan Hallett as chief risk officer. Hallett will assume this position from Peter Hill, who served as chief risk officer for six years and recently retired. Hallett has been with the company for six years. Prior to accepting this role, she served as Black Knight's deputy chief risk officer, where she led enterprise risk governance, identity and access management and the enterprise risk management project management office.Massachusetts Danvers Mortgage Network Inc. has hired Alisa Johnson as director of talent acquisition and development. Johnson has almost 20 years of experience in recruitment and career development, and most recently served as assistant vice president/senior talent acquisition specialist at Camden National Bank. New Jersey Ewing Cenlar FSB has promoted Christopher Johnson to vice president, mortgage servicing. He is a 25-year mortgage and financial services industry veteran and served with JPMorgan from 2006 to 2019. The company also promoted Nancy Irwin, a 34-year Cenlar veteran, to senior vice president, executive client manager. Texas Dallas SLK Global Solutions has hired Alan Shumate as vice president of business development. Shumate, who will also be responsible for growing SLK's customer base of title insurance agents, has more than 15 years of experience in the financial services industry. He most recently served as vice president of fiduciary banking at Capital Bank.

Fintech provider forms partnership to launch mobile mortgage app

November 25th, 2020|

A soup-to-nuts fully digital mortgage process presently stands as the Holy Grail for the lending industry. Working toward that goal, Bee Mortgage App teamed with Elphi — a software as a service mortgage technology provider — to make the first lending app created entirely from a mobile standpoint. As it stands, the initial 1.0 version of the app is a loan calculator that generates mortgage leads for Florida Capital Bank."It's pretty straightforward and has been called 'a COVID tool for real estate agents.' You answer some simple questions and it pings Optimal Blue for a rate, does a PITI and DTI/LTV calculation allowing the buyer to identify their ideal mortgage payment and sales price before they start looking," Curtis Wood, founder and CEO of Bee Mortgage App, said in a statement to NMN. Bee wrapped up its pre-seed fundraising in September and moved onto a seed round — which is live now — and collected $125,000 on the first day. The startup's investors include hundreds of individuals, Dysruptek — the corporate venture capital fund of engineering firm Haskell — and GFL Investments, a firm that, according to Wood, is made up of "a bunch of old high school buddies from the '60s who invest in blockchain projects." The current round of funding will go to developing the artificial intelligence and blockchain capabilities planned for the next step of the app: automated pre-approval. Recently, Freddie Mac partnered with Zest to test AI use in conjunction with its underwriting. Over the last few years, blockchain has been leveraged to streamline lending, cut down closing costs, and even prevent fraud. "We're using it to replace the loan officer within an automation architecture that merges the POS and LOS into a streamlined database controlled by the borrower via our mobile app instead of a LO at their desk working and decisioning the data," Wood said, noting that the company also has taken several steps to ensure the transaction is compliant. "Blockchain acts as a trusted data validation method used to verify a borrower qualifies for the loan they want and we're using it to validate qualifying data. We are not using blockchain as a database or storing or placing any personal information of our customers on it."Bee estimates three-minute fully automated mortgage pre-approvals will be ready in 12 months.

Citi compiles bevy of 'dirty' currents in next RPL deal

November 25th, 2020|

Citigroup is securitizing more than $1 billion in “dirty” current and delinquent mortgages that its realty arm acquired via auction from Fannie Mae. According to ratings agency presale reports, Citigroup Global Markets Realty Corp. is sponsoring a $1.06 billion mortgage-backed securities offering that is secured by 6,739 well-seasoned performing and re-performing loans. Approximately 9.5% of the loans are currently delinquent, and only 12.2% of the loans have a clean payment history for the past 24 months, according to presale reports from Fitch Ratings and DBRS Morningstar. The loans were purchased from Fannie Mae as part of the GSE’s periodic whole-loan sales auctions of nonperforming and reperforming loans to reduce its exposure to seriously delinquent or troubled mortgage accounts on its books. Approximately 89% of the mortgages (which include fixed- and adjustable-rate) have been previously modified. The loans are well-aged at an average of 167-169 months since origination, according to the presale reports from each agency. While more than 90% of the loans were considered current, 11.5% have been delinquent in the past 24 months — and more than 45% within the past year, according to DBRS Morningstar. Fitch’s report stated that although only about 6% of the loans are in — or have exited — a pandemic-related forbearance plan, analysts have “assumed” most of the delinquencies were recent. While Fitch did not speculate on how many were related to economic fallout from the COVID-19 outbreak, “[t]his transaction has among the highest percentage of dirty current loans Fitch has rated.” DBRS Morningstar’s report noted the agency expects increased delinquencies, forbearances and potential near-term property value degradation due to the coronavirus pandemic. The loans have an average balance of $156,869 to borrowers with current weighted average FICO scores of 646 (compared to 683 on Citigroup’s previous re-performing loan securitization this year). The transaction includes a $695.8 million Class A tranche of notes with preliminary AAA ratings from Fitch and DBRS Morningstar, as well as several classes of mezzanine and subordinate notes. Citigroup served as the lead underwriter of the deal. The loans will be serviced by Select Portfolio Servicing, which is not required to make advances on delinquent principal and interest payments.

Online shopping for city homes is on the rebound: Redfin

November 25th, 2020|

Large metropolitan housing markets may be making a comeback. The latest monthly page-view report by online real estate company Refin reveals a year-over-year jump of 200% within cities in October that is the biggest seen to date this year. The equivalent increase within rural areas was even larger at 235%, but it was down its peak of 273% in August.These trends are notable because they could be early indicators that the wave of people leaving cities may have crested. The availability of low-rate financing, more limited supply outside large metros, progress in vaccine development, and reports of rising infection rates in even rural locations may be among the reasons why. The number of homes available for sale was down 40.9% in rural areas and 31.9% in suburban locations during the four-week period ending Nov. 8. In big cities, that number was down just 14.5%. Listings in large metros were up 13.7% during that same period, compared to 13.4% for suburban locations and just 8.8% for rural markets. "Rural areas and small towns remain desirable — especially for families who need space to accommodate remote work as the pandemic persists — but record-low mortgage rates are motivating people to search in cities, too," said Redfin Chief Economist Daryl Fairweather in a press release. "Many buyers are crossing their fingers that restaurants, bars and shops may be bustling again in the next year or so, and they're looking to invest in the eventual resurgence of cities." There are questions about whether page views will result in actual transactions or not, and year-over-year gains in pending sales numbers remain stronger for rural and suburban markets than for big cities. These were 37.4%, 36% and 26.1%, respectively, during the four-week period ending Nov. 8.

New-home sales remain elevated in October at 999,000 pace

November 25th, 2020|

New-home sales in the U.S. held up in October, remaining near the best pace since 2006 and well above pre-pandemic levels, the latest sign that record-low mortgage rates are underpinning robust buyer interest. Purchases of new single-family houses dropped 0.3% from September to a 999,000 annualized pace from an upwardly revised 1.002 million rate, government data showed Wednesday. The median forecast in a Bloomberg survey of economists called for a 975,000 rate. The median selling price rose 2.5% from a year earlier to $330,600. Recent momentum in housing has been driven by attractive mortgage rates and buyers looking for more space as they work from home. Purchases, however, may face greater headwinds after infections began to soar around the U.S. in recent weeks and new restrictions threatened to curb hiring. The number of properties sold for which construction hadn’t yet started increased to a fresh 14-year high of 385,000 in October, suggesting that strength in construction will continue in coming months. The supply of new homes remained the tightest on record. At the current sales pace, it would take 3.3 months to exhaust the supply, the same as the prior month and the leanest inventory in data going back more than a half century. The number of homes for sale was unchanged at 278,000, the fewest since 2017.

Mortgage rates remain at record lows, driven by Fed QE buying

November 25th, 2020|

Mortgage rates remained unchanged at their record lows heading into the Thanksgiving holiday, as investors reacted to a growing resurgence in coronavirus cases. Another factor in both rates and mortgage-backed securities yields remaining at record lows in recent days was quantitative easing purchases made by the Federal Reserve, a Nov. 23 note from Optimal Blue said. "Until these quantitative measures are rolled back and the COVID recovery path becomes clearer, the yields on MBS and mortgage rates will likely be materially insulated from other market factors that would otherwise drive rates higher," Optimal Blue said.The 30-year fixed-rate mortgage averaged 2.72% for the week ending Nov. 25, unchanged from last week, according to the Freddie Mac Primary Mortgage Market Survey. A year ago at this time, the 30-year fixed-rate mortgage averaged 3.68%. "Mortgage rates remain at record lows and while that has fueled a refinance boom, it's been driven mainly by higher income borrowers. With about 20 million borrowers eligible to refinance, lower- and middle-income borrowers are leaving money on the table by not taking advantage of low rates," Sam Khater, Freddie Mac's chief economist, said in a press release. "On the home buying side, demand continues to surge, and it has created a seller's market where inventory is at a record low and home prices are rising, beginning to offset the benefits of the low rates." The 15-year fixed-rate mortgage averaged 2.28%, unchanged from last week. A year ago at this time, the 15-year fixed-rate mortgage averaged 3.15%. The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.16% with an average 0.3 point, up from last week when it averaged 2.85%. A year ago at this time, the five-year adjustable-rate mortgage averaged 3.43%.

Reducing mortgage defaults starts with beefing up housing supply

November 25th, 2020|

The coronavirus pandemic has revealed a distressing fact in the housing world: Federal home-loan policies that promote “responsible, affordable mortgage credit access” for minorities are instead setting them up for an increased risk of failure. Sadly, structural barriers for people of color do exist in housing. Rather than being the result of inadvertent discrimination by lenders, it mostly stems from misguided government policies. At the state and local level, zoning and building codes have created a supply shortage that is most pronounced at lower price points, where minorities tend to buy and which helps to drive up prices. At the federal level, policymakers and advocacy groups have been trying to promote greater buying power for marginalized groups in a futile attempt to increase access. However, lowering lending standards or interest rates only works when there is ample supply. In today’s constrained market, the unintended consequence is that marginalized borrowers mainly bid against one another for scarce homes. The additional buying power is thus quickly capitalized into higher home prices, which means stretched budgets for marginalized borrowers. During economic hardship, this translates into higher default risk. A new analysis by the AEI Housing Center shows that because of these federal policies, today the single best predictor (per ZIP code) of a change in delinquency rate due to the pandemic has become the share of minority borrowers residing in it. The higher the minority share, the larger the increase in the delinquency rate. The outcome is a fundamental injustice that runs counter to the 1968 Fair Housing Act, which not only prohibits discrimination in housing, but legally requires federal agencies to further the goal of fair housing. These heightened delinquencies are occurring mostly in the same neighborhoods that were devastated a decade ago in the aftermath of the Great Recession. The only difference is that it is happening despite all the purported safeguards of the 2010 Dodd-Frank Act, which stopped the most egregious underwriting practices, and the U.S. government securitizing about three in four of all mortgages. But there is a second issue. These affordable federal housing policies, which enable minorities to buy especially during a boom when houses are more expensive, expose them to greater default risk during a bust. This also creates greater home price volatility in less affluent communities — a phenomenon that is greatly attenuated in more affluent ones with less risky lending and greater borrower resources to fall back on. While it is often argued that buying a home early in life is the key to building wealth, it is when and where you buy that matters most. Ultimately, nothing strips wealth faster from borrowers of color than purchasing a home in high-risk neighborhoods late in a housing up-cycle. Unwittingly, borrowers end up speculating in land (since the structure value of the home is mostly fixed). In many areas of the country with high levels of minority homeownership, land prices over the last 25 years have been much more volatile than the Dow Jones Industrial Average. Wild home price cycles and risky lending discriminate against unwitting borrowers of color that get their timing of the purchase wrong. Stable home price cycles and safe lending, on the other hand, allow borrowers to build lasting wealth. To achieve this, there needs to be more supply. Places such as Minneapolis or Portland, Ore., have already eased burdensome local zoning codes, which will ultimately enable new home construction. Another place, Palisades Park, N.J., a suburb of New York City, which did away with its restrictions long ago, was able to add 24% to its housing stock between 2000 and 2013. While this process will take time, the AEI Housing Center estimates that gradually replacing a small portion of one-unit homes with two-to-four-unit ones has the potential of adding about 8 million homes over the next two decades — or about 6% to the current stock. In the meantime, federal policies should limit risky lending practices, especially during a boom, instead of encouraging them. Unfortunately, this message has not reached everyone. The Consumer Financial Protection Bureau’s new QM (qualified mortgage) proposed rule would enable borrowers to get even riskier loans, setting up people of color, once again, for failure. Even if the effects of COVID-19 do not result in a full-fledged housing recession, the current delinquency data warns us that unless federal home loan policies change quickly, communities of color will again be the ones that will shoulder the most pain. This is the definition of systemically unfair housing.

Mortgage applications rises as rate volatility boosts activity

November 25th, 2020|

Mortgage applications increased 3.9% from one week earlier as another week of record low rates drew more borrowers into the market, according to the Mortgage Bankers Association. "Weekly mortgage rate volatility has emerged again, as markets respond to fiscal policy uncertainty and a resurgence in COVID-19 cases around the country," Joel Kan, the MBA's associate vice president of industry and economic forecasting, said in a press release. "The decline in rates ignited borrower interest, with applications for both home purchases and refinancing increasing on a weekly and annual basis." The MBA's Weekly Mortgage Applications Survey for the week ending Nov. 20 found that the refinance index increased 5%from the previous weekand was 79% higher than the same week one year ago. The refinance share of mortgage activity increased to 71.1% of total applications from 69.8% the previous week."The ongoing refinance wave has continued into November," Kan explained. "Both the refinance index and the share of refinance applications were at their highest levels since April, as another week of lower rates drew more conventional loan borrowers into the market." The seasonally adjusted purchase index increased 4% from one week earlier, while the unadjusted purchase index decreased 2% compared with the previous week and was 19% higher than the same week one year ago. "Amidst strong competition for a limited supply of homes for sale, as well as rapidly increasing home prices, purchase applications increased for both conventional and government borrowers. Furthermore, purchase activity has surpassed year-ago levels for over six months," Kan noted. Adjustable-rate mortgage activity remained unchanged at 1.9% of total applications, while the share of Federal Housing Administration-insured loan applications decreased to 10% from 10.5% the week prior. Veterans Affairs-guaranteed loans saw their share decrease to 11.8% from 12.1% and the U.S. Department of Agriculture/Rural Development share fell to 0.4% from 0.5% the week prior. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased 7 basis points to 2.92%, the lowest since the MBA started tracking this data. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased 12 basis points to 2.99%. For 15-year fixed-rate mortgages, the average decreased 8 points to 2.51%. The average contract interest rate for 5/1 ARMs decreased to 2.63% from 2.84%. But that downward movement did not transfer to all product types. For 30-year fixed-rate mortgages with jumbo loan balances (greater than $510,400), the average contract rate increased 7 basis points to 3.18%.

San Diego home prices rising at rates not seen since 2014

November 25th, 2020|

San Diego home prices went up the third fastest in the nation in September and appreciated at a pace not seen in more than six years. Prices in the San Diego metropolitan area were up 9.5% annually, the S&P CoreLogic Case-Shiller Indices reported Tuesday. The acceleration is still not near housing boom levels when, in July 2004, prices were up 33.37% in a year. Only Phoenix, up 11.4%, and Seattle, up 10.1%, saw prices go up faster in September. But all markets covered in the 19-city index were up, even places like New York and San Francisco, that saw price gains slow considerably since the start of the COVID-19 pandemic. Zillow economist Matthew Speakman said price gains are the result of mortgage rates at record lows and a lack of homes for sale nationwide. He said competition for homes has put upward pressure on prices for months, but it seemed to have greatly accelerated in September. "Some measures show home prices now growing at a faster pace than they ever have," he wrote. "While the worsening spread of COVID-19, and the economic uncertainty that accompanies it, do pose some potential risks to the booming housing market, it appears unlikely that this remarkable growth in home prices will abate in the coming months." In September, the interest rate for a 30-year, fixed-rate mortgage was 2.89%, said Freddie Mac, down from 3.61% the year before. Rates are seen as one of the factors motivating potential buyers to compete for a limited number of houses. The national average increase for home prices was up 7%, a six-year high. Even the worst-performing cities saw notable gains. Chicago was up 4.7% in a year and New York was up 4.3%. Other California cities were also up, but not as much as San Diego. Los Angeles prices increased 7.7% and San Francisco increased 6%. "The strength of the housing market was consistent nationally," wrote Craig J. Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices. "All 19 cities for which we have September data rose, and all 19 gained more in the 12 months in September than they had done in the 12 months ended in August." The only area not included in the index was Detroit as it has been off the list since March because of pandemic-related delays at its recording office. The Case-Shiller indices take into consideration repeat sales of identical single-family houses as they turn over through the years. Prices are seasonally adjusted. The San Diego County median home price for a resale single-family home in September was $715,000, according to CoreLogic data provided by DQNews. We know from October data from CoreLogic that home price gains did start to slow, but it is unknown if it will be a long-term trend and reflected in future Case-Shiller reports. Many experts say the factors that have pushed up prices will likely continue for the rest of the year, especially low inventory. From Sept. 7 to Oct. 4 there were 5,305 homes listed for sale in the San Diego metropolitan area, said the Redfin Data Center. That's down from 7,858 around the same time in 2019 and 9,236 in 2018. "Prices have reached the highest level in years," wrote Bill Banfield, Rocket Mortgage executive vice president of capital markets, "but in order to keep them within reach for buyers, listing volume needs to increase — whether that is through building new homes or by more existing homes hitting the market." Upward pressure is expected to continue into the next year even if there is a marginal increase in homes for sale. CoreLogic deputy chief economist Selma Hepp wrote that about 15 million millennials, ages 28 to 30 years old, are reaching their typical first-time homebuying age. Also, she said mortgage rates are likely to stay at or below 3% into 2021. "These two factors will bolster the home buying market and continue propping up home price growth," she wrote.

GSE loan limit approaches $550,000 as home prices jump 7.4%

November 24th, 2020|

In 2021, Fannie Mae and Freddie Mac’s maximum single-family loan size will grow to $548,250 in most areas, with a ceiling of $822,375 in pricier neighborhoods. The baseline loan limit reflects a 7.42% seasonally adjusted home-price increase, according to the Federal Housing Finance Agency. The FHFA bases that increase on a year-over-year comparison of the average for the third quarter. The baseline limit during 2020 was $510,400, based on a 5.38% increase in home prices.The price increase illustrates the extent to which federal rescue programs and a supply-demand imbalance have been a counterweight to economic pressures from the pandemic. The coronavirus was originally expected to exert downward pressure on housing values prior to the implementation of these programs. U.S. home prices have grown every quarter since the third quarter of 2011, based on the FHFA’s seasonally adjusted home price index, which reflects a more limited data set than the one used to set the conforming limit. The baseline conforming limit has risen more than $100,000 during the past five years. Regions where 115% of the local median home value exceeds the baseline conforming loan limit are generally considered high-cost areas under the Housing and Economic Recovery Act. The ceiling for high-cost areas represents 150% of the baseline loan limit. Certain counties where there are high-cost loan limits can be found in California, Florida, Idaho, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, North Carolina, Tennessee, Utah, Virginia, Washington and Wyoming. Alaska, Hawaii, Guam and the U.S. Virgin Islands have different calculations due to special statutory provisions. This year, their baseline loan limit is the same as the maximum high-cost loan limit. All but 18 counties or county equivalents in the United States will have higher maximums next year.

MetLife extends RMBS market reach with investment-property pool

November 24th, 2020|

MetLife Life Insurance is making its first foray into securitizing prime investor-owned residential properties, selling via a trust $300.6 million in bonds secured by nearly 1,000 fixed-rate investment property mortgage loans. According to a presale reports, MetLife’s initial securitization through MetLife Securitization Trust 2020-INV1 will consist of multiple classes of notes and subordinate pass-through certificates backed by investor loans. S&P Global Ratings has issued preliminary AAA ratings to 15 Class A “super-senior,” senior and senior support notes including (including related interest-only notes). DBRS Morningstar has assigned triple-A ratings to only six of those tranches; the rest of the Class A notes unrated by the agency. Both agencies have assigned ratings ranging from AA to single-B on the remaining subordinate notes and certificates. MetLife acquired the pool of loans acquired from entities connected to Community Loan Servicing (formerly Bayview Loan Servicing). Community will maintain servicing rights and retention interests in the loans, according to S&P Global Ratings and DBRS Morningstar. Although the loans are for investment properties, MetLife sponsored all of them as qualified mortgages under the Consumer Financial Protection Bureau’s ability-to-repay standards as they were underwritten to GSE guidelines, according to S&P. But as business-purpose investments, nearly all of them (897) are classified as exempt from the QM rule normally placed on owner-occupied homes. Adobe Stock Another 96 are classified as safe harbor qualified/non-higher-priced mortgage loans, and another is classified as qualified/rebuttable presumption. Most of the loans (52.6% of the pool balance) are secured by single-family residences. The rest are backed by planned-unit developments (19.3%), condominiums (16.5%) and two-to-four family homes (11.5%). S&P notes the weighted average borrower FICO is 766 and the average current combined loan-to-value ratio is 67.4%. Most of the loans (42.1%) are located in California, with an average loan balance of $302,383. MetLife has issued three prior securitizations through the trust since 2017, each a collateral pool of reperforming and nonperforming loans.

Yellen at Treasury could resuscitate Fed’s loan programs

November 24th, 2020|

WASHINGTON — President-elect Joe Biden’s selection of Janet Yellen to be Treasury secretary increases the odds the government will double down on pandemic recovery efforts, which include lending programs that enable banks to provide credit to households and businesses. If confirmed, Yellen — a former head of the Federal Reserve — would inherit a shaky economy rattled by the coronavirus pandemic and growing division between Treasury and the Fed about how the recovery should proceed. After Treasury Secretary Steven Mnuchin essentially ordered the central bank to shut down credit backstops such as the Main Street Lending Program, many experts expect Yellen would work with Fed Chair Jerome Powell immediately to revive its emergency lending programs and would even try to convince Congress that those programs need more fiscal support. “Both Powell and Yellen believe that it's good to have a full toolbox, and that having those programs available is helpful even if you don't end up using them,” said Ian Katz, a director at Capital Alpha Partners. Mnuchin last week called on the Fed to let programs meant to limit the economic effect of COVID-19 expire at the end of the year and return unused funds appropriated by the Coronavirus Aid, Relief and Economic Security Act to backstop the facilities. Many experts predict Janet Yellen would work with Fed Chair Jerome Powell immediately to revive emergency lending programs and could even try to convince Congress those programs need more fiscal support. Bloomberg News After the Fed initially resisted, saying it preferred "that the full suite of emergency facilities established during the coronavirus pandemic continue to serve their important role," Powell later relented and said in a letter to Mnuchin that the central bank would return the money. That means five programs, including the Main Street Lending Program and the Municipal Liquidity Facility, will shut down on Dec. 31. The $600 billion Main Street program provides banks financial backing to make loans to midsize firms meeting certain criteria that need pandemic relief. But the program has been criticized for a slow start and limited participation by banks and borrowers. Brian Gardner, chief Washington policy strategist at Stifel, argued in a research note that replenishing the emergency lending programs will be one of Yellen’s top priorities once she is confirmed. “Yellen's first matter of business will be to not only provide additional COVID-relief funding but to reestablish additional, temporary [Exchange] Stabilization Fund support that Treasury can provide to backstop Federal Reserve funding programs,” he said. Yellen, who would be the first woman to lead Treasury, could leverage her relationships with Powell and lawmakers on both sides of the aisle to achieve robust economic stimulus, which could include revamped emergency lending facilities. She differs from Mnuchin and other Treasury chiefs since she doesn't hail from the financial sector. Before becoming Fed chair in 2010, Yellen held posts as a governor on the Fed board, the head of the Federal Reserve Bank of San Francisco and an economic adviser in the Clinton administration. Since leaving the central bank in 2018, she has been a fellow at the Brookings Institution. “She knows the banking system. She knows the economy. She's very well versed in what the issues are, and I think she's going to hit the ground running,” said Gilbert Schwartz, a partner at Schwartz & Ballen and a former Fed attorney. “I think she'd be a terrific choice.” Yellen could potentially be confirmed even before Biden is inaugurated Jan. 20, said Jaret Seiberg, an analyst with Cowen Washington Research Group. That would set the stage for another round of economic stimulus shortly after Biden takes office, and renewed life for several of the emergency lending facilities the Fed has stood up under section 13(3) of the Federal Reserve Act. “We believe the Yellen pick increases the prospects that the Federal Reserve in late January will launch 13(3) emergency loan facilities to boost the economy,” Seiberg said in a research note. “That could get low-cost credit into the economy.” Powell, who was a Fed governor when Yellen served as Fed chair, had said earlier this month that he didn’t believe it was the right time for the central bank to pull back on the facilities, a sentiment that has been echoed by several of his colleagues. “I think an important question to ask is, in the middle of a second wave of a pandemic, when financial markets frequently are quite volatile at the end of the year anyway, is this the time to have a hard stop on our facilities?” Eric Rosengren, president of the Federal Reserve Bank of Boston, said in a Nov. 10 interview. Sen. Pat Toomey, R-Pa., who would likely chair the Senate Banking Committee if Republicans retain control of the Senate, has indicated that Yellen’s position on the emergency lending facilities funded by congressional appropriations will be front and center. (Toomey also sits on the Senate Finance Committee, which holds hearings to examine nominees for Treasury secretary.) “As the Senate considers her nomination, I look forward to discussing with her a variety of issues, including the legal requirement for CARES Act-funded temporary emergency lending facilities to shut down by year-end and remain so, absent further congressional action,” Toomey said in a statement. Proponents of closing the five Fed facilities funded with money from the CARES Act argue that Congress did not intend for the programs to be extended, and that several of the programs have garnered little interest anyway. So far, only two issuers have tapped the Municipal Liquidity Facility, and the Main Street Lending Program has purchased just over $5.2 billion in loans as of Nov. 13 — a fraction of the program’s size. In the letter Mnuchin wrote to Powell last week requesting that the Fed return unused funds from the CARES Act, Mnuchin said that “in the unlikely event” it became necessary to restart any of the facilities that will close Dec. 31, the Fed can request approval from Treasury. (The Dodd-Frank Act requires that the Treasury secretary sign off anytime the Fed wishes to flex its emergency lending powers.) Although the Fed doesn’t require any investment from Treasury to stand up a facility, it has suggested that investments from Treasury’s exchange stabilization fund are necessary in order to protect the central bank from losses. While Mnuchin does not appear to be inclined to make any more investments into the Fed’s facilities, Yellen may have a different view. “I think Yellen will work with Powell and they will be on the same page to do what they can do to stimulate the economy, so if Powell tells her he would like ESF money, I expect she would go along with it,” said Katz. But Schwartz cast doubt on a Biden administration restart of the facilities set to close at the end of the year. “All of a sudden, having a new administration come in and try to recast them, it seems to me would be difficult to do, and potentially too disruptive to what people's expectations are, so I don't think you're going to see significant revamping of any of these facilities,” he said. Such a move could also receive pushback from Senate Republicans like Toomey who want to see the programs sunset. Though it’s possible Congress could appropriate more money to the Treasury to backstop the Fed’s emergency lending facilities after Biden is inaugurated, it’s unlikely, said Katz. “Republicans would make the case that the money isn't needed, and wasn't used much when it was available, and even Democrats would want to put conditions on the programs,” he said. “I think Congress only really opens the purse strings if the economy takes a dramatic turn for the worse.”

SFA to Mnuchin: Don’t rush GSEs out of conservatorship

November 24th, 2020|

The Structured Finance Association has called on Treasury Secretary Steven Mnuchin to refrain from immediately releasing the government-sponsored enterprises from conservatorship in response to a report that such a move was under consideration. “We call upon Treasury to take responsible steps to avoid the potentially destructive effects of releasing the GSEs prematurely,” CEO Michael Bright said in a letter sent to Mnuchin from the group on Monday. Bright previously served as an executive at government mortgage bond insurer Ginnie Mae from July 2017 to January 2019. The Federal Housing Finance Agency has been consistently intent on a conservatorship exit under the Trump administration and recently completed a redrafted capital plan to that end. That’s given rise to the notion that the Trump administration may want to rush to complete such an exit on the way out. The Biden administration is expected to put an exit from conservatorship on the back burner. Michael Bright Bloomberg “If progress is not made before the change in administration, it is unclear if the Democrats would be eager to change the status quo of a system that is widely regarded as ‘working’ when there are perhaps more pressing issues in other areas of government oversight,” Keefe, Bruyette & Woods analyst Bose George said in a research note on Monday. The letter from the SFA, which represents 370 institutions active in the capital markets, highlights a key barrier to a quick conservatorship release: its potential impact on the huge uniform mortgage-backed securities market, which the GSEs guarantee and the U.S. housing financing market relies on for liquidity. “We hope the Treasury Department will ensure that the transition to the next phase of housing finance is a stable and healthy one, not one that whipsaws investors back and forth, is tethered to politics of the moment, and is difficult to explain to asset managers with strong fiduciary responsibilities to the pension plans and 401k investments under their responsibility,” Bright said. The SFA said in its letter that it does support an eventual release from conservatorship and indicated moves like the capital rule have helped stabilize their financials. However, its members would like to see several other issues addressed first. Chief among these is a clear definition of “the level and form of government support” that would be available to the GSEs post-conservatorship. In the early days of the pandemic, private-label residential MBS markets failed to recover as quickly as the GSEs’ MBS did because the Federal Reserve supported the latter market but not the former. Other trade associations also have suggested the government slow down — not only on exiting conservatorship but also on its move to implement the capital plan. Mortgage Bankers Association President and CEO Robert Broeksmit recently said in a statement that while some aspects of the final plan — such as slightly more modest treatment of credit-risk transfers vehicles the GSEs use — represent improvements over an earlier version, more study of its implications should be done before implementation. “We … remain concerned that the high leverage ratio requirements will be binding more frequently than is appropriate and will further contribute to negative impacts on consumers,” he said. “Given that this rule will affect both the cost and availability of mortgage credit for borrowers, we believe FHFA should conduct a quantitative impact study to determine the full impact.”

Third-quarter home prices reflect largest annual increase since 2006

November 24th, 2020|

Overall housing value growth continued in the third quarter, as some markets more than doubled the national average, according to the Federal Housing Finance Agency's Home Price Index. Housing prices shot up 7.8% in the third quarter from the year before and 3.1% from the second quarter. Prices have now grown annually in every quarter since 1Q 2012 and quarterly since 3Q 2011. Additionally, September's prices increased 1.7% from August. The inventory crisis directly led to intensified competition and recent spikes in property values."House prices recorded their strongest quarterly gain in the history of the FHFA HPI purchase-only series in the third quarter of 2020," Lynn Fisher, deputy director of the division of research and statistics at the FHFA, said in a press release. "Relative to a year ago, prices were up 7.8% during the quarter — the fastest year-over-year rate of appreciation since 2006. Monthly data indicate that prices continued to accelerate during the quarter, reaching 9.1% in September, as demand continues to outpace the supply of homes available for sale." Every state experienced annual home price appreciation but Idaho led them all with a 14.4% growth. Arizona followed at 11.1%, then Washington at 10.8%. North Dakota home values appreciated the least at 4%, behind 4.7% in Iowa and 4.8% in Louisiana. Idaho also boasted the largest growth rate among the largest 100 metropolitan areas. Home prices in Boise jumped 16.4% year-over-year in the third quarter. Tacoma, Wash., trailed in second place at 12.8% and Phoenix came in third at 12%. Baton Rouge, La., sat at the other end of the spectrum, climbing 2.1% from the third quarter of 2019. Lake County, Ill., was next at 2.8% followed by 3% in Houston. All top 100 housing markets had annual growth in each of the last four quarters.

Nine arrests made in alleged California mortgage relief scam

November 24th, 2020|

The California attorney general — in tandem with the Federal Housing Finance Agency and the United States Department of Housing and Urban Development — arrested and arraigned a group of nine on 136 felony counts of alleged mortgage fraud. The charges brought against the defendants accuse them of conspiring in an advance fee mortgage relief scheme across the four Southern California counties of Los Angeles, Orange, Riverside and San Diego. The indictment documents said the scheme ran from 2010 to 2019 and defrauded over 200 mortgaged properties out of a combined $6 million.The operation targeted distressed borrowers and offered foreclosure and eviction protection for monthly payments. The alleged scammers filed false documentation, bankruptcies and interest grant deeds, resulting in many of those borrowers losing their homes. All nine defendants pleaded not guilty. Eduardo Toro, who was charged with 98 of the counts, faces a maximum sentence of 66 years in prison if found guilty. His lawyer, Rajan Maline, didn’t return a call for comment. “Individuals who choose to prey on vulnerable Californians at risk of losing their homes will be held accountable,” California Attorney General Xavier Becerra said in a press release. “The Department of Justice will continue to work with our law enforcement partners to identify and prosecute those who disregard the law in order to make a profit.” Rooting out foreclosure relief scams rings is especially pertinent with so many distressed borrowers out of work and living under forbearance protection from the pandemic. Recently, a task force comprised of the CFPB, Mortgage Bankers Association, American Bankers Association, Housing Policy Council and NeighborWorks America launched the COVID Help for Home campaign aimed at directing consumers away from potential scammers. The mortgage market’s current state of heightened distress and disorder make it primed for fraudsters who take advantage of struggling homeowners and uncertain times. “Our objective is to ensure that the public is not taken advantage of when they have fallen on hard financial times,” said Michael Gibson, HUD’s special agent in charge of the Office of Inspector General.

October was another strong month for Tampa Bay home sales

November 24th, 2020|

Tampa Bay's real estate market continued to charge forward in October, marking the fifth straight month of mostly robust numbers since the onset of the pandemic slowed down sales this spring. Compared to the same month last year, sales of single-family homes were up by about 13% in Pinellas County, by about 12% in Hillsborough, by nearly 28% in Pasco and around 15% in Hernando, according to figures recently released by Florida Realtors. Both Pasco and Hernando counties have seen enough sales so far this year to overcome the slump earlier this year, with an overall increase of sales year-to-date. Pinellas and Hillsborough counties still have had slightly fewer sales year-to-date, but are on track to make it in the black by the end of 2020 if the momentum persists. "Frankly, considering all the adverse elements of the year we are all delightfully surprised that things in the real estate world are going so well," said Lance Williams, a Tampa Realtor. Lou Brown Jr., a St. Petersburg broker and owner of his own firm in Pinellas, said one sign of the market's fast pace is he's been hearing from homeowners around Midtown St. Petersburg who've been receiving unsolicited texts, postcards and other solicitations from investors trying to buy their houses. "Two or three times a week people get either a text or some kind of email ... just begging for their business," he said. "It's aggravating if you have no interest." The inventory of houses on the market still sat at abnormal lows, with all four counties seeing more than 39% fewer listings at the end of the month compared to October 2019. Pasco's drop was the most dramatic, at nearly 50%. That low inventory plus soaring demand meant that October also followed the pattern of rapidly rising prices. Last month, Pinellas' median sales price climbed more than 18% year-over-year to reach $325,000, Hillsborough's increased nearly 16% to $290,000, Pasco's went up by about 16% to $266,208 and Hernando's also rose 16% to $215,500. Brown said these numbers only add to his concerns about affordability. "It's great if you're on the inside and you got it, but if you're on the outside and you're trying to get it, not so good," he said. The local numbers reflected the continuing national strength of the housing market. Nationwide, sales of single-family homes, townhomes, condos and co-ops were up 26.6% in October year-over-year, according to the National Association of Realtors. "With news that a COVID-19 vaccine will soon be available, and with mortgage rates projected to hover around 3% in 2021, I expect the market's growth to continue into 2021," said Lawrence Yun, the association's chief economist, in a statement. Prices are also rising quickly around the country. A recent report by the National Association of Realtors found that in the third quarter, single-family existing-home prices rose in all of the 181 metro areas that it tracks, 65% of which saw price increases in the double digits.

Zombie property sales drove September's foreclosure auction rise

November 24th, 2020|

Completed foreclosed property auctions in September reached their highest level since the pandemic began as zombie properties, which are not covered by any moratorium, came back on to the sales market, Auction.com said. "Foreclosure supply is slowly returning to the market as servicers refine their vacant or abandoned procedures and as states gradually open up," Ali Haralson, chief business development officer at Auction.com, said in a press release. "These vacant or abandoned properties, which are exempt from the national foreclosure moratoria on government-backed mortgages, benefit neighborhoods when they are returned to occupancy." September had a 24% increase in completed foreclosure auctions compared with August. However, that was 78% below the year-ago level."The increase is due to more properties that were already in the foreclosure process prepandemic becoming vacant and abandoned, which means they can then go to the foreclosure auction on the courthouse steps," Daren Blomquist, vice president of market economics, added in a follow-up note. "A side effect of the foreclosure moratoria is that the longer properties sit in foreclosure limbo, the greater the likelihood that they will become vacant or abandoned." At the same time, demand for distressed properties — both at foreclosure auction and in an online auction of bank-owned properties (properties taken back after a failed courthouse sale as real estate owned) — hit new multiyear highs during the third quarter. The foreclosure sales rate, properties that were sold to a third party rather than becoming REO, reached a seven-year high of 55.6% in September, according to buyer demand data from the Auction.com marketplace. The average price per square foot for these sales, however, dipped in the third quarter, likely because of the shift to auctioning vacant or abandoned properties that are often largely in a state of disrepair. Still the ratio of average price paid at sale relative to the estimated full market value increased to a 6.5-year high in September. The average number of bids per REO property sold via an online auction increased to 12% in September; that is the highest average bids per REO sold since September 2012, which is the earliest data available. The increased competition helped to push the average price per square foot to an all-time high of $87 in July; it also drove the ratio of average price relative to seller reserve to a new all-time high of 104.5% in September. On the other hand, there is also a "growing backlog" of mortgages that are already in the foreclosure process, or are delinquent and not in a forbearance program, according to Auction.com's data and other industry sources. That foreclosure backlog is projected to consist of 1.1 million properties by the end of the first quarter of 2021, Blomquist said. "That means we would expect the foreclosure process to start or restart on the mortgages secured by those properties once applicable moratoria are lifted and courts begin to resume foreclosure cases in judicial states," Blomquist said in the press release. "Given the patchwork of state approaches, the return of this backlogged volume will likely be spread over months, if not years." On a quarter-to-quarter basis, the foreclosure inflow on Veterans Affairs mortgages was up 84% and on Federal Housing Administration loans, it was up 30%. But Blomquist noted in his follow-up comments that both categories were coming off of record lows in the second quarter. Also, VA loans make up a smaller number of foreclosed loans, which explained the larger percentage increase. The foreclosure inflow for loans of all types was down 7% compared with the second quarter, with conforming mortgages down by 3% and private label and portfolio loans down by 9%.

Home sales surge in Sarasota-Manatee despite pandemic, low inventory

November 24th, 2020|

Despite a tightening stock of homes on the market, home sales surged 38% last month in the Sarasota-Manatee, Fla., region. Local buyers closed on 1,695 existing single-family homes in October, 465 more than one year earlier and 108 ahead of September, according to a report from the Florida Realtors trade group. Home sales in the two-county region are now 5.0% ahead of year-ago levels, a show of resilience from the real estate market after several months of plunging sales early in the coronavirus pandemic. "The October numbers help us realize just how crazy our market has been over the past several months," said David Clapp, president of the Realtor Association of Sarasota and Manatee. "Closed sales are up by 34% among all categories, and this extremely strong market does not appear to be ending anytime soon, as new pending sales are up by a combined 39.5% compared to last year in October." Homes are trading at a fast pace as the number of homes for sale continues to shrink. The combined inventory of active listings was down by 35.1% over the year in Sarasota-Manatee. "As we go into year end, we continue to be challenged with a low supply of inventory," Clapp said. "The lack of inventory, and highly competitive bidding for existing inventory, has discouraged some buyers from buying now. It is our hope and expectation that supply will increase after the holidays and going into the new year." The median sale price for an existing single-family home in the two counites rose 16% over the year to $351,851, topping the record of $340,000 set in July and August. Looking at third-quarter data, Sarasota County home prices have finally recovered to their pre-Great Recession levels, said Robert Goldman, an agent with Michael Saunders & Co. in Venice. "It has taken 14 years for home prices to claw their way back," he said. "To have done so in the grips of the COVID pandemic, is nothing short of amazing." Real estate database CoreLogic disagrees, saying Sarasota-Manatee prices as of September remained 7.3% lower than their pre-bubble highs, the 28th largest margin of peak-to-current among the 404 U.S. metro areas it studied. Condo sales also jumped in the two-county area. The 715 units closed marked a 33% gain over the year, with year-to-date sales now nearly 11% ahead of 2019. Condos traded for $260,000, up 19.4% in October, and they have now climbed 9.1% for the year. Pending sales — a good measure of future closings — rose in Sarasota-Manatee for the fifth straight month, with homes up by 38% in Sarasota and by 33% in Manatee. The inventory of single-family homes remains well below year-ago levels, now with just a 2-month supply in Sarasota and 1.8 months in Manatee. A six-month supply is the traditional level of a balanced market. The supply of available condos is down to 3.2 months in Sarasota and 2.6 months in Manatee. With fewer homes on the market, buyers are closing deals more quickly. The median time from listing to contract for single-family homes was 18 days in Manatee and 21 days in Sarasota, both around half as much time as last year, the Realtor Association reported. Cash buyers are becoming bigger players in the market, with those deals for homes up 54% in Manatee and 17% in Sarasota. Statewide, buyers closed on 29,659 existing single-family homes last month, 27% ahead of 2019. Condo sales jumped by 30% to 12,110, Florida Realtors reported. Homes sold for a median $305,000 throughout Florida in October, up 15.6% over the year, while condos traded for 16% more, at $221,000. "Housing is an essential need, and there is strong demand from buyers despite the ongoing pandemic, and perhaps even sparked by the fact that our homes have become more important than ever this year," said Barry Grooms, a Bradenton agent who is the current president of Florida Realtors. "But increasing constraints on the inventory of for-sale homes in Florida is making it more and more difficult for buyers, and putting pressure on rising prices, which in turn impacts affordability." In Florida, the inventory for single-family existing homes fell to a record low of a 2.1-months' supply, while condo inventory also hit a record low of 4.9 months. Persistent demand and shrinking inventory continue to drive up home values, but that is only part of the reason, said Brad O'Connor, chief economist at Florida Realtors. "A good share of these increases is still being driven by good, old-fashioned price appreciation, especially among single-family starter homes, which are increasingly difficult to find on the market," he said. Nationwide, sales of existing homes rose for a fifth straight month in October, the National Association of Realtors reported, reaching a level not seen since before the housing bubble popped 14 years ago. Existing homes sales rose 4.3% to an seasonally adjusted rate of 6.85 million annualized units, the industry trade group said. Reflecting the searing-hot housing market, that figure is up 26.6% from a year earlier. The 6.85 million figure is the highest for that data since February 2006 — the eve of when the housing market reached its apex and subsequently collapsed. Realtors and housing market experts have said, despite the historical comparison, the housing market is in a different and healthier place than it was last time it was at these levels. Interest rates are at near record lows, which subsequently has led to mortgage rates to be at historic lows. Also, the pandemic has caused many families to seek out different living arrangements to reflect that many people are likely to work remotely for the foreseeable future. But the housing market is now heading into the winter months, and with resurgent cases of coronavirus happening nationwide, it is more likely that the housing market will take a pause in the coming months instead of continue to rocket higher. "We do expect the pace of sales to slow in the fourth quarter, with a weak recovery, resurgent pandemic and depleted inventories weighing on activity, although the risk may be for further upside surprises," said Nancy Van Housten, lead U.S. economist for Oxford Economics.

Why Adjustable-Rate Mortgages Are Bad News Right Now

November 24th, 2020|

Posted on November 23rd, 2020 With mortgage interest rates as low as they are at the moment, you may be looking beyond fixed-rate options if you’re in the market to purchase a home or refinance an existing home loan. After all, while 30-year fixed mortgage rates are hovering around 2.75%, some adjustable-rate mortgages are in the very low 2% range. This can certainly push your monthly mortgage payment even lower, especially if you have a jumbo loan amount. But is it worth the risk? Is It Worth Going After an Even Lower Mortgage Rate? There’s no question that fixed mortgage rates are very attractive right now But there are still other home loan programs out there Some savvy homeowners might be looking at ARMs because there’s an opportunity to save even more money It might be possible to pay less interest with the safety of a fixed rate for 5-7 years They say not to look a gift horse in the mouth. And with mortgage rates setting 13 record lows so far this year, why look any further than a fixed-rate mortgage? Well, because it’s possible to obtain an even lower rate if you go with say a 5/1 ARM instead, which is fixed for the first five years before becoming annually adjustable. That means there’s relative safety there if you don’t plan on sticking around for long, or have the flexibility to pay off your home loan in full if interest rates do rise. For instance, if you sell your home or refinance before those five years are up, you could save a good amount of money over those 60 months. Let’s look at a quick example to illustrate: 30-year fixed @ 2.75%: $1,224.725/1 ARM @ 2.25%: $1,146.74 On a $300,000 loan amount, the difference in monthly mortgage payment is roughly $78 a month. Over five years, that’s roughly $4,680 in savings. Not an incidental amount by any stretch, but there has to be a catch, right? Well, we’re in a unique spot at the moment. Mortgage rates are pretty much in unprecedented territory. They’re absolutely rock-bottom historically, having fallen to record lows in what I assume is also a record 13 times so far this year. So looking a gift horse in the mouth might not be the smartest move. Mortgage Rates Have Nowhere To Go But Up ARMs generally make sense when interest rates are high Because there’s a better chance of a bigger discount relative to a fixed-rate loan option But the spreads between FRMs and ARMs are pretty narrow right now And if rates are at record lows they’ll probably rise in the near future Unfortunately, the general consensus is that mortgage rates have nowhere to go but up. That’s mostly not debatable, though I wouldn’t be surprised if they do move lower this year and next. However, if and when they do rise, how much will they go up? That’s the big question. They could rise quickly if there’s a COVID-19 vaccine and the economy gets back on track in a hurry, which is a must eventually, right? So if you reside in a home that you plan on living in for the foreseeable future, taking a chance on an ARM right now may burn you a few years from now. Sure, you may save money over the next 5+ years, but after that you may find that mortgage rates have surged. At that point, when your ARM is set for its first adjustment, it will most likely adjust higher. And potentially a lot higher. And let’s face it, five years can go by in the blink of an eye. The other problem with ARMs right now is that they just aren’t that cheap. The spread between a 30-year fixed and ARM is marginal at best with many lenders. Many aren’t even advertising their ARM rates, and are instead directing everyone to a 15-year or 30-year fixed. Of those that are advertising ARM rates, what I saw wasn’t all that impressive, especially on conforming mortgages. We’re talking a quarter to three-eighths of a point lower, so maybe 2.375% instead of 2.75%. Others weren’t even offering a discount. On jumbo home loans, you might see a bigger spread, but historically they are still very tight because fixed rates are so low at the moment. If 30-year fixed mortgage rates were in the 4-5% range, you’d maybe see a difference of .75% to a full percentage point with some lenders. In other words, there isn’t much of a discount on ARMs right now, and you’re taking a relatively big risk with rates being at record lows. Don’t Choose an ARM If You Can’t Handle the Higher Monthly Payment If you do want a slight interest rate discount you can go with an ARM Just be sure you can make the larger monthly payment once it adjusts  in the future Otherwise you could be asking for trouble if rates rise over the next several years and you still own your home Chances are the fully-indexed rate on your ARM will be higher even if rates remain steady, which at best will require a refinance If you can’t handle the interest rate uncertainty of an adjustable-rate mortgage, and don’t know if you’ll be selling before the adjustable period ends, an ARM probably isn’t a good choice right now. Once interest rates rise, you’ll be stuck with a larger monthly payment, or you’ll be forced to refinance to cut your losses. And even a mortgage refinance may be out of the question if you’ve got income restraints (debt-to-income ratio) or some other unexpected life event transpires. It’s never an absolute guarantee that you’ll be able to sell your home (for the right price) or refinance in the future. So you really have to be prepared for what’s next once the ARM’s initial fixed period comes to an end. Ultimately, ARMs aren’t coming with a very large discount at the moment, so you’ll need to sit down and decide if a rate .25% to .375% lower is worth the stress over the next several years. If you’re super confident you’ll move, or be able to refinance no matter what takes place, you can take a chance, but there are probably better times to do so. Lastly, if you are set on an ARM, be sure to put in a lot of time shopping around because ARM rates are super variable from one lender to the next, much more so than fixed rates. Read more: 30-year fixed vs. ARM (photo: Travis Hornung)

Castle & Cooke Mortgage Review: Are They the Key to Your Castle?

November 23rd, 2020|

Today we’ll take a close look at “Castle & Cooke Mortgage,” an independent mortgage lender with a sizable presence in the Southwestern United States. They’re a retail, direct-to-consumer lender that has been around for about 15 years, yet they still mustered nearly $1.5 billion in total production last year. The company is located just south [&hellip The post Castle & Cooke Mortgage Review: Are They the Key to Your Castle? first appeared on The Truth About Mortgage.

Small landlords are suffering most in rental sector: Harvard confirms

November 23rd, 2020|

The share of properties with rental hardships is up to 5 percentage points lower for buildings with five or more units, analysis by the Harvard University Joint Center for Housing Studies shows. The finding in the center’s annual report on the state of the nation’s housing market, which shows hardship rates were 12% for five-plus-unit buildings compared to 14%-17% for small rental properties, reveals the extent to which larger multi-unit properties are insulated from distress. This may be one reason for the mixed outlook in the rental sector. Some multifamily mortgage executives, including Fannie Mae Senior Vice President and Chief Credit Officer Charles Ostroff, have been relatively optimistic about performance amid broader concerns about tenants’ ability to pay rent. However, Ostroff said that in his case, it is because the five-plus-unit market tends to outperform smaller multifamily properties.While on one hand the Census Bureau data shows that buildings with a bigger number of units do have a lower share of distressed renters, it also reveals that the relative difference is limited. Concerns are mounting regarding multifamily and single-family mortgage performance given the expiration of certain federal programs and some holes that exist in the safety net they currently provide. “I do worry about the fact that 12 million people are going to run out of unemployment insurance the day after Christmas,” Chris Herbert, managing director at the Harvard Joint Center for Housing Studies, said at a virtual event held in conjunction with the release of the report. Even if unemployment insurance, eviction bans, forbearance and the paycheck protection program were all to be extended, issues will remain given that these programs have been imperfect, said Marietta Rodriguez, president and CEO of community development nonprofit NeighborWorks America. Moratoria on evictions have been a great help to renters in the short term, but landlords may be in trouble if the amount of rent in abeyance isn’t offset by the forbearance that is available on government-related loans. “We need to think about how the landlords and owners maintain that,” Rodriguez said. “That is particularly true for small landlords with smaller portfolios or one or two rental units. We worry about them.” A broad lack of awareness of forbearance options available to some borrowers is another point of concern, she added. “I think many people have taken advantage of it, but we see that many have not, and they don’t even know about it,” said Rodriguez. In response to this concern, the Mortgage Bankers Association and the Consumer Financial Protection Bureau have launched an outreach campaign for borrowers on government-related loans. While the number of uncertainties regarding government programs suggest the housing market may not fare as well in 2021, there’s still a chance the outlook could improve, Herbert said. “It’s like the Christmas story. It’s the future that could be,” he said. “I think we still have opportunities to take steps so that that doesn’t happen. I think that’s just a call to say we need to take action. There’s still time.”

Forbearance rate rises for first time since June

November 23rd, 2020|

After falling or staying static for the proceeding 22 weeks, the number of mortgages in coronavirus-related forbearance grew 1 basis point between Nov. 9 and 15, according to the Mortgage Bankers Association. Home loans in forbearance plans represent 5.48% — approximately 2.7 million homeowners — of all outstanding mortgages, up from 5.47% the week prior. The share of forborne loans at independent mortgage bank servicers held flat at 5.94%, while depositories increased to 5.44% from 5.43%. "A marked slowdown in forbearance exits, as well as a slight rise in the share of Ginnie Mae, portfolio, and PLS loans in forbearance, led to an overall increase for the first time since early June," Mike Fratantoni, the MBA's senior vice president and chief economist, said in a press release. "The decline in exits in the prior week follows a flurry of them last month, when many borrowers reached the six-month point in their forbearance terms."Conforming mortgages — those purchased by Fannie Mae and Freddie Mac — continued leading all loan types and decreased for the 24th straight week to 3.35% from 3.36%. Forbearance in Ginnie Mae loans — Federal Housing Administration, Department of Veterans Affairs and U.S. Department of Agriculture Rural Housing Service products — increased to 7.73% from 7.7%. Private-label securities and portfolio loans in forbearance — products not addressed by the coronavirus relief act — also went up to 8.48% from 8.38%. "Renewed weakness in the latest job market data indicate that many homeowners are continuing to experience severe hardships due to the pandemic and still need the support that forbearance provides," Fratantoni said. A 21.32% share of all forborne mortgages sit in the initial forbearance stage while 76.76% shifted to extended plans and the remaining 1.92% re-entered forbearance after exiting previously. Forbearance requests as a percentage of servicing portfolio volume rose to 0.09% from 0.08% the week previous. Call center volume as a percentage of portfolio volume held week-to-week at 8.3%. The MBA's sample for this week's survey includes a total of 49 servicers with 26 independent mortgage bankers and 21 depositories. The sample also included two subservicers. By unit count, the respondents represented about 74%, or 37.2 million, of outstanding first-lien mortgages.

It’s Taking a Really Long Time to Get a Mortgage Right Now

November 23rd, 2020|

Posted on November 23rd, 2020 Similar to the increased waiting times to get a COVID-19 test these days, it’s taking an extended amount of time to get a mortgage to the finish line. The reason is simply unprecedented demand, just like those COVID-19 tests. The more people that need one, the longer the wait, period. This is the downside to record low mortgage rates, which while undoubtedly great for homeowners, mean mortgage lenders are absolutely slammed. Average Time to Close Now 54 Days Home loans are taking a lot longer to close due to unprecedented demand It now takes 54 days for a home loan to fund, up from 44 days a year ago While purchases are taking a similar amount of time to close, refis have slowed by about two weeks Expect your refinance to take nearly two months from start to finish While you might see advertisements telling you it’s possible to get approved for a mortgage in just minutes, that’s very different than actually closing a home loan. Sure, you can get the ball rolling right away, maybe get a fairly solid mortgage pre-approval that has been run through an automated underwriting system the same day. But in terms of your loan actually making it to the funding table and getting recorded, the timeline might be closer to two months than 10 minutes. The latest Origination Insight Report from Ellie Mae revealed the average time to close all home loans increased to 54 days in October, up from 51 days in September. Broken down by transaction type, it took 48 days to close a purchase loan in October, up from 47 days in September, and 57 days to close a refinance loan, up from 54 days in September. For perspective, it took an average of 42 days to get a home loan closed six months ago, and 44 days a year ago. Back in April, a refinance took just 39 days, while a home purchase took 46 days. So while purchase loan closing times have held fairly steady, refis are taking about two weeks longer on average. In other words, be patient and expect it to take a while, regardless of all the cool new technology you’ve seen and heard about. Yes, it’s easier to get a mortgage these days thanks to digital mortgage applications, including those powered by Ellie Mae themselves, but that doesn’t necessarily mean the process goes much faster. It just means you’ll get tasks done quickly, then spend a lot of time twiddling your thumbs while home appraisals get scheduled and your loan makes it through underwriting and on to the funding department. Mortgage Rates Fall Below 3% for First Time The average mortgage rate on a closed loan fell below 3% for the first time ever The 30-year note was 2.99% in October, down from 3% a month earlier and 3.94% a year ago VA loans had an average rate of 2.75%, while conventional and FHA loans averaged 3.01% Expect this number to dip even lower as rates have fallen over the past couple months Ellie Mae also noted that mortgage rates fell below three percent for the first time since the company began tracking such data back in 2011. Again, this explains why those wait times to get a mortgage have increased so much. The report revealed that the average 30-year fixed note rate was 2.99% in October, down from 3% in September and 3.94% a year earlier. By loan type, it was 2.75% for a VA loan, and 3.01% for both a conventional loan and FHA loan. Combined, that was enough to push the average interest rate on a closed loan below 3%. My expectation is this number will continue to fall as mortgage rates have only moved lower in recent months, and the data lags. In summary, patience is a virtue right now when it comes to just about anything, including home loans. And remember, aside from it being difficult (by human nature) to wait, mortgage lenders also tend to keep rates elevated when demand is super high. So it could actually pay to wait to apply for a refinance until things calm down – the only dilemma there is if rates happen to rise during that time. About the Author: Colin Robertson Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for nearly 15 years.

Delinquencies keep falling in October, but still double 2019's rate

November 23rd, 2020|

In October, mortgage delinquencies dropped to the lowest level since March but they're still much higher than pre-coronavirus rates, especially at the seriously delinquent level, according to Black Knight. Loans at least 30 days late on their payment or already in foreclosure at the end of October descended to under 3.62 million from 3.72 million in September. While this marks the fifth consecutive month of decreases, the rate is a steep increase from the 2.04 million logged in October 2019.The delinquency rate — which does not include loans in foreclosure — fell to 6.44% from 6.66% the month prior but nearly doubled the year-ago rate of 3.39%. Seriously delinquent borrowers — those late on their payments for 90 days or more but not yet in foreclosure — also decreased monthly, to 2.26 million from 2.32 million, but significantly rose from 433,000 year-over-year. While its rate is improving, Mississippi continues to have the highest share of noncurrent mortgages — both delinquencies and foreclosures — at the state level, at 11.29%. Shares of 11.04% in Louisiana and 9.55% in Hawaii followed. Idaho boasted the lowest at 3.52%, with 4.08% in Washington and 4.24% in Colorado just behind. Pandemic moratoriums have helped to keep the distressed numbers in check and foreclosures at the lowest point since Black Knight began recording this metric in 2000. Properties in active foreclosure inched down to 178,000 in October from 181,000 in September and 255,000 in October 2019. The total foreclosure presale inventory rate decreased to 0.33% from 0.34% month-over-month and 0.48% year-over-year. Foreclosure starts, however, grew to a total of 4,700, up from September's 4,500 and down from last year's 43,900. Because interest rates kept dropping to new historic lows, prepayment activity set a new high water mark. October's monthly prepayment rate reached 3.17%, growing from 3.04% and 1.81% from September and October 2019, respectively.

October's new-home mortgage apps up over 30%, bucking usual fall trend

November 23rd, 2020|

October's mortgage application activity for newly constructed homes increased on a month-to-month basis for the first time since July, defying the typical seasonal drop-off in these transactions, the Mortgage Bankers Association said. The group's Builder Application Survey found a 5% increase in volume over September and a 32.9% increase compared with October 2019. Furthermore the average loan size recorded — $355,684 — is the highest in the survey since 2013. The application data is not seasonally adjusted."October is usually when home buying activity slows as the weather turns colder," Joel Kan, the MBA's associate vice president of economic and industry forecasting, said in a press release. "However, this fall has been a different story, with delayed activity from the spring, and more households seeking larger homes with more indoor and outdoor space, driving demand." By product type, conventional loans composed 71.8% of new-home loan applications. Among government loans, Federal Housing Administration-insured mortgages made up 17.6%, Veterans Affairs-guaranteed were 9.9% of applications, while the U.S. Department of Agriculture Rural Housing Service had a 0.8% share. The MBA estimated October's new single-family home sales ran at a seasonally adjusted annual rate of 927,000 units, the highest pace in the survey's history. This was a gain of 6.7% over September's 869,000. On an unadjusted basis, MBA estimated that there were 70,000 new-home sales in October, an increase of 4.5% from 67,000 new-home sales in September. "These results are in line with the Census Bureau's reported 6% gain in October single-family housing starts. Homebuilders are boosting production based on strong current activity and sales expectations," Kan said. In its latest origination forecast, the MBA is predicting 972,000 SAAR single-family housing starts this year, up from 893,000 in 2019. It projects that to grow to 1.12 million in 2021, 1.16 million in 2022 and 1.2 million in 2023. The MBA predicts that new-home sales will number a SAAR of 839,000 this year, up from 685,000 one year ago. Over the three years, new-home sales are expected to increase to 960,000 then 980,000 and 997,000 in 2023.

GOP readies counterpunch if Biden removes CFPB chief

November 23rd, 2020|

Many expect President-elect Joe Biden will fire Consumer Financial Protection Bureau Director Kathy Kraninger after taking office, but a fight is already brewing over who would succeed her. The Supreme Court ruled in June that the president can fire a CFPB director for any reason, but some Republicans are suggesting Biden would be constrained by statute from naming an acting director, setting up yet another power struggle over control of the agency. Even though few dispute that Biden can remove the current CFPB chief before her term expires in 2023, a former deputy to Kraninger argues that such a move would likely still provoke a legal challenge over her replacement. Brian Johnson, who served as the bureau’s No. 2 under both Kraninger and former acting CFPB Director Mick Mulvaney, says the Federal Vacancies Reform Act — which gives presidents latitude in certain cases — does not cover vacancies created by firings. “There is a strong case to be made that the Federal Vacancies Reform Act does not apply to vacancies created by removal,” said Johnson, a partner at Alston & Bird. “In that circumstance the attempted appointment of an acting director and any actions taken by that acting director could be challenged.” Even though few dispute that Biden can remove current CFPB Director Kathy Kraninger before her term expires in 2023, a former deputy to Kraninger argues that such a move would likely still provoke a legal challenge over her replacement. Bloomberg News The Federal Vacancies Reform Act, which has frequently been used by the executive branch to install acting regulatory leaders, applies when an officer “dies, resigns or is otherwise unable to perform the functions and duties of the office.” Johnson recently cited interpretations of the statute to mean that a president who fires an agency head to create a vacancy cannot bypass Senate confirmation to fill the post. "Conventional wisdom again holds that President Biden would name an acting director to run the CFPB," Johnson said in a recent post on the Alston & Bird website. "However, it is far from clear that he would succeed in doing so." Others say the statute is open to interpretation. “It’s actually a pretty hard question and something the courts are going to have to resolve,” said Andy Hessick, a law professor and associate dean for strategy at the University of North Carolina at Chapel Hill’s School of Law. “I could easily imagine when Biden becomes president, he fires the director, appoints someone as acting director, and that person is immediately sued.” Still others said the idea that the statute cannot be invoked after a firing is at odds with the law’s text and history. “An officer who has been fired is ‘unable to perform the functions and duties of the office,’” said Brianne Gorod, chief counsel of the Constitutional Accountability Center. She noted that former Sen. Fred Thompson, one of the law’s authors, had explained during floor debate that Congress chose broad language to ensure that the law covers all situations when an officer cannot perform the duties of the job. Johnson maintains that the FVRA cannot be invoked after a firing. That would mean the Dodd-Frank Act would be the default statute, and the CFPB's current deputy director, Tom Pahl, would automatically become acting director. “Tom Pahl could say that in the absence or unavailability of Kraninger, he has a claim to serve as acting director,” Johnson said. But Alan Kaplinsky, a partner and co-practice leader at Ballard Spahr, said he doubted that such a legal challenge could succeed. “I think the Republicans are mistaken,” Kaplinsky said. “Biden might be fine with letting Tom Pahl succeed, but he would still be able to put his own person in that position, though the person would have to be at the CFPB in a senior position for some time.” Kaplinsky cited a 2018 opinion from the Justice Department’s Office of Legal Counsel that claimed the Federal Vacancies Reform Act applies to firings. The DOJ weighed in on President Trump’s ability to name Matthew Whitaker as acting attorney general, replacing Jeff Sessions, who had resigned in late 2018. “Even if Attorney General Sessions had declined to resign and was removed by the President, he still would have been rendered ‘otherwise unable to perform the functions and duties of the office,’” the DOJ opinion stated. “As this Office recently explained, 'an officer is "unable to perform the functions and duties of the office? during both short periods of unavailability, such as a period of sickness, and potentially longer ones, such as one resulting from the officer’s removal.'" Of course, a smoother transition at the CFPB is possible if Kraninger resigns or Biden asks for her resignation and she complies. But many are gearing up for another legal battle given that the CFPB has been in the cross-hairs before for both temporary and recess appointments. Former CFPB Director Richard Cordray’s resignation in late 2017 and his eleventh-hour appointment of Leandra English as his successor created havoc and prompted a brief legal brouhaha over who was in charge. Alhough the White House ultimately prevailed, for a few weeks the CFPB had two different people claiming to be the rightful head of the agency. English had sued to block the appointment of Mulvaney. A judge ultimately denied her claims, ending the standoff. Last week, the Biden transition team named English to lead the review team for the CFPB, raising fresh concerns that another political fight is in the works. Some suggest that attempts to block the president’s appointment of an acting CFPB director would not make much headway. “Of all the fights that are going to take place, I would be surprised if Republicans want to use political capital on a legal challenge like this at the CFPB,” said Ashley Taylor Jr., a partner at the law firm Troutman Pepper. Kaplinsky said any wrangling could depend on who Biden picks to fill the job temporarily. One candidate floated for the acting CFPB post is Patrice Ficklin, the bureau’s current director of fair lending, who has been a senior CFPB official under Cordray, Mulvaney and Kraninger. “If it’s somebody like Patrice Ficklin who has been at the agency the entire period of time, Republicans would be hard-pressed to complain about her,” Kaplinsky said. “I don’t think we are going to end up with the kind of situation with Leandra English and Mick Mulvaney.”

Where commercial lenders may find opportunity in a distressed market

November 23rd, 2020|

While some commercial mortgage lenders will have to pull back or even exit the business as delinquencies rise, others like Gelt Financial will be looking to take advantage of the displacement. "As soon as people get worried, they tend to be more cautious than they should," said Noah Miller, vice president of the family-owned firm based in Delray Beach, Fla. "On the other hand, I think there's a lot of opportunistic lenders out there, us being one of them." Gelt lends for its own account and keeps everything on its balance sheet. The company was founded by Miller's father Jack back in 1989. The younger Miller joined Gelt this past June after serving as vice president of acquisitions and finance at Pensam Capital, a private institutional multifamily owner, operator and lender in Miami. While Gelt has become a "little more conservative" in its underwriting due to the coronavirus, the company is willing to do deals involving distressed properties, Miller said. Noah Miller "I think we're going to see a lot of buyers going after distressed properties in all asset classes," said Miller. "Retail, office and hotel will see the most [activity], but even in multifamily, you'll see some buyers going after distressed properties and that's something we want to be in front of on the lending side." Although multifamily delinquency rates are low, moratoriums on rent payments and evictions have left quite a few small and midsized landlords financially pinched. "A lot of owners have taken on massive amounts of debt and there's not a lot of room for error," Miller said. "If you take three months or six months of nonpaid rent, that's not one or two dollars, that's a lot of money. And it's going to add up quickly for a lot of these owners and bring some distress to the market." As a commercial lender and servicer, Gelt's business model includes serving customers with troubled properties, which puts the company at an advantage amid the unpredictable market conditions of today, Miller said. "For us, we're used to that," said Miller. “We're never the lender someone's coming to with a clean, easy permanent solution, so we are always seeing opportunities that are unique, whether it's an issue with a property or an issue with a borrower, where we have to act quickly and have to get creative and be flexible." Retail is one of those lending opportunities for Gelt. "We do a little of everything, we do strip centers, we do owner-occupied, we've done some vacant retail," he said. "People are buying vacant retail at a great discount and we're one of the few lenders that's willing to look at that, as long as we like the story." The election results — and the projected GOP wins in the two Georgia runoff senate races — will allow Gelt's opportunities to continue along their current path, Miller said. "With neither party controlling both branches, it seems that real estate investors are expecting the market to continue as it has for the previous few years," Miller said. "Asset classes like multifamily, self-storage and warehouse will continue to be the hot sectors, while office, retail and hospitality will lag behind, even with the advancement of a COVID-19 vaccine."

Bay Area ZIP code ranks as the most expensive in the country, again

November 23rd, 2020|

You probably knew Atherton was expensive, but did you know it was the most expensive ZIP code in the country? With a $7 million median home price tag, Atherton's 94027 remains the No. 1 most expensive ZIP code for the fourth consecutive year, according to a new report from PropertyShark. California also claimed the No. 4 priciest ZIP with 94957 in Ross and Portola Valley's 94028 at No. 5. Both Bay Area ZIPs rose in price in 2020, with Ross gaining 8% over 2019 figures to reach $3,605,000 while Portola Valley rose 7% to $3,530,000. One hundred twenty one ZIP codes make up the list of ZIPs with the 100 most expensive median sales prices, which is ranked by median sales prices between Jan. 1 and Oct. 16, 2020. San Francisco claimed 11 of the priciest ZIP codes, the highest concentration of any city, with the Bay Area home to 50 of the top 121. The Marina District's 94123 was the 36th most expensive ZIP with a $2,150,000 median sale price, followed by the Richmond District's 94118 at No. 42 with its $2,028,000 median. Prices grew in both areas, with the Marina up 7% from 2019, while the Richmond District gained a more modest 2% over year-ago figures. They were followed by the Castro's 94114 at No. 52. California has the most expensive housing market overall, with 87 of the most expensive ZIP codes nationwide. Los Angeles County has the highest concentration of expensive ZIP codes at the county level, with 23 ZIP codes. As Bay Area residents fled to Lake Tahoe amid the pandemic, home prices predictably rose. In Nevada, Glenbrook's 89413 ranked as the 35th priciest ZIP code nationally, with a 23% increase in prices over 2019. Its median climbed to $2,170,000. Nevada's Crystal Bay came in with the second-priciest ZIP code in the area, with 89402 in the state at No. 95. However, this year it actually saw a decline from 2019 prices, with a median price of $1,490,000. With about 7,200 residents, Atherton is home to tech titans like Google's Eric Schmidt, Facebook's Sheryl Sandberg and former Hewlett Packard CEO Meg Whitman. It's also popular with professional athletes including Jerry Rice, Willie Mays and Warriors star Steph Curry and his wife, Ayesha.

Access Denied: Representation

November 23rd, 2020|

The lack of Black representation in the financial services stems from two interconnected problems. Black professionals face significant hurdles once they break into the industry. And the presence of nearly 175,000 Black financial professionals displays that their widespread absence at the upper executive ranks isn’t a product of an insufficient talent pool. Featured guests: Suggestions for further reading/ways to get involved: Organizations: Executive Leadership Council, Association of African American Financial Advisors, National Association of Black Accountants, National Association of Real Estate Brokers, The National Association of Minority Mortgage Bankers of America, National Bankers Association, National Association of Securities Professionals, Blacks on Wall Street, Annual Conference of African American Financial Professionals, dfree Financial Freedom Movement, CEO Action for Diversity and Inclusion, CFP Board’s Center for Financial Planning “Job Patterns For Minorities And Women In Private Industry,” Finance and insurance industries, U.S. Equal Employment Opportunity Commission, 2018; “Labor Force Statistics from the Current Population Survey,” U.S. Bureau of Labor Statistics, 2019 “Financial Services Industry: Trends in Management Representation of Minorities and Women and Diversity Practices, 2007-2015,” U.S. Government Accountability Office, December 2017 “The Role of Signaling When Promoting Diversity and Inclusion at the Firm Level: A Financial Advisory Professional Case Study,” Advances in Business Research, 2019 “What do the Data Reveal about (the Absence of Black) Financial Regulators?,” pre-printed academic study, August 2020 “The Only One in the Room,” Bloomberg News, August 2020 “Black Executives Are Sharing Their Experiences of Racism, Many for the First Time,” The Wall Street Journal, June 2020 “She Spent 16 Years as Morgan Stanley’s Diversity Chief. Now She’s Suing,” The New York Times, June 2020 “Wells Fargo CEO ruffles feathers with comments about diverse talent,” Reuters, September 2020 “Fed wants banks to say what they’re doing to promote diversity,” American Banker, September 2020 “Fed’s Top Ranks Dominated by White Men Despite Diversity Push,” Bloomberg News, July 2020 “The Heat's on Corporate America to Reveal Racial Diversity Data,” Reuters, July 2020 “FDIC Chairman Jelena McWilliams on ‘Creating a Financial System of Inclusion and Belonging’” FDIC, August 2020 “Serving the African-American Community,” National Association of Insurance and Financial Advisors, August 2020 “AICPA Trends Report,” American Institute of CPAs, 2019 Accounting Inclusion Maturity Model, American Institute of CPAs “Strategies for CPAs to encourage positive changes in diversity,” Journal of Accountancy, July 2020 “Here’s How to Harness This Moment for Lasting Change,” George Nichols, Barron’s, July 2020 “Upward Mobility and Wealth Building for Black America: The Financial Services Industry Responds By Promoting Racial Equality and Financial Wellbeing,” The American College of Financial Services, August 2020 “Committee Finds More Work is Needed to Improve Diversity at Megabanks,” House Financial Services Committee, Subcommittee on Diversity and Inclusion, August 2019 “An Overview of Diversity Trends in the Financial Services Industry,” House Financial Services Committee, Subcommittee on Diversity and Inclusion, February 2019 hearing “Report to the Congress on the Office of Minority and Women Inclusion,” Federal Reserve, March 2020

Access Denied: Representation

November 23rd, 2020|

The lack of Black representation in the financial services stems from two interconnected problems. Black professionals face significant hurdles once they break into the industry. And the presence of nearly 175,000 Black financial professionals displays that their widespread absence at the upper executive ranks isn’t a product of there being an insufficient talent pool. Featured guests: Suggestions for further reading/ways to get involved: Organizations: Executive Leadership Council, Association of African American Financial Advisors, National Association of Black Accountants, National Association of Real Estate Brokers, The National Association of Minority Mortgage Bankers of America, National Bankers Association, National Association of Securities Professionals, Blacks on Wall Street, Annual Conference of African American Financial Professionals, dfree Financial Freedom Movement, CEO Action for Diversity and Inclusion, CFP Board’s Center for Financial Planning “Job Patterns For Minorities And Women In Private Industry,” Finance and insurance industries, U.S. Equal Employment Opportunity Commission, 2018; “Labor Force Statistics from the Current Population Survey,” U.S. Bureau of Labor Statistics, 2019 “Financial Services Industry: Trends in Management Representation of Minorities and Women and Diversity Practices, 2007-2015,” U.S. Government Accountability Office, December 2017 “The Role of Signaling When Promoting Diversity and Inclusion at the Firm Level: A Financial Advisory Professional Case Study,” Advances in Business Research, 2019 “What do the Data Reveal about (the Absence of Black) Financial Regulators?,” pre-printed academic study, August 2020 “The Only One in the Room,” Bloomberg News, August 2020 “Black Executives Are Sharing Their Experiences of Racism, Many for the First Time,” The Wall Street Journal, June 2020 “She Spent 16 Years as Morgan Stanley’s Diversity Chief. Now She’s Suing,” The New York Times, June 2020 “Wells Fargo CEO ruffles feathers with comments about diverse talent,” Reuters, September 2020 “Fed wants banks to say what they’re doing to promote diversity,” American Banker, September 2020 “Fed’s Top Ranks Dominated by White Men Despite Diversity Push,” Bloomberg News, July 2020 “The Heat's on Corporate America to Reveal Racial Diversity Data,” Reuters, July 2020 “FDIC Chairman Jelena McWilliams on ‘Creating a Financial System of Inclusion and Belonging’” FDIC, August 2020 “Serving the African-American Community,” National Association of Insurance and Financial Advisors, August 2020 “AICPA Trends Report,” American Institute of CPAs, 2019 Accounting Inclusion Maturity Model, American Institute of CPAs “Strategies for CPAs to encourage positive changes in diversity,” Journal of Accountancy, July 2020 “Here’s How to Harness This Moment for Lasting Change,” George Nichols, Barron’s, July 2020 “Upward Mobility and Wealth Building for Black America: The Financial Services Industry Responds By Promoting Racial Equality and Financial Wellbeing,” The American College of Financial Services, August 2020 “Committee Finds More Work is Needed to Improve Diversity at Megabanks,” House Financial Services Committee, Subcommittee on Diversity and Inclusion, August 2019 “An Overview of Diversity Trends in the Financial Services Industry,” House Financial Services Committee, Subcommittee on Diversity and Inclusion, February 2019 hearing “Report to the Congress on the Office of Minority and Women Inclusion,” Federal Reserve, March 2020

‘Big War’ in bonds escalates as Treasury rift puts Fed in play

November 22nd, 2020|

The tide in the $20 trillion Treasury market appears to be turning in favor of the bulls for now, with expectations growing that the Federal Reserve will boost purchases of longer-maturity debt as soon as next month. U.S. government debt just logged its best week since August after the Treasury demanded the Fed return unused funds from emergency lending programs, a request the central bank said late Friday it would comply with. The development bolstered Wall Street predictions that the Fed will unveil more monetary action when it meets in mid-December. Strategists are coalescing around the Fed tilting its $80 billion of monthly Treasury purchases more toward longer-term obligations in a bid to buoy the economy as coronavirus cases surge and as fiscal-stimulus talks have stalled out. That backdrop is helping cap long-term rates, in a blow to the reflation trade in bonds — namely, bets on a steeper yield curve, which have struggled even after positive vaccine news. Jerome Powell, governor of the U.S. Federal Reserve, listens during a Senate Banking Committee hearing in Washington, D.C., U.S., on Thursday, June 22, 2017. Top U.S. banking regulators are sprinting to ease the Volcker Rule, stress tests and other constraints on Wall Street after the Trump administration issued a long list of proposals last week for rolling back post-crisis financial rules. Photographer: Andrew Harrer/Bloomberg Andrew Harrer/Bloomberg “There’s a big war going on in bonds,” said Jack McIntyre, who helps oversee about $62 billion at Brandywine Global Investment Management. “With the vaccine news bonds should be selling off, but that hasn’t held. The market’s expectations for Fed action is what is keeping bonds from selling off.” Longer maturities were last week’s best performers. The yield curve from 5 to 30 years, which on Nov. 4 reached its steepest level since 2016, has flattened to levels last seen in September. The momentum toward flattening picked up Friday as traders prepared for a holiday-shortened week and a total of nearly $200 billion of 2-, 5- and 7-year auctions, including floating-rate notes, crammed into Monday and Tuesday. Meanwhile, an above-average month-end index extension may add impetus for the long-end to outperform through the end of November. Benchmark 10-year yields are at 0.82%, after looking like they were about to break the key 1% mark for the first time since March in the wake of the U.S. election. And net bearish wagers in bond futures by so-called leveraged accounts have declined from a record level seen in October. JPMorgan Chase & Co. is among firms predicting the Fed will use its Dec. 15-16 meeting to extend the maturity of its purchases of U.S. Treasuries to create more of a catalyst to reduce longer-term yields. The Fed currently buys Treasuries across a range of maturities without a skew toward one sector. Andrew Hunter, an economist at Capital Economics, wrote in a note Friday that Treasury’s action regarding emergency programs shouldn’t have a major impact on the economy. But he said it still could raise the likelihood that the Fed provides more stimulus, most likely by increasing the pace of its monthly asset purchases. Treasury Secretary Steven Mnuchin on Friday said his agency and the Fed have enough fire-power to continue to support the economy. He’s bidding to revive stimulus talks with congressional Democrats by proposing the use of untapped Fed relief funds as part of a new aid package. The tug of war in Treasuries, which are up about 8% in 2020, according to a Bloomberg Barclays index, is likely to extend through year-end, even if the intensifying pandemic appears to be swaying investors right now. A flurry of options trades has emerged betting the 10-year yield will fall to 0.7% by late December. But many firms are looking beyond the short-term economic headwinds to see a brighter 2021 that pushes up long-term yields. Charles Schwab & Co.’s Kathy Jones sees potential for the 10-year to reach 1.6% next year. “People are nervous about the virus with a lot of states imposing partial lockdowns and school closings,” said Elaine Kan, a portfolio manager at Loomis Sayles & Co. “So yields are probably going to be rangy and the more we have negative headline news, the flatter the curve will be.”

FHFA releases final capital rule, mortgage rates hit new all time low, CoreLogic drama continues and more of the week's top news

November 20th, 2020|

Steven Mnuchin, U.S. Treasury secretary, wears a protective mask while speaking to members of the media after a meeting with Senate Majority Leader Mitch McConnell, a Republican from Kentucky, not pictured, at the U.S. Capitol in Washington, D.C., U.S., on Thursday, July 23, 2020. The Trump administration and Senate Republicans have a "fundamental agreement" on a GOP plan for another round of virus relief after the White House dropped the idea of including a payroll tax cut. Photographer: Al Drago/Bloomberg Al Drago/Bloomberg

Hotel, retail loans fuel surge in CMBS delinquencies

November 20th, 2020|

Coronavirus-related disruptions at retail and hotel properties are fueling a surge in conduit CMBS delinquencies, according to Moody's Investors Service. The rating agency said in a Nov. 19 report on the U.S. CMBS market that the increase stemmed from newly delinquent large retail and regional mall loans. "With continued cash flow issues from the ongoing health crisis, we expect the distress to continue in the coming months," Moody's said. As new coronavirus infection rates reach all-time highs, prospects for a second round of federal aid to ailing businesses remains uncertain. Moody's said that its CMBS conduit loan Delinquency Tracker (DQT) increased to 7.77% in October from 7.51% the previous month, reaching the second highest rate since November 2013. The October rate, however, remains below the post-crisis peak of 7.95% in July, and well below the previous peak of 10.06% in July 2012. The 26 basis points jump represents the third largest monthly increase since May 2017, Moody's said. The rating agency's Specially Serviced Loan Tracker (SSLT) increased to 9.81% in October from 9.68% the month before. Specially serviced loans are typically those in which payments are 60 days or more past due and are seen as being at risk for default. The outstanding balance of those loans, according to Moody's, increased to $37.77 billion in October from $37.17 billion in September, with hotel and retail loans accounting for 76.21% of the aggregated total. "Six of the 10 performing loans newly transferred to special servicing are secured by retail, two are secured by hotel and the other two are secured by office and multifamily each," the Moody's report says. It adds that retail properties made up 44.9% of delinquent loans that were 60 days or more past due, and hotel properties made up 35.1%. Hotel and retail property loans also drove increases in forbearance and loan modifications stemming from COVID-19-related business disruptions. Moody's said that 3.6% of CMBS conduit loans received COVID-related modifications, of which loans secured by hotel and retail properties made up 90%. Large Loan / Single Asset Single Borrower (LLSASB) loans made up 7.8% of all COVID-related modifications, of which hotel and retail properties made up 98%, according to Moody's. "Within the conduit universe, 17.3% of all hotel loans and 3.6% of all retail loans have received recent loan modifications," the report said. "Within the LLSASB universe, 24.0% of all hotel loans and 13.2% of all retail loans have received recent loan modifications."On a more positive note, Moody's said, the share of loans less than 60 days delinquent has been largely flat, "potentially signaling that the most stressed assets as a result of the initial coronavirus-related interruptions have been completely realized."The rating agency cautioned, however, that the signal is "highly contingent" on factors such as debt relief agreements, government support, and a successful resolution to the health crisis that enables regional economies to open safely.

Mortgage rates drop again, housing hits the gas

November 20th, 2020|

For 17-straight weeks, the 30-year fixed-rate mortgage interest rate has averaged below 3%. This week the Freddie Mac 30-year fixed-rate mortgage average dipped to another historic low, the thirteenth this year, hitting 2.72%. Freddie Mac’s Chief Economist Sam Khater cited weak consumer spending as the reason for the decline.  Historically low rates giving buyers more spending power, combined with the COVID-related push to buy a home with more space instead of renting, have resulted in a surge of homebuying activity. Continue reading Mortgage rates drop again, housing hits the gas at Movement Mortgage Blog.

Mortgage volume has 'banner quarter' in 3Q, hitting a 13-year high

November 20th, 2020|

In the third quarter, mortgage lending shot up 45% from the year before and 17% quarterly to the highest amount of originations since 2007, according to Attom Data Solutions. Consumers came out in droves to lock in record-low interest rates. Overall, 3.25 million home loans were completed in the quarter. Purchase originations accounted for 1.05 million of those, with rises of 25.4% annually and 28.1% quarterly. Refinances held the largest share of originations, at 1.96 million loans, up 84.5% from a year ago and 15.7% from the second quarter. Home equity lines of credit — which the coronavirus has negatively impacted — decreased to a total of 244,555. That’s the fewest since 2014 and reflects a decrease of 28.7% year-over-year and 7.1% quarter-over-quarter."The home-loan industry got even busier in the third quarter of 2020, with the housing market still operating as if the recession brought on by the pandemic didn't exist," Todd Teta, chief product officer at Attom Data Solutions, said in the report. "Buyers and owners, lured by low mortgage rates, kept lining up for loans at levels not seen in more than a decade. The one difference in the third quarter was that purchase lending [growth] beat out refinance activity for the first time in more than a year." The amplified lending generated $974.1 billion, jumping 52% year-over-year and 20% quarter-over-quarter, marking the most borrowed since 2005. Purchases brought in $336.3 billion, refinances $587.6 billion and HELOCs about $49.9 billion. While Teta described the activity as "another banner quarter for lenders," he exercises caution, noting "the pandemic and other factors could come together and halt the market boom." Among housing markets with populations over 1 million, the largest quarterly growth in purchases came in Boston (up 75.3%), Hartford, Conn., (up 52.6%) and San Jose, Calif., (up 49.8%). Only Baltimore (down 7%) and Pittsburgh (down 3.6%) fell from the second quarter. The largest quarterly rises in residential refis happened in Tucson, Ariz., (up 38.4%), Virginia Beach, Va., (up 37.8%) and Richmond, Va., (up 35%). Pittsburgh led the refi declines, falling 29.5%, followed by drops of 14.8% in Rochester, N.Y., and 9.6% in Detroit. Mortgages backed by the Federal Housing Administration totaled 336,272. That made up 10.3% of all residential originations, down from 13.2% year-over-year and up from 9.4% from last quarter. Loans backed by the U.S. Department of Veterans Affairs compiled 283,216 mortgages. The VA share of 8.7% declined slightly from 8.8% a year ago and inched up from 8.5% in the second quarter.

New Residential announces IPO for its mortgage business, NewRez

November 20th, 2020|

New Residential Investment confidentially filed a draft registration statement with the Securities and Exchange Commission on its intention to spin off its NewRez subsidiary in an initial public offering, the company announced. "Management had discussed this possibility on its third quarter earnings call so this filing is not a surprise," said Bose George, an analyst with Keefe, Bruyette & Woods in a note on the move. "At that time, the company also noted that an IPO could be a positive for New Residential's valuation since a mortgage bank could trade at a premium to book value." The common stock of New Residential, which is a real estate investment trust that also owns mortgage-backed securities, was trading at 80% of its third quarter book value of $10.86 per share before the market opened on Nov. 20, George pointed out. But even after the announcement, New Residential was trading below that mark, opening on Friday at $9.30 per share. During New Residential's third quarter earnings call on Oct. 29, CEO Michael Nierenberg pointed to the mortgage companies that went public in the weeks prior. "When we look at where those are trading, I am not going to compare us to Rocket, which trades at anywhere from 12 times to 16 times EBITDA, but when we look at ... where this company could trade as a standalone company in the public markets, you know the comps are anywhere from 5 times to 6 times," he said. "The one thing we know what we believe is that the sum of our products is greater than the whole. And we think that the value of the operating business is not captured in our equity price." Besides Rocket, Guild Mortgage completed its IPO, but two others, Caliber and AmeriHome, delayed theirs because of market conditions. Both United Wholesale Mortgage and Finance of America announced mergers with publicly-traded special purpose acquisition companies. LoanDepot also filed a confidential statement with the SEC in a second attempt at an IPO, while Better.com, following a private equity raise, is reportedly considering an IPO in 2021. NewRez is a mortgage lender and servicer that was acquired in New Residential's purchase of Shellpoint Partners in 2018, where it operated as New Penn Financial. In October 2019, the company was the successful bidder for bankrupt Ditech's forward mortgage business. Since the pandemic started, NewRez has been the bright spot for New Residential. The company earned $77.9 million in the third quarter, compared with an $8.8 million loss in the second quarter. During the quarter that ended on Sept. 30, the origination business earned $236.1 million, while servicing earned $24.2 million. New Residential originated $18.1 billion in the third quarter, up from $8.3 billion in the second quarter and $5.7 billion in the third quarter 2019. The number of shares of common stock to be sold has not yet been determined, New Residential said in a press release. The initial public offering is expected to take place after the Securities and Exchange Commission completes its review process, subject to market and other conditions.

Don’t Let Your Current Lender Talk You Out of a Mortgage Refinance

November 20th, 2020|

Posted on November 20th, 2020 What I’ve seen and heard through the years is certain lenders not being so forthcoming with existing customers wanting to refinance their mortgage. For example, when a homeowner goes to inquire about the “awesome low rates,” their first instinct may be to pick up the phone and call the lender who gave them their current home loan. Or perhaps they make contact with their loan servicer, the company that collects their mortgage payments each month. The problem is some lenders may respond with, “you’ve got a killer rate already.” Or, “why would you refinance, your mortgage rate is already the lowest in history!” They’ll say this in their most convincing tone, though it’ll be pretty clear they’re lying through their teeth, assuming your rate is much higher than today’s going rates. So why are they throwing up roadblocks, as opposed to quoting you a new low rate and getting your loan application started? Well, it could be that it’s not in their best interest, regardless of the fact that it could be in your benefit. Your Mortgage Rate Could Be Substantially Lower Mortgage rates have hit 13 record lows so far this year And they might not be done going down yet! You need to keep an eye on rates to see if a refinance could be beneficial, even if you recently refinanced Always take the time to look beyond your current lender/loan servicer for pricing At last glance, mortgage rates have hit 13 new all-time record lows this year, per Freddie Mac. And we’ve still got another 40 days or so left until 2021. For perspective, a homeowner may have refinanced into a 30-year fixed back in January 2019 when rates were close to 4.5%. Today, that same loan scenario may be pricing closer to 2.75%. That’s a whopping 1.75% difference in rate, surely convincing enough to refi. Heck, even if you refinanced your mortgage back in January of this year, there’s a good argument to give it another look and refinance a second time. At the start of the year, the 30-year fixed averaged 3.60%, which puts it nearly a point higher than today’s levels. Just look at that chart above! [The Refinance Rule of Thumb] In other words, if you got your mortgage two years ago, or even just six months ago, when the 30-year fixed was hovering close to 3.5%, you could be overpaying on your mortgage. Today, lenders are dishing out 30-year fixed mortgages around 2.75%, so clearly a refinance can benefit a ton of homeowners, even those who refinanced during a period they thought was the lowest point EVER. Now who exactly is telling borrowers not to bother with another refinance? Well, this tends to be more of an issue for those who call the bank their home loan got sold to, as it wouldn’t really benefit the lender to offer a lower rate. Or if you revisit your loan with the bank or mortgage broker who just refinanced you a few months ago, they may be at the mercy of commission recapture (essentially they forfeit their earnings if you refi too quickly). Simply Shop Your Mortgage Elsewhere Loyalty often doesn’t get you anywhere in the mortgage business or elsewhere Take the time to get multiple mortgage quotes from a variety of lenders Even if your original lender/broker is willing to help, get other quotes as well to compare pricing Also watch out for those who are constantly telling you to refinance If you encounter any resistance when inquiring about a refinance, it’s not the end of the world, not by a long shot. For example, if you call your lender and ask about a rate and term refinance, thinking it could save you money, they may tell you to not to bother. No worries. All you need to do is call a different bank, credit union, or mortgage broker and have them price your loan instead. It’s pretty darn simple really. Your current lender may not want to lift a finger to help you save money, but there will be many others champing at the bit to get you that refinance. So don’t be discouraged if you are told otherwise. Simply say thank you, hang up the phone, and get in touch with other lenders. After all, if you could stand to save hundreds to thousands of dollars annually, it’d be pretty imprudent not to inquire about a refinance. Heck, even if your current lender does offer to refinance your mortgage, you should shop around. Not shopping means you won’t know what else is out there. It’s something you should do no matter how wonderful or easy to use your current lender is. They may have had the best pricing last year or six months ago, but not today. This is why I recently said if your lender reaches out, reach out to other lenders. At the same time, be sure it makes sense to refinance your mortgage. It isn’t always going to be the right move for a variety of different reasons. Lastly, watch out for overzealous loan officers looking to serially refinance your mortgage every time rates drop by some minimal amount, which may benefit their pocket but not yours. Read more: When to refinance a mortgage?

Realtors apologize for role in housing racial discrimination

November 20th, 2020|

The real estate industry contributed to racial inequality and segregation in housing, an “outrage” that merits a historic apology, the incoming president of the National Association of Realtors said. “What Realtors did was an outrage to our morals and our ideals,” Charlie Oppler said Thursday during a virtual fair-housing summit hosted by the group. “It was a betrayal of our commitment to fairness and equality.” It was the first time the association, with 1.4 million members, has apologized for its role in fomenting housing discrimination, a legacy that has contributed to widening economic and racial inequality. The homeownership rate among Black Americans was 46% as of Sept. 30, compared with 67% for all U.S. households and 76% for Whites, Census Bureau data show. The NAR opposed passage of the Fair Housing Act in 1968 and allowed exclusion of members based on race or gender, according to a statement from the group. That discrimination was part of systemic residential racial segregation, led by the federal government and supported by the U.S. banking system through practices like redlining, the NAR said. “We can’t go back to fix the mistakes of the past, but we can look at this problem squarely in the eye,” said Oppler, chief executive officer of Prominent Properties Sotheby’s International Realty in Franklin Lakes, New Jersey. “And, on behalf of our industry, we can say that what Realtors did was shameful, and we are sorry.” Home equity is the biggest source of household net worth, according to Federal Reserve data, putting minorities at a disadvantage generation after generation. Black homebuyers continue to face hurdles, such as lower credit scores and less money for down payments, which limit their ability to get on the American Dream escalator of home ownership. A “Black tax” averages $13,464 during the life of their home loans to cover such costs as mortgage insurance and higher interest rates, according to a study by a Massachusetts Institute of Technology group. An apology from the National Association of Realtors is long overdue and falls short of the need for reparations to compensate African-Americans for the financial disadvantages caused by discrimination, according to Donnell Williams, president of the National Association of Real Estate Brokers, an industry association that promotes Black homeownership. His group was founded in 1947 because the Realtors “wouldn’t allow us in the club,” he said “The difference of Black-American wealth and White wealth is tied directly to homeownership,” Williams said in a phone interview. “They manipulated the entire system.” While the apology is welcome, the Realtors are in a position to take action by promoting measures to reduce the racial homeownership gap, such as improving the supply of affordable housing, promoting equitable financing and providing counseling for mortgage-ready minority buyers, according to Michael Neal, a senior research associate at the Urban Institute. “As the industry comes to grips with its past, words must be accompanied with action,” Neal said in an email. “My hope is that their actions will spur other key housing sectors to make the additional investments needed for change.” The Realtors recently implemented a new fair housing campaign and a partnership with the U.S. Chamber of Commerce’s Equality of Opportunity Initiative, to ensure they “lead in the fight against housing discrimination,” according to the group’s statement. “Now we are talking about expanding the Fair Housing Act in ways we could not have imagined perhaps several decades ago,” Bryan Greene, the NAR’s director of fair housing, said in the statement.

People on the move: Nov. 20

November 20th, 2020|

Georgia Atlanta First Community Mortgage has named Antonio Roundtree vice president of community engagement. He joins the company to help launch and foster community development, extending its multicultural lending initiative division. Roundtree has worked in banking, last focusing on Rutherford County, Nashville and extending to Knoxville, Tenn. Illinois Chicago Interfirst Mortgage Co. has named Kendall Berry vice president of wholesale operations, Nadina Bradescu vice president of retail operations and Russ Therrell vice president of underwriting. Berry previously worked for Interfirst from 2010 through 2017 as AVP of client services. She has also served as an account manager at Paramount Residential Mortgage Group Inc. and a senior underwriter at Ethos Lending. Bradescu previously worked with Interfirst from 2009 to 2017, most recently as manager of retail operations. During her career she also served as mortgage operations manager at C&R Mortgage. Therrell joins Interfirst with more than 20 years of experience in the mortgage industry. He previously served as vice president and underwriting manager at Affiliated Bank.New York Uniondale Arbor Realty Trust Inc. has appointed Arthanais Williams as managing director, affordable housing. He will be responsible for establishing, developing and managing Arbor's multifamily affordable financing platform across the agency and structured product lines. Prior to his current position at Arbor, Williams served as relationship manager, targeted affordable housing at Freddie Mac. Oregon Bend Guaranteed Rate has opened a new branch in Bend, naming Tim Floyd as the location's manager. He joined Guaranteed Rate in 2018 and previously served as renovation leader for its Western division. Along with Floyd, the new branch also added Cory Benner and Douglas Amend as vice presidents of mortgage lending. Texas Houston Stewart Title has hired Lee Wilson as the new director of operations for Los Angeles and Ventura counties. Prior to joining Stewart, Wilson spent his entire career at First American Title, working his way from title officer, to chief title officer for Los Angeles County, and most recently serving as the title operations manager for Southern California for the last 12 years.

Peak pipeline management takes more than commitment

November 19th, 2020|

While community banks have typically enjoyed a steady, but smaller, share of the overall mortgage origination business as compared with their independent lender counterparts, record-low interest rates have skyrocketed both purchase and refinance volume across the board. Increased demand translates into higher profits — a welcome sight on any bank’s balance sheet. However, given the level of volumes at play in the current market, banks need to focus on managing mortgage pipeline risk to ensure the long-term health and stability of their mortgage operations. Many banks choose a bulk mandatory commitment model to take advantage of the better pricing available over best effort, and it is easy to see why. On average, mandatory delivery provides a quarter-point improvement or more over best effort pricing, and given bank executives’ desire to see steady returns, bank mortgage divisions would naturally opt for the delivery mechanism that yields a greater return on investment. As is often the case, greater returns also yield greater risk, and many banks typically manage the risk of mandatory execution using a combination of institutional/loan-level knowledge, spreadsheets and, in the case of experienced secondary marketing managers, gut instinct. In an average market, this strategy works, as the size of the pipeline is such that the secondary/capital markets department can use the “eyeball test” or a spreadsheet to manage the bank’s position on its commitments. However, the current market is anything but average, and when volumes reach the point where the number of loans exceeds the department’s ability to track each one individually, the “eyeball test” is no longer sufficient to ensure the bank meets its commitments and avoids the financial consequences that result from failure to deliver loans as promised. To truly manage the risks associated with mandatory execution, banks must invest in more sophisticated modeling, reporting and analytics to track market movements, accurately calculate expected as well as actual pull-through rates and ultimately maximize profitability. For example, when a lender fails to make good on a mandatory commitment, Fannie Mae and Freddie Mac typically charge a pair-off fee. Once upon a time, this only occurred when there was a loss. However, the GSEs will now pay lenders’ pair-off gains when applicable. In either case, the GSEs take out a one-eighth of a point administration fee for mandatory pair-offs, and for bank lenders using the “eyeball test” method, this results in significant inefficiencies even when receiving a pair-off gain, since the GSEs are taking out a 12.5 basis point administrative fee. Utilizing predictive analytics and modeling, bank lenders can not only avoid mandatory pair-offs (both positive and negative) but also take advantage of pay-ups for specific loan groups/types that are in high demand, such as low-balance loans, by moving from bulk commitments to committing loans on an more individualized basis. The pay-ups available for individual commitments can be tremendous, ranging from 30 to 300 basis points or more, and the total cost of implementing a system to help achieve these pay-ups is typically less than six basis points, which is less than half of the admin fee the GSEs charge for pair-offs. Furthermore, a bank can easily cover the cost of such a system with only two small-balance (under $225k) loan pay-ups per month. While $10 million in monthly production is the oft-quoted benchmark, banks can begin to realize the benefits of a more sophisticated mandatory execution strategy with pipelines as small as $5 million, as it not only helps maximize profitability but also provides the bank with flexibility when consumers need to change loan programs or lock pricing structures after the loan has been locked or require a rate lock extension. Furthermore, a more sophisticated mandatory execution strategy enables banks to be more strategic in retaining versus releasing servicing if desired by allowing the bank to make these decisions after loans have closed. With the massive amount of mortgage business currently available, banks would be doing themselves a serious disservice by not fully capitalizing on this opportunity. Simply put, eschewing the “eyeball test” in favor of advanced modeling, reporting and analytics is an overall better way to manage mandatory execution risk, as it allows the bank to more reliably predict monthly revenue from loan commitments, avoid costly mandatory pair-offs and maximize the overall profitability of its loan sales.

Treasury wants CARES Act programs to expire. Fed says not so fast.

November 19th, 2020|

WASHINGTON — Treasury Secretary Steven Mnuchin called on the Federal Reserve Thursday to let several of its emergency lending programs expire at yearend, and return unused funds appropriated by the Coronavirus Aid, Relief and Economic Security Act to backstop the facilities. But in a statement, the Fed argued for letting the programs continue. “The Federal Reserve would prefer that the full suite of emergency facilities established during the coronavirus pandemic continue to serve their important role as a backstop for our still-strained and vulnerable economy,” the central bank said. In a letter to Powell, Mnuchin said returning the unused money backing credit programs established under the Fed's 13(3) emergency authority “will allow Congress to re-appropriate $455 billion.” Treasury Secretary Steven Mnuchin said it was legislators’ intention for the Federal Reserve to return unused CARES Act funds by yearend. But Fed Chairman Jerome Powell made remarks earlier this week suggesting that he didn’t believe the Fed should shut down its emergency facilities just yet. Bloomberg News The Fed, along with Treasury, established nearly a dozen emegency lending programs after the onset of the coronavirus to grease the wheels of credit markets and ensure banks were still able to lend to their customers. The programs are largely set to expire at the end of next month, but some have called for the Fed and Treasury to extend them. If the Fed returns the CARES Act funds, it would shut down the Primary Market Corporate Credit Facility, the Secondary Market Corporate Credit Facility, the Term Asset-Backed Loan Facility, the Municipal Liquidity Facility and the Main Street Lending Program on Dec. 31. Mnuchin said that was legislators' intention. “I was personally involved in drafting the relevant part of the legislation and believe the congressional intent … was to have the authority to originate new loans or purchase new assets (either directly or indirectly) expire on December 31, 2020,” Mnuchin said. Mnuchin also asked that the Fed approve a 90-day extension of the Commercial Paper Funding Facility, the Money Market Mutual Fund Liquidity Facility, the Primary Dealer Credit Facility and the Paycheck Protection Program Liquidity Facility, all of which were funded without CARES Act appropriations. The move comes after Powell made remarks earlier this week suggesting that he didn’t believe the Fed should shut down its emergency facilities just yet. “I don’t think the time is yet, or very soon," he said about closing the 13(3) programs at an event hosted by the Bay Area Council. However, Mnuchin did say he would be open to restarting any of the facilities if the conditions were warranted. “In the unlikely even that it becomes necessary in the future to reestablish any of these facilities, the Federal Reserve can request approval from the Secretary of the Treasury,” he wrote. The back and forth between Fed and Treasury comes amid heightened attention to whom President-elect Joe Biden picks to be his Treasury secretary. On Thursday, Biden indicated he was close to announcing his decision. Fed Gov. Lael Brainard is rumored to be among the leading candidates. “You’ll soon hear my choice for Treasury. I’ve made that decision, we’ve made that decision, and you’ll hear that either just before or just after Thanksgiving,” Biden said. “You’ll find it is someone who I think will be accepted by all elements of the Democratic party, the progressive to moderate coalitions.”

Home sales blast off for record month in October, hottest of 2020

November 19th, 2020|

The widening chasm between housing supply and demand drove record sales growth and caused prices to hit a seven-year high in October, according to Redfin. Home sales surged 23.9% year-over-year — the largest annual spike since Redfin started tracking the data in 2012 — while rising 3.8% from September. The high level of activity pushed median prices to $335,900, up 14.2% from the year before — the second largest growth since 2012 — and 0.9% month-over-month. For-sale inventory plummeted 22.1% and 1.4% from year-ago and month-ago rates, respectively, to a total of 1.66 million units. "October very well may have been the hottest the housing market gets this year," Redfin chief economist Daryl Fairweather said in the report. "Buyers who stepped away from the market at the beginning of the pandemic had been making up for lost time, which sent prices skyrocketing."Home sales rose annually in all 85 of the largest housing markets across the U.S., led by 71.3% in Bridgeport, Conn., 54% in Elgin, Ill., and 53.9% in New Haven, Conn. With the exception of a 0.8% annual decrease in Honolulu, all other metros logged growth in median prices. Bridgeport saw the largest at 39.4%, followed by 30.1% in Memphis, Tenn., and 23.5% in Newark, N.J. Only three markets posted yearly increases in properties for sale. San Francisco climbed by 48.4%, New York by 25.4% and San Jose, Calif., by 3.7%. That tracks with reports of a pandemic and remote work-induced exodus from major cities. Allentown, Pa., had the largest drop in for-sale supply with 50.2%, trailed by 49.4% in Kansas City, Mo., and 49.1% in Salt Lake City — the most competitive metro area in both September and October. While the start of the fourth quarter avoided its typical annual slowdown, 2020's been anything but typical. COVID-19 infection rates and subsequent restrictions are mounting in November, causing a dampened outlook for the coming months. "Given that we are entering a winter wave of the pandemic, housing demand will likely lose a bit of steam until 2021, cooling the market from red-hot to just hot," Fairweather continued. "If you are a seller, it’s probably a good idea to wait until the new year to list your home, but if you are a buyer, right now is a short window of opportunity where competition likely won’t be as intense as it was in October.”

Zest, Freddie Mac officially testing AI use in underwriting

November 19th, 2020|

Freddie Mac will use Zest AI’s machine learning tools as a means of improving models the government-sponsored enterprise uses to assess mortgage risk, according to an announcement issued by the technology vendor on Wednesday. The move follows a report last year that the GSE was looking into using technology from Zest, a provider of artificial intelligence-driven risk models previously known as ZestFinance. Lenders are cautiously optimistic about the use of AI in credit decisions and underwriting. More variables can be included when using it, potentially expanding the universe of borrowers that can be qualified. The software makes quick decisions and is designed to speedily digest new information, so that it can adapt to changing conditions — a particularly valuable skill in 2020. “It’s able to withstand the market shifts and turns that are occurring right now in this pandemic,” said Zest AI CEO Mike de Vere, who said that the technology’s ability to incorporate new experience into models much more quickly than traditional methods has been particularly appealing to clients this year. When asked about concerns that the use of AI in underwriting could have unintended consequences with implications for fair lending compliance, he noted that the company has taken several steps to address this. Among other things, the company has a stated mission to facilitate fair and transparent credit decisions, it has severed ties with payday lenders, and it has worked checks and balances into its models. Zest has two machine-learning models and they address economic return as well as inclusiveness, he said. Freddie is keeping a close eye on the inclusivity of Zest models. “Freddie Mac is always evaluating technology solutions that meet our high standards and support our continued commitment to expanding homeownership opportunities responsibly, especially among first-time homebuyers, communities of color, and those living in underserved markets,” said Michael Bradley, Freddie Mac’s senior vice president of modeling, econometrics, data science and analytics for the GSE’s single-family business, in Zest’s press release. A recent survey conducted by The Harris Poll on Zest’s behalf suggests that the majority of consumers think that technology that takes in multiple data points is a net positive for inclusivity. Zest’s CEO previously worked for The Harris Poll. A little over half or 51% of consumers would prefer a bank to use machine learning rather than humans to approve loans, according to the survey. The poll also found 57% of respondents would share more personal data if it resulted in a fairer credit decision and that 62% wish there was a way to show they were credit-worthy beyond credit scores. Donna Corley, executive vice president and head of single-family at Freddie Mac, served as single-family chief risk officer before being promoted earlier this year. Since she has worked closely with the GSE’s data scientists and modeling teams, some speculate that she might pursue advances in these areas as a part of her new role. Lenders have long called for updates to the GSEs’ risk management operations and the credit scores they use, and they have been evaluating alternatives to the latter. However the GSEs’ regulator and conservator, the Federal Housing Finance Agency, recently released a report indicating that the GSEs will continue to use the Classic FICO score for now. “FHFA expects it will take the Enterprises an additional year to complete the validation and approval process of the remaining credit score models,” the agency said in a press release issued earlier this month.

Lenders predict as much as a 30% rise in hybrid closings in 2021

November 19th, 2020|

COVID-19 threw the world a giant curveball in 2020. For the mortgage industry, the pandemic meant adapting to an all-digital environment while handling the deluge of record-breaking volume charged by plunging interest rates. Lending technology accelerated by years over the course of the eight months since quarantine measures began. Looking ahead, industry advancements for 2021 could be less about novel innovation and more about building on the progress of the past year, with hybrid digital closings taking up a larger share of mortgage transactions. "Last year there were about 129,000 loans executed digitally. We have recently been running at as much as 50,000 per week. That's 1 million annualized," Brian Madocks, CEO of eOriginal, said in an interview. "It's been a huge leap forward in terms of total loan volume and a way greater number of participants with more and more coming on. We expect 2021 to be the continuation of that, because it's still in the early stages of digital conversion for the mortgage industry." Real estate brokerage Realogy, too, reported that its RON mortgage closings in the first half of 2020 were nearly triple the amount logged for all of 2019. A total of 25 states have permanent RON laws in place as of Nov. 13, growing from 14 at the beginning of 2020, according to the National Notary Association. Three more — Alaska, Colorado and Hawaii — will have theirs go into effect Jan. 1, 2021 and Louisiana's will be live Feb. 1, 2022. Aside from California and South Carolina, the rest approved temporary emergency authorizations."I expect at least 30% of all U.S. closings in 2021 to be hybrid in nature, driving massive efficiency across the board and creating a much improved borrower experience," said Aaron King, CEO of Snapdocs. "On the other hand, the lack of standardization means RON will continue on its 20-year voyage of still not making into the mainstream." While remote notarization still has a ways to go, it's an important tool for conducting transactions while social distancing measures remain in place. While some state governments take time in passing RON legislation, a growing list of companies offer their own capabilities or have integrated with one of the eight MISMO-certified providers — a group that doubled in November from September. Lending tech platform eOriginal, for example, recently partnered with Notarize and Nexsys to build out its RON Hub. Linking the numerous pieces of the home financing process makes it less disjointed for consumers. In turn, making loan obtainment easy for borrowers drives business for lenders. "If we're to improve the mortgage process in 2021, technology must play a critical role in connecting all parties," King said. "Lenders that can only close on paper will be left behind next year, and a number of companies will fail because of their inability to address the fragmentation and complexity of all numerous parties involved." Many industry experts predict lending in 2021 — both the activity and technology — will be a redux of 2020, continuing the frothy demand and advancements in digitization. Fannie Mae's latest forecast shows interest rates to stay below 3% as origination volume tapers but still stays close to $3 trillion. The dearth in for-sale inventory is also supposed to turn around behind the recent bolstering of housing starts. Fannie projects starts to grow 8% annually in 2021, another factor that should boost lending activity for the year. The Mortgage Bankers Association predicted in November that the increased construction, combined with the refinance boom of 2020, will lead to a record year for purchase originations in 2021. With the pipeline likely to stay on full blast, lenders and servicers need to make their tech stacks as efficient as possible. "2021 is going to separate the wheat from the chaff when it comes to those who claim they're building tech-enabled companies and those who actually are," said Karl Jacob, CEO of LoanSnap. "You just can't hire your way out of the mess a lot of these mortgage companies got themselves into. Given interest rates are going to stay low, I worry 2021 is going to be this reckoning around companies that can actually thrive in an environment where volume continues to stay extremely high."

Mortgage rates drop on concerns over economy and the coronavirus

November 19th, 2020|

Mortgage rates plummeted this week to a new all-time low, as poor economic news as well as concerns about a resurgence of the coronavirus outweighed news about a second vaccine emerging. The 30-year fixed rate mortgage fell 12 basis points to an average of 2.72% from 2.84% last week, according to the Freddie Mac Primary Mortgage Market Survey. That is 6 bps lower than the previous record set just two weeks ago. For the same week last year, the 30-year FRM averaged 3.66%. "Weaker consumer spending data, which accounts for the majority of economic growth, drove mortgage rates to a new record low," Sam Khater, Freddie Mac's chief economist, said in a press release. "While economic growth remains unstable, strong housing demand continues to have a domino effect on many other segments of the economy." Zillow's rate tracker, which reflects mortgage offers made to consumers on its site, dropped to lows last seen in August, Matthew Speakman, an economist for the company, noted in his weekly commentary issued Wednesday evening. "Treasury yields, which generally drive mortgage rate movements, initially ticked up following news of another coronavirus vaccine contender, but the upward movement was only a fraction of the surge that followed a similar announcement from the week before," Speakman said. "The uptick was also quickly erased by more sobering statistics regarding the spread of COVID-19, questions about distribution challenges for an approved vaccine, as well as a disappointing reading on U.S. retail sales." The 10-year Treasury yield peaked on Nov. 9 at 0.975% after Pfizer's announcement about a vaccine, up over 19 bps from its low point on Nov. 6. After the yield started trending downward later last week, the announcement of a second vaccine from Moderna this past Monday only boosted the 10-year to a daily high of 0.921%, an increase of 5 bps from the low point on Nov. 13. Since then, the yield started to decline again, opening on Thursday at 0.857%. "The lackluster results of the latter report inserted fresh pessimism into markets regarding the state of economic recovery and drove investors to seek safer assets, pushing mortgage yields downward. Such a muted reaction to the latest vaccine news makes it unlikely that mortgage rates will spike higher anytime soon, absent any concrete decisions regarding vaccine approval and distribution, or a slowdown in the virus' spread," Speakman continued. The 15-year FRM averaged 2.28%, down 6 bps from last week when it averaged 2.34%. A year ago at this time, the 15-year fixed-rate mortgage averaged 3.15%. But the largest drop came in the five-year Treasury-indexed hybrid adjustable-rate mortgage, which averaged 2.85% with an average 0.3 point, compared with last week when it averaged 3.11%. A year ago at this time, the five-year adjustable-rate mortgage averaged 3.39%.

Is GSE reform dead on arrival under Biden?

November 19th, 2020|

WASHINGTON — The Trump administration in the last two years has laid the groundwork to free mortgage giants Fannie Mae and Freddie Mac from conservatorship without any congressional help. But following President-elect Joe Biden's victory, mortgage industry veterans predict those efforts will slow considerably or stop altogether. Some have speculated that the incoming Biden administration may not view reforming the government-sponsored enterprises with the same urgency as President Trump's appointees, and could view the status quo — the two companies remaining in conservatorship — as sufficient for the moment. To slow the Trump administration's progress, Biden's team could quickly seek to remove Federal Housing Finance Agency Director Mark Calabria, pending the outcome of a crucial Supreme Court case about the agency's leadership structure. A new FHFA appointee could then try to overturn Calabria initiatives, such as a rule on the GSEs' post-conservatorship capital levels finalized Wednesday. Even if Calabria stays on, he would likely face difficulty achieving his goals, observers said, because Biden appointees in the Treasury Department would have a different reform philosophy. “I can say with great confidence that a Biden administration will think about policy as it relates to the GSEs very differently than the way this administration has,” said Jim Parrott, the owner of Parrott Ryan Advisors and a former Obama administration official. Former Freddie Mac CEO Don Layton, a fellow at Harvard’s Joint Center for Housing Studies, argued in a paper last week that the Biden administration shouldn’t make reform of the GSEs a priority at all, at least in the first two years in office. That view flies in the face of Calabria’s efforts to release the companies from government control. “The GSE reform question does not need to be totally ignored, but it does not seem to be worth pursuing in a manner that consumes major administration resources or political capital,” Layton said. With Congress still at an impasse over legislative reform of the GSEs, the focus for a while has been on tools available to the FHFA and Treasury to end the 12-year-old conservatorships. But similar to some other Democrats, Biden might view the status quo of conservatorship as tenable, and could choose to prioritize housing in a much different way than the Trump administration has, said Tim Mayopoulos, former Fannie CEO and now president of Blend, a digital lending platform. While in the government's hands, Fannie and Freddie have curtailed certain activities and their risks that were exposed in the 2008 housing crash have been mitigated. “Fannie Mae and Freddie Mac are not the companies they were before the crisis, and so there's already been very substantial reform,” said Mayopoulos. “There is a housing crisis in the United States [but] the crisis is not Fannie Mae and Freddie Mac. The crisis is the lack of affordable housing.” Since Calabria took the helm of the FHFA in April 2019, he has made clear his goal to eventually put the GSEs back into private hands. He has taken action to allow the companies to retain more of their earnings, a move designed to enable them ultimately to stand on their own. The final capital rule released Wednesday forces the GSEs to hold unprecedented amounts of capital once they reenter the private sector. But the incremental steps FHFA has taken to free the companies from conservatorship under Calabria may be in conflict with priorities of the incoming Biden administration, which could create some tension, Parrott said. “FHFA is driving the ship of housing finance at breakneck speed in one direction, and that is not the direction the Biden administration is going to want them to be heading in,” he said. “The question is, how and who turns the ship?” Much of the influence that the Biden administration will be able to wield over housing finance depends on the Supreme Court, which is set to hear a case challenging the single-director structure of the FHFA. If the court rules as many expect — that presidents can fire FHFA directors without cause — it would give Biden the ability to replace Calabria well before the latter's term ends in 2024. But even if the high court ruled a different way or if Biden declined to fire Calabria, it could be challenging for Calabria to find common ground with certain Biden appointees who would have a say on Fannie and Freddie's future. That would include whomever Biden appoints as Treasury secretary. “[Calabria’s] goal is to ultimately get Fannie Mae and Freddie Mac out of conservatorship,” said Mayopoulos. “It's difficult to see how you can effectuate that after January 20 without the cooperation and support of the Biden Treasury Department.” In the two months left of the Trump administration, the FHFA has said it wants to negotiate with the Treasury Department further changes to the preferred stock purchase agreements that lay out the government’s ownership of Fannie and Freddie. Up until last year, those agreements required the companies to deliver nearly all of their profits to Treasury to repay taxpayers for the 2008 bailout. Calabria and Treasury Secretary Steven Mnuchin amended the PSPAs last year to allow the GSEs to retain a combined $45 billion in earnings. Calabria has said that he would like to lift the cap altogether in order for the companies to build up enough capital to eventually exit conservatorship, and the agency hopes to finalize that sometime in the fourth quarter, FHFA officials said. But it’s still unclear whether Treasury is also on board, said Parrott. “We know FHFA is committed to this course, even if it's on maybe a faster pace than the market would like, but it's quite unclear whether or not Treasury is in the same place on this,” said Parrott. “It depends probably more on Treasury’s focus, interest and bandwidth than it does FHFA's.” It remains to be seen whether Mnuchin and Calabria would be able to reach an agreement on changes to the agreements — which could also include codifying reforms Fannie and Freddie have undergone in conservatorship — before Biden takes office. With a limited time frame, “each day that goes by makes that less and less likely,” said Scott Olson, executive director of the Community Home Lenders Association. “Obviously, it takes two to tango, in the sense that … the FHFA couldn't on their own pull the trigger on moving forward” with amendments to the PSPAs, said Olson. “If the Biden administration is not supportive of that, then that sort of process kind of slows down significantly or grinds to a halt.” Even if FHFA and Treasury are able to lift the cap on the amount of capital Fannie and Freddie can have on hand, new appointees under Biden may wish to renegotiate those changes, Parrott said. “Eventually, it may take a new FHFA at some point to come in and agree with the new Treasury to re-amend the PSPAs and all that whole back-and-forth could be disruptive,” he said. But Olson theorized that amendments to the PSPAs before Biden takes office could “put a lot more pressure” on the new administration to seriously consider GSE reform. “If the die is cast, if you've already moved down the field … then one approach would be to start thinking about how you make this work,” he said. Although FHFA only just finalized its new post-conservatorship capital framework, which requires the GSEs to hold bank-like amounts of capital equal to more than five times the amount they currently have on hand, Biden’s administration might look to overturn that rule. Consumer advocates, Democratic lawmakers, and even Fannie and Freddie themselves have expressed concern that the capital plan will make mortgages more expensive and require the companies to boost fees. “The capital rule is a nice example of how the path that Calabria has the GSEs on is likely to run counter to the way in which an incoming Biden administration is going to think about what is helpful coming from policymaking around the GSEs,” said Parrott. Based on the positions of other Democrats, a Biden administration GSE plan could focus on increasing the supply of affordable housing and providing access to mortgage credit to low- and moderate-income families. But those goals could be accomplished without the GSEs, some argue. “The biggest argument in favor of tackling GSE reform … is that it is an embarrassment to the government that these two companies, designed as privately-owned, are staying in its hands for so long with no end in sight,” Layton wrote. Still, he added, the practical consequences of a long-term conservatorship are limited. "The failure to complete GSE reform is theoretically a problem, but in practice it does not seem to be.” Others warn that an aggressive reform schedule could risk harming stability in the mortgage market. “One argument is, things are working, why screw around with it? Just let it stay the way it is indefinitely,” said Olson. “The flip side of that is, sooner or later [GSE reform] may happen, so shouldn't you put time and effort to figure out how to permanently do it right and make sure this lasts? They're both equally valid viewpoints.”

VIP Mortgage Review: A Top-10 Arizona Mortgage Lender

November 18th, 2020|

Posted on November 18th, 2020 If you live in State 48, there’s a pretty good chance you’ve heard of “VIP Mortgage,” either because you’ve been a customer or you’ve seen one of their ads. Regardless, they are a major mortgage force in Arizona, having closed billions in home loans there just last year alone. In fact, they were a top-10 mortgage lender in Arizona based on total volume, only falling behind the biggest mortgage lenders out there like Chase, loanDepot, Quicken Loans, and Wells Fargo, along with fellow Arizona lender NOVA Home Loans. So it’s clear they’ll be a consideration for you if buying a home or refinancing a mortgage in Arizona. Let’s learn more about the company. VIP Mortgage Fast Facts Direct-to-consumer retail mortgage lender located in Scottsdale, Arizona Founded by Marine veteran Jay Barbour in 2006 20+ brick and mortar branches and hundreds of licensed loan officers nationwide Funded more than $2 billion in home loans last year More than 80% of total loan volume came from their home state of Arizona Currently licensed in 24 states including Hawaii VIP Mortgage funded more than $2 billion in home loans last year, with a whopping $1.76 billion coming from the state of Arizona. They did another $130 million or so in the state of Colorado, with the remainder coming from a variety of states, mostly located on the West Coast. At the moment, they appear to be licensed to do business in 24 states, including: Alabama, Arizona, Arkansas, California, Colorado, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Michigan, Minnesota, Nebraska, New Mexico, North Carolina, Ohio, Oregon, Tennessee, Texas, Utah, Washington, Wisconsin. The company has physical branches in Arizona, California, Colorado, Hawaii, Indiana, Texas, Washington, and Wisconsin. How to Apply with VIP Mortgage You can apply for a home loan directly from their website Or schedule a consultation first with one of their loan officers They offer a digital mortgage loan experience powered by Floify It allows you to complete most tasks remotely via smartphone or computer While they seem to prefer that you speak to a loan officer first to go over your goals and available options (a loan officer directory is on their website), you can freely apply on your own as well. If you visit their website, you can simply click on “apply,” at which point you’ll be asked if you’re already working with a loan officer. Assuming the answer is yes, simply enter their name and it will populate. If no, you’ll be piped over to their digital loan application. It appears they use Floify’s digital mortgage product, which lets borrowers fill out the app from anywhere on any device. Additionally, borrowers can review and eSign disclosures from a web-based portal, link financial accounts, and scan/upload supporting documentation. Once your loan is submitted, you can access the borrower portal at any time to see your to-do list, check loan status, or get in contact with your lending team. They make it easy to apply and monitor your loan status from start to finish. Loan Types Offered by VIP Mortgage Home purchase loans and refinance loans Home renovation and construction loans Conventional conforming loans backed by Fannie Mae and Freddie Mac Government loans: FHA/USDA/VA Jumbo loans Reverse mortgages HUD-184 loans (for Native Americans) Down payment assistance programs “Inclusive Loan” Various fixed-rate and adjustable-rate mortgage options available VIP Mortgage offers tons of different home loan programs, including home purchase loans, refinance loans, renovation loans, and construction loans. Compare the Top 10 Mortgage Refinance Options Near You Select your state to get started State Additionally, you can get a reverse mortgage if 62 and older, or a HUD-184 loan if a Native American. They’ve also got a proprietary loan program called the “Inclusive Loan” that is geared toward home buyers who experienced a recent foreclosure, short sale, or bankruptcy. In terms of loan programs, you can get a conventional loan, including conforming loans and jumbo loans, or a government-backed loan such as an FHA loan, USDA loan, or VA loan. VIP offers both fixed-rate and adjustable-rate mortgages with various loan terms, including a 30-year fixed, 15-year fixed, 5/1 ARM, 7/1 ARM, and so on. So you shouldn’t be at all limited when it comes to loan choice if you choose to go with VIP Mortgage. VIP Mortgage Rates Like many other mortgage lenders, VIP Mortgage chooses not to advertise their mortgage rates on their website. While there are many reasons not to advertise rates, such as the extra work it takes and the fact that such rates are just ballpark estimations, they can be helpful to get a feel for pricing. Nonetheless, you can still easily get loan rates if you contact a loan officer directly. And it should be a more accurate quote since you’ll need to provide them with specific loan details first. It’s also unclear what they charge in the way of lender fees, such as a loan origination fee, underwriting, processing, and so on. You’ll need to inquire with them directly to determine that. Once you obtain that key information, be sure to shop around with other lenders to see how competitive they are. VIP Mortgage Reviews On SocialSurvey, VIP Mortgage has a 4.90-star rating based on nearly 16,000 reviews from its past customers. The company also landed in SocialSurvey’s Top 10 list for customer satisfaction in the medium lender division back in 2018 They have a 4.96-star rating out of 5 on Zillow, based on roughly 1,100 customer reviews. That’s clearly beyond excellent and a testament to their exceptional customer service. A good proportion of the reviews on Zillow indicated that the interest rate received was lower than expected, if you’re curious about pricing. VIP Mortgage is an accredited business with the Better Business Bureau (BBB) and currently enjoys an A+ rating. They also have a 4.33-star rating on the BBB website, which is quite high. VIP Mortgage Pros and Cons The Good You can apply for a home loan directly from their website without human assistance They offer a digital mortgage loan process Tons of different loan programs to choose from Excellent customer reviews A+ BBB rating, accredited since 2008 Lots of free mortgage calculators on site The Maybe Not Good Not licensed in all states Do not disclose mortgage rates or lender fees on their website

FHFA issues capital rule, previews next steps on plan to release GSEs

November 18th, 2020|

WASHINGTON — The Federal Housing Finance Agency has finalized a rule imposing higher capital requirements for Fannie Mae and Freddie Mac to take effect once the companies exit their federal conservatorships. The capital framework, released Wednesday, is a prelude to steps the FHFA is expected to pursue to allow the mortgage giants to retain all of their earnings, senior FHFA officials said. However, the FHFA must agree with the Treasury Department on a new retained-earnings plan soon or it could face pushback from the incoming Biden administration. President-elect Biden is set to take office on Jan. 20. The final capital rule, which is similar to a proposal unveiled in May after the agency scrapped an earlier 2018 plan, is considered a huge step in freeing Fannie and Freddie from government control. It has been a central focus of FHFA Director Mark Calabria since he took office last year. “The final rule is another milestone necessary for responsibly ending the conservatorships,” Calabria said in a statement. The next step, according to senior FHFA officials, is for the FHFA and the Treasury Department to amend the preferred stock purchase agreements, which lay out the government’s ownership in Fannie and Freddie. The FHFA's final capital rule, which is similar to a proposal unveiled in May after the agency scrapped an earlier 2018 plan, is considered a huge step in freeing Fannie and Freddie from government control. Bloomberg News Those changes would allow the companies to keep the entirety of their profits. They currently have a combined $45 billion cap on their retained earnings. Advocates of privatizing the GSEs have urged the government to end the so-called net worth sweep that requires the companies to deliver profits in excess of that cap to Treasury to repay taxpayers for the 2008 bailout. But the incoming Biden administration may favor a more cautious approach to the GSEs, and could push for maintaining the current status quo of keeping the companies in conservatorship. A pending Supreme Court case, meanwhile, is expected to give the new president greater power to fire Calabria. If the new capital requirements had been in place as of June 30, Fannie and Freddie would have had to maintain a combined $283 billion in adjusted total capital — compared to $263 billion if the May proposal had taken effect — or would risk restrictions on dividend and bonus payments. Part of the reason behind the increase is that the GSEs’ adjusted total assets have increased 9% since Sept. 30, as the companies have reported strong earnings thanks to low mortgage rates and a strong demand for refinancing. The jump in projected required capital can also be attributed to the FHFA raising the floor on the adjusted risk weight assigned to mortgage exposures from 15% to 20%, which adds about $12 billion in capital to the total requirement. That change was made after the Financial Stability Oversight Council said in September that capital requirements “materially less than those contemplated by the proposed rule” could put the GSEs and the financial system at risk. The final version of the rule better aligns the GSEs’ capital requirements with those of other market participants, the FHFA said. Notably, the final framework provides more capital relief for credit risk transfer transactions than the May proposal. Stakeholders had expressed concern about the proposal’s treatment of CRT, which Fannie and Freddie currently take advantage of in order to offload some of their risk to third parties, and worried it would disincentivize the use of the program altogether. The increased capital the GSEs will be required to hold for mortgage exposures could also increase the amount of capital relief a GSE could be for certain credit risk transfers to a certain extent, according to FHFA. The final framework also cuts the credit risk capital requirement for non-performing loans that are in forbearance due to the coronavirus pandemic, which would amount to about $11 billion in capital relief.

Appraisal exception for higher-priced mortgages unchanged for 2021

November 18th, 2020|

The exemption from the special appraisal requirements for higher-priced mortgages with balances at or under $27,200 will remain unchanged in 2021, federal regulators announced. A higher-priced mortgage loan, sometimes also known as a high-cost mortgage, has an annual percentage rate that exceeds the annual prime offer rate by 1.5 percentage points for a first lien loan and 3.5 percentage points for a junior lien. Under this exception, created in the 2013 rulemaking for the Dodd-Frank Act, loans under the threshold do not have to comply with appraisal rules that are specific to these loans. The current methodology for calculating the threshold was adopted in 2016.The Consumer Financial Protection Bureau, the Federal Reserve Board and the Office of the Comptroller of the Currency jointly administer the rule and calculate the threshold annually. It is based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers as of June 1. The last CPI-W before that date was published on May 12, showing a 0.1% increase in the index in April over the same month one year prior, the joint notice said. After rounding, the calculation left the amount of the exemption unchanged for 2021. Under the higher-priced mortgage loan rule, there must be a written report from an appraiser who performs a physical interior visit to the property. Among loan types that are exempt from the higher-priced rule are mortgages secured by a new manufactured home, mobile homes, boats and trailers; transactions to finance the initial construction of a dwelling; bridge loans with maturities of 12 months or less on a primary residence; and reverse mortgages.

Forborne mortgages have similar traits to those likely to default

November 18th, 2020|

Mortgages in forbearance status have very similar characteristics to loans associated with higher default rates, a Freddie Mac study found. Both commonly feature low equity in the property and borrowers with low credit scores and high debt-to-income ratios. Consumers faced with a loss of income during the periods studied — several months of 2017 and 2020 — turned to a forbearance program to avoid default or a forced sale of their property. The forbearance saved the borrower from a distressed home sale that could depress home values, which in turn leads to a loss of equity and the possibility of further mortgage defaults as neighboring properties move underwater on their loans, the GSE said. The GSE undertook the study in order to prepare for what may come next in the upheaval created by pandemic, its head economist Sam Khater wrote in a press release on the report."Mortgage forbearance provides liquidity to households and plays a vital role in mitigating the damage to homeowners during times of crisis whether it be a hurricane, wild fire, or health epidemic," Khater wrote. "Research on this topic is important because it will help us prepare for the next several months as we continue to navigate the COVID-19 pandemic, and beyond." The study found that the rate of mortgage borrowers requesting forbearance between March and June of this year was similar to that of the highly destructive 2017 hurricane season. An examination of 30-year fixed-rate mortgages in Freddie Mac's portfolio found that the forbearance rate was 5.6% during the COVID-19 period and 5.8% during the 2017 storms. Unlike the CARES Act-mandated forbearances of the pandemic, the 2017 loans were eligible for disaster-related assistance between August and December of that year, primarily as the result of Hurricanes Harvey, Irma and Maria. As a control, the study included a baseline period established between January 2019 and February of this year, where the forbearance rate was a modest 0.09%. While loans with LTVs of 60% or lower made up 52.4% of Freddie Mac's 30-year FRMs during the pandemic period, they were 43.4% of all loans in forbearance. But the bucket between 61% and 70% were 17.5% of the total portfolio but 19.4% of loans in forbearance. The remaining nearly 30% of Freddie Mac's portfolio, including a scant 0.1% where the LTV was over 100%, made up over 37% of loans in forbearance. For the 2017 period, a similar pattern exists, where the 61% to 70% LTV bucket has a higher share of loans in forbearance than their weight in the total portfolio, but the difference is not as vast. These loans made up 17.3% of Freddie Mac's portfolio at the time, but 17.8% of loans in forbearance. The 2017 period also had a much higher share of loans where the LTV was over 100% than during the pandemic, at 1.9%, with a 5.6% share of the Freddie Mac 30-year FRMs in forbearance. But only 3.73% of the loans with an LTV under 40% were in forbearance during the pandemic. For loans with an LTV between 81% and 90%, 7.4% were in forbearance and in the bucket of loans with LTV of 91% and 100%, the rate was 7.7%. Compare that to the heavy storm season of 2017, when 3.09% of the under-40% LTV mortgages were in forbearance, but 9.63% of the 81% to 90% loans and 11.27% of the 91% to 100% loans were in forbearance. When looking at the DTI, the forbearance rate during the pandemic for the under 25% bucket is 2.72%. But that grows to 4.24% for DTIs between 26% and 35%, 6.18% for the 36% to 40% bucket, 8.35% between 41% and 45%, before a slight drop to 8.26% for DTIs over 46%. In comparing the loan sets by credit score bands, a lower percentage of loans under a 700 FICO score took a deferral in 2020 than in 2017, but a larger percentage over that point took one in 2020 than in 2017. But it is all relative, as 11.13% of loans below 620 and 11.21% between 620 and 639 were in forbearance for COVID-19, compared with 4.06% for those between 760 and 779, 2.86% for those between 780 and 799, and 2% for those with a credit score over 800. The report raises questions for future studies, asking why some borrowers who have entered forbearance continue to make their mortgage payments and why borrowers who qualify for forbearance sometimes choose to default.

FHFA lowers multifamily cap, increases affordable housing requirements

November 18th, 2020|

The Federal Housing Finance Agency reduced the size of the multifamily caps for Fannie Mae and Freddie Mac in 2021, while increasing the share of lending dedicated to mission-driven affordable housing. Fannie and Freddie will each be able to help lenders finance up to $70 billion of multifamily loans for a total of $140 billion combined in 2021. That’s down from $100 billion each or $200 billion combined in 2020. The caps will apply to the calendar year only. Last year, the caps applied to a five-quarter period. FHFA Director Mark Calabria was named to his post in April 2019, and he arranged an overhaul of the multifamily caps that became effective Oct. 1 of that year.Before 2020, the caps were generally set for four-quarter periods and tended to be around $35 billion each, or $70 billion combined. But Calabria’s predecessor appointed under the Obama administration, Mel Watt, allowed exclusions that included green loans used to finance energy- or water-efficient projects. Those excluded loans boosted Fannie and Freddie’s multifamily production to higher levels than the caps historically would have allowed. Calabria removed the exclusions altogether when he raised the caps. Caps can be adjusted to address changing market conditions, and there are mixed expectations about how well multifamily will perform given the employment stress in some industries due to the pandemic. “As we continue to address the shortage of affordable housing, especially amid the COVID crisis, FHFA will keep a close eye on the multifamily caps to ensure that they are sufficient and serve to increase the supply of affordable housing but do not crowd out private capital,” said FHFA Director Mark Calabria in a press release. At least 50% of the multifamily loans have to be used for mission-driven affordable housing next year, up from 37.5% this year. A minimum of 20% of the mortgage volume in this market now must be affordable to residents whose earnings are 60% of the area median income or less. The definition of mission-driven affordable housing has been further amended so that it’s aligned with Duty-to-Serve regulation and includes special provisions for rural and manufactured housing communities. Manufactured housing communities must now be owned by residents, nonprofits or governmental entities; or have tenant-pad lease protections to count as mission-driven, affordable housing. Loans on rural homes in DTS-designated rural areas where residents make 100% of the area median income or less will be counted toward the affordable housing requirement. The FHFA also recently released its annual performance and accountability report from the Government Accountability Office. The report found that it met its targets for 16 out of 22 or 73% of criteria. It fell short of its targets in five areas (23%), and lacked enough data to be measured in one area: an employee viewpoint survey it plans to complete in 2021. Part of the FHFA’s shortfall was due to the lack of a final capital plan. Risk-based supervisory strategies and examination plans for the Federal Home Loan Banks also remain uncompleted, but they are due by the end of January. In addition, the FHFA fell short in measures related to: delivering quarterly assessments of the enterprises’ performance, turnaround times for responses on items submitted to the agency, and increasing the dollar amount of contracts awarded to minority- and women-owned businesses. The GAO found no instances of reportable noncompliance with applicable rules and regulations it tested.

First Mortgage Direct Review: An Online Mortgage Lender That Appears to Offer Low Rates

November 18th, 2020|

Posted on November 18th, 2020 If you’ve been shopping mortgage rates online lately, perhaps via the Zillow marketplace, you may have stumbled upon “First Mortgage Direct.” The online mortgage lender appears to advertise quite a bit on Zillow, so I thought we’d take a deeper dive to see what this lender is all about. They’re a family-owned direct-to-consumer mortgage lender that says it’s driven by three founding principles, including honesty, integrity, and experience. That involves a “consultative approach to lending” to find the perfect loan program for each homeowner, with no nonsense or hidden fees. First Mortgage Direct Fast Facts Direct-to-consumer mortgage lender founded in 2007 Family owned and headquartered in Kansas City, Missouri Offer home purchase loans and mortgage refinances Licensed in lend in 17 states nationwide A DBA of First Mortgage Solutions, LLC Their lending team boasts over 75 years of experience in the mortgage industry First Mortgage Direct, which is actually a dba of First Mortgage Solutions, LLC, has been around since 2007. They are a small family-owned and operated lender headquartered in Kansas City, Missouri. At the moment, they are licensed just a handful of states, including California, Colorado, Connecticut, Florida, Georgia, Illinois, Kansas, Missouri, New Jersey, North Carolina, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, and Washington. How to Apply for a Home Loan with First Mortgage Direct As an online-only mortgage lender, the application process is pretty no-frills and straightforward. You simply visit their website and hit “Apply Now.” Their digital mortgage application is powered by Ellie Mae, which is one of the most common and popular forms out there. It allows you to complete much of the process from your computer or smartphone in just minutes, including ordering a credit report and eSigning documents. Once your loan is approved, you’ll be able to log in via their website to track loan progress and see your updated to-do list. A loan officer and loan processor will assist you as you inch closer to the finish line. They do not have physical branches, but you can call or email them directly if you need assistance or loan pricing. Loan Programs Offered by First Mortgage Direct Home purchase loans Refinance loans: rate and term and cash out Home renovation loans: FHA 203k and Fannie Mae HomeStyle Conforming loans backed by Fannie Mae and Freddie Mac Government loans backed by the FHA, USDA, and VA Available on primary residences, second homes, and investment properties Fixed-rate and adjustable-rate mortgage options available with various loan terms First Mortgage Direct Mortgage Rates While they don’t advertise their mortgage rates on their own website, you can often catch them in the wild if you compare lenders on the Zillow marketplace. Compare the Top 10 Mortgage Refinance Options Near You Select your state to get started State And they tend to offer the lowest rates of all the lenders listed, at least for the sample scenarios I ran through the engine. That tells us they are competitive lender relative to other online mortgage lenders, which seem to offer lower interest rates than the bigger brick-and-mortar banks and brand-new lenders you’re probably more familiar with. Ultimately, you should get a discount when using an online-only lender because their costs should be lower, with saving passed onto consumers. If they aren’t competitive and you haven’t heard of them, it’d be pretty difficult for them to make an argument to use them versus a company you know and are comfortable with. So my assumption is their rates are likely pretty good relative to other options. But you’ll need to get in touch for pricing to be sure. First Mortgage Direct Reviews On Zillow, they’ve got a 4.83-star rating out of 5 based on nearly 600 customer reviews, with many indicating that both rates and fees were lower than expected. On SocialSurvey, they have a 4.79-star rating out of 5 from nearly 3,000 reviews, which again is a very favorable number considering the large sample size. They are also a Bankrate Select Lender for 2020 and have a 4.8-star rating on Bankrate based on 126 customer reviews. First Mortgage Direct is Better Business Bureau accredited and has been since 2010 – they currently have an ‘A+’ rating. All in all, they come highly-rated and seem to be a no-frills online lender that offers low mortgage rates, which could be a good choice for homeowners with straightforward loan scenarios looking to save money. They are probably a better fit for a seasoned homeowner looking to lower monthly payments via a refinance, but may not provide enough support for first-time home buyers who may require more hand-holding. First Mortgage Direct Pros and Cons The Pros Can apply directly from their website Use a digital mortgage application powered by Ellie Mae Lots of loan programs to choose from Appear to offer low rates as evidenced by sample searches on Zillow marketplace Excellent customer reviews Named a Bankrate Select Lender for 2020 A+ BBB rating, accredited company The Cons Not licensed in all states Do not publicize mortgage rates or lender fees No physical branch locations May not offer jumbo loans or second mortgages About the Author: Colin Robertson Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for nearly 15 years.

Housing starts reach highest point of the pandemic era

November 18th, 2020|

The momentum of construction activity continued in October as single-family housing starts hit their highest points since February, according to the Census Bureau and the Department of Housing and Urban Development. Residential starts grew 4.9% from September and 14.2% year-over-year to a seasonally adjusted annualized rate of 1.53 million. Broken down by region, the South led in annual growth, jumping 24.3%, with the Midwest right behind at 23%. The West increased by 5.4%, while the Northeast dropped 32.8%. The overall rise could potentially quell the surge in home prices by helping to increase housing inventory, which recently hit a 13-year low. Homebuilder sentiment also reached its all-time high in November, fueled by robust consumer demand."With homebuilders maintaining an incredible pace not seen in years, even well into the fall, brokers should view this as a clear sign they will continue assisting purchase clients throughout the rest of the year," Austin Niemiec, executive vice president of Rocket Pro TPO, said in a statement. Permits, a barometer for upcoming construction, held month-over-month at about 1.55 million — the highest level of 2020. It represents a 2.8% rise from October 2019. Authorized permits yet to break ground declined to 179,000 in October, down 0.6% from September and 4.3% the year prior. Homes under construction rose to over 1.22 million, up 1.2% monthly and 6% annually. Meanwhile, completed construction fell to 1.34 million units in the short term, it grew 5.4% from October 2019. Although the majority of indicators for increased building point up, there are still political and logistical hurdles to clear, as well as possible lockdowns resulting from the pandemic's next wave. "The current housing market is characterized by robust demand, but not enough homes for sale," said First American deputy chief economist Odeta Kushi. "Despite record-low inventory of existing homes for sale, construction activity has lagged. The construction industry faces several supply-side headwinds: increasing material costs (specifically rising lumber costs), a chronic lack of construction workers, a dearth of buildable lots, and restrictive regulatory requirements in many markets."

Metro Atlanta home sales up, prices soaring

November 18th, 2020|

October was a good month for home sellers in metro Atlanta. The median price of the houses sold last month was $290,000 — 16.5% higher than in October 2019, according to Remax, which collects data from transactions in 28 metro counties. There were 9,150 homes sold in that region during October, up about 11% from a year ago. "The only metric that is down is the number of listings, which means we still cannot meet buyer demand," said Kristen Jones, broker and owner of Remax Around Atlanta. With the paychecks of many white-collar professionals relatively unscathed, the pool of wannabe homebuyers has grown. Yet the supply they are competing for has been shrinking. Experts consider the market balanced — with equal leverage to sellers and buyers — when the number of listings is equal to about six months of sales. But metro Atlanta has been tilting in favor of sellers for several years, and the shortage of homes has been even more acute during the pandemic. In October, the number of listings in the region represented about 1.7 months of sales. That means buyers are often bidding against each other for homes, a formula for higher prices. A year ago, the median sales price was 7.8% below the seller's asking price. Last month, the median sales price was just 2.8% below the list price, according to Remax. According to Remax, in Atlanta, a home is on the market for an average of just 37 days before a sale, the shortest time in more than a decade. . Low interest rates are enticing buyers into the market and giving them more buying power, said Jennifer Pino, president of the Atlanta Realtors Association. "These factors should continue to put upward pressure on the average sales prices over the next few months," she said.

Mortgage application volume flat on steep drop in government refis

November 18th, 2020|

Mortgage applications slipped 0.3% from one week earlier, as refinance volume, particularly for Federal Housing Administration and Veterans Affairs loans, shrank significantly, according to the Mortgage Bankers Association. The MBA's Weekly Mortgage Applications Survey for the week ending Nov. 13 found that the refinance index decreased 2% from the previous week and was 98% higher than the same week one year ago. The refinance share of mortgage activity decreased to 69.8% of total applications from 70% the previous week. This week's results do not include an adjustment for the Veterans Day holiday. "Mortgage market activity was mixed last week, despite the 30-year fixed rate mortgage staying below 3%," Joel Kan, the MBA's associate vice president of economic and industry forecasting, said in a press release. "The average refinance loan balance of $291,000 last week was the lowest since January. Many borrowers with higher loan balances may have acted earlier on in the current refinance wave."The seasonally adjusted purchase index increased 4% from one week earlier, while the unadjusted purchase index decreased 1% compared with the previous week and was 26% higher than the same week one year ago. "The purchase market recovered from its recent weekly slump, with activity … climbing above year-ago levels for the 26th straight week. Housing demand remains supported by the ongoing recovery in the job market, and an increased appetite from households seeking more space because of the pandemic," Kan said. Adjustable-rate mortgage activity decreased to 1.9% from 2% of total applications, while the share of FHA-insured loan applications decreased to 10.5% from 10.6% the week prior. The VA-guaranteed loan market share decreased to 12.1% from 12.6% and the U.S. Department of Agriculture/Rural Development share increased to 0.5% from 0.4% the week prior. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) increased 1 basis point to 2.99%. For 30-year FRMs with jumbo loan balances (greater than $510,400), the average contract rate decreased 2 basis points to 3.11%. As for the 30-year FHA fixed rate loan, the average contract rate increased 3 basis points to 3.11%. For 15-year FRMs, the average increased 4 basis points to 2.59%. The average contract interest rate for 5/1 ARMs increased 5 basis points to 2.84%.

Was reboot of this Fed crisis-relief program a bust?

November 18th, 2020|

One of the main spigots of cash the Federal Reserve opened to fight the economic fallout from the coronavirus pandemic, the Term Asset-Backed Securities Loan Facility, has delivered only a relative trickle of financing. As of the end of October, the Fed had funneled about $3.7 billion in loans through TALF to bond investors at rock-bottom rates, a fraction of the $100 billion the central bank had committed. Narrowing spreads have made the program less lucrative than expected, limiting participation to a handful of investors. With TALF set to expire at year-end, it seems likely to be shelved, right? Hold on, say policy experts who argue the program has had some less noticeable — but real — stabilizing effects on secondary markets in general. With the sharp rise in new COVID-19 cases this fall, those observers and funds participating in TALF are urging policymakers to extend the program into 2021. "Because the market did find its footing before TALF became operational, the economics are borderline for the deals in TALF,” said Kristi Leo, president of Structured Finance Association, which represents a variety of participants in the bond markets. Yet “it really gave a backstop and some confidence to the market." Investors participating in TALF use the program’s cheap financing to buy securities backed by commercial mortgages and loans to small businesses, students and a variety of others. The idea was to provide a backstop to the market so that money would continue flowing through these investment companies to lenders that provided badly needed credit as social-distancing measures went into effect and businesses shuttered. Scores of investment firms began building up special investment funds to jump into the program. Many of them had netted massive profits from the original TALF in the 2008 financial crisis by scraping up the difference in what the risky subprime mortgage bonds yielded and the rate the firms had to pay on the Fed loans. However, 79% of the program’s loans this time around have landed at just two investment firms: Belstar Management Company and MacKay Shields. The reason can be found in a key indicator in the securities market that started to wobble in early March as the pandemic unfolded. The credit spread on triple-A-rated commercial mortgage-backed securities, which is the difference in interest offered to investors to buy the bonds compared to what they would gain from ultrasafe Treasuries, began spiking around March 12, according to research from Neuberger Berman. Higher spreads are a sign of rising risk that bond investors want to be paid a premium to shoulder. The spread climbed from below a 50 basis-point difference in the middle of March to almost 350 basis points by the time the Fed announced there would be a new round of TALF on March 23 along with a menu of other stimulus measures. But before the Fed could publish the specifics of the program like which securities would qualify for purchase by participating investors, in April, spreads on highly-rated CMBS had settled back to about 200 basis points by that point and have deflated since. That’s the calming effect experts have pointed to. "A lot of folks were raising money and ultimately decided not to go through with their fund as spreads came in when the program was launched,” Leo said. Matthew Hays, who leads the asset-backed securitization team at the law firm Dechert, said some private funds are keeping “some powder dry” to participate in the program if it’s needed to steady markets again because of the recent rise in COVID-19 cases. "When spreads came down earlier this spring, it wasn’t because TALF was available — it was because it was announced,” Hays said. "The potential is fairly strong still that we see an extension. If there isn’t a stimulus package at all, that may create tension in the market, but it’s unclear right now." Credit spreads on other kinds of lower-rated securities, like those backed by properties that have gone vacant during the pandemic, have ticked up to their highest point since the last financial crisis, The Wall Street Journal recently reported. If that shakiness bleeds over into higher-graded debt, there could be more urgency to extend TALF and other programs if investors are spooked and need government financing to buy these bonds. MacKay Shields has taken more than $837 million in TALF loans through a special fund designed for the program, according to Fed data. It has used the funding to buy CMBS issued by several large banks and other securities backed by Small Business Administration loans and student debt issued by Navient. "Our investment thesis was that TALF 2.0 would be fairly different from TALF 1.0,” said Stephen Cianci, co-head of the global fixed-income team at MacKay Shields. “We were very measured in the size of the program we were offering to clients. We kept the program rather small. We believe that larger sizes would dilute the potential for [returns].” Extending TALF into 2021, while lengthening the time the market can operate with a backstop, could also serve fund managers that went through the costly process of putting a fund together to take advantage of the program and are trying to deploy the capital before the deadline. “People will try to ensure that the money they put into these funds are deployed,” Leo said. “People have been watching that very closely." Fed Chair Jerome Powell said at a Nov. 5 press conference following a Federal Open Market Committee meeting that policymakers, including those at the Treasury Department, were “just now turning to that question” of whether to extend the programs, including TALF. Cianci said when the Fed announced an extension of TALF from its original expiration date in September to the end of the year, it was a kind of insurance policy if there was a new wave of COVID-19 cases or if the presidential election proved difficult. "There is a likelihood of a potential extension,” Cianci said, adding, “we are not banking on that potential extension.”

USA Mortgage Review: #1 Mortgage Lender in Missouri?

November 17th, 2020|

Posted on November 17th, 2020 If you live in the USA and need a mortgage, perhaps you’ve thought about applying at “USA Mortgage.” Makes sense, right? It just so happens that USA Mortgage is located right smack in the middle of our fine country, in St. Louis, Missouri to be exact. Well, that’s pretty darn close to the midpoint… Anyway, geography aside, they’ve been around for about 20 years now and actually operate under the name DAS Acquisition Company, LLC, which purchased the lender when it was a distressed company. Today, it’s the largest privately held mortgage banker in the state of Missouri and employs more than 750 licensed loan officers and operations personnel. Technically, USA Mortgage is a full-service mortgage broker, meaning they can offer loan programs from various lender partners at wholesale prices. USA Mortgage Fast Facts Employee-owned direct-to-consumer mortgage lender located in St. Louis, MO Founded in 2001 by current president and CEO Doug Schukar Originally acquired as a distressed asset by DAS Acquisition Company, LLC Has been #1 mortgage lender in metro St. Louis since 2012 Funded nearly $2.5 billion in home loans during 2019 More than half of total loan volume came from their home state of Missouri Currently licensed to do business in 41 states and D.C. If you live in Missouri, there’s a good chance you’ve heard of USA Mortgage. They did more than half their business in The Show-Me State last year. They also funded hundreds of millions in mortgages in the states of Texas, Washington, and Ohio. At the moment, they’re licensed in 41 states and the District of Columbia. They don’t appear to be available in Delaware, Hawaii, Montana, Nevada, New York, North Dakota, South Dakota, Vermont, or Wyoming. How to Apply for a Home Loan with USA Mortgage You can apply for a home loan directly on their website in minutes without human interaction Or get in contact with a loan officer at one of their many branches nationwide Their digital mortgage application is powered by fintech company Ellie Mae They also offer a free smartphone app that lets you complete most tasks remotely It’s super easy to apply for a home loan with USA Mortgage. Simply surf on over to their website and click on “Apply.” From there, you’ll need to fill in a digital mortgage application powered by Ellie Mae. You can complete much of the process online, including the ordering of a credit report and the eSigning of disclosures. If you are currently working with a loan officer, there is a box you can check, at which point you’ll be able to select that individual. If not, simply click the “no” box and someone will be assigned to you automatically. Once your mortgage application is submitted, you’ll receive status updates about loan progress and a to-do list for remaining conditions. It’s also possible to download the free USA Mortgage smartphone app, which allows you to run calculations, scan and upload docs, contact your loan officer, and check loan status. All in all, USA Mortgage provides a digital process from start to finish that is both convenient and easy to follow. Loan Types Offered by USA Mortgage Conventional loans backed by Fannie Mae and Freddie Mac Government-backed loans: FHA, USDA, and VA loans Jumbo home loans Home renovation loans (203k, VA renovation, and Fannie Mae HomeStyle) New construction loans Bank statement programs (stated income) Reverse mortgages Doctor mortgages Bridge loans State bond programs, down payment assistance Non-warrantable condos are OK In terms of loan programs, USA Mortgage offers the whole gamut from conventional loans to government-backed loans and even bank statement programs (a newer version of a stated income mortgage). Compare the Top 10 Mortgage Refinance Options Near You Select your state to get started State You can get financing on a primary residence, second home, or an investment property. It’s possible to take out a home renovation loan, such as a FHA 203k, or a new construction loan if you’ve got the lot but have yet to build the property. Seniors who are 62 years of age and older can also take out a reverse mortgage in order to tap equity without monthly payments. They also got a lock and shop program that allows you to lock in a mortgage rate up to 120 days in advance with no upfront lock fees. You can choose between all the popular fixed-rate and adjustable-rate mortgage options available on the market today, such as 30-year or 15-year fixed, or a 5/1 and 7/1 ARM. USA Mortgage Rates USA Mortgage does not advertise its mortgage rates on its website or elsewhere to our knowledge. In order to get pricing, you’ll need to contact a loan officer directly and/or begin the loan application process. If on the USA Mortgage website, simply click on “branches” to find a loan officer near you, then you’ll find their contact info to inquire about pricing. The same goes for lender fees – once you reach out to someone, ask them what fees they charge when comparing mortgage rates, such as a loan origination fee if applicable. You should know both the interest rate and lender fees, which collectively make up the mortgage APR, an important figure to use when shopping lenders. USA Mortgage Reviews USA Mortgage has a pretty amazing 4.98-star rating out of 5 on Zillow based on more than 2,500 customer reviews. Clearly that’s quite impressive given the number of reviews and the near-perfect rating. Similarly, they have a 4.90-star rating out of 5 on SocialSurvey from over 30,000 reviews. Again, pretty close to perfection here. They are Better Business Bureau accredited, and have been since 2010, with a current ‘A+’ rating based on complaints history. All in all, they appear to offer stellar customer service to their clients, which would explain the almost-perfect scores they enjoy on several ratings websites. Another plus is the wide range of loan programs offered, along with their access to wholesale mortgage rates. USA Mortgage Pros and Cons The Pros Can apply for a home loan directly from their website without a loan officer Offer a digital mortgage loan process Tons of different loan programs to choose from Excellent reviews from past customers A+ BBB rating (and an accredited company) Free mortgage calculators Free smartphone app The Cons Not licensed in all states Do not publicize mortgage rates or fees Do not service their own loans

2021 priorities include more equitable access to homeownership for NAR

November 17th, 2020|

Expanded housing equality and affordability are among the National Association of Realtors’ priorities for the coming year, incoming President Charlie Oppler told reporters on Tuesday. “It is imperative that Realtors lead on this issue,” he said during a media call held in conjunction with the group’s annual conference. Oppler’s remarks followed a vote by NAR’s board last Friday to expand its code of conduct to ban “harassing or hate speech.” The move was a response to offensive comments made online by some Realtors earlier this year about racial bias against Blacks. Any Realtors who have been the subject of complaints to NAR about such behavior will undergo a hearing process, Oppler said.“It’s not just that somebody says something and you’re not a Realtor anymore, that’s not in this the intent of this,” he said. “The intent of this is not to be, quite frankly, engaging in hate and communication that is not positive for the industry.” NAR has also been working on related measures aimed at bridging the homeownership gap, which is particularly pronounced for Blacks. These include a training program aimed at helping members provide “equal opportunity to all homebuyers,” and recruiting and education efforts in underserved neighborhoods, Oppler said. Those efforts are aimed at introducing residents to mortgage and real estate job opportunities. NAR plans to continue to push for the passage of affordable housing proposals as well. Oppler cited as an example a bill with bipartisan support that would create tax-advantaged savings accounts for down payments. “There are a lot of first-time homebuyers looking to get into the marketplace whether it’s now or in the next couple of years and certainly this will allow us to champion their efforts,” he said. Oppler added that the association will more broadly “advocate for real estate as an essential service during times of crisis.” He noted that the group is concerned that extending the current eviction moratorium could strain landlords and create additional need for public assistance. He was optimistic about the outlook for single-family residential sales. While operating amid the pandemic early on was a challenge when infection rates were high and social distancing protocols had not been established, it’s in a good position now, he said. Oppler said that mortgage rates are expected to rise only slightly next year to 3.2% from an average this year that is closer to 3%. Existing home sales that support the purchase-loan market are likely to remain strong, he added. “Real estate really has busted out,” he said.

Why Are Mortgage Rates Different?

November 17th, 2020|

Mortgage rate Q&A: “Why are mortgage rates different?” Why is the sky blue? Why are clouds white? Why won’t your neighbor trim their tree branches? These are all good questions, and ones that often puzzle even the most savvy of human beings. First things first, take a look at how mortgage rates are determined to better understand how banks and mortgage lenders come up with interest rates to begin with. From there, you’ll need to consider why mortgage rates are different for consumer A vs. consumer B. No One Size Fits All for Mortgage Rates Mortgages are kind of like snowflakes in that no two are exactly the same (not really) The subject property and the borrower will always have unique characteristics As such risk on the underlying loan will vary and so too will the interest rate received Lenders also price their mortgages differently so even identical scenarios can result in variable pricing Mortgages are complicated business, and there certainly isn’t a one-size-fits-all approach in this industry. First off, there are thousands of different banks, lenders, and credit unions that offer mortgages, some of them entirely unique. These companies compete with one another to offer the lowest rate and/or the best customer service. The well-known names might offer higher rates in exchange for their perceived trust and familiarity. Meanwhile, the smaller guys might offer rock-bottom rates to simply stay in contention with the big players. Along with that, every loan scenario is different (just like a snowflake), and must be priced accordingly to factor in mortgage default risk (risk-based pricing). Simply put, the higher the risk of default, the higher the mortgage rate. But that’s just the tip of the iceberg. There also promotional rates, such as mortgage rates that end in .99%, and innovative marketing products like UWM’s Exact Rate that lets brokers offer strange rate combinations, including 2.541% or 2.873%. So the possibilities truly are endless these days when it comes to different mortgage rates. Mortgage Rates Vary Based on the Loan Criteria Mortgage lenders make a lot of assumptions when advertising rates Your particular loan scenario may be quite different than their hypothetical loan You have to take into account the many pricing adjustments applicable to your mortgage if it doesn’t fit inside that box These adjustments have the potential to greatly increase or decrease your interest rate Mortgage rates don’t exist in a bubble – the parts affect the whole. Banks and lenders start with a base interest rate (par rate) and then either raise it or lower it (rarely) based on the loan criteria. There are loan pricing adjustments for all types of stuff, including: · Loan amount (conforming or jumbo)· Documentation (full, stated, etc.)· Credit score· Occupancy (primary, vacation, investment)· Loan Purpose (purchase or refinance)· Debt-to-Income Ratio· Property Type (single-family home, condo, multi-unit)· Loan-to-value / Combined loan-to-value The more you’ve “got going on,” the higher your mortgage rate will be. And vice versa. In short, an individual purchasing a single-family home with a conforming loan amount, 20% down payment, and a 800 FICO score will likely qualify for the lowest rates available. Conversely, the individual requesting cash out on a four-unit investment property with a 640 FICO score will likely be subject to a much higher rate, assuming they even qualify. And again, rates will vary from lender to lender, so it’s a multi-layered situation. I’ve already covered a few related topics, including why mortgage rates rates are higher for condos and investment properties. Mortgage rates also tend to be higher on jumbo loans and refinance transactions, especially those involving cash-out. Compare the Top 10 Mortgage Refinance Options Near You Select your state to get started State Advertised Mortgage Rates Are Best Case Scenario Mortgage rates on TV and online are usually best-case scenario They are intended to be super attractive to lure you in and snag your business When the dust settles your interest rate might look nothing like what you saw advertised This is why it’s important to shop around and better understand how risky your particular loan is You know those mortgage rates you see on TV or on the Internet? Those assume you’ve got an owner-occupied single family home, a perfect credit score, a huge down payment, and a conforming loan amount. Not to mention a newborn golden retriever with an unmatched pedigree. Most people don’t have all those things, and as a result, they’ll see different mortgage rates. And by “different,” I mean higher. How much higher depends on all the factors listed above.  So take the advertised rates you see with a huge grain of salt. Also, take the time to shop around with different lenders, and in the process, get to better understand your risk. Find out what lenders are docking you for and take steps to fix those things if you want the lowest rates available. Do Mortgage Rates Vary By State? Yes, they sure can! You might get a lower rate in California vs. Nebraska Depending on lender appetite for a certain geographic region Rates may vary from state to state, or even in certain counties Make sure the lender you use offers the best pricing for the state in which you reside One last thing. I’ve been asked if mortgage rates can vary from state to state, and the answer is actually YES. In fact, they can even vary by county in some cases. As you can see from the image below, some states tend to have lower average mortgage rates for one reason or another. This list is from February 2019, when the average rate for the 30-year fixed was 4.84% nationwide, per LendingTree. While no state offered an average rate below 4.74% or above 4.96% (pretty narrow range), there was some divergence by locality. California led the nation with an average rate of 4.74%, followed closely by the 4.75% average seen in New Jersey and the 4.76% average found in both Washington and Massachusetts. Nothing earth-shattering, but still different nonetheless. But it might not be for any one reason, such as a higher default rate in state X or fewer natural disasters in state Y. Or more regulations in another state. It could be more to do with the fact that lenders want to increase their business in a certain part of the country, and thus they’ll offer some sort of pricing special or incentive to drive rates down in say California. So you might see a rate sheet that says .50% rebate state adjustment for loans in CA and FL, for example. This will give them a competitive advantage in those regions. How about states where mortgage rates tend to be slightly higher, such as New York, Iowa, and Arkansas, which averaged 4.96%, 4.93%, and 4.92%, respectively? It’s possible you might see a pricing adjustment of say .25% for one of these states that may drive the interest rate up somewhat. In other words, rates can be priced both higher or lower depending on the state where the property is located. Of course, if this results in unfavorable pricing you can just move on to a different lender that doesn’t charge more for the state in question. All the more reason to shop around, compare mortgage rates online, and speak with a mortgage broker or two. Once you’ve done that, check mortgage rates with your local bank or credit union as well. Don’t be one of the many who obtain just one mortgage quote because you may wind up paying too much. Read more: What mortgage rate can I expect?

Senator and Cannae remove three CoreLogic directors

November 17th, 2020|

Though Senator Investment and Cannae Holdings dropped their hostile bid for CoreLogic, the investors were successful in electing three of their preferred candidates to the mortgage technology company's board. According to a preliminary analysis, more than 86% of the votes cast by shareholders supported adding the three Senator and Cannae nominees — W. Steve Albrecht, Wendy Lane and Henry "Jay" Winship — to the board at Tuesday's special meeting."Today's vote is a clear mandate from shareholders for CoreLogic's board to promptly engage in good faith with all bidders for the company and to maximize value," said Quintin Koffey, a partner at Senator in its press release. "However, we are committed to remaining significant shareholders and we will not hesitate to use all options available to us to hold the board accountable if need be." Furthermore, approximately half of the votes cast were in favor of removing CoreLogic's Paul Folino, Senator/Cannae said. Folino remains on the board. The Senator/Cannae nominees will replace J. David Chatham, Thomas O'Brien and David Walker. "We thank our shareholders for their participation in the special meeting, and we welcome Steve, Wendy and Jay to the board of directors," Folino said in a press release. "We look forward to working together and will get them up to speed quickly on our business and our strategic review process." Senator and Cannae — whose chairman Bill Foley has the same title at Black Knight and Fidelity National Financial — abandoned their joint $66 per share bid for CoreLogic after the company revealed it was in talks with bidders willing to offer in the area of $80 per share. Those bidders, according to Bloomberg, were CoStar Group, which did not sign a nondisclosure agreement, and a consortium consisting of Warburg Pincus and GTCR, which did.

Mortgage economists raise forecasts despite signs of a slowing market

November 17th, 2020|

Both the Mortgage Bankers Association and Fannie Mae have recently increased their mortgage volume forecasts for this year and next, despite signs that the pent-up demand from the delayed spring home buying season has started to wane. "The housing market continues to thrive in the low-rate environment, particularly refinancing, but the sector is showing some early signs of slowing on the purchase side as the delayed seasonal effect works its way through the market,” Fannie Mae Chief Economist Doug Duncan said in a press release. He noted that while issues related to COVID-19 create some uncertainty, the pace of growth won't likely be hindered "to the level of a potential second recessionary downturn." Fannie Mae predicts average rates for the 30-year fixed loan will remain at 2.8% through 2021 and only rise to 2.9% for 2022. The MBA is more conservative, predicting the 30-year FRM will go from 2.9% in the current quarter to 3.3% one year from now and to 3.6% by the end of 2022. However, the MBA's chief economist, Mike Fratantoni, recently said he expects rates to go even higher if both Senate seats in Georgia flip to the Democrats after January's runoff election.Fannie Mae's November forecast calls for $4.12 trillion in mortgage originations this year, up from $4.08 trillion in the October outlook. For 2021, the latest projections call for $2.72 trillion in volume, up from the $2.62 trillion that Duncan last predicted. For 2022, Fannie Mae is making an initial projection of $2.47 trillion. Purchase volume will increase from $1.53 trillion this year, to just under $1.6 trillion in 2021 and $1.64 trillion in 2022. Meanwhile, Fratantoni raised his projections for 2020 to $3.39 trillion from October's $3.18 trillion. Next year, he projects $2.56 trillion, compared with $2.49 trillion one month prior. The forecasts for 2022 and 2023 were also raised to $2.2 trillion and $2.17 trillion, respectively. While Fratantoni's total forecast remains conservative compared with Duncan's, he also boosted his prior prediction for record purchase activity over the next three years. The MBA expects 2020 to end with $1.42 trillion in purchase volume. That will increase to $1.59 trillion next year, then to $1.63 trillion in 2022 and $1.65 trillion in 2023. Total home sales will increase 5.7% this year over 2019, to 6.37 million units on a seasonally adjusted annual rate basis, Fannie Mae said. That will be driven by a 21.5% increase in new-home sales. Existing-home sales will be up 3.6% on a year-over-year basis. While total home sales are expected to increase by 0.8% next year, new-home sales will be up by 6.2% while existing-home sales should remain flat in Fannie Mae's forecast. However, growth in the supply of new homes might be on the wane as well. While there was a 2.24% year-over-year increase in October in new single-family permit authorizations, that was down from September's gain over the prior 12 month period of 6.09%, according to the BuildFax Housing Health Report. There was a 3.72% increase in October compared with September in authorizations. "Housing activity remains strong in October spurred by historically low mortgage rates and strong demand," said BuildFax Managing Director Jonathan Kanarek in the report. "However, this trend may begin to slow — as seen with new construction this month. The recent announcement of a vaccine candidate against COVID-19 has shown conflicting signals within housing stocks. We're closely monitoring how the news could impact a potential reversal in mortgage rates and homebuilder trends." For existing homes, maintenance volume increased 5.23% year-over-year in October while remodels — a subset of maintenance that includes renovations, additions, and alterations — had a 4.59% increase in volume, BuildFax said.

Well-heeled consumers benefiting most from refi boom

November 17th, 2020|

Borrowers with excellent credit are benefiting the most from the recent mortgage boom — the latest evidence that the pandemic is exacerbating economic inequality in the United States. The median credit score for new residential mortgages climbed to 786 during the third quarter, the highest level in more than two decades, according to a report published Tuesday by the Federal Reserve Bank of New York. About 72% of all mortgages originated in the quarter went to borrowers with a credit score of 760 or higher, up from 61% in last year’s third quarter. Meanwhile, borrowers with credit scores below 683 got just 10% of all the mortgages made during a quarter in which loan volume reached a 17-year high. Mortgage originations totaled $1.05 trillion between July and September, up from $528 billion a year earlier. The findings suggest that Americans who were already in good shape financially have been the primary winners from low mortgage rates. The average cost of a 30-year fixed-rate mortgage fell below 3% this year for the first time in at least three decades. Researchers at the New York Fed noted Tuesday that high credit scores for mortgage borrowers reflected an increase in refinancing during the quarter. Existing homeowners tend to have higher scores than first-time buyers. “Mortgage originations, including refinances, continued on their upward trend as homeowners continue to take advantage of the low interest rate environment,” Donghoon Lee, research officer at the New York Fed, said in a press release. But even during previous refinancing booms, including those that came after the close of the subprime mortgage era, average credit scores did not climb as high as they did between July and September 2020. A similar gap between credit haves and have-nots is evident in the auto lending sector, where borrowers with scores below 620 accounted for only 17% of loan originations during the third quarter, the lowest percentage in a decade. U.S. auto loan originations reached $168 billion during the quarter, their highest level ever. The increase was likely due in part to pent-up customer demand, since many car dealers were closed for much of the spring, as well as a shift in consumer preferences away from public transit during the pandemic. Roughly half of all new auto loans this year have gone to borrowers with credit scores of 720 or higher, a level unmatched since the aftermath of the Great Recession. Total outstanding consumer debt, which fell between April and June for the first time in nearly six years, climbed by $87 billion during the third quarter to $14.35 trillion. For months, economists have been describing the recovery that followed stay-at-home orders in the spring as K-shaped, a reference to the disparate paths traveled by white-collar and blue-collar workers. “If you’re on the top, you’re going to do very well,” President-elect Joe Biden said during a campaign appearance last month. “And if you’re on the bottom or if you’re in the middle or the bottom, your income is coming down. You’re not getting a raise.” The research published Tuesday shows that consumers who received forbearance on their auto loans and mortgages during the pandemic had average credit scores that were about 40 points lower than borrowers who did not get forbearance. In addition, borrowers who enrolled in forbearance had remaining loan balances that were about 30% higher than those who did not enroll. They were also much more likely to have been delinquent prior to the pandemic. Many lenders have classified borrowers who were delinquent before entering into a forbearance program as current, since they had no payment due during the deferral period, the New York Fed researchers noted in a blog post. That methodology may help to explain why delinquency rates fell sharply this year across the consumer lending industry. The findings suggest that delinquent borrowers who entered into forbearance programs have gotten a sizable boost to their credit scores as a result of being marked as current. “On average, delinquent borrowers whose loans were converted to ‘current’ upon entry into forbearance saw an average 48 point increase in their credit scores,” the researchers wrote. “In contrast, the average credit score of borrowers who were current before the forbearance was unchanged.” The New York Fed’s report is based on data from Equifax, and its findings about the credit scores of borrowers rely on Equifax Risk Score 3.0.

Texas homeownership hits record high as sales surge

November 17th, 2020|

The COVID-19 pandemic hasn't put a pause on the increase in Texas homeowners. The state's homeownership rate just hit an all-time high of 70%, according to a new report from the Real Estate Center at Texas A&M University. The Texas homeownership share now tops the nationwide rate of 67.4%. It's the first time in eight years that Texas has surpassed the national average. "Strong sales activity during the third quarter pushed the Texas homeownership rate to the unprecedented high," Real Estate Center chief economist Jim Gaines said in the new report. "Nationally, homeownership fell across all races and every age group, except those 65 and older." The Austin area has the most homeowners, with an ownership rate of 74.7%. Dallas-Fort Worth is second with a 69% homeownership rate. Homeownership in the Houston area has fallen slightly to 65.5%, according to the latest study. "Homeownership could suffer in 2021, as COVID-19 foreclosure-protection policies expire," Gaines said. "Texas has a higher proportion of Federal Housing Administration and Veterans Administration loans." Homeowners with those government-supported mortgages have been more likely to seek payment forbearance during the pandemic. Housing analysts worry that mortgage defaults will rise when those forbearance programs expire. North Texas real estate agents have sold record more than 99,000 single-family homes during the first 10 months of 2020. That's an 8% increase from property sales at this time last year. With record low mortgage rates, buyers have headed to the housing market this year, looking for new properties with more room during the pandemic. Statewide home sales were up more than 5% through the third quarter, a greater gain than the nationwide year-over-year increase of 2.1%

With fewer homes for sale than ever, listings close at lightning speed

November 17th, 2020|

Housing inventory fell to another all-time low in October, causing rapid closings and rising prices that month, according to Remax. October's average listing-to-sale time was the shortest it's been in the 13 years of the Remax National Housing Report. Homes spent 38 days on market in October, down from 39 in September and 49 the year prior. Among the 52 largest housing markets, Cincinnati had the fewest days at 18, followed by Boise, Idaho, at 20 and Nashville, Tenn., at 21. Miami finished at the other end of the spectrum with an 89 day average, trailed by 86 days in Des Moines, Iowa, and 74 days in New York.The number of properties for sale plummeted 32.5% year-over-year and 7.6% from September to another new nadir since Remax started its report. National supply decreased to 1.7 months in October from 1.9 month-over-month and 3.6 months the year prior. Boise, Idaho, continues to have the lowest inventory at 0.5 months, followed by Albuquerque, N.M., and Manchester, N.H., at 0.7 months. A 6-month supply defines market equilibrium. "Buyers are ready to act as soon as they see the right home. Sellers who want to get through the process quickly, without having to move much on price, have a great opportunity to do so right now," Adam Contos, Remax CEO, said in the report. "That advantage should bring more listings into the market in the months ahead, but with inventory levels as low as they are, it will likely be awhile before we see anything resembling a balanced market." Closed sales grew in October and further dried up the supply. Transactions rose 0.1% from September and 20.8% from October 2019. Hartford, Conn., led all metro areas in annual sales growth, spiking 41.3% year-over-year. Wichita, Kan., came second at 33.9% and Chicago third at 33.4%. With short supply and historically low interest rates driving demand, prices continued to climb. The median sales price reached $295,000 in October, rising 0.9% from September and 15.4% annually. Augusta, Maine, boasted the largest growth from last October at 29.1%. The 20.5% jump in Tulsa, Okla., just edged out Cincinnati's 20.4% for second place. Meanwhile, none of the 52 metros analyzed saw annual declines.

Homebuilder confidence hits another record on buying boom

November 17th, 2020|

Homebuilder confidence jumped in November, hitting another record high as buyers swarmed sales offices to take advantage of the lowest mortgage rates in history. The gauge of builder sentiment rose to 90, the highest in data going back to 1985 and up from 85 in October, according to the National Association of Home Builders/Wells Fargo Market index released Tuesday. It was third straight month of record-high readings and beat the median forecast of 85 in a Bloomberg survey of economists. Home construction has been a bright spot for the U.S. economy, plagued by high unemployment and the raging coronavirus. Americans who can afford to buy houses are pouncing on sub-3% rates for 30-year mortgages, and many are choosing new communities in the suburbs, partly because existing-home listings are growing more scarce. “In the short run, the shift of housing demand to lower-density markets — such as suburbs and exurbs with ongoing low resale-inventory levels — is supporting demand for homebuilding,” Robert Dietz, the group’s chief economist, said in a statement. “However, affordability remains an ongoing concern, as construction costs continue to rise and interest rates are expected to move higher as more positive news emerges on the coronavirus vaccine front.” The spike in demand has created challenges for builders because labor remains tight, materials costs are rising and companies are running out of finished lots to build on. The seasonally adjusted index measures builder perceptions of single-family home sales and expectations for the next six months. A number above 50 indicates that more builders view conditions as good than poor. Sixty-nine percent of survey responses were received before the presidential election was called for Joe Biden on Nov. 7.

Digital dollar, inclusion and the stimulus bill

November 17th, 2020|

The effect of coronavirus is constantly felt by Americans, both in their daily lives and in their financial well-being. While the first stimulus package delivered some financial relief starting in April through Economic Impact Payments (EIP), there were several glitches in the first stimulus package, partially due to the lack of direct deposit access for the critical mass of Americans. Join PaymentsSource Executive Editor John Adams in a conversation with Jodie Kelley, CEO of the Electronic Transactions Association as they discuss some of the progress that has been made in terms of a second stimulus deal, how these funds will be delivered, and how it will benefit traders, fintechs, financial institutions and consumers.

The Senate may not flip but Banking Committee is poised for shake-up

November 17th, 2020|

WASHINGTON — With Republicans close to holding Senate control, the status quo of a divided Congress is likely to remain in place even with a new president. But the Senate Banking Committee is poised for a leadership shakeup. If the GOP wins just one of the Senate runoff elections in Georgia, it will hold the majority. In that scenario, Sen. Pat Toomey will likely chair the Senate Banking Committee, with current Chairman Mike Crapo, R-Idaho, expected to lead a different panel. While Crapo has championed several industry causes — including the 2018 regulatory relief package — Toomey, a former banker, is seen as an even fiercer defender of the free market and a louder opponent of government intrusion. An early issue in Toomey's chairmanship could be whether Congress extends Federal Reserve pandemic relief programs, including the Main Street Lending Program. The Pennsylvania Republican has already indicated he wants the programs to expire at yearend. “Clearly Toomey would like to end the emergency authority granted to the Fed and Treasury to assist medium-sized businesses,” said Ed Mills, a policy analyst at Raymond James. “If that’s the first fight, that could certainly be a partisan fight from the get-go, especially if a Biden-chosen Treasury secretary is about to get access to that funding.” Observers said Toomey could forge deals with Sen. Sherrod Brown, D-Ohio, on bipartisan issues such as cannabis banking reform. But if Toomey gets the gavel, many predict starker partisan differences between the two lawmakers than exists under Crapo. (If Democrats win both Georgia Senate races and seize the majority, Brown is then expected to become chairman. It is unclear who the Republicans' ranking member would be.) Observers caught a glimpse of the stark ideological differences between Sen. Sherrod Brown, D-Ohio, and Sen. Pat Toomey, R-Pa., who could soon chair the Senate Banking Committee, during a hearing with Fed Chairman Jerome Powell. Bloomberg News Toomey's staunch free-market views could clash with the comparably progressive views of Brown, according to some analysts. "It’s going to take on a new somewhat confrontational tone compared to what was a subdued and largely respectful relationship between the chairman and the ranking member,” said Isaac Boltansky, director of policy research at Compass Point Research & Trading. Toomey's statements in recent hearings calling for the Fed's emergency lending facilities to be wound down set up a potential clash with Democrats when the new Congress gets to work in January. He is also expected to conduct tough oversight of regulators appointed by Biden, and push back against progressive regulatory reforms advanced by the new administration. Former staffers and industry observers say that Toomey will likely be a backstop against a Democratic proposal, for example, requiring banks to conduct stress tests for climate change, as well as other proposals resulting in higher regulatory burdens. “His first reaction is not to look to the government for answers,” said a financial services lobbyist who spoke on the condition of anonymity. “It’s probably not even his second response either.” Before he came to Congress in 1999, Toomey's non-political career included a stint at Chemical Bank, a predecessor to JPMorgan Chase, where he worked on currency swaps. He later was involved in derivatives at Morgan, Grenfell & Co., before it was acquired by Deutsche Bank. He has also served as president of Club for Growth, a conservative organization and super PAC focused on cutting taxes, free trade and deregulation. “Coming from a position of being the president of Club for Growth at one point, I think he looks at the powers and the scale of some of these independent agencies and questions the growth of their powers and the influence over the financial sector and the economy,” said Paul Merski, group executive vice president for congressional relations and strategy at the Independent Community Bankers of America. Observers got a glimpse of the stark ideological differences between Toomey and Brown at a June Senate Banking Committee hearing with Fed Chairman Jerome Powell. In his opening statement, Brown spoke about a need for policymakers to address racial inequities in the economic system. “Whenever we try to fix it, the people who created and perpetuate that system, people who have no problem intervening in the market to save corporations and the white men who run them say, ‘Oh no, we can’t have government meddling in the economy,’" Brown said. "Let's be clear: governments always intervene in the economy. It's only been a question of who it's intervening on behalf of? Corporations, the wealthy, the privileged, or the people who make this country work?” As Brown was speaking, Toomey was caught on a hot mic saying in reference to the Ohio Democrat's comments, “He is so shameless.” Still, industry representatives and former congressional staffers say there is room for common ground between the two senators. Some believe they could strike a deal on legislation to make it easier for companies to go public. “[Toomey] has had a longstanding interest in improving our capital markets for emerging growth companies, private companies, identifying opportunities to improve our securities laws,” a former Republican staffer said. And it is possible that Toomey would be more open to working with Democrats on legislation that would enable banks to serve cannabis businesses in states that have legalized the substance. “There might be a slight easing of the view of cannabis banking at least from Senator Toomey, particularly after these elections where more and more states have legalized cannabis and you are going to have billions of dollars from the cannabis industry in multiple states now,” said Merski. “The reasonable approach of being able to bank those dollars, I think we are going to see a little bit more opportunity there with Senator Toomey.” Since Toomey recently announced that he is not running for reelection in 2022, the senator could be in a better position to cut deals with Democrats. “My gut is that Senator Toomey is liberated from the burdens of reelection and so he is liberated from many political considerations at this point,” said Milan Dalal, managing partner at Tiger Hill Partners and a former Democratic Senate staffer. “So you are going to see Senator Toomey follow his conscience and do what he thinks is right.” The former Republican Senate staffer said Toomey may try to forge more agreements on legislation than his critics expect. “There is no question that he has deep-rooted principles and a lens through which he views policy issues that come before the Banking Committee,” the former staffer said. “But I think we’ve seen evidence that he is more pragmatic than some of the portraits that have been painted of him.” But Boltansky noted that a potentially fraught relationship between Toomey and Brown would be a departure from the current Senate Banking Committee leadership, where Crapo and Brown had some degree of “personal affinity,” despite their policy disagreements. “I know that Toomey and Brown do not have that same degree of personal relationship,” Boltansky said. Mills agreed that while “Brown and Crapo could disagree without being disagreeable, ... it will be a slightly greater challenge" between Toomey and Brown. Toomey’s limited government ideology was evident in his previous opposition in to reauthorizing the Export-Import Bank, even as a number of Republican senators attempted to work with Democrats to reuthorize the bank. The bank was finally reauthorized in late 2019 to Toomey's dismay. Toomey “was very out front in the opposition to reauthorization,” said Graham Steele, director of the Corporations and Society Initiative at the Stanford Graduate School of Business and a former aide to Brown. The senator also helped lead GOP efforts during the Obama administration to reverse a Consumer Financial Protection Bureau guidance restricting indirect auto lenders. The differences between Toomey and Brown could come to a head if Congress considers additional coronavirus stimulus legislation. Toomey has said that the Fed's emergency lending facilities, including the Main Street Lending Program and the Municipal Liquidity Facility, should end when they are set to expire next month. Democrats have pushed to extend the facilities, as well as for broader fiscal stimulus. "This series of programs did their job," Toomey said at a recent hearing. "The private sector is providing the capital that's needed. It's now time to terminate these programs, which is exactly what was contemplated by the [Coronavirus Aid, Relief and Economic Security Act]." Toomey would also have the ability to block Biden from nominating progressive policymakers to lead financial regulatory agencies, but a former staffer who worked on financial services issues for Toomey said the senator will likely facilitate Biden’s nomination process if the incoming administration picks qualified individuals. “If somebody is qualified for the position even if he doesn’t agree with him or her, he will put the nominee through,” Toomey’s former staffer said. “I was with him when Obama was president. … He didn’t like to vote ‘no’ unless there was a really good reason.” Toomey and Brown could clash on an industry-backed proposal reforming anti-money-laundering requirements that Crapo and Brown agreed to support as a potential amendment to a defense spending bill. The legislation would require businesses to disclose their true owners to the Financial Crimes Enforcement Network at the point of incorporation, shifting that burden away from banks. If that legislation is not passed this year, it would face an uphill battle with Toomey as the top Republican on the Senate Banking Committee. He has stated his reservations about the legislation. His former staffer said the senator likely wouldn't take up the legislation as chairman because he is concerned that “it also may have the unintended effect of making it more difficult for private companies to raise capital.” The financial services lobbyist said there could be also be a fight brewing between Democrats and Republicans over banking policy proposals related to climate change. Democrats in the House and Senate have been pressing federal regulators to do more to address financial risks associated with climate change. “To the extent Democrats on the committee want to pass some sort of ‘banking industry climate change’ legislation, I think from Toomey’s perspective, he thinks the banks can already do that,” the financial services lobbyist said. “They are in the business of writing loans and getting paid back for their money. They are not going to write a loan or a mortgage on a house that’s sitting at or below sea levels that’s going to be flooded within the term of the loan. And I think that’s a different perspective than maybe Senator Brown would take.”

Is representation a step in the right direction — or a solution?

November 17th, 2020|

Despite tangible evidence dispelling that it's hard to find Black talent, the financial services have yet to crack the code when it comes to building a representational workforce. But is representation a sufficient solution on its own? Join us for a panel discussion with host Tobias Salinger of Arizent featuring guests from the Access Denied: Systemic Racism in Financial Services podcast Jina Etienne, founder of Etienne Consulting and Ras Asan, co-founder of BREAUX Capital.

‘Blue wave’ in Georgia runoffs would change mortgage rate outlook

November 16th, 2020|

The Mortgage Bankers Association’s interest rate outlook hinges on what happens in Georgia's January Senate runoffs, Chief Economist Mike Fratantoni told attendees at the MaxOut virtual event hosted by industry fintech Maxwell. “With Democratic control of the entire government we would … forecast a much steeper rate path,” Fratantoni said. As a result, mortgage rates could be 50 basis points higher than the MBA’s current forecast, which anticipates the 30-year FRM will average 3.6% next year, up from 3% this year.President-elect Joe Biden, pending a recount, is forecast to take the state’s Electoral College votes, but a “blue wave” in which Congress is completely controlled by the Democrats is considered unlikely. Even with forecasts calling for somewhat higher rates along with continuing unemployment concerns in some industries particularly hard hit by the pandemic, Fratantoni expects demand for homes that continues to outweigh available housing inventory to sustain relatively strong purchase activity and prices. Prices will likely keep rising in most areas but at a slower rate, he said. “We don’t see them dropping in much of the country at all,” said Fratantoni. There are some concerns about credit availability and underwriting overlays for government loans given relatively higher forbearance rates in the Federal Housing Administration market. The FHA market primarily serves first-time homebuyers, and FTHBs are fueling a lot of the current demographic demand, he noted. However, the latest Mortgage Credit Availability Index report did note slightly more availability of credit in the government sector during October. Furthermore, while the forbearance rates for government loans are higher than in the government-sponsored enterprise market, they are falling. The Ginnie Mae forbearance rate in the MBA’s most recent weekly report was 7.7%, down from 7.95% the previous week. In comparison, the forbearance rate for GSE loans was 3.36%, down 13 basis points from the previous week. Overall forbearance rates dropped 20 basis points to 5.67% of servicers’ portfolio volume as of Nov. 8. There was a 16-basis-point drop the previous week.

Austin-area homebuilding still booming amid pandemic

November 16th, 2020|

The coronavirus pandemic has made for a rough year for a number of industries in Central Texas, but the home construction sector hasn't been one of them. The area's homebuilding industry has continued to thrive despite the outbreak, as new home starts were up 17% in the 12 months that ended in September, according to industry research firm Zonda (formerly Metrostudy). The Austin region spans five counties from Georgetown to San Marcos. "The Austin market was hot before the virus hit," said Vaike O'Grady, regional director in Austin for Zonda. "After a short hiatus, demand roared back and that demand held throughout the summer. What's more, it was evident across all price points and (areas)." Builders started work on 20,395 houses in the 12 months that ended in September. That's almost 2,000 more homes than the pre-recession peak of 18,407, which came in the 12 months that ended in September 2006. In the July through September quarter, builders started construction on 5,330 houses in the Austin metro area. That was down 3% from the third quarter of 2019, which — prior to the pandemic — saw a record 5,509 housing starts. Central Texas homebuilders recorded 20,356 closings in the 12 months ended in September, which was up 16% from the 12 months ended in September 2019. For the third quarter, there were 5,695 closings, up 13% from the third quarter of 2019, according to Zonda's report. Builders define a closing as a home that has both sold and into which the buyer has moved. The Austin housing market had entered 2020 poised for a record year in home sales, owing to historically low mortgage interest rates and "the demographic tailwind of millennial family formations," O'Grady said earlier this year "The pandemic sent demand into overdrive," O'Grady said in October. "When your home becomes the center of your world, where — and how — you live becomes even more important." Market fuel The demand for new homes is being driven by low mortgage interest rates, buyers' desire for more space during the pandemic and an influx of buyers from other states, said Eldon Rude, principal of Austin-based consulting firm 360 Real Estate Analytics, Rude said his monthly survey of builders indicates year-to-date sales through September were up 25% over last year. "Although sales remained strong through September, one major change we are seeing in the market is builders are now running extremely low on both housing inventory and lot inventory," Rude said. "The impacts on prospective home buyers include a combination higher home prices and longer wait times before their homes are completed." Rude said some builders are restricting the number of weekly sales in select communities in an effort to finish homes on time and to better control construction costs, which continue to increase. "Whether it be the seasonal slowing of sales over the last two months of 2020, or a shortage of lots and homes, I expect new home sales to slow as we finish the year," Rude said. "That said, builders will remain extremely busy the balance of this year completing and closing homes they sold over the summer, as well as racing to finish construction on lots they will need to put them in position to meet 2021 sales goals." Zonda's new home pending sales index for Austin is up a seasonally adjusted 54% year-over-year in September. That's due in part to a shortage of pre-owned homes for sale. "Sellers have opted to stay put, either not listing due to fear of the virus or because of economic uncertainty," O'Grady said in her report. Affordability concerns The strong demand for new homes in Central Texas, coupled with a lack of supply, is also driving home prices higher, industry analysts say. In September, the median price of existing home in the Austin metro area was $355,000, a tie with the median in August for the highest level on record, the Austin Board of Realtors said last month. The $355,000 median means half the homes sold for more than that amount and half for less. September's median was up 12.1% from September 2019. In addition, sales of homes, townhomes and condominiums skyrocketed 31.5% in September compared to September 2019, the Austin Board of Realtors said. With bidding wars on the rise due to a lack of housing supply, "prices are not expected to come down anytime soon," according to O'Grady's report. The rising prices continue a trend in Austin, which over the past five years has seen home prices rise 2.5 times faster than annual wages, according to a recent report by Construction Coverage examining housing affordability across the U.S. The affordability question is an ongoing issue in Austin, according to Zonda's report. "Many would-be buyers may be priced out of the (Austin) market and forced to the sidelines," the report said. "Relative affordability is one of the reasons people move to Austin but there are demand as well as cost pressures that are making reasonably priced housing hard to deliver in 2021." Outlook As 2020 winds down, most of the indicators suggest Central Texas homebuilding will continue its torrid pace during the fourth quarter and into 2021, industry analysts say. In her latest report, O'Grady noted that the Urban Land Institute recently named Austin the country's No. 2 market for real estate investment for 2021. O'Grady said the home-closings rates in the Austin region are expected to continue through the fourth quarter, "thanks to strong sales well into the summer months." Looking ahead to next year, Rude said robust housing demand combined with low inventory of both new and resale homes should make 2021 another good year for builders. But a couple of unknowns could affect sales, he said. "How many homebuyers that purchased a home this year accelerated their plans to purchase and therefore won't be in the market next year?" he said. "And how long can housing demand remain at recent levels in the absence of meaningful job growth in the region?"

National Association of Realtors Says Home Prices Are Rising Too Fast

November 16th, 2020|

Posted on November 16th, 2020 It’s good to be a homeowner these days. After all, home prices are rising at an incredible pace, and have been for nearly a decade now since bottoming out. On top of that, many of today’s homeowners hold fixed-rate mortgages with ultra-low mortgage rates, making it very affordable to own rather than rent. Unfortunately, the same can’t be said of those looking over the fence, or sitting on the fence, wondering if they too should make the move to homeowner. One of the biggest hurdles to homeownership that continues to worsen is the pesky down payment. And as property values increase, so too does the minimum amount required to get a mortgage, assuming a down payment is needed, which it often is unless you’re taking out a USDA loan or VA loan. This has made it more and more difficult for renters to become homeowners, despite mortgage rates being at/near all-time lows. It also highlights the fact that low mortgage rates, while certainly great, aren’t a be-all, end-all solution to affordable housing. Home Price Gains Outpace Mortgage Rate Discounts Median monthly mortgage payment on an existing single-family home increased to $1,059 in Q3 That number was up from $1,019 in the second quarter and $1,032 in Q3 2019 Mortgage payments accounted for 15.6% of income in Q3 based on median income of $81,477 That was up from 14.8% in the second quarter unchanged from a year ago In the National Association of Realtors (NAR) latest statistical release, they noted that the median existing single-family home price surged 12.0% on a year-over-year basis to $313,500. These home price gains were seen all throughout the country, with double-digit year-over-year increases in the West (13.7%), Northeast (13.3%), South (11.4%), and the Midwest (11.1%). Meanwhile, home prices are growing four times as fast as median family incomes, which have only ticked up about 2.9%. Still, with mortgage rates so low at the moment, the monthly mortgage payment on an existing single-family home has only increased to $1,059 from $1,019 a quarter earlier and $1,032 a year ago. Compare the Top 10 Mortgage Refinance Options Near You Select your state to get started State For most prospective home buyers and existing homeowners, this is probably incidental, and not a deal-breaker in terms of qualifying for a mortgage. But NAR chief Lawrence Yun still remarked that “housing prices are increasing much too fast.” Interestingly, the low mortgage rates are a double-edged sword because they’re continuing to lure buyers to market, thereby increasing demand and raising home prices in the process. So while you might get a lower mortgage rate, you’ll pay more for the house, assuming you don’t already own it. In fact, 65% of metro areas , or 117 areas out of 181, experienced double-digit price gains from one year ago. Biggest Year-Over-Year Home Price Gainers 1. Bridgeport, Conn. (27.3%)2. Crestview, Fla. (27.1%)3. Pittsfield, Mass. (26.9%)4. Kingston, N.Y. (21.5%)5. Atlantic City, N.J. (21.5%)6. Boise, Idaho (20.6%)7. Wilmington, N.C. (20.6%)8. Barnstable, Mass. (19.4%)9. Memphis, Tenn. (19.1%)10. Youngstown, Ohio (19.1%) These are the hottest metros nationwide when measuring home price growth from the third quarter of 2019 to the third quarter of this year. Shockingly, home values were up nearly 30% in Bridgeport, Connecticut, which certainly doesn’t sound like healthy home price appreciation. Yun noted that home prices have “jumped” in cities that contain larger properties with more open space, a symptom of the ongoing COVID-19 pandemic. More frightening is the continued lack of housing inventory – at the end of the third quarter there were just 1.47 million existing homes available for sale, which was down a whopping 19.2% from a year earlier. That represented just 2.7 months at the current sales pace, as of September 2020, which tells you why it’s overwhelmingly a seller’s market still. Sure, you can probably get your hands on a super low mortgage rate, but good luck finding a house if you don’t already own one! Read more: Would You Rather Have a Low Mortgage Rate or Pay a Lower Price for a Home? About the Author: Colin Robertson Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for nearly 15 years.

Majority of October home sales faced bidding wars

November 16th, 2020|

The continual lag in housing inventory relative to demand and low mortgage rates kept homebuyer competition heated in October. While the share of home sales with bidding wars dwindled as activity slowed seasonally into the fourth quarter, October marked the sixth consecutive month where over half of homes for sale faced competition, according to Redfin. About 56.8% of U.S. properties underwent bidding wars in October, down from September's revised rate of 57.4% and the 2020 peak of 59.3% in August. However, the share of bidding wars greatly surpassed the year-ago rate of 10.1%.In back-to-back months, Salt Lake City held the top spot for most competition, as 75% of listings underwent bidding wars. San Diego came second with 73.2% competition share and the combined statistical area of San Francisco-San Jose followed with 69.6%. Austin, Texas, Washington, D.C., Sacramento and Seattle also had bidding war shares above 60%. Of the 24 metro areas in the study, Las Vegas had the lowest competition at 38.2%, narrowly edging out Miami's 38.5%. Tampa, Fla., saw the biggest rise in competition, jumping to a 51.2% share from 26.3% in September. New York sat at the other end of the spectrum with the largest decline, falling to 45.3% from 58.5%. Anecdotal evidence from the report suggests waiving appraisal contingencies gives buyers the biggest advantage in this competitive marketplace, even more so than all-cash bids. A separate report from Zillow shows the fierce competition keeps pulling down the average availability for listings. For-sale properties spent an average of 12 days on the market in October, down from 16 days in September and 29 days in October 2019. "The housing market is taking us all back to Economics 101 and teaching lessons about supply and demand," Chris Glynn, Zillow senior economist, said in a press release. "A persistent interest in buying and moving is creating an imbalance that is driving prices higher than we typically see at this time of year. In many cases, buyers in this market should be realistic about the chance of bidding wars and leave themselves financial flexibility by looking at homes listed for less than their maximum price point. With tight inventory, low interest rates, and robust demand from households re-evaluating their housing needs, a strong, competitive market with many transactions is likely here to stay into 2021."

Data-security lapses surge in work-from-home era

November 16th, 2020|

Insider threats — the risk that employees will steal or inadvertently leak sensitive corporate information — are on the rise, partly because so many employees are working from home. According to the Ponemon Institute, the number of publicly disclosed insider incidents has increased by 47% in two years, from 3,200 in 2018 to 4,716 in 2020. The research firm Forrester predicts insider incidents will increase another 8% in 2021. Companies are only required to publicly disclose data breaches when personally identifiable information is compromised, so the actual numbers are likely higher. In a report published last week, Forrester analysts said three factors will produce a perfect storm for insider threats next year: the fast shift to remote work as a result of the COVID-19 pandemic, employees’ job insecurity and the increased ease of moving stolen company data. In the work-from-home environment, “you have more weak points for data exposure that could be caused by accidents,” said Heidi Shey, a principal analyst of security and risk at Forrester. At the same time, the cost of insider breaches is growing. According to Ponemon, the average cost of insider threats grew 31% from 2018 to 2020, to $11.45 million. Financial services is among the hardest-hit industries. Shareth Ben, director of insider threat and cyber threat analytics at Securonix, which provides user- and entity-behavior analytics software to financial services firms, recently analyzed 300 insider incidents across eight industries. Financial services had the second-highest rate of insider breaches — 27.7% of the total (right after pharmaceutical and life sciences at 28.3%.) “Anybody that works in the cybersecurity business knows we're in a riskier environment,” said Gary McAlum, chief security officer at USAA. “The first reason is, you've taken a bunch of people that normally work inside facilities and now they're dispersed. So any benefit you have from physical access controls and management oversight has essentially gone.” “Anybody that works in the cybersecurity business knows we're in a riskier environment,” said Gary McAlum, chief security officer at USAA. The second, less obvious reason is that as people work remotely, as 98% of USAA employees are doing, “they want to be able to do exactly what they were doing when they were inside the building,” McAlum said. For instance, they want to be able to print, and sometimes they print sensitive documents. Employees are using personal devices to connect to corporate networks, without necessarily having the proper software security controls. They’re using USB and Bluetooth data transfer devices unsupervised, McAlum said. “Companies don't have a really good governance process for how they allow all of that,” he said. “You can start to lose sensitive information and data that way.” USAA has a rigorous policy around who is allowed to print remotely. “Just because you say, I need to print, that's not enough,” McAlum. Another issue for people who can access sensitive information from home is, who else is in that home, McAlum noted. “How is that information being protected? Who's looking over your shoulder?” he said. Employees working from home are using the same Wi-Fi as other family members who might be downloading movies that might contain malware, pointed out MIT professor Stuart Madnick. They’re using new software tools, such as webinar and conferencing programs, with which they might not be familiar. Another threat escalator is the fact that bad actors know that everybody's working remotely and have been targeting vulnerabilities in virtual private networks and stepping up their phishing attacks over the past eight months. Employees are more vulnerable to business-email-compromise attacks that appear to come from colleagues who are no longer down the hall. They’re also more susceptible to phishing attacks from emails that appear to have useful information about local COVID-19 cases and lockdown information. At the same time, patching all the computer and phone endpoints in a remote environment can take longer than when they’re in common buildings, McAlum said. And employees are under more financial pressure, especially those with spouses out of work, which can help them rationalize improper behavior. In the worst-case scenario, a person who has elevated data-access privileges is actively looking to steal or do something malicious, McAlum said. But plenty of times, insider threats are inadvertent. Wade Lance, chief technology officer at Illusive Networks, estimates that 60% of insider threats are unitentional data leakages, policy violations, data exposure or data-loss incidents. Illusive Networks’ software detects cybersecurity threats and tries to gather information and remediate; half its customers are in financial services. Companies need to keep a close eye on people with data-access privileges, such as software developers, database administrators and systems administrators. “It's a huge risk for that insider going rogue or for their system to be compromised so an external threat actor can leverage the capacities of that system,” Lance said. Privileged users can accidentally click on phishing emails and become unwitting accomplices, for instance. “An insider incident could be as simple as someone who got distracted sending an email and attaching the wrong file or typing in the wrong recipient name,” Shey said. And there are negligent insiders: people who, in the course of trying to get their job done, circumvent existing controls out of frustration. Not all employees are completely equipped to do their jobs from home, Shey pointed out. “You have some people who start to go off and find free tools to use so they can remain productive,” she said. She has also heard of employees who do paper-based work moving filing cabinets full of records to their homes. “To me, that's a bit of a nightmare in terms of how are you controlling access and use of this information and protecting it at that point?” Shey said. Banks are doing several things to mitigate the insider threat: They're tightening controls around data access, monitoring access to data more closely through data-loss-protection and behavioral analytics, and educating employees about security. Along with these stricter security measures, Shey recommends a softer approach: supporting employees more broadly during these tougher times, and therefore giving them less motivation to compromise data. Companies that don’t do this “could inadvertently be setting up the conditions that are ripe for insider threats of the malicious kind, from disgruntled workers and people who feel like they're just a number.”

Mortgage credit rises as more lower score loan products offered

November 16th, 2020|

Lenders increased their product availability in October for only the second time since last November, helped by the economic recovery and improved labor market, the Mortgage Bankers Association said. "There was an overall increase in credit availability for low credit score and higher loan-to-value loans, with conventional credit supply increasing 5.1%, and government credit staying essentially flat," Joel Kan, the MBA's associate vice president of economic and industry forecasting, said in a press release. "Despite October's slight turnaround, credit availability remains constrained to near a low last seen in 2014."The MBA's Mortgage Credit Availability Index increased 2.3% to 121.3 in October, compared with 118.6 in September and 185.1 in October 2019. July marked the only other month this year where lenders loosened their credit offerings. Mortgage lenders cut their product offerings even before the pandemic started. Last November the index peaked at 188.9, near its post-housing boom high. But because of the changed economic environment, even with record levels of mortgage originations this year, lenders furthered culled their credit extensions. October's increase can be tied to two specific product trends. "After seeing a drop in supply of around 60% since the onset of the pandemic, the jumbo index rebounded 6.1% in October to its highest level since July of this year," Kan said. "There was also an increase in the adjustable-rate mortgage loan supply, likely driven by the government-sponsored enterprises' Sept. 30 deadline for Libor ARM loan applications. More lenders rolled out SOFR ARMs following the deadline." The Conventional MCAI increased 5.1%, which besides that surge in its jumbo loan portion, also had a 4.1% increase in its conforming loan component. On the other hand, the Government MCAI increased by 0.2%. This modest rise represents the third increase in this component in the past four months, which is a reversal in the long-term trend of tightening of this product offering. The MBA calculates the MCAI using loan program data from Ellie Mae's AllRegs Market Clarity database with a benchmarked value of 100 based on conditions in March 2012. Decreases in the index indicate stricter lending standards.

CFBank Mortgage Review: A Boutique Bank That Offers Mortgages in all 50 States

November 16th, 2020|

Posted on November 16th, 2020 You may have considered a large commercial bank for your home loan needs, but what about a boutique commercial bank? That’s how CFBank describes itself, a Columbus, Ohio-based retail mortgage lender that recently converted from a savings and loan (S&L) into a national bank. Despite being a publicly-traded company worth about $100 million dollars, they say they offer concierge banking services via a “high-touch relationship style.” So if you’re the type who wants to use a big bank to get your mortgage, perhaps because you’re old school, but don’t want to get lost in the bureaucracy, CFBank might be for you. Let’s discover more about them to see if they’re the right fit. CFBank Mortgage Quick Facts Full-service commercial bank founded in 1882 Publicly-traded company headquartered in Columbus, Ohio Offer mortgages, checking and savings accounts, and other consumer loans Originated roughly $1 billion in home loans last year Appear to specialize in mortgage refinancing with limited or no lender fees Licensed to lend in all 50 states and D.C. They’re probably one of the oldest mortgage lenders around, given the fact that they were founded all the way back in 1882. Of course, they don’t just offer home loans – they’re a full-service bank with all types of products including checking and savings accounts, credit cards, and business banking services. But we’ll focus on the mortgage part. Last year, they funded nearly $1 billion in home loans, with over $100 million coming from their home state of Ohio, and another $100 million or so from far away California. Roughly 80% of their overall volume was made up of mortgage refinances, with the remainder home purchase lending. So they appear to be the go-to bank for refinancing. They are licensed to lend in all 50 states and the District of Columbia, meaning there are no geographical limitations. How to Apply for a Mortgage with CFBank You can apply for a home loan directly from their website in minutes They use a digital mortgage application powered by fintech company Blend Or request a mortgage rate quote instead and discuss pricing with a loan officer They also have branch locations throughout the state of Ohio if you prefer face-to-face interaction If you’re interested in applying for a home loan, simply visit the CFBank website and hit the “Apply Now” button. From there, you’ll be sent to their digital mortgage application powered by Blend, which allows you to complete the form from anywhere on any device. You can link financial accounts, scan and upload necessary paperwork, and eSign documents. You’ll also be able to see what you can afford, compare loan options, and get personalized mortgage rates. And of course, a dedicated lending team will be with you along the way should you have any questions or require assistance. All in all, they provide a digital, hands-off loan process, but are there to step in if and when you need them. Types of Loans Offered by CFBank Mortgage As you can see, they offer an absolute ton of different home loan programs. Compare the Top 10 Mortgage Refinance Options Near You Select your state to get started State And you can get financing on all types of properties, whether it’s an owner-occupied condo, vacation home, or multi-unit investment property. You can even get financing for a lot, a new construction loan, or a renovation loan if you’re working with a fixer-upper. Additionally, CFBank offers non-QM loan products including interest-only loans, along with zero down financing and high-LTV loans without PMI. Unlike a lot of smaller mortgage lenders, they’re also able to offer home equity lines of credit (HELOCs), and jumbo loans if your loan amount exceeds the conforming loan limit. In summary, they’ve got basically everything under the sun, though it’s unclear if they offer USDA loans. With regard to loan types, you can get a fixed-rate mortgage or an adjustable-rate mortgage in a variety of different loan terms. CFBank Mortgage Rates You can see their mortgage rates if you click on “Check today’s rates,” at which point you’ll need to fill out a fairly lengthy lead form. It’d be nice if they just listed their mortgage rates right on their website so you didn’t have to go to all that trouble, but that’s their prerogative. Ultimately, advertised mortgage rates don’t mean a whole lot unless you actually qualify for them and the loan assumptions they make match up with your unique loan scenario. But it would be helpful to at least see where they stand rate-wise. However, it is possible to see their mortgage rates on the Zillow mortgage platform if comparing lenders there. From what I saw, they offered one of the lowest rates on a conventional 30-year fixed with just $1 in lender fees. Some of their other listed rates came with lender credits as well. In other words, they appear to offer no cost refinances if that’s what you’re looking for. CFBank Mortgage Reviews On SocialSurvey, they have a 4.74-star rating out of 5 based on more than 4,000 reviews. That’s a pretty impressive rating given the large number of reviews. On Zillow, they have a 4.41-star rating out of 5 at last glance, based on nearly 200 customer reviews. Many of the reviewers indicated that the interest rate they received was lower than expected. While CFBank is not Better Business Bureau accredited, they do have an A+ rating at the moment, which is based on customer complaint history. In summary, they might be a good option if you’re an existing homeowner looking to refinance to a lower rate, or if you want to take advantage of one of their more unique loan programs. CFBank Mortgage Pros and Cons The Good Licensed to lend in all 50 states Offer a ton of different home loan programs Can apply for a mortgage directly from their website Digital mortgage application powered by Blend Excellent customer reviews A+ BBB rating The Maybe Not Good Do not publicize their mortgage rates Do not list their lender fees May not offer USDA loans

Homebuilders in metro Denver on track for an unexpectedly stellar year

November 16th, 2020|

Facing a slim inventory of existing homes for sale, Denver buyers are snapping up new homes at the fastest pace in the country, a rebound so strong that it has caught local builders off guard. "During the initial stages of the pandemic in late March, especially when the stay-at-home orders were in place during all of April, no builder thought that demand would return the way that it did," said John Covert, regional director for Zonda, a real estate analytics firm. "Sales rebounded sharply through the summer and early fall to the point where many builders will not only exceed 2019 sales but will likely have their best year ever." Zonda's pending new home sales index is up 95.3% in metro Denver compared to a 46.9% gain nationally in September. The next hottest markets in terms of the gain in contracts signed to purchase new homes are Jacksonville, Fla., up 73.3% on the index and Raleigh, N.C., up 69.6%. "All of these markets are benefiting from positive net in-migration and are among the top markets in the country for millennials," said Ali Wolf, chief economist at Zonda Economics, in comments accompanying the index report. "Builders in Denver are outselling the national average across all categories: entry-level, move-up and luxury." Beyond migrating millennials, builders also are seeing a flow of older adults escaping more crowded and expensive markets, especially in California, a move that the switch to remote work arrangements during the pandemic has made easier. "We have seen a huge flight from markets where there is an affordability issue, like San Francisco and Los Angeles," said Pat Hamill, founder of Denver-based Oakwood Homes. He adds Oakwood, whose communities include Green Valley Ranch and Reunion, is also picking up buyers from downtown areas that faced unrest in recent months. The Federal Reserve is also keeping interest rates low to support the economy, improving affordability and fueling housing demand. Freddie Mac reported Thursday that rates for 30-year mortgages averaged 2.84%, compared to 3.75% last year at this time. Years of price gains have left homeowners with large amounts of equity to roll into a new purchase, Covert said. The stay-at-home orders also coincided with the start of the peak spring buying season, which created pent-up demand once restrictions lifted. Randy Carpenter, president of the Colorado division of KB Home, said traffic has returned to levels seen last year and those who show up are buying at a much higher rate. Home sales on the whole in metro Denver are up 37% compared to 2019, he said, quoting Zonda data. "Since the pandemic, we have seen an increased number of buyers who are specifically looking for a new home. At KB Home, we are seeing buyers across all demographics," Carpenter said. Builders also successfully marketed improved interior air quality and technological features and design configurations that could accommodate remote workers, Covert said. And their timing was good in launching new communities, many of which offered relatively affordable options. Purchases are mostly concentrated in the suburban ring of metro Denver, with Broomfield, Adams, Arapahoe, Douglas, and Elbert counties representing 69% of all housing production compared to 64% a year ago, Covert said. Add in southwest Weld County and nearly 80% of housing production is happening on the metro periphery. "The uncertainty surrounding COVID-19 pandemic has not diminished the demand for new homes, and in many ways, it has increased home buying activity, thanks to the growing importance of where and how we live," Larry Mizel, executive chairman of MDC Holdings, a national homebuilder based in Denver, told analysts during an earnings call on Oct. 29. Net new home orders rose 89% year-over-year in the third quarter to $1.65 billion and that the average selling price increased by 10%, the company said. Robust sales have contributed to a backlog valued at $3.1 billion, which is up 47% from last year. Basically, there just aren't enough existing homes available for sale to meet demand. Hamill said the perception is that new homebuilders compete against each other, but in reality, they compete primarily against the existing home market. Between 1985 and 2019, buyers had an average of 15,577 listings to select from at the end of October, according to the Denver Metro Association of Realtors. Last month, there were only 4,821 listings for homes and condos, a decline of nearly 44% from a year earlier, and a record low for October. "Low inventory is pushing buyers to consider newer developments outside their initial target location, even if that means waiting for homes to finish being built by going month-to-month in leases or pushing back a closing," said Jenny Usaj, a Denver-area realtor. When the inventory is too tight, buyers face bidding wars and must work harder to land a deal. Signing a contract on a new home can be much easier. But the trade-off is a much longer wait, which can feel like an eternity for buyers wanting to escape the confines of a tight space during the pandemic. Hamill said Oakwood Homes is taking 6 to 9 months to complete homes after purchase. MDC Holdings reports that the time from sale to closing averaged 215 days in the third quarter, up from 198 days last year. Of that, construction time is running 142 days on average compared to 132 days. Although new home sales are way up, the number of permits pulled this year for single-family homes is running about 4% below last year, said Rich Staky, interim CEO of the Home Builders Association of Metro Denver. Part of that reflects obstacles created by the outbreak. Governments are slower in providing the required approvals. Expecting a big drop in construction, lumber mills shut down, creating severe shortages when demand quickly rebounded. "I am 30 years in this business, and I have never seen the price increase that we saw in lumber," Hamill said. He notes that appliances are taking 10 to 11 weeks to arrive. Even light fixtures became harder to obtain. Skilled labor remains in short supply, a problem that has plagued builders for several years now. And while service workers displaced by the pandemic might be more open to switching to a higher-paying career in construction, training them takes time. "There have been a lot of sales written, but there was a delay in getting starts going. Builders are going fast and furious starting new homes," Staky said. He expects the gap between sales and permits to narrow as builders tackle more of the backlog. But don't expect builders to try and get ahead of the curve with speculative building, something they did in the mid-00s with disastrous consequences for the industry. That downturn wiped out the more aggressive builders, and those who survived carry deep scars. They may be enjoying an unexpectedly strong market, but they don't fully trust it yet. "MDC's policy as a concept is not to build specs, and the specs that are created are strategic as to particular subdivisions and fallout during the construction period. We consider it very advantageous to our business model to keep the spec count low," Mizel said on the company's earnings call. Hamill said Oakwood pre-sells 99% of what it builds, and tries to keep a good handle on where the market is headed. When the new coronavirus first hit, he feared it would be 2008 and the Great Recession all over again. Some homes under construction did end up without buyers because of people losing their jobs, but those were quickly claimed once the economy opened up again. Builders have enough of a backlog to keep them busy even if new shutdown orders keep buyers away this winter, which is normally a slower time for purchases. "They will adjust construction to the sales rates. I don't think builders will be taking a lot of risks around those issues. There is not a lot of exuberance in the home building community," Stacy said. And Hamill said he remains concerned that what happened this summer and fall could be the anomaly, not the new normal. "I do believe we will have some headwinds as we move forward. You still can't have 22 million people unemployed without having some issues at some point," he said.

Biden's housing transition team announced, loanDepot reconsiders IPO, foreclosures tick upward and more of the week's top news

November 13th, 2020|

While moratoria have kept foreclosures low compared to last year's rates, October activity jumped 20% from September, according to Attom Data Solutions. Foreclosure filings — inclusive of default notices, bank repossessions and scheduled auctions — totaled 11,673, up month-over-month from 9,707 but down 79% year-over-year from 55,197. (Read full story here.)

Fannie, Freddie extend purchases of mortgages in forbearance

November 13th, 2020|

The Federal Housing Finance Agency has extended Fannie Mae and Freddie Mac’s temporary ability to buy loans in forbearance to Dec. 31. There have been several extensions of the policy since it was put into place in April as a way to sustain originations amid a wave of forbearance allocated to borrowers with government-related loans by the CARES Act. The new delivery deadline date for the loans is Feb. 28, 2021. Lower prices paid for such purchases remain for the time being, but some consultants think the Biden administration may be open to taking measures to improve pricing.While a relatively small number of loans go into forbearance in the period after closing but before delivery to the GSEs, it’s a circumstance that can be quite costly for lenders. It’s also particularly burdensome for smaller players with fewer financial resources. The FHFA also has extended to year-end several processing flexibilities aimed at reducing risks associated with the pandemic amid a resurgence in U.S. infections. Forbearance rates for the government-sponsored enterprises’ mortgages have been low relative to other loan types but the dollar volume of loans affected is higher, and there remains concern that there could be another uptick due to the second wave of infections. The share of GSE loans in forbearance was 3.5% in Black Knight’s latest weekly snapshot of its daily forbearance tracking data. In comparison, 9.1% of loans insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs were in forbearance. The unpaid principal balance of GSE loans in forbearance is $208 billion, compared to $190 billion for FHA and VA loans. There were 990,000 loans in forbearance at the GSEs and nearly 1.1 million FHA and VA loans in forbearance recorded in Black Knight’s latest report.

FHA's capital buoyed by house price appreciation despite higher defaults

November 13th, 2020|

WASHINGTON — A key indicator of health for the Federal Housing Administration’s mutual mortgage insurance fund reached a high not seen since 2007, as strong house price appreciation more than offset economic harm done by the pandemic. The FHA said Friday in its annual actuarial report that the fund's capital reserve ratio increased to 6.10% in fiscal year 2020, up from 4.84% a year earlier. Meanwhile, the fund's economic net worth increased to $78.95 billion — more than double its value just two years earlier. The FHA is required by law to maintain a buffer of at least 2%. “Thanks to this administration’s focus on prudent capital management, FHA entered the pandemic with a strong capital position, which will help us weather the immediate impact of COVID-19,” said FHA Commissioner Dana Wade on a call with reporters. Generally, FHA’s mortgage fund owes much of its success in 2020 to strong house price appreciation, which “eclipsed other negative economic developments,” Wade said, and added that FHA’s modeling showed that a 1% decrease in house price appreciation would equate to a blow of 1.3% to the mortgage insurance fund. Still, FHA’s portfolio was not completely immune to COVID-19. The agency’s portfolio of seriously delinquent loans grew by $117 billion thanks to provisions in the congressional stimulus package from earlier this year that allowed borrowers to request up to a year of forbearance. The value of seriously delinquent loans as of Sept. 30 was $158 billion, beating out the previous high of $105 billion in 2012. The rate of seriously delinquent credits in FHA’s portfolio reached 11.59%. However, FHA said that rate is expected to rise because the agency tends to serve borrowers with lower credit scores and higher amounts of debt. “Given these and other characteristics, the COVID-19 pandemic has hit FHA borrowers disproportionately harder than those served by conventional and private markets,” the agency’s report said. Early payment default rates also remain at “historically high levels” and reached 9.27% at the end of the fiscal year, said Wade. Given those factors, Wade indicated that FHA would likely not cut insurance premiums, despite calls from the mortgage industry to do so. “I think FHA really needs to continue to be in a strong capital position moving forward in order to deal with this because servicing these loans will be the No. 1 priority,” Wade said. The FHA reverse mortgage — or home equity conversion mortgage — program, which has historically been a drag on the agency’s finances, improved markedly this year with a capital ratio of -0.78%, up significantly from the 2019 ratio of -9.22%. But the reverse mortgage portfolio remains a concern for FHA, said Wade. “I think the important thing to note with HECM is that this modeling is despite what is a very positive trend that we've seen and have projected for house price appreciation, so that's certainly of concern to us, and I think we need to continue to vigilantly monitor HECM,” she said. Still, there were several positives in FHA’s report. The share of the agency’s portfolio of loans to first-time homebuyers climbed to 83.10%, representing a new high. And FHA insured more loans for its core borrowers, which include first-time and lower-income homebuyers, during the second half of the year, despite constrained credit in the marketplace. The average debt-to-income ratio for FHA borrowers also decreased for the first time in seven years and the average borrower’s credit score rose slightly to an average of 672, the agency said. “Honestly, a lot of that has to do with some of the credit tightening that was instituted by the private sector participants this year,” said Wade, referring to lenders raising credit standards in fear that the pandemic would render some borrowers unable to repay a loan. And, though positive, the amount of FHA loans with a debt-to-income ratio of 50% or higher “remains at historically elevated levels,” FHA’s report said.

Better.com raises $200M — is an IPO imminent?

November 13th, 2020|

Better.com could be the next mortgage company to join the herd of lenders going public. The company that fancies itself as the UberX of home lending just closed $200 million in Series D fundraising. L Catterton, a private equity investor headquartered in Greenwich, Conn., led the round, alongside Activant Capital, Ally Financial, American Express Ventures, Ping An Global Voyager Fund and 9Yards Capital. The cash infusion comes 15 months after Better raised $160 million in its Series C round from August 2019. All told, Better compiled $454 million in funds starting in 2016.The New York-based digital lender plans to use its latest pool of money to continue growing its team and building out its technology, according to a company press release. That aligns with the company's recent expansion. "We've been able to grow nearly 500% year-on-year and on average 10% to 15% month-on-month," Vishal Garg, founder and CEO of Better.com, said in an interview at the 2020 Digital Mortgage Conference. "We're probably the second-largest online lender today that's pure direct-to-consumer online. We're doing over $2.5 billion a month of volume." With lenders like Rocket, Guild Mortgage and United Wholesale Mortgage going public in recent months, speculation abounds as to whether Better's latest capital raise signals an imminent IPO. However, no official filing has been made at this time and the company declined to comment on that possibility. The white-hot demand for refinancings and purchases lead market watchers to project 2020 originations will break annual records, eclipsing $4 trillion. Going public creates an opportunity for nonbank lenders to cash in. Many already reaped the benefits and watched their stock prices grow. But some industry veterans warn that the flood of mortgage IPOs could saturate the market, create too much noise and diminish returns.

Freddie Mac CEO David Brickman resigns, interim leader appointed

November 13th, 2020|

Freddie Mac’s CEO, David Brickman, quietly tendered his resignation earlier this week and will be officially stepping down Jan. 8, according to a Securities and Exchange Commission filing Friday. Representatives from Freddie Mac offered no additional comment on the personnel change. Michael Hutchins, an executive vice president in the government-sponsored enterprise’s investments and capital markets division, has been named to replace him on an interim basis. Brickman, who has been with Freddie Mac for 21 years, was named as its CEO in 2018, after his predecessor, Don Layton, retired. Both Freddie Mac and Fannie Mae replaced their CEOs with multifamily executives amid a broader wave of political turnover at the housing-finance agencies that included Mark Calabria’s appointment as the head of the Federal Housing Finance Agency. David Brickman Freddie Mac Hutchins has been in his current position since January 2015, and served as a senior vice president in the department before that. His Wall Street background could factor into discussions related to the GSEs' moving out of conservatorship, in line with a path the Trump administration had set for them. The Biden administration is said to be less likely to see that process through. Before joining Freddie Mac, Hutchins was co-founder and CEO of a private-label residential mortgage-backed securities investment firm called PrinceRidge from 2007 to 2013. Before co-founding PrinceRidge, he held a variety of senior management positions at UBS and he worked at Salomon Brothers from 1986 to 1996, when the company played a formative role in the MBS market. Hutchins will retain his current title and compensation while Freddie’s board searches for a new CEO. The salaries for CEOs at the GSEs are capped at $600,000 a year. Members of Congress and the Federal Housing Finance Agency’s inspector general, a watchdog agency, have been monitoring attempts to circumvent this. The salary for GSE chief executives is by no means meager, but consultants have said the salary cap can create recruiting challenges because it is below the amount received by qualified executives with similar positions in the private market. However, GSE leadership positions can be appealing to executives seeking to take on influential public-service roles.

Potential for a vaccine drives Wall Street; rates remain steady, low

November 13th, 2020|

Mortgage interest rates remain well below 3%, with Freddie Mac’s latest 30-year fixed-rate mortgage average coming in at 2.84%. While that’s an increase from a week ago, it’s still far below the 3.75% we saw last year at this time. Freddie Mac’s Chief Economist Sam Khater notes that rates increased slightly due to the news about a potential COVID-19 vaccine, which buoyed markets. Khater added,  “Despite this rise, mortgage rates remain about a percentage point below a year ago and the low rate environment is supportive of both purchase and refinance demand. Continue reading Potential for a vaccine drives Wall Street; rates remain steady, low at Movement Mortgage Blog.

Biden transition team replete with housing experts but lacking lenders

November 13th, 2020|

Several housing experts who worked at government-related agencies during the Obama era are on the Biden administration’s transition teams, but representation of companies currently working in the mortgage business is lacking. The team-lead for review of the Department of Housing and Urban Development, for example, is the vice president and chief innovation officer at the Urban Institute, Erika Poethig. Poethig previously served as an acting assistant secretary for policy, development and research at HUD under the Obama administration from 2012 to 2013. Erika Poethig At least one team member has past mortgage industry experience. Helen Kanovsky, who was the general counsel for the Mortgage Bankers Association from 2016 to 2019, is on the Treasury transition team. Kanovsky served as general counsel for HUD from 2009 to 2016. The transition teams include people who previously worked for the Treasury and the Federal Housing Finance Agency as well as HUD. Benson “Buzz” Roberts, for example, formerly served as the director of the Office of Small Business, Community Development and Housing Policy at the Treasury from 2011 to 2015 and will be on that agency’s review team. Roberts most recently has served as president and CEO of the National Association of Affordable Housing Lenders. Julia Gordon, who managed the single-family policy team at the FHFA from 2011 to 2012 and most recently has served as president at the National Stabilization Trust, is on the HUD review team. So, too, is Eric Stein, the former special adviser to past FHFA Director Mel Watt, who served from 2014 to 2019. Stein was previously a deputy assistant secretary for consumer protection in the Department of the Treasury in the Obama era. He worked on legislation to create the Consumer Financial Protection Bureau in 2011 and most recently has served as the chief operating officer at the Center for Community Self-Help and as senior vice president at the Center for Responsible Lending. “These names are probably more consumer-centric, which I think is not a bad thing. They are knowledgeable about what government can accomplish,” said Faith Schwartz, owner of advisory firm Housing Finance System Strategies. “The mortgage business, as you know, is very complex and it helps to have people in government who can guide career staff to help consumers navigate that.” “The only thing I think they need to be careful of is that they should have a mix of some people that have some business background and some that represent consumers,” added Schwartz, who previously played a key role in loss mitigation policy during the 2008 crisis, and has worked with some of the people on the transition team. “That helps businesses do the best job they can as far as making good loans.” The roles transition team members play is generally temporary but influential. However, some might have long-term involvement with the administration, said Tim Rood, head of government and industry relations at SitusAMC. “They are definitely kingmakers and the ones who are inclined to stay on have the fast-track to some of the open spots,” he said. The Biden administration is likely to bring more mortgage professionals and representatives of other businesses into the fold down the road in order to negotiate compromises with Republicans, particularly if they end up controlling the Senate after the two January runoffs, Rood added. “While I can see why they would mainly bring in people from nonprofits, think tanks and what not if the Democrats are controlling the House and the Senate, that whole thing gets flipped on its head if the Senate remains in Republican control,” Rood said. “So maybe over time things will change.”

One third of households report job or income loss: Redfin

November 13th, 2020|

Coronavirus-related hardships cut employment or wages in 32% of households, according to a study by Redfin. Renters bear the brunt of the burden, as 39% were affected compared to 30% of homeowners. A 53% share of homeowners said they were doing better financially now than in 2016, with 22% saying they're worse off. Comparatively, 44% of renters said they were better off now versus 37% who said things are worse today. Some homeowners have benefitted from equity boosts during the pandemic. Renters cannot leverage any built-up equity during the COVID-induced downturn. "The pandemic is exacerbating inequality and widening the wealth gap between those who own homes and those who don't," Redfin chief economist Daryl Fairweather, said in the report. "Renters who have lost jobs or wages are likely dipping into savings for daily living expenses, pushing homeownership further out of reach. More homeowners have been able to keep their jobs, and many who can work remotely are cashing in their home equity to purchase a bigger, better home in a more desirable area." In addition to shrinking the pool of potential homebuyers, missed rent payments could cause distress for real estate investments and eventually limit home price growth. "Landlords use rent payments to meet their mortgage obligations, so there could be an increase in mortgage defaults on investment properties," Tendayi Kapfidze, LendingTree's chief economist, said in a statement to NMN. "Landlords with higher levels of leverage would be at higher risk. This could weaken home prices somewhat, but strong demand from the owner-occupied part of the market has thus far kept home prices increasing. So we are not yet at the point where there is concern about the mortgage market." Thus far, Southern states are furthest behind on rent, according to a LendingTree study. Mississippi had the largest share of renters late on payments at 29%. Louisiana followed at 28.3%, then came Tennessee (24.8%), Georgia (22.9%) and Michigan (22%). Conversely, Montana boasts the lowest share at 4.2%, trailed by 6.8% in Vermont and 8% in Utah.

People on the move: Nov. 13

November 13th, 2020|

California Tustin New American Funding has hired Charles R. Lowery Jr. as director of legislative policy and external affairs. Lowery, who will be based in Washington, brings more than 20 years of mortgage, housing and advocacy experience to the position. Previously, he served three years as the director of state regulatory relations for Ocwen Financial Corp. Before that, he spent five years with the NAACP, including as interim senior director of the National Economic Department and director of Fair Lending and Inclusion. District of Columbia Washington MISMO has selected Seth Appleton as its new president, effective Dec. 1. He currently serves as the assistant secretary, policy development and research, for the Department of Housing and Urban Development and as the principal executive vice president of Ginnie Mae. Appleton joined HUD in 2017 and added his Ginnie Mae position in 2019.Iowa Des Moines LenderClose has hired Trinh Le-Coulter in the newly created role of director of operations. She brings more than five years of experience in shared services operations and previously served with Businessolver, a provider of employee benefits administration technology. Along with the addition of Le-Coulter, the firm is promoting Melanie Wacha to lead operations specialist and hiring Cory Ellerd as an operations specialist. New York New York Verus Commercial Real Estate Finance said that Ken Wood,Stratos Athanassiades and Ken Gaitan and joined the company as managing directors. Prior to Verus, Wood was VP of originations for Money 360 and has served in executive management and leadership roles for MC-Five Mile Capital, Patriot National Bank, Hometown Commercial Capital and Impac. Athanassiades previously served as the Midwest regional director for Money360 and prior to that was a commercial mortgage portfolio manager at Alliant Credit Union. Gaitan was previously a regional director for Money 360 and has served in production and leadership positions with national mortgage banking firms (CBRE and HFF) and CRE lenders (Merrill Lynch, JPMorgan and Bank of America). Texas Irving BSI Financial Services has hired Brandon McGee as vice president of mortgage servicing rights transaction manager. A 15-year veteran of the mortgage industry, McGee comes to BSI from Fannie Mae, where he has worked for the past 11 years, most recently as a relationship manager. He also held various positions in JPMorgan Chase's mortgage division and at H&R Block Mortgage.

How the great mortgage boom of 2020 will end

November 12th, 2020|

A number of analysts have been speculating about whether the pending equity IPOs for a number of mortgage firms will be completed. The good news is that business volumes across the industry are excellent and likely to continue into 2021 at least, albeit with shrinking spreads. The bad news is that the Federal Open Market Committee is stepping on the gas in terms of market intervention, meaning that prepayment rates are likely to remain elevated. When Rocket Cos. reported earnings, they revealed that the fair value of the firm’s mortgage servicing rights actually declined slightly over the past nine months despite record lending volumes. “In the third quarter, we delivered a record performance with $89 billion of closed loan volume, representing a 122% increase year-over-year,” Rocket CEO Jay Farner told investors. “The growth we're achieving, it’s unmatched in Q3. We added nearly $50 billion of year-over-year closed loan volume. Consider this, our incremental volume in the third quarter is so large it alone would have made us the second largest retail mortgage lender in the nation.”During the monthly call to discuss the secondary market for MSRs, the folks at SitusAMC noted that the Fed has been purchasing Ginnie Mae and USB 1.5% coupon mortgage securities for the past several weeks. Since most lenders are still delivering new loans into pools with 2% or even 2.5% coupons, this suggests that many of these loans will prepay, again, in the next 12-24 months. For mortgage lenders like Rocket, which brag of client retention rates of over 80%, high prepayment rates are a way to boost revenue and particularly gain-on-sale income. As we wrote back in September in NMN (“Banks retreat again from residential servicing”): “The only rational strategy for holding MSRs is to be very aggressive on protecting the servicing assets via loan recapture. This is one of the chief reasons that banks have been willing to give up their share in lending and servicing as they collapse back to retail-only lending strategies.” When the markets in August saw Rocket forced to discount its share price from the $22 per share indicated to $18 and with a smaller deal, it was the first hint that the independent mortgage banks faced tough sledding with equity managers. IMBs, after all, are pretty much fixed income stories that are best served raising long-term capital in the debt markets. The fact is that IMBs such as Rocket, PennyMac and Mr. Cooper are good enough lenders that they can defend the value of the MSR by replacing it with new servicing assets. But for other holders of MSRs including IMBs, commercial banks and REITs, the FOMC’s latest actions to further juice the volumes in the housing sector are a dire threat to profitability on investment in whole loans, MBS and MSRs. But, of course, the FOMC is not the only problem for these investors. Back in October of 2019, Ginnie Mae 3% coupon MSRs were being capitalized at 5x annual cash flow or around 150 basis points (32 bps annually x 5). Today, those same Ginnie Mae 3% coupon MSRs are being capitalized at 3x annual cash flow — or 90 bps — and that level is still too high given visible prepayment speeds. “Price multiples are too high relative to the current environment,” notes one of the most respected CIOs in the mortgage industry with respect to Ginnie Mae MSRs. “Risk has risen far faster than the risk-free rate has fallen. It is possible to lose MORE than one’s investment in a Ginnie Mae MSR.” The mortgage banker tells NMN that expected default rates, particularly for low-FICO borrowers, are far below realistic levels. Mostly, he avers, MSR brokers don’t consider FICO scores in government loans and appear to assume a much higher quality borrower for FHA than actually exists. Now, in theory, as MSRs with higher coupons and faster speeds prepay, the fair value of the remaining portfolio can actually go up over time as the portfolio is left with a larger percentage of lower coupon assets. At the same time, however, the actions by the FOMC and the increasingly competitive environment for loans is driving prepayments across the entire coupon spectrum. For investors such as banks, REITs, central banks and investment funds, the prospect for continued high loan prepayment is a huge problem. Just as some investors are taking losses on MSRs that were purchased at 3 and 4 multiples a year ago, holders of government and agency MBS are experiencing negative net returns on their investments. That screaming you hear off in the distance is the Bank of Japan calling Fed Chairman Jerome Powell. Various media outlets have attributed the delay in IPOs by mortgage firms as being due to “market volatility,” but in fact investment managers are smarter than the investment bankers pretend. Look at the fact that coupon spreads have narrowed 25 bps in the past month and you’ll appreciate that profits per new loan are falling as industry capacity catches up with demand. Remember, when it comes to profits for IMBs, REITs or commercial banks, it’s all about spreads over funding, not the level of interest rates. It does not take a genius to realize that the boom in mortgage lending is due to low interest rates and aggressive asset purchases by the FOMC. These purchases will continue to support record new loan volumes, but with declining profits and loan quality overall. And as and when new lending volumes start to recede, even with the FOMC’s actions, the shoals of credit and operational risk lurking just beneath the surface will emerge. As all mortgage bankers know very well, eventually the good times do end.

2021 predictions for the secondary market, mortgage servicing rights

November 12th, 2020|

When the secondary market shut down during the pandemic this year, lenders primarily worried about two things: whether borrowers could still pay and whether they’d have enough places to sell loans to. They’re hoping for better in 2021, while not forgetting lessons learned about the market’s risks in 2020. “I want as many arrows in my quiver as possible,” said Brian Gilpin, senior vice president, treasurer and head of capital markets at Embrace Home Loans. “We’re just trying to keep all of our options available come 2021 because you just don’t know where things are going to go, and we saw this year things can go pretty far in one direction pretty fast,” he said. “When that happens, you just have got to adapt.” For Gilpin, that means staying in touch with all the possible outlets to sell to, which he thinks he will be able to do through traditional networking. However, other players may turn to secondary market trading platforms, he noted. When the pandemic hit, Gilpin, like many lenders, saw those secondary buyer options quickly whittled down primarily to the government-related outlets and he adjusted accordingly. But the market recovery seen in fits and starts in the past year have made him hopeful that he may be selling to more buyers next year. “We haven’t sold much into the secondary market that went to investors besides Fannie Mae, Freddie Mae and Ginnie Mae this year, but we do work to maintain those relationships so come January, we could be ready to go,” he said. “From my talks with account executives at the larger aggregators, I sense folks have been coming back,” Gilpin added. “I would expect we could start to see more people selling to aggregators some of that flow that’s been going directly to the agencies.” Booming originations from rate stimulus coupled with the redirection of sales have caused the conduits the agencies use to buy loans to swell. Fannie Mae, for example, reported 150% year-over-year growth in its whole loan conduit that absorbs sales from small and midsized lenders during the third quarter. There’s a lot of uncertainty around public policy and the pandemic that will determine to what extent government-related agencies will compete with investors in the private market for loans next year. Among the many possible reforms contemplated for Fannie and Freddie by policymakers — who collectively have had mixed feelings about the extent of government involvement in the mortgages — are price adjustments and proposals that would decrease the GSEs’ involvement in certain types of loan purchases. “One of the studies that they’re evaluating at the GSEs is whether it is really part of their mission to support second homes and investment properties,” said Tim Rood, head of government and industry relations at SitusAMC. The government-sponsored enterprises could possibly stop purchasing these loans next year if policymakers were to decide such purchases are outside Fannie and Freddie’s affordable housing mission. However, it’s by no means a given, because ceasing those purchases could hurt the GSEs’ ability to cross-subsidize other mortgages that do directly finance affordable-home purchases, Rood said. The private-label mortgage-backed securities market, which purchases loans outside the government-sponsored enterprise, Ginnie Mae and bank portfolio markets, has seen a recovery in recent months. However, because its liquidity was hit hard at the onset of the pandemic, there’s some caution around predicting much expansion of it next year. “The private label MBS market is not currently viewed as likely to be more robust than it is today,” said Rood. Interviews with Rood and Gilpin were conducted just prior to the U.S. election in November. The future of MSRs If low rates continue into 2021, the value of mortgage servicing rights could remain depressed due to prepayments that erode their value. Persistent economic distress could also lead to other servicing market challenges. Most notable of these are questions of how many loans currently in forbearance will ultimately enter the foreclosure process, when and what condition the properties will be in when they do, as Aces Quality Management CEO Trevor Gauthier pointed out. Because government-related secondary market agencies dominate the market currently, they may play a key role in setting policy standards in this area. After the Great Recession, servicers found that the best way to pace foreclosure pipelines was to find a balance between delays that address an interest in keeping people in their homes as long as possible and applying enough speed to avoid property deterioration that contributes to neighborhood blight. Whatever happens with public policy next year, most prognosticators don’t think officials will want to jeopardize the main government-related mortgage-backed securities market that lenders sell into. “I think most would argue that the government should shrink its footprint,” Rood said. “But they first and foremost need to do no harm to the housing market.”

Mortgage application fraud risk climbs in 3Q from decade low

November 12th, 2020|

The increased share of purchase applications in the third quarter — following the refinance wave that crested in the second — caused a rise in mortgage application fraud risk, according to CoreLogic. The Mortgage Application Fraud Risk Index crept up 2.4% to 99 in the third quarter from a revised 96 in the second — its lowest point in a decade. However, it’s still down 15% from 116 year-over-year. This marks only the fourth time the index went below 110. CoreLogic set a baseline score of 100 when it created the metric in the third quarter of 2010.The risk index grew in union with the third quarter’s increasing share of purchase applications compared to the second. As the refinance boom of record-low interest rates gave way to buyers — especially first-timers — it brought a comparatively heightened fraud risk for purchase applications. Among the 100 most populated U.S. housing markets, the Poughkeepsie-Newburgh-Middletown, N.Y., area took over the top spot with a fraud index value of 219, a 15% jump from the second quarter. McAllen-Edinberg-Mission, Texas, posed the second-highest risk at 165. McAllen, in particular, continues to exhibit fraud risk due to a high share of foreclosed properties. The Las Vegas-Henderson-Paradise, Nev., metro area came third at 163. In addition to mortgage fraud risk, Las Vegas faces increased odds of declining home values in 2021 since the coronavirus impacted its economy especially hard. Miami-Fort Lauderdale-West Palm Beach and Cape Coral-Fort Myers, Fla., rounded out the top five with scores of 157 and 144, respectively. Florida remains a magnet for mortgage fraud, as eight of the top 15 most at-risk markets reside in the state.

CFPB sets stage for long fight on data-sharing rule

November 12th, 2020|

The Consumer Financial Protection Bureau has spent significant time on long-running policy battles — like regulating payday lenders and proper mortgage underwriting — but analysts predict a new rulemaking still in its early phase could soon dominate the agenda. In seeking to write a rule around how much control consumers have over their own financial data, the agency is tackling one of the thorniest issues affecting banks, fintechs and data aggregators. Unlike other regulations affecting single industries, the consumer data rule could be all-encompassing. And the agency is embarking on the project ahead of an expected change of leadership. Many observers say it could be one of the most consequential rulemakings under the incoming Joe Biden administration. “The CFPB is looking at this as touching every market they cover,” said John Pitts, policy lead at Plaid, a San Francisco data aggregator, and a former deputy assistant director of intergovernmental affairs at the CFPB. The bureau released an advance notice of proposed rulemaking last month seeking comment on more than 100 questions related to the sharing of consumer data, potential risks to consumers and how data is accessed by third parties. Broadly speaking, fintechs and aggregators want access to a consumer's bank account data through screen scraping or application programming interfaces to help provide a service, and advocates of consumer access say the bank has to abide. “This is not a partisan issue, this is an issue where a greater degree of choice and consumer control has the ability to change financial services in a way that benefits consumers,” said Pitts. But some banks and others worry about consumers giving third parties too much control, the potential for security and privacy breaches, and a bank's proprietary information about fees and other pricing getting released in the exchange. Dan Murphy, a policy manager at the Financial Health Network, a Chicago nonprofit that serves unbanked and underbanked consumers, said many consumers provide fintechs and aggregators access to their data without quite understanding to what they are consenting. “The absence of meaningful ways to view, modify, or revoke consent is problematic, and limits consumers’ ability to control their data,” Murphy wrote in a letter to CFPB Director Kathy Kraninger in February. “Consumers’ ability to understand the terms of their consent is particularly hampered by some data aggregators’ practice of using banks’ branding to make it appear as if the consumer is on their bank’s website. This practice should be discontinued." The CFPB's rulemaking is intended to implement section 1033 of the Dodd-Frank Act, which gave consumers the right to access their own bank account and transaction data in a usable electronic format. The bureau recently published its 34-page ANPR in the Federal Register, giving stakeholders until Feb. 2 to comment. The agency is expected to follow the notice with a more formal proposal. But the bureau is focusing on the rulemaking just as the agency's current leadership is on shaky ground. With Biden's election victory, Kraninger is widely expected to be replaced as a result of a recent Supreme Court decision enabling presidents to fire CFPB directors at will. "The bureau’s priorities could shift quickly" on consumer data access under new leadership, said Isaac Boltansky, director of policy research at Compass Point Research and Trading, in a recent note. The core of any CFPB rule will likely focus on what guardrails, if any, should be constructed to limit what data can be shared. “The question has always been who owns the data but there is a better way of doing this than everyone poking around in consumer data without the consumer knowing,” said Elan Amir, CEO of MeasureOne, a San Francisco provider of consumer-permissioned academic data. “The position of the institutions may be that it's their data and the customer cannot share it with another party and they don’t want to give the consumer the reins to share [the data] without the institutions’ consent.” Although the CFPB’s notice was the first step toward a formal rulemaking, the bureau has spent several years engaging industry and consumer groups. The bureau first issued a request for information in 2016 on consumer-authorized access to financial data and followed up with a statement of principles in 2017. In February, the CFPB held a symposium where bankers, fintechs and aggregators faced off on the problems of screen scraping, one of the most common methods of collecting consumer data. According to Boltansky's note, a representative of JPMorgan Chase made a compelling case at the symposium for the CFPB to issue guidance on obtaining consent from consumers for data unrelated to products and services that customers have requested. Consumers often give third-party fintechs access to their data simply by sharing online or mobile banking usernames and passwords. Fintech or data aggregators then log in to a consumer’s account and copy the latest data. Currently nearly 100 million consumers in the U.S. use at least one finance app that takes data from their bank account, with 90% of the data coming from screen scraping and less than 10% coming from an API provided by a financial institution to a data aggregator. Some analysts have suggested that the CFPB would prefer for the industry to set its own standards for data sharing through APIs. “Networks or consortia of data holders have begun to acquire or partner with data aggregators to offer access solutions to data holders as well as to their traditional data user clients,” the bureau’s ANPR states. “These moves may herald a broader move towards multilateral standards for data access, much as network standards function in two-sided payment card markets.” Screen scraping remains controversial. Banks claim that it poses a security risk by giving fintechs access to sensitive customer data such as account numbers. “Consumers often do not fully understand what data is being taken, where it is being sent, or how it is being used,” the American Bankers Association said in a statement last year. Banks want the CFPB to designate a list of a data entries that are considered proprietary and therefore cannot be shared, such as pricing, interest rates or fee information. Competition among financial products is at the core of the CFPB’s proposal. The bureau cited several examples of how authorized data access can improve existing products. The bureau cited mortgage lenders that now routinely verify a potential borrower’s assets and income as an example of data sharing that ensures data accuracy and reliability while providing a benefit to the consumer. “Authorized data access holds the potential to intensify competition and innovation in many, perhaps even most, consumer financial markets,” the CFPB said in the advance notice. Pitts, at Plaid, said the CFPB also clarified in the ANPR's first footnote that consumers can allow a third party to retrieve data on their behalf, an issue that some thought was an open question. Quyen Truong, a partner at the law firm Stroock & Stroock & Lavan, said the bureau’s likely goal of fostering innovation and consumer rights while addressing security concerns highlights “the challenge of regulation.” “It’s a tightrope because rules that emphasize privacy and data security could be deemed to hinder consumer access to information,” Truong said. Most banks and financial firms "are concerned about the unintended consequences around the development of a new regulatory framework.”

2021 predictions from originators

November 12th, 2020|

As lenders look to the year ahead, a number of question marks make gazing into the crystal ball even more of a challenge than usual. As the pandemic worsens in hot spots across the country, disputed election results are creating even more uncertainty about the road ahead. Taking these variables into account, NMN checked in with leaders in the origination to make their predictions for the year ahead. With 2021 in line to become one of the best years ever for purchase origination volume, there are a few potholes in the road ahead that lenders need to be aware of. In particular they should be watchful of how pandemic-related pain points will continue to evolve, Jim Cameron, a senior partner at Stratmor Group, pointed out. At the start of 2021, the industry will be considering what reentry from remote work "is going to look like [for their staff] and that certainly will come to the fore when the refinances slowdown, which no one knows when that will occur,” Cameron said. Interest rate movements will determine where the struggles will lie in 2021. If rates go up next year, rate and term refinancings are likely to drop off significantly, more than the expected rise in purchases. This would trigger massive margin compression as too many lenders chase too few loans, Cameron said. Companies who hired aggressively in 2020 will have to reduce staff or reduce compensation for operations personnel like underwriters. The margin compression will also likely lead to a wave of industry consolidation, he said. But if rates remain low, the primary pain points will be recruiting and retaining staff; managing capacity; and looking for ways to automate the process to decrease cycle times and increase throughput. Meanwhile, a recent uptick in early payment defaults, particularly among government guaranteed mortgages, could carry into the next year, said Trevor Gauthier, the CEO of Aces Quality Management, a firm that does post-closing quality control reviews. Through July, the number of EPDs reviewed by lenders through the Aces software was 75% higher than the average monthly rate of these reviews for 2019, the company noted in a September report. That continued to grow through the third quarter, he added. Typically, lenders have to repurchase any loans sold into the secondary market if the borrower defaults in the first few months after closing. But borrowers who were granted CARES Act payment delays stand to have a far greater impact on lenders in the next year, after the forbearance period ends, Gauthier said. Assessing the financial health of those borrowers will be key to understanding the landscape ahead. “What percentage of those people that are currently on forbearance plans are actually able to start making the payment that is larger than their original payment?” he asked. “And what percentage of those end up in loss mitigation and have long-term defaults? And then the next step to that is, [asking] what that will look like from an increase in repurchase reviews by the agencies and investors?” Unemployment is one of the drivers of early payment defaults, but the growth in cash-out refinancings might be masking some of the problems that borrowers are having, he said. When those forbearance plans end, and the borrowers are still jobless and the equity removed runs out, there could be that wave of foreclosures. Meanwhile, because it is going to be a purchase dominant market, mortgage loan defects are likely to increase, Gauthier added. “Purchase is that much more complex [than refi] and in addition to that, you’ve got a number of things from an operational perspective that are new to the process, whether that be COVID-related or agency and state requirements, which have been changing regularly,” he said. “You’ve got reverification turnarounds that are superfast, and you’ve got a lot of potential for human error,” Gauthier added. “Not to mention the different processes to handle these purchases because they are at home, with your processor, underwriter and closer handling different bits of that process.”

Wyndham Capital Mortgage Review: A Modern Mortgage with No Hidden Fees

November 12th, 2020|

Posted on November 12th, 2020 Today, we’ll dig into the details over at Wyndham Capital Mortgage, or WCM for short, which promises no hidden lender fees and competitive, below market mortgage rates. What’s not to like about that, especially since they bundle certain third-party services to potentially save you thousands in closing costs. They say their preferred settlement agents can offer better rates than the competition on things like title insurance, which can often be quite expensive. On top of all that, Wyndham offer a digital mortgage experience for those who prefer to talk less and type more. Read on for additional details. Wyndham Capital Mortgage Fast Facts Direct-to-consumer retail mortgage lender Founded in 2001 by current CEO Jeff Douglas Headquartered in Charlotte, North Carolina Licensed to lend in 46 states and D.C. Funded over $18 billion and served 60,000+ customers since inception Offer home purchase loans and mortgage refinance loans Wyndham Capital Mortgage was founded around the turn of the 21st century by its current CEO Jeff Douglas. The company is headquartered in Charlotte, North Carolina where they also happen to do the most mortgage lending. Last year, Wyndham Capital did about 12% of its total loan volume in NC, with almost the same amount of volume across the U.S. in California. Overall, they originated more than $2 billion in home loans, with a near equal proportion of home purchase loans, rate and term refis, and cash out refis. They appear to be licensed in 46 states and the District of Columbia, with Alaska, Hawaii, Massachusetts, and New York the exceptions. How to Apply with Wyndham Capital Mortgage They say it’s so easy you can start and finish your home loan all by yourself Offer a digital mortgage application powered by fintech company Blend Allows you to link financial accounts, scan/upload paperwork, eSign documents, and close virtually You get 24/7 access to your loan status and a dedicated loan team if you have questions along the way One thing I like about Wyndham Capital Mortgage is the ability to apply for a home loan directly from their website. You don’t need to search a loan officer directory (although they have one) or wait for someone to call you back after completing an obligatory rate quote request. Instead, simply cruise over to their website and click on “Apply Now” and you can begin filling out their digital mortgage application powered by Blend. Lots of mortgage lenders use Blend’s technology, which allows prospective borrowers to complete a home loan application from anywhere on all types of different devices. Wyndham Capital Mortgage also takes part in Fannie Mae’s Day 1 Certainty, which makes applying for a mortgage even easier and potentially a lot faster too. This includes things like home appraisal waivers, and automated income, asset, and employment verification thanks to AccountChek by FormFree. You may even be able to schedule a virtual closing as opposed to having to go anywhere or interacting with someone face-to-face. Basically, their goal is to make it as quick and painless as possible to obtain a home loan, leveraging the latest technologies available. Once your loan is approved, you can check status at any time via the loan portal and get in touch with your loan team if you have any questions. Wyndham Capital Mortgage Loan Programs Home purchase financing Mortgage refinances: Rate and term, cash out, and streamline Conventional home loans backed by Fannie Mae and Freddie Mac Government home loans: FHA loans and VA loans Fixed-rate and adjustable-rate mortgages in various loan terms One of their claims to fame is that they offer the “widest array of products and programs” in the industry, so my assumption is you shouldn’t have an issue getting whatever it is you need mortgage-wise. However, they don’t appear to offer USDA loans, and it’s unclear if they offer renovation loans such as the FHA 203k or Fannie Mae HomeStyle. But they seem to have all the other, more common stuff, including home purchase financing and all types of refinance loans. Those purchasing a home can take advantage of their “Priority Purchase Program,” which is an actual underwritten mortgage pre-approval that works similar to a cash offer. Compare the Top 10 Mortgage Refinance Options Near You Select your state to get started State And once you’ve got it, you can generate real-time pre-approval letters for specific properties you’d like to make an offer on. This shows home sellers and their real estate agents that you mean business, and more importantly, that you actually qualify for a mortgage. If you’re an existing homeowner looking to refinance, you can take advantage of their low rates by way of rate and term refinance, or tap equity via a cash out refinance. They also offer streamline refinances for those looking to lower monthly payments, without all the usual hoops to jump through. In terms of specific loan types, you can get a fixed-rate mortgage in a 15-, 20-, or 30-year term, or an adjustable-rate mortgage in a 5-, 7-, or 10-year term. Wyndham Capital Mortgage Rates You can see Wyndham Capital Mortgage rates on their website if you click on “Compare Rates,” which is a nice touch. They allow you to toggle between conventional rates, FHA rates, and VA rates, with 30-year fixed and 15-year fixed options. Wyndham also shows you the rates of select competitors, such as Bank of America, Chase, loanDepot, Quicken Loans, Wells Fargo, and others. As you might expect, their listed rate is the lowest relative to those other lenders, at least on the day I checked them. What’s more, they list their rates with $0 lender fees, so the APR you see listed is basically the interest rate. Wyndham Capital Mortgage $10,000 On-Time Closing Guarantee Those who are purchasing a home can take advantage of their $10,000 On-Time Closing Guarantee, assuming certain conditions are met. That works out to up to $5,000 for you and $5,000 for the home seller if Wyndham Capital Mortgage is unable to fund the loan by your closing date. In order to qualify, you must use the Priority Purchase Program along with their digital loan portal, and meet various timelines along the way. Additionally, you must select Wyndham’s preferred settlement service provider to guarantee title is clear to close by your closing date If you select a non-preferred settlement agent, it’s still possible to qualify for a $5,000 closing guarantee. In any event, they seem to believe their “speed team” will be able to meet your closing date. So if anything, it’s added peace of mind and a boost of confidence that they can gets things done quickly. Wyndham Capital Mortgage Reviews On Zillow, they have a 4.81-star rating out of 5 based on more than 1,000 customer reviews, which is an excellent score. A lot of the recent reviews said the interest rate was lower than expected. Over at LendingTree, they’ve got a 4.8-star rating out of 5 from almost 7,000 reviews, which is quite a statement in terms of customer satisfaction. And 99% of customers would recommend them. They also have a 4.8-star rating out of 5 on Google based on over 1,500 reviews, so it appears they’re consistently making folks happy. Wyndham Capital Mortgage is Better Business Bureau (BBB) accredited, and has been since 2002. They currently have an ‘A-‘ rating based on customer complaint history. Somewhat amazingly, they also have a 4.97-star rating out of 5 on the BBB website, which is surprising given customer reviews on the BBB website are typically very negative. In summary, the combination of low mortgage rates, no lender fees, and a tech-backed mortgage loan process seem to be driving high levels of customer satisfaction. Wyndham Capital Mortgage Pros and Cons The Pros They appear to offer low mortgage rates You can get a mortgage with no lender fees They don’t charge origination fees Offer a digital mortgage application powered by Blend Can apply directly from their website without human interaction Excellent customer reviews BBB accredited since 2002 (currently hold ‘A-‘ rating) $10,000 On-Time Closing Guarantee Free mortgage calculators and mortgage glossary on site The Cons Not licensed to do business in every state May not offer USDA loans or home equity loans No physical office branches

Albuquerque's home price growth continues into October

November 12th, 2020|

Colder weather wasn't enough to slow down Albuquerque's hot housing market, as home prices continued to increase in October. According to the Greater Albuquerque Association of Realtors' monthly home price report, the median sale price for a detached single-family house in metro Albuquerque stood at $260,000 in October. The median home price represents a 1.6% increase over September, and a 13.6% increase from last October, suggesting that Albuquerque's robust home price growth isn't likely to end even with summer — traditionally the busiest time for buyers and sellers — in the rearview mirror. "We're certainly not seeing the typical cycles of buying and selling," said GAAR board president Sherry Fowler. "It's just been a hot market, and it continues to stay that way." Driven by low interest rates and limited inventory, Albuquerque has seen strong home price growth for nearly the entire year. The number of closed sales increased 18.7% year-over-year in October, while pending sales increased 36.4%, according to the report. During the same period, the number of single-family homes on the market declined from 2,857 last October to just 1,300 a year later, according to the report. Fowler said many of the buyers she's working with are existing Albuquerque homeowners who have been motivated to move into a larger house during the pandemic. Among these buyers, home offices are in high demand. "Maybe during the pandemic they got tired of working out in the living room," Fowler said. Fowler added that Albuquerque has remained attractive to buyers moving from larger markets as well, due to its sunshine and relatively spread-out population. She noted that single-level floor plans have been popular, which suggests that some of the buyers may be retirees. "A lot of people are looking for a lifestyle change," Fowler said. Barring a significant uptick in interest rates or further economic disruption, Fowler said she expects the home price growth to continue at least until more new home construction begins around metro Albuquerque. "I don't know what it would take to significantly change things," Fowler said.

Mortgage rates rise on positive news about a vaccine

November 12th, 2020|

Mortgage rates moved off of their all-time low this week as a result of reports that Pfizer's coronavirus vaccine was potentially 90% effective, according to Freddie Mac. "Despite this rise, mortgage rates remain about a percentage point below a year ago and the low rate environment is supportive of both purchase and refinance demand," Sam Khater, Freddie Mac's chief economist, said in a press release. "Heading into late fall, the housing market continues to grow and buttress the economy." The 30-year fixed-rate mortgage averaged 2.84% for the week ending Nov. 12, up from last week when it averaged 2.78%. A year ago at this time, the 30-year fixed-rate mortgage averaged 3.75%.The 15-year fixed-rate mortgage averaged 2.34%, up from last week when it averaged 2.32%. A year ago at this time, the 15-year fixed-rate mortgage averaged 3.2%. The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.11% with an average 0.4 point, up from last week when it averaged 2.89%. A year ago at this time, the five-year adjustable-rate mortgage averaged 3.44%. "In a topsy turvy week for markets, mortgage rates ultimately finished the last seven days above where they started, as investors reacted strongly to the initial federal election results and encouraging news regarding a COVID-19 vaccine," Matthew Speakman, an economist with Zillow, said in his weekly comment issued Wednesday night. "While economic data have improved, they’ve included very few surprises for investors to react to, meaning most reports have already been priced in by the time the data are released. That changed this week, however," he noted. Bond yields first dropped following the initial uncertainty surrounding the election, which was expected and had been priced into the market. The Pfizer news was unexpected and as a result, investors took money out of bonds and that moved the yield higher. "Mortgage rates followed suit, rising firmly in recent days. The movement was a stark reminder of the influence the coronavirus — and our ability to contain it — has on the direction of financial markets going forward. This budding optimism regarding a treatment for the virus is likely to continue to nudge mortgage rates higher in the near term, barring any setbacks," Speakman said.

'Dueling trends' impact Opportunity Zone home price growth

November 12th, 2020|

Median home prices rose annually in 74% of Opportunity Zones across the country in the third quarter, with 53% growing by 10% or more, according to Attom Data Solutions. A 36% share of zones had a median price below $150,000, down from 48% from the year before. Overall, 76% of the zones had housing prices below the national median of $283,813 while the remaining 24% were above that mark, compared to 79% and 21% in the third quarter of 2019 when the median price was $270,000. “Home prices in Opportunity Zones around the country continued rising in the third quarter of 2020, riding the wave of a nationwide boom that has defied the economic damage from the widespread coronavirus pandemic," Todd Teta, chief product officer with Attom Data Solutions, said in a press release.Under the Tax Cuts and Jobs Act of 2017, investors dodge capital gains taxes to develop Opportunity Zones, providing affordable housing in low-income urban and rural communities in poor census tracts across the U.S. Within the zones, 89% of homes had prices under the median of their individual metro areas, while about 29% had median prices under the 50th percentile of their surrounding markets. However, 11% had values above the median sales price of their housing market. Because of their status in poor census tracts, Opportunity Zone housing is vulnerable, even during a strong year for real estate. "The increases point toward signs that some of the country’s most distressed communities have great potential for revival." Teta said. "At that same time, though, prices remain depressed in Opportunity Zones, and a notable number actually dropped in the third quarter — a potentially very troubling indicator. Those dueling trends will be important to watch over the coming months amid a highly uncertain economic outlook.” Missouri and Washington led all states by share of zones with median price increases at 88%. Arizona trailed closely at 86%, with Ohio's 83% and Rhode Island's 82% not far behind. Attom based its report on 1,737 zones with at least five home sales in the third quarter of 2020.

The ongoing reporting weaknesses in mortgage lending

November 11th, 2020|

Since the 2008 financial crisis, data transparency has proven itself to be a foundation for safe, stable, and responsible financial markets. Democratized access to reliable loan-level data and reporting tools can truly be the difference between allocating immense amounts of capital to diligently identified return streams or to poorly labeled pitfalls — and the consequences of the latter can be tremendous. Twelve years later, and during a new crisis in the form of a global pandemic, many expected the young and untested online consumer lending market to fall short of these best practices, and the long-established mortgage markets to have learned their lesson. The evidence suggests the opposite. Research into online consumer lending and mortgage loan performance shows that the former benefits from a highly digitalized reporting, documentation, and communication infrastructure with fewer intermediaries, while the latter suffers from a highly fragmented process where multiple servicers each capture and report payment interruptions differently. This in turn results in significant discrepancies among data providers and trustee reports. Without a common reporting standard or consistent communication between servicers, the current reporting framework for mortgages allows opportunities for both misrepresentation and inaccuracy in data reporting. At the onset of the pandemic, misreporting of loan performance within mortgage markets was rife, which increased investor uncertainty and delayed sector recovery during a time of crisis. For example, loan modifications — any deferral or forbearance options offered to borrowers to temporarily cease loan payments — are a crucial indicator of a borrower’s successful effort in preventing ultimate defaults, as empirical redefault evidence has shown. Stakeholders, however, could not reliably determine which borrowers are due to pay their loans because a substantial amount of modified loans are labeled as current. This subsequently exposes investors to securitizations that can be retroactively corrected, creating what is at times alarming price volatility after a purchase has already been made based on previous reporting. Much of the early, post-COVID-19 efforts were also focused on tracking down modification data that was missing altogether. There was little consistency between different servicers and trustees, and actual loan performance; some borrowers that were not paying their mortgage were still classified as current. Common examples of underreporting included instances where zero modifications are reported but loan balances remained unchanged or increased month over month, as well as discrepancies of total modified loans between multiple servicers. Although some problematic securitizations remain, after nearly eight months of COVID-19 reporting cycles, the frequency of completely underreporting modifications has declined for the mortgage industry as a whole. Additionally, some data providers have provided supplemental data and disclosure around COVID-19-related modifications. However, reporting a modification is merely the first step toward the level of data transparency that the industry requires. Data providers need to provide additional information about the start date, duration, and expected end date for the modification. Dates in particular have been a stubborn problem, and there is little transparency on whether the start of a modification refers to when the borrower first missed a payment, when they contacted servicers to request modification, or when that modification was granted. dv01 has specifically seen evidence of no modification dates provided and sometimes all three, with little consistency between. Additional data is also required around the expected payment schedule of the loans once modifications conclude: How will missed payments be treated, will borrowers’ scheduled payments change, and will the maturity of the loan be extended? All of this information is critical to properly understanding modification performance, and thus far the relevant data has been inconsistent and sparsely provided. Ideally, information should flow consistently from the individual servicers to the Master Servicer and then down to the Trustee, who ultimately shares the information to investors and other third-party data providers. However, that is not the case when you factor in counterparties. Data reporting quality varies across deals and even between reporting parties within a single deal. In order for investors to gain confidence in the health of the mortgage market and the broader economy, the industry needs a more modern and innovative approach to how we report modifications. To accomplish this, we need alignment, advocacy, and accountability across all industry participants, and an entity overseeing and coordinating these efforts in every securitization. Of course, the industry must also ramp up its ability to leverage modern technology to solve for inefficient reporting workflows. While data insights may now be the world’s most valuable commodity, they are only as good as the tools available to access and identify them. More work must be done to have streamlined processes that improve the timeliness and accuracy of reporting, combat manual data entry errors, and facilitate procedural industry standards that mortgage markets can more easily agree on.

Radian's CEO on managing risk and adding record business during COVID

November 11th, 2020|

The world today looks very different from the one Radian Group was operating in a decade ago, during the worst of the housing crisis. Back then, its delinquent inventory ended up well over the 100,000 mark and the high level of claims affected both its capital level and profitability. As Radian navigates the pandemic, the number of delinquent loans is much lower and the capital requirements imposed by the secondary market have created a level of safety and soundness for the company and the industry, CEO Rick Thornberry said. Those changes put Radian and its competitors in a position to effectively handle the current situation, Thornberry added. National Mortgage News spoke with Thornberry after Radian's third-quarter earnings call. Questions and responses have been edited for clarity and length. Radian's delinquent inventory is down from the second quarter, but still rather elevated. How big of a concern is that for the company? We reserve based on new defaults, [which] have continued to run at much lower levels than the general industry expected back in April. And then cures continue to come in, exceeding new defaults. A lot of attention gets paid to our default-to-claims rate that we use for reserves. We expect 8.5% of the loans to default and ultimately have a claim paid. And those claims are to be paid out in a couple of years [following foreclosure]. The trends we’ve seen the last four months are encouraging. We believe there's still uncertainty in the market [and] that the strength of our capital puts us in a position to navigate through the level of delinquencies we've seen. The numbers really aren't that big. Our delinquencies outstanding at the end of October were around 59,000. So you're talking about 5,000 claims maybe, over a period of two or three years. Those aren't big numbers.Your new insurance written for the quarter was a company-record of $33 billion. Three of your competitors have reported they did over $30 billion as well for the quarter. So even with the defaults, it was a great quarter for the MIs. The best thing about it is the quality of that $33 billion and that it's primarily monthly premium business. We feel comfortable about the loan attributes, with 70% purchase business in the third quarter, only 30% refinance. The MI industry, we're more than likely to participate in a purchase transaction, so this growth is not fueled by refinancings. It's fueled by participation in a purchase market that's characterized by first-time homebuyers. We have an economic cycle where we see credit continue to remain strong, especially in the purchase market. Still, that 30% refinance share is high. Are you concerned about the credit quality because these borrowers remained over an 80% loan-to-value even as their loans seasoned? The credit profile of that refinance borrower is strong. They're migrating down from where they put 3% or 5% down to begin with and maybe they're at 10% equity in their home or 15% equity in their home and they still require a refinance. But what they're doing is they're lowering their payment, so therefore they become a better borrower. We don't see any measurable amounts of cash-out refinances. These are rate and term refis where somebody is lowering their payment. And so the credit quality is just as good on refinances as it is on purchases. Prior to the earnings release, Radian announced its real estate segment will not offer traditional appraisals anymore. It will still be doing valuations, but via automated products. Did COVID-19 push Radian in this direction or was it just a business decision based on what has been happening in the broader appraisal business? It was a straight-up business decision. We see where the world is going versus where it's been. And I think COVID is accelerating a lot of digital opportunities around automated valuations and hybrid valuations. We think we did a pretty good job at it, but we really want to focus our time and energy on the data and analytics and digital products and services. It was a tough decision but it's a small business. We don't expect it to have any material impact on our next financial results and we're working with our customers to transition them to other providers. How is your March 2018 acquisition of Entitle Direct working out? Independent underwriter companies like States Title and Westcor have attracted some investment, and could potentially take some market share from the big four. Is this a growth business for Radian? We've taken Entitle, now Radian Title Insurance, and another company we bought, ValuAmerica, now Radian Settlement Services and year-over-year we've seen a 157% increase in title orders. We have a strong pipeline of blue chip customers that will be joining us soon. So, we do see an opportunity for our overall title business to grow. It's very, very accretive to the deepening of our MI-lender relationships. We like that business. We're approaching it differently than the traditional title company. We're not building a business based on agents. We really see the opportunity to work with lenders, consumers and Realtors through our centralized platform leveraging data and analytics and technology.

LoanDepot confirms it’s considering an IPO again

November 11th, 2020|

LD Holding Group Wednesday said that its new loanDepot Inc. affiliate submitted a draft registration statement with the Securities and Exchange Commission relating to a proposed initial public offering. The draft IPO filing for its Class A shares follows speculation by analysts that it would follow the lead of Rocket Cos. in going public. AmeriHome and Caliber Home Loans are planning IPOs as well, though they revised their initial plans following stock market volatility ahead of the U.S. election. A handful of other nonbank lenders — Guild Mortgage, United Wholesale Mortgage and Finance of America — have also gone public of late, with UWM and Finance of America doing so by merging with special purpose acquisition companies. Anthony Hsieh is the founder and CEO of loanDepot. The number of loanDepot shares to be sold and their price range have not yet been determined, the company said in its press release. Sources close to the matter had valued the company at $12 billion to $15 billion in an IPO, according to a September report from Bloomberg. LD Holdings’ announcement about its draft IPO filing came a little over a week after it announced a private call about its third-quarter results, which was limited to holders of its 6.5% senior unsecured notes due 2025, prospective institutional buyers of those notes, and certain securities analysts and market makers. LoanDepot, which is led by founder and CEO Anthony Hsieh, previously considered going public in 2015, but never followed through due to what it saw as unfavorable market conditions at the time. Hsieh headed a series of online mortgage companies prior to the Great Recession and founded loanDepot in 2010. Rocket and loanDepot were both early pioneers in developing digital mortgage technologies. LoanDepot’s equivalent of Rocket’s eponymous loan platform is named mello. Among loanDepot’s innovative practices was an early embrace of technology-enabled flexible work strategies. It initiated the effort last year, before the pandemic made remote work a more widespread necessity.

CFPB, MBA form coalition to help distressed borrowers avoid scams

November 11th, 2020|

In order to educate pandemic-impacted borrowers on payment assistance and forbearance plans, a group of government entities and trade associations came together to launch the COVID Help for Home campaign. This coalition — led by the CFPB, Mortgage Bankers Association, American Bankers Association, Housing Policy Council and NeighborWorks America — aims to curb coronavirus-related delinquencies and foreclosures by doing effective, coordinated outreach to borrowers who have missed one or more payments and who may be eligible for mortgage payment relief via CARES Act forbearance assistances."The CARES Act provides important relief to homeowners seeking assistance on their federally backed mortgages, and I'm happy to support this campaign in getting the word out about financial relief options that can help eligible borrowers stay in their homes," CFPB Director Kathy Kraninger said in a press release. The rate of forborne mortgages continues to decline with the overall economic recovery. The latest numbers from the MBA show about 2.8 million borrowers sit in forbearance plans as of Nov. 1 but some of that is attributed directly to the CARES Act expirations. Servicers are required to make quality right-party contact as CARES Act forbearance protections expired after the initial six months. However, many servicers cannot reach their customers so the coalition aimed its message toward the borrowers themselves with the slogan, "Not Ok? That's Ok." The unrest of the pandemic created new opportunities for fraudsters to take advantage of struggling consumers. Members of the COVID Help for Home coalition hope that borrower education furnished by the group will help them avoid scams. "If you're still struggling, pick up the phone and call your servicer, pick up the phone and call a counselor, but pick up the phone and call somebody," Pete Mills, SVP of residential policy and member engagement at the MBA, said in an interview. "You need to make that contact to get the additional forbearance or other assistance," he added. "We're just trying to get folks focused on that part of it to know it's not an advance fee scam. Some of the scammers out there are saying give us a fee, we'll get you additional forbearance. You don't have to pay a fee."

Why Joe Biden and Kamala Harris Haven’t Paid Off Their Mortgages

November 11th, 2020|

Posted on November 11th, 2020 You’d think presumably wealthy politicians like Joe Biden and Kamala Harris would own their homes free and clear. But that’s not the case, per their 2019 tax returns. Both individuals disclosed their returns on the JoeBiden.com website, and each paid tens of thousands of dollars in mortgage interest last year. But why would they pay interest if they had the means to simply pay off the loans, a luxury most other Americans can’t afford to do? The reason is simple. Mortgage Debt Is the Cheapest Debt Out There Joe and Jill Biden paid $15,796 in home mortgage interest in 2019 Kamala Harris and Douglas Emhoff paid $32,041 in home mortgage interest in 2019 There’s a good chance both parties could have paid off their mortgages in full But why bother if you can earn a higher rate of return for your money elsewhere? Why Biden and Harris and so many other rich homeowners choose to carry mortgages as opposed to paying them off has to do with how cheap they are relative to virtually everything else. Ultimately, it doesn’t get much better than home loan debt, especially with mortgage rates in the 1-2% range at the moment. What other type of loan offers such cheap financing? This is why I refer to mortgages as good debt, especially since you have the opportunity to write off the interest in many cases. On top of that, the low rate of interest makes it easy for savvy homeowners to beat the rate of return on their mortgage by investing elsewhere. Simply put, your mortgage rate is your rate of return if you choose to prepay your home loan ahead of schedule. Any extra dollars put toward your loan essentially earn whatever your mortgage rate is, so if it’s 2.75%, you’re earning 2.75% if you choose to pay any extra each month or year. Unfortunately, the lower mortgage rates go, the less it makes sense to prepay the mortgage because you’re earning a lower and lower rate of return. Interestingly, we often hear feel-good stories in the news about everyday Joes paying off their mortgages in just 5-10 years. Or even less time. But why? What’s the rush exactly? Compare the Top 10 Mortgage Refinance Options Near You Select your state to get started State Getting Rid of the Mortgage Is a Psychological Victory The obsession with paying off the mortgage is a psychological one Often times there are better uses for your money than prepaying your home loan An alternative might be to pay off other high-interest rate debt like credit cards Or to invest any extra funds in the stock market, mutual funds, or a general retirement account Sure, it’s great not to have to make a monthly mortgage payment, but that doesn’t mean it’s the best move financially to prepay your home loan. Often, the desire to pay off the mortgage has more to do with human psychology than it does math. It probably feels good to pay off any debt, especially a large sum of money such as a mortgage. But as noted, it’s cheap debt and you might be better served putting extra dollars elsewhere. Apparently, this is what Joe Biden and Kamala Harris do, and Obama did the same based on his old tax returns. In the past, I reported that Joe Biden had been a refinancing machine, constantly taking advantage of cheaper financing by way of rate and term refinance to save money on his home loans. One of the richest men in the world, Warren Buffett, has also been a proponent of carrying a mortgage for the same reasons. You get to lock in an ultra-low mortgage rate for three decades and watch the payment become effectively cheaper over time as inflation erodes the value of the dollar. It doesn’t get much better than that, especially when you might be able to write off the interest too. This explains why Joe Biden, Kamala Harris, Warren Buffett, and even Facebook founder Mark Zuckerberg choose to hold mortgages when they can easily pay them off. Read more: Should I pay off my mortgage early? (photo: Elvert Barnes) About the Author: Colin Robertson Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for nearly 15 years.

Rocket’s 3Q originations soar as gain-on-sale margins shrink

November 11th, 2020|

Rocket Cos. earned nearly $3 billion in the third quarter, up from $495 million in 3Q19, and down from the $3.5 billion reported in preliminary and final results for 2Q20. Closed origination volume soared during the three-month fiscal period to a record high of $89 billion, a substantial increase from more than $40 billion in 3Q19. It also was up from $72.3 billion in 2Q20. The third-quarter gain-on-sale margin, at 4.52%, was up compared to the 3.29% logged during the same quarter a year ago, but it was lower than in the second quarter of this year, at 5.19%.Historically, gain-on-margins typically shrink much more quickly in this type of market environment, said Julie Booth, chief financial officer and treasurer at Rocket. She gave the following breakdown of contributors to the change after analysts asked for it. “Change in the loan pricing represented less than 10 basis points of that variance [from Q2 to Q3]. Channel and product mix were the biggest drivers of this variance — about 40 basis points of this — and that resulted from our strong partner network growth that we found during Q3,” she said during the company’s earnings call. “If we look ahead into Q4 margins are still strong by historical standards and they continue to remain strong.” Company executives noted several initiatives aimed at reducing its reliance on the refinancing boom, including partnership with high-profile referral partners such as Realtor.com, Charles Schwab and Mint. They also flagged relatively higher advertising and marketing costs for the company in the third quarter due to high demand for ads during the election. Company executives are considering a $1 billion buyback of the company’s stock, or may alternately consider paying a special dividend to investors. Rocket Cos. stock was trading at $21 per share shortly before noon on the East Coast on Wednesday. After its IPO launched in August, Rocket’s stock climbed to its current price level and has largely remained flat ever since. Just prior to the release of its earnings it was trading slightly higher, just shy of $22 per share. The digital mortgage pioneer’s executives additionally noted plans to continue its efforts to make inroads into the Canadian mortgage market. A lot of traditional nonbank companies focused primarily on mortgages tend to stick to their knitting, but Rocket, which positions itself as more of an technology-driven innovator, also is pursuing auto and personal loans. Executives declined to provide guidance for those businesses.

Colorado man sentenced in $32 million bank scheme

November 11th, 2020|

A Boulder, Colo., man was sentenced to five years in prison after using information obtained through legitimate transactions to create and sell almost $32 million of fraudulent loan packages to a bank. Michael Scott Leslie, 57, was sentenced for bank fraud and aggravated identity theft, according to a news release. He was also sentenced to five years of supervised release following prison. According to the facts contained in the plea agreement, Leslie owned, operated, or otherwise had an interest in several business entities that were involved in or affiliated with financing or originating residential mortgage loans. Through these business entities, Leslie sold residential mortgage loans to investors, including an FDIC-insured bank in Texas, the release states. Between October 2015 and October 2017, Leslie created a scheme to defraud the bank by selling it 144 fraudulent residential mortgage loans valued at $31,908,806.88. These loans were purportedly originated by one of Leslie's companies, Montage Mortgage, and "closed" by Snowberry, which earned fees for the closing. The loans were then presented and sold to the victim bank until Montage identified a final investor, Mortgage Capital Management. But Leslie never disclosed to the bank that he operated both Mortgage Capital Management and Snowberry. The 144 residential mortgage loans sold to the bank were not real loans, but fraudulently used personal identifying information from real borrowers who had used Montage for legitimate residential real estate transactions or had been solicited by Montage about refinancing their existing loans. According to the release, Leslie forged signatures on closing documents and fabricated and altered credit reports as well as title documents, often by using the names of legitimate companies. The fraudulent real estate transactions were never filed with the respective counties in which the properties were located, there were no closings and no liens were ever recorded. Through numerous bank accounts for the various business entities and his personal accounts, the defendant used money in a "Ponzi-like fashion" from prior fraudulent loans sold to the bank to fund future fraudulent loans. Leslie was charged June 5 of this year and pleaded guilty July 31. "Five years in federal prison is an appropriate sentence for a fraudster that stole personal identities and used them to steal millions of dollars from a legitimate business," U.S. Attorney Jason Dunn said in the release. "Thanks to the hard work of the investigating agencies and the prosecution team in my office, not only will Mr. Leslie have several years in prison to contemplate his actions, but other such criminals are on notice that we take economic crime seriously and will prosecute them to the full extent of the law."

Can a VA loan be used more than once in a lifetime?

November 11th, 2020|

If you’re a veteran of the US armed forces or on active military duty, you probably have heard of the VA loan. This government-backed mortgage can make homeownership more affordable for eligible borrowers by providing financing that requires no down payment and no private mortgage insurance. In addition, VA loans can offer lower interest rates, lower monthly payments and loan terms that are typically more favorable than conventional mortgages.  But what many homebuyers affiliated with the military may not know is that VA loan benefits can be used more than once.  Continue reading Can a VA loan be used more than once in a lifetime? at Movement Mortgage Blog.

VA loans: What to know about funding fees and closing costs

November 11th, 2020|

Coming up with a down payment for a new home is often the thing that keeps people from taking the leap from renter to homeowner in the first place. That’s why US veterans, active-duty service members, National Guard and reservists who may not have saved up enough for a down payment look to VA loans to help make homeownership a reality. VA loans allow for 100% financing of a property, meaning no down payment is required for eligible applicants. Continue reading VA loans: What to know about funding fees and closing costs at Movement Mortgage Blog.

What is VA loan entitlement in regards to homeownership?

November 11th, 2020|

When you’re exploring the opportunities that come with a VA loan, you may come across some terms you won’t typically hear when looking into other types of mortgages and home financing.   This blog post will explore the different VA loan entitlement benefit levels and how they’re applied to give veterans and other military professionals a leg up when considering homeownership.  Note: This article is part of a series. Earlier this month, we looked at the nuts and bolts of a VA loan. Continue reading What is VA loan entitlement in regards to homeownership? at Movement Mortgage Blog.

What is a VA IRRRL loan?

November 11th, 2020|

Are you a current or former US military member who took advantage of the benefits of a Veterans Affairs mortgage — aka VA loan — to purchase your home? If so, you can use a VA-backed Interest Rate Reduction Refinance Loan (IRRRL) to refinance quickly and easily and with very little documentation to pull together.  The VA IRRRL (we agree, it’s a cumbersome acronym, which is why it’s sometimes pronounced “earl”) can lower your monthly payment, reduce your interest rate, change your terms or move you from an adjustable to a fixed-rate loan.  Continue reading What is a VA IRRRL loan? at Movement Mortgage Blog.

Purchase mortgage applications continue their downward trend

November 11th, 2020|

Mortgage applications decreased 0.5% from one week earlier as inadequate housing supply is putting upward pressure on home prices and affecting purchase activity, according to the Mortgage Bankers Association. The MBA's Weekly Mortgage Applications Survey for the week ending Nov. 6 found that the refinance index increased 1% from the previous week and was 67% higher than the same week one year ago. The refinance share of mortgage activity increased to 70% of total applications from 68.7% the previous week."Mortgage application activity was mixed last week, despite the 30-year fixed rate decreasing to 2.98% — an all-time MBA survey low. The refinance index climbed to its highest level since August, led by a 1.5% increase in conventional refinances," Joel Kan, the MBA's associate vice president of economic and industry forecasting, said in a press release. The seasonally adjusted purchase index decreased 3% from one week earlier, while the unadjusted purchase index decreased 5% compared with the previous week and was 16% higher than the same week one year ago. "The purchase market continued its recent slump, with the index decreasing for the sixth time in seven weeks to its lowest level since May 2020," Kan said. "Homebuyer demand is still strong overall. However, inadequate housing supply is putting upward pressure on home prices and is impacting affordability, especially for first-time buyers and lower-income buyers." Still, there is a bright spot when it comes to purchases. "The trend in larger average loan application sizes and growth in loan amounts points to the continued rise in home prices, as well as the strength in the upper end of the market," Kan added. Adjustable-rate mortgage activity decreased to 2% from 2.1% of total applications, while the share of Federal Housing Administration-insured loan applications decreased to 10.6% from 11.1%. The share of applications for Veterans Affairs-guaranteed loans increased to 12.6% from 12.2% and the U.S. Department of Agriculture/Rural Development share decreased to 0.4% from 0.5% the week prior. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased 3 basis points to 2.98%. For 30-year fixed-rate mortgages with jumbo loan balances (greater than $510,400), the average contract rate decreased 5 basis points to 3.13%. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA remained unchanged at 3.08%. For 15-year fixed-rate mortgages, the average remained unchanged at 2.55%. The average contract interest rate for 5/1 ARMs increased to 2.79% from 2.67%.

Delinquencies fall in Q3 but 'no guarantee it will continue'

November 11th, 2020|

The number of mortgage delinquencies fell after spiking in the second quarter — the first full quarter which suffered coronavirus ramifications, according to the Mortgage Bankers Association. The third quarter's seasonally adjusted delinquency rate hit 7.65%, dropping quarterly from 8.22% while nearly doubling the 3.97% rate from the year before — the second-lowest point since 1995. The short-term improvement came through employment gains, leading to borrowers making more payments. However, uncertainty remains ahead.“There are no guarantees that last quarter’s improvement in the delinquency rate will continue," Marina Walsh, the MBA's vice president of industry analysis, said in a press release. "Recent actions to combat another wave of COVID-19 cases could slow or halt the recovery in some sectors — particularly the service industries — and the passage of another stimulus package is still uncertain. “Despite this ongoing concern, steady home-price gains and homeowner equity accumulation seen in most of the country in the last several years potentially work in favor for distressed borrowers," she added. "We continue to encourage them to reach out to their mortgage servicer as soon as possible to discuss their options.” Delinquencies varied greatly by loan type. Those backed by Fannie Mae and Freddie Mac fell to 5.93% from 6.68% in the second quarter. Federal Housing Administration mortgages declined to 15.59% from 15.65%, while VA loans increased quarterly to 8.16% — the highest rate since 2009 — from 8.05%. By stage, the 30-day delinquency rate fell to 1.86% — the nadir of the MBA's survey which started in 1979 — down from 2.34% in the second quarter. The 60-day delinquencies dropped to 1.02% from 2.05%. Meanwhile 90-day delinquencies hit the highest point since the second quarter of 2010, rising to 4.78% from 3.72% quarter-over-quarter. "With forbearance plans still active and foreclosure moratoriums in place until at least the end of the year, many borrowers experiencing longer-term distress will remain in this delinquency category until a loss mitigation resolution is available," Walsh added.

Why banking groups are congratulating Biden, even if Trump won’t

November 11th, 2020|

Despite President Trump’s refusal to concede the presidential election, financial services trade groups were quick to congratulate President-elect Joe Biden on his victory and are pledging to work with the incoming administration on industry priorities. These statements are normally routine and perfunctory, and help the associations jumpstart getting their priorities in front of lawmakers and others in positions of power. But the 2020 election was highly contentious and a significant number of Americans don’t believe it was fair. Because of that, industry groups must tread carefully when publicly discussing politics to avoid angering their members.“My honest answer is I don’t believe that it [alienates anyone] but I am going to caveat that,” said Greyson Tuck, a board member at the consulting and law firm Gerrish Smith Tuck. “With the political climate the way it is today, I don’t know if there is a right answer either way. I do think it’s appropriate when a winner has been declared.” On Saturday, multiple media outlets projected that Biden would win Pennsylvania, giving him enough electoral votes to claim victory. Biden is currently projected to win at least 279 electoral votes with a few states still undecided. Since then, various financial services groups, including the Credit Union National Association, the American Bankers Association and the National Association of Federally-Insured Credit Unions, have congratulated Biden and Vice President-elect Kamala Harris. Other business-oriented groups, including the U.S. Chamber of Commerce and the Business Roundtable, have issued similar statements. “I think in transitions for a presidential election, it’s traditional and gracious to congratulate the president-elect,” said Debbie Matz, a former chairman of the National Credit Union Administration. “There will always be people who didn’t vote for that person but offering to work together is part of the American system of democracy." Besides being good manners, these statements are meant to signal to the association’s members that the group is prepared to work with new leadership on industry priorities, said Steven Reider, president of the consulting firm Bancography. “Trade groups that want to be part of the new administration’s first week’s agenda better get in line,” Reider added. “You have [70 plus] days left to get your agenda in front of that transition team.” In a statement on Saturday, Jim Nussle, president and CEO of CUNA, congratulated Biden and Harris on their victory, adding, “We look forward to working with Mr. Biden’s administration to advance the credit union mission and increase financial well-being of American consumers.” To ensure it doesn’t get ahead of the news, CUNA relies on the Associated Press and other major outlets to call an election before putting out a statement, said Ryan Donovan, the group’s chief advocacy officer. The trade association generally puts out these types of press releases after an election and when a new member joins the NCUA board. “We approach it with recognition that there are supporters of both candidates within our stakeholders,” Donovan said. “We are mindful of that. We hope that credit union volunteers, executives and members understand that no matter the outcome, we are ready to work with anyone who won.” Groups traditionally phrase these statements extremely carefully and that is perhaps even more important in 2020 given the divisive nature of the election. Trump has vowed to fight the results in court, and many Republicans, including Senate Majority Leader Mitch McConnell, have backed this decision. A significant portion of the electorate is also questioning the result. Thirty-four percent of respondents believe the election was either “probably not” or “definitely not” free and fair, according to a survey by Politico and Morning Consult taken in the days since Americans cast their votes. That number jumps to 68% for Republicans and those who lean that way. Additionally, the banking industry tends to skew more conservative than other sectors of the economy. Arizent, the parent company of American Banker and Credit Union Journal, conducted a survey before the election that found 61% of bankers who responded believed Trump’s re-election would be the best outcome for the country. By comparison, 56% of all respondents, which included fields beyond just financial services, shared that view. Overall, sources said, these press releases tend to be fairly generic and written in a way to avoid offending voters who supported the losing candidate. They also frequently steer clear of policy details. For instance, the statement from Rob Nichols, president and CEO of the American Bankers Association, is just over 100 words and only four sentences. He notes that his group and "member banks stand ready to work with the Biden administration and lawmakers from both parties to bolster the economy, increase opportunity and create a brighter future for all Americans.” But Nichols didn’t get into specific policy preferences. A spokesman for the ABA said issuing these types of press releases is “standard practice,” and that it did so after the 2016 presidential contest and 2018 midterm elections. The CEOs of several megabanks have commented on the election, including JPMorgan Chase CEO Jamie Dimon and Bank of America CEO Brian Moynihan, according to reports from other media outlets. It makes sense for the money center banks to comment since they have “significant leadership” and can help “signal to the equity market of a smooth transition,” Reider said. But smaller credit unions and banks that don’t have that level of clout are better off staying out of the fray, sources said, in part because highlighting the election results could needlessly frustrate some consumers. Jason Lindstrom, president and CEO of Evergreen Credit Union in Portland, Maine, and chair of the CUNA Marketing & Business Development Council, said his institution traditionally stays out of politics. Discussing the election wouldn’t further the $381 million-asset institution’s role of providing financial products and services to its members, and could risk alienating at least some of them, he said. But Lindstrom did believe it was right for industry trade groups to start acknowledging the results since their job is to lobby for credit union priorities. “They are our advocacy wing,” he added. “They may alienate a credit union CEO. But at the same time they are who we pay to advocate on behalf of the credit unions. They need to start the relationship building early on.”

BBVA and Prosper partner to offer digital home equity lines

November 10th, 2020|

BBVA USA customers can now directly apply for a digital home equity line of credit on the company's website. The technology was created by Prosper, an online marketplace for consumer loans that is based in San Francisco. BBVA, of Birmingham, Ala., is the first bank partner to use Prosper’s technology on its own website. Though the offering was officially announced Tuesday, BBVA began offering these digital HELOCs in September to customers in Alabama, Arizona, Florida, Colorado and New Mexico. Since the HELOC platform launched, "we've seen a significant improvement in the number of customers who complete the online application,” said Murat Kalkan, BBVA USA head of mortgage banking. The two companies first partnered in 2019, but customers of the $100.9 billion-asset BBVA could only apply for HELOCs online through Prosper’s website. "Consumer spending on home improvement has risen over the past six months as people spend more time at home during the pandemic,” David Kimball, Prosper's CEO, said in a press release. “A home equity line of credit is a great option for financing a large project as it offers flexibility and access to low rates." Based on early results, including from a test it conducted in July, BBVA estimates that Prosper’s service enables it to close HELOCs 14 days faster on average compared with applications submitted in other channels. Other benefits, the two companies say, include instant prequalification, a dedicated client services team that can answer questions about HELOCs and the ability to upload electronic documentation. "We are excited to expand our relationship with Prosper by using their digital platform to power our online HELOC application process, as we both strongly believe that digital can lend convenience, speed and efficiency to customers’ banking experiences," Murat Kalkan, BBVA USA's head of mortgage banking, said in the release. “Since our Prosper-powered HELOC application launched in early September, we've seen a significant improvement in the number of customers who complete the online application,” Kalkan said.

FHA proposes rule that allows borrowers to obtain private flood insurance

November 10th, 2020|

The Federal Housing Administration has proposed a rule that would allow borrowers to obtain private flood insurance policies on mortgages the FHA insures. "Our proposal would expand the options for obtaining flood insurance, rather than continuing to lock in borrowers to one federal option without any ability to comparison shop," Federal Housing Commissioner Dana Wade said in a press release. "We are also proposing important safeguards that will help protect borrowers, so their homes will have flood insurance coverage at a level at or above the level available through the National Flood Insurance Program," she stated.Currently, FHA-insured mortgages secured by properties in special flood hazard areas must have NFIP policies. The Biggert-Waters Reform Act of 2012 required the acceptance of private flood insurance policies by the government-sponsored enterprises as well as the government agencies. However, the GSEs required the private insurance terms and amount of coverage to be at least equal to that provided under an NFIP policy on any mortgage they purchase. That has had an impact on insurers that offer the flood line. Last year, federal banking regulators implemented a rule regarding the acceptance of private flood insurance that applied to depositories only. If the FHA rule were to be put into place, it could expand the market further. "This proposal will remove yet another unnecessary regulatory barrier to doing business with FHA and can also reduce costs to the federal government," added Joe Gormley, deputy assistant secretary for single-family housing. "Allowing participation by private insurers should generate the competition needed to ultimately reduce costs for consumers." The FHA's proposed rule also notes the ongoing problems with renewing the NFIP, commenting that a private option "may reduce the likelihood of delays in the processing of new originations" if a lapse occurs as a result of Congress' failure to act, as it did in 2018. Between 3% and 5% of FHA borrowers could obtain a private flood insurance policy if this option becomes available, the agency said. In 2019, $522.6 million in direct premiums were written by 41 private flood insurers, compared with $360.1 million from 32 companies the prior year, according to the Insurance Information Institute. However, this data does not include policies written by FM Global, which in 2019 reclassified its private flood insurance into allied lines. In 2018, FM Global had $300 million in direct premiums written or a 43% market share. The top underwriter in 2019 was Assurant, with $94 million in premiums written for a 17% market share. Arch Capital Group, which also writes private mortgage insurance, ranked sixth in 2019, with $38 million in direct premiums written. Interested parties will have 60 days to comment on the FHA's proposed private flood insurance rule once it is published in the Federal Register. The administration is also seeking public comment on a proposal to create a compliance aid for lenders, which would determine if a private flood insurance policy meets the agency's requirements.

Ginnie Mae issuance rebounds to level just shy of August record

November 10th, 2020|

The monthly volume of new securitized mortgages in the Ginnie Mae market rebounded a little in the latest numbers released by the Department of Housing and Urban Development. Issuance during October inched up to $76.4 billion from $75.8 billion in September, but remains below the record high of $77.6 billion seen in August. October’s volume is up 27% from a year ago, when it was $60 billion.The decrease from that August high may reflect in part a decline in Federal Housing Administration-insured volume, which tends to occur in a refinancing boom. FHA borrowers, if eligible, tend to refinance into government-sponsored enterprise loans when rates fall because the mortgage insurance premiums on FHA loans are relatively expensive. That means FHA volumes, which are a key contributor to Ginnie Mae issuance, could continue to fall as long as the refinancing boom continues, unless the FHA considers taking a step that could reverse that trend. The FHA may consider such a step, according to Edward Golding, a former principal assistant secretary of housing at HUD during the Obama era, who is currently executive director at the MIT Sloan School of Management. The volume of loans refinancing away from FHA due to the refi boom “will renew the issue of whether life-of-loan insurance — MIPs — are appropriate,” Golding said during a virtual event hosted by the Urban Institute last month. FHA mortgage insurance premiums have not been competitive with those of the insurers that work with the GSEs. The premiums private MI companies charge borrowers are discontinued once the low down payment loans they insure build sufficient equity. Whether the FHA does reconsider life-of-loan premiums may depend on loan performance and the health of its Mutual Mortgage Insurance fund. Prior to the pandemic, a run of generally strong loan performance outside of the reverse mortgage market left the fund with relatively strong finances. That could encourage the FHA to consider a reduction in premiums. But if officials are concerned that future deterioration in loan performance could drain reserves, they may not want to reduce premiums. Loan forbearance rates have generally been improving, but there are questions about whether that will continue without additional government stimulus. The FHA is due to discuss its financial outlook when its annual actuarial report is released later this month.

Rise in mortgage foreclosures reflects unemployment, COVID-19 woes

November 10th, 2020|

While moratoria have kept foreclosures low compared to last year's rates, October activity jumped 20% from September, according to Attom Data Solutions. Foreclosure filings — inclusive of default notices, bank repossessions and scheduled auctions — totaled 11,673, up month-over-month from 9,707 but down 79% year-over-year from 55,197.One in every 11,683 mortgaged properties reached a point in the foreclosure process in October. South Carolina had the highest foreclosure ratio, with one in every 6,133 units. It was trailed closely by Nebraska's one in 6,246 and Alabama's one in 6,660. Broken down by housing markets with populations above 1 million, Birmingham, Ala., posted the worst rate, at one in every 1,993 properties. Cleveland followed at one in 4,511, then came Jacksonville, Fla., with one in 5,119 units. "It's probably not a surprise that almost all of the metro areas where foreclosure activity increased on a month-over-month basis are also places where unemployment rates are higher than the national average, and in many cases have been hotspots of COVID-19 infections," Rick Sharga, executive vice president at RealtyTrac, said in the report. Among metro areas with over 1 million people, New York led with 485 foreclosure starts, followed by 240 in Chicago, 196 in Los Angeles, 151 in Miami and 143 in Houston. Foreclosure starts moved almost identically with the foreclosure rate overall, spiking 21% month-over-month to a total of 6,042 nationwide while falling 79% from October 2019. North Carolina led all states with a 294% monthly rise in starts, followed by 74% in Ohio 74% and 30% in Illinois. Similarly, banks repossessed 2,577 properties in October, an increase of 28% from September while dropping 81% year-over-year. While Sharga was surprised that activity rose despite the moratoria, some of the increases were credited to properties that were already in the stages of default or were zombie properties before the pandemic took hold. Managing the coronavirus-related distress of the housing market and getting borrowers the necessary aid stands as a major issue for President-elect Joe Biden and his administration to address. "There's some near-term things they will have to tackle with COVID relief," Chris Morton SVP of public affairs at American Land Title Association, said in an interview. "A critical one is ensuring folks continue to have opportunities to stay in their homes and receive assistance to get through the economic challenges. There is broad agreement that something further needs to be done, the question just becomes the scope of that. Having had a number of conversations with both sides up on the Hill, there is a recognition of the stress that both the real estate sector and consumers are under."

Mortgage market should remain strong in a rising rate environment: KBW

November 10th, 2020|

The mortgage market should remain robust even if the 10-year Treasury yield rises to 1.5%, and the economy continues to recover, a report from Keefe, Bruyette & Woods said. The yield on the 10-year Treasury moved up significantly this week, following the news that Pfizer has a COVID-19 vaccine that is reportedly 90% effective. The yield broke above 0.9% for the first time since June. The last time the 10-year yield was above 1% was on March 18. The 10-year yield is used as a benchmark to price 30-year fixed rate mortgages. A spread of 200 basis points between the 10-year Treasury and the 30-year FRM was reported by Optimal Blue on Nov. 9. If that spread holds, it would indicate mortgage rates rising to 4.25% to 4.5% in KBW’s scenario.The latest Freddie Mac Primary Mortgage Market Survey put the 30-year conforming FRM at an all-time low of 2.78%. “We think the mortgage insurers are the best recovery play in our mortgage universe,” Bose George, an analyst for KBW, said in a report. “Higher interest rates are neutral to positive for the sector as long as they are not high enough to impede the housing market.” During the third quarter, four of the six active underwriters reported record levels of new insurance written — over $30 billion each — with a fifth company also having its best three month period ever. George predicted that mortgage originators will take the biggest hits as the broader economy recovers, given that rising interest rates could slow refinance activity faster than previously predicted. “While this is unlikely to change our 2022 earnings per share estimates (which already assume normalized refinance activity), it could materially reduce 2021 EPS estimates,” George said. “That being said, we believe that the 10-year yield would likely have to rise to the 1.25% or higher range before volume expectations change in any meaningful way.” Besides the MI companies, title insurers are likely to benefit if interest rates continue to move up, George said. “While title insurers have benefited meaningfully from the refinance wave this year, the market is valuing the sector based on either 2021 or 2022 earnings estimates, which already incorporate declining refinance activity. So to the extent we see a strong commercial recovery, we could see upside to our 2022 estimates,” he said. KBW predicts that publicly traded mortgage lender Mr. Cooper would outperform other stocks in a rising rate environment because it has a large mortgage servicing rights portfolio, George said. The downside risk for PennyMac Financial Services is limited even though its earnings expectations could fall sharply for 2021. But Rocket Cos., which went public on Aug. 6, “is probably the most challenged name given its large exposure to the refinance market and its relatively small balance sheet relative to its market capitalization,” George said.

LoanFlight Review: Lower Mortgage Rates Because They Advertise Less?

November 10th, 2020|

Posted on November 10th, 2020 If you haven’t heard of LoanFlight Lending, things are going according to planned. The mortgage company, which prides itself on not spending a lot of money on advertising, likes to keep things simple (and costs low). That means not splurging on “expensive ads, sponsorships, or even putting our logo on sports stadiums.” The result is ideally lower mortgage rates for its customers without lender fees. The logic is they’re spending less, so you should have access to better rates, all else being equal, unlike some of the big guys who spend so much they might not be as competitive. And remember, a mortgage is a commodity; they’re all basically the same, at least once they fund. There’s nothing special about a name-brand mortgage. Now let’s learn more about LoanFlight to determine if you should buy a ticket. LoanFlight Lending Quick Facts Retail direct-to-consumer mortgage lender founded in 2016 Headquartered in Tampa, Florida Currently licensed to lend in 12 states nationwide Funded more than $200 million in home loans during 2019 More than 90% of their overall volume was mortgage refinancing While LoanFlight might not be the oldest or largest mortgage lender out there, they still manage to fund hundreds of millions in home loans annually. And they do so in just a dozen states, which is all the more impressive. At the moment, they’re operating in Alabama, Arizona, California, Colorado, Florida, Georgia, Illinois, Indiana, Kentucky, Maryland, Minnesota, and Texas. Last year, they seemed to do the most volume in the state of California, with Florida and Texas not far behind. While they may not be big on advertising, you can catch them in the wild on the Zillow mortgage marketplace, which is where you may have first seen them. Simply put, they are a no-frills lender that is all about low rates with no lender fees. To that end, they say you’ll see $0 in Section A of their Loan Estimate (LO) if you choose to apply with them. They’re also big on refinancing, though they offer home purchase financing as well. But more than 90% of their loans were refis last year, if that’s any indication of their niche. How to Apply with LoanFlight Lending You can apply directly from their website using their digital mortgage application powered by Blend They rely on technology and a streamlined process to keep costs low and pass savings onto you Once you apply you’ll receive an email whenever a new task (additional paperwork) must be completed Easily track loan progress at any time by logging into the loan portal As noted, LoanFlight keeps things super simple and straightforward. While you can call them up if you prefer to speak to a human, they let you apply directly from their website as well. With no human interaction necessary, you can simply click “Apply” and you’ll be sent to their digital mortgage application powered by Blend. It allows you to complete your loan application from any device, save your progress, link financial accounts, scan and upload paperwork, and eSign documents. You’ll also receive personalized loan rates once you complete the application to see what you’re eligible for. And remember, LoanFlight doesn’t charge lender fees, so the rates should be listed without a cost. Once your loan is submitted, you’ll receive an email any time a task becomes due, and you can check loan progress at any time via the online loan portal. Compare the Top 10 Mortgage Refinance Options Near You Select your state to get started State LoanFlight says it uses technology and relies on fewer people to ensure your mortgage loan process goes as smooth as possible. Loan Programs Offered by LoanFlight Lending LoanFlight Lending Mortgage Rates They say “low rates” right on their website, but then don’t list them for us. That’s fine, but it’d be nice to get an idea, right? Like a lot of mortgage companies, they keep their mortgage rates to themselves, but at least they tell us they’re low, and give us a reason to believe them. Remember, they don’t spend lots of money on fancy advertisements and run a tight ship, so there’s reason to expect a low mortgage rate. In terms of lender fees, they say they charge $0, so that should be pretty cut and dry. This means their interest rates should be viewed as even more attractive relative to any other lenders that charge points and fees. As always, take the time to shop around if you want to ensure that their rates beat out the competition. LoanFlight Lending Reviews On Zillow, they have a 4.76-star rating out of 5 based on about 150 reviews from past customers. Not a ton of data, but overwhelmingly positive for what it is. On LendingTree, they’ve got a 4.7-star rating out of 5 from 65 reviews, with a 91% recommendation rate. And on Bankrate, a 4.9-star rating based on nearly 100 customer reviews. So while the reviews aren’t plentiful, which is understandable given their young age as a company, they’re consistently excellent. While they aren’t Better Business Bureau accredited, they do currently enjoy an ‘A’ rating with the company. All in all, LoanFlight might be a good fit for a homeowner looking to refinance an existing home loan that is pretty straightforward. By that, I mean a salaried employee with good credit who needs to refinance an owner-occupied single-family home, without much hand-holding. For example, if you’ve refinanced in the past and/or have no problem going through the process without a lot of guidance. These low-cost mortgage lenders tend to excel when it comes to vanilla loan scenarios like the one mentioned above since they’re generally easy to close without much work or hoops to jump through. LoanFlight Lending Pros and Cons The Good Do not charge lender fees Say they offer low rates because they don’t spend a lot of money on advertising Offer a variety of popular home loan programs Excellent reviews from past customers ‘A’ rating from the Better Business Bureau The Maybe Not Good Only licensed in a dozen states at the moment Do not publicize mortgage rates Do not service their own loans (transferred shortly after closing)

Mortgage credit markets need new government support programs

November 10th, 2020|

A recent Securities and Exchange Commission report supports the conclusion that new programs are needed to better address the next event-driven mortgage credit crisis arising from future economic shocks similar to COVID-19. The data-driven report shows how the concentration of mortgage credit assets owned by nonbank entities exacerbated the impact of the COVID-19 market shock. Currently, 70% of mortgage loans are originated by nonbank mortgage originators. Similarly, mortgage credit assets are increasingly held by mortgage REITs, which grew significantly after the 2008 subprime credit crisis, increasing from $168 billion in assets in 2009 to almost $700 billion in assets in 2019. This trend of mortgage credit moving away from banks will continue. While the reactivated bond buying programs from the 2008 subprime credit crisis helped contain the COVID-19-related market dislocation, new programs are needed to better address the next event driven mortgage credit crisis that will likely occur when an even higher percentage of mortgage credit assets are owned by non-bank entities. In the early days of the COVID-19 crisis, the federal government and the states announced legally mandated forbearance periods for the enforcement of residential mortgage loans. As a result, anticipated and actual mortgage delinquencies increased quickly, and mortgage loans financed on short-term repo facilities were marked down, triggering margin calls. Requests for relief, although reasonable, were difficult for lenders to grant because they, too, were experiencing similar margin calls or write-downs of mortgage credit positions on their books, illustrating the interconnectedness of the mortgage credit markets. For margin calls made and enforced, the credit impact of the write-downs created a negative feedback loop ― as holders of mortgage credit sold securities and loans into an illiquid market to meet margin calls, they drove prices lower, increasing the margin calls. The SEC report acknowledges this phenomenon and attributes additional mortgage credit market stress to the lack of buyers in the market. In response, the Federal Reserve restarted a quantitative easing program to deliver stimulus to the economy and increase liquidity to the credit markets during a time of sudden need. Many of the bond purchasing programs created in the 2008 subprime credit crisis were reactivated, increasing demand for credit securities and therefore rapidly raising prices for those securities, including mortgage-backed securities issued or guaranteed by the government-sponsored enterprises Fannie Mae and Freddie Mac, as well as by Ginnie Mae. The SEC report is rightly complementary of the bond buying programs that added liquidity to the credit markets when it was needed the most to address a temporary market dislocation. Situational problems require situational solutions that can be easily calibrated to the duration and severity of the problem. Unimaginative and inflexible solutions to mute the impact of market dislocations, such as imposing leverage limits on mortgage REITs, for example, are attractive in theory but not ideal. They are blunt tools that may lessen future liquidity challenges from market dislocations, but at the same time they may unintentionally stunt the growth of the mortgage credit markets at a time when banks have exited the markets and non-bank capacity is needed to support growing consumer demand. One of the biggest drivers of COVID-19-related market dislocation was the lack of clarity on and coordination of consumer payment relief plans at the federal, state and local level. Generally, states have had carte blanche to design their own uncoordinated forbearance and foreclosure laws and increasingly they use that unfettered authority, for example, to add consumer protection-type conditions to the commencement or finalization of foreclosure, generally increasing and adding uncertainty to the timeline for resolving defaulted mortgage loans. We must develop a coordinated national consumer credit relief program that can be activated like the bond buying programs for future economic shocks similar to COVID-19. The SEC report underplays the role of the nonbank mortgage servicers in the mortgage credit market. These are the entities tasked with the frontline work of collecting payments and working out forbearance plans with affected consumers, but at the same time they do not get paid for this work because servicing fees are not paid on delinquent, nonremitting mortgage loans. Nonbank mortgage servicers use the mortgage credit markets to fund servicers need liquidity to make advances during forbearance that go along with mortgage servicing, namely owning mortgage servicing rights and making advances. We must develop coordinated government crisis-support programs to help nonbank mortgage servicers fund mortgage servicing rights and advances. These programs are necessary for the stable and proper functioning of the residential mortgage credit markets going forward, particularly following an event driven economic shock. Expecting the banks to jump back in to pick up the slack is not the solution. It doesn’t account for their regulatory capital impediments to holding mortgage servicing rights and their general distaste for the asset as a result of the heat they took during the 2008 subprime credit crisis.

What the Biden administration may do in the housing sector

November 10th, 2020|

Mortgage professionals envision broader access to government-related credit sources but potentially tighter regulation under the incoming Biden administration. However, changes won’t be quick to materialize, particularly if Republicans gain control of the Senate after Georgia’s two runoff races on Jan. 5. And don’t expect every move President Trump has made over the last four years to be undone, industry experts say. Some Trump administration initiatives that are already in progress, like government-sponsored enterprise reform, could proceed apace, noted Bob Broeksmit, president and CEO of the Mortgage Bankers Association. Joe Biden Bloomberg “The open question is whether [Federal Housing Finance Agency Director Mark Calabria] would craft some sort of consent order that would permit him to release the GSEs from conservatorship, even as soon as between now and Jan. 20,” Broeksmit said. Calabria’s term technically continues for the next three years. A pending court case, which deals with the constitutionality of the structure of the FHFA, may allow Biden to fire Calabria at will, depending on the outcome. That court case may take some time to play out but is expected to follow the same course as a similar case filed over the Consumer Financial Protection Bureau, Broeksmit noted. Either way, at some point the Biden administration will likely want to put a new director in place. “I would think a Biden FHFA director would want to focus more on the affordable housing mission of the GSEs and figure out ways to have those mandates in place,” Broeksmit said. That could potentially include more leeway for the GSEs to buy loans that go into forbearance before purchase, said Brian Chappelle, partner at Potomac Partners. “Hopefully, the 500 to 700 basis points paid on new originations that go into forbearance before loans are sold to Fannie Mae and Freddie Mac will be on the table,” he said. Chappelle also hoped for the elimination of a partial indemnification fee of 20% for Federal Housing Administration-insured loans that go into forbearance prior to being insured. While only a few loans fall into that category, “as a result of both of those policies, lenders have put overlays in place so that these pricing changes have definitely negated access to credit,” he said. “It’s more difficult today for potentially eligible borrowers to get mortgages and I think those two policies contribute to it,” he said, adding that he hoped the new administration might also increase access to credit by eliminate the pending refinancing fee and restrictions on refinancing related to forbearance. While policies that bolster affordable housing and the expansion of credit would help the industry, increased regulations often favored by Democrats could be a damper on activity for lenders and servicers. “We’re going to have a hell of a lot more regulation than we’ve had over the last four years,” said Peter Norden, CEO of HomeBridge Financial Services. “I hope we don’t go back to the same regulatory environment we were in when it was Obama and Biden, because certainly that would be very negative to the industry … [regulation] takes time to put in though, it doesn’t happen overnight.” Biden may seek to establish a Homeowner and Renter Bill of Rights aimed that would include penalties aimed at discouraging predatory lending, DavisPolk noted Monday in a report. "In general, a Democratic administration is going to favor more, rather than less, regulations,” said Jennifer Keys, vice president of compliance strategy solutions at Covius. “I think with a Biden administration given everything that’s happened with the pandemic and other issues, I would expect a focus on fair housing and fair lending. It may be an administration more similar to [that of the Obama era, under CFPB leader Richard Cordray] with rule making by enforcement.” For servicers, one aspect of this regulation could include longer loan-resolution timelines. "I would expect with a Biden administration, obviously regulation and policy that are more borrower-friendly and more pro-borrower. And that could mean, possibly, foreclosure and eviction moratorium extensions,” said Keys. However, some consultants expect the relative health of the mortgage market now will limit the extent to which Washington will be inclined to regulate. A wave of loose underwriting preceded the wave of regulation put in place during the Obama administration. “It’s very different now. We have a strong credit environment lenders have adapted to all the rules that have been put in place, and the vast majority do so with extraordinary focus on ensuring that they are compliant,” said David Stevens, CEO of Mountain Lake Consulting and a former federal housing commissioner at the Department of Housing and Urban Development under Obama. “I don’t think that there is any unusual risk for lenders as it relates to servicing or oversight.” A Biden administration is unlikely to change the outlook for mortgage risk, said Rick Thornberry, CEO of mortgage insurer Radian. “I think Calabria is on a mission to recap and release the GSEs, you could see Biden slow that down a little bit. At some point they have to be resolved. But I would say we feel comfortable really under either scenario.” Pending the outcome of the Senate runoff elections in Georgia, a pretty closely matched mix of Republicans and Democrats in Congress also could limit the Biden administration’s ability to put housing incentives and well as regulation in place, said Stevens. That includes the first-time homebuyer tax credit Biden has backed. One of the most immediate mortgage moves that the Biden administration could indirectly make is to restore the ability of so-called Dreamers to get FHA loans. Biden has said one of his early actions would be to put in an executive order that would restore the Deferred Action for Childhood Arrivals program as a means of allowing children of undocumented immigrants the right to live in the United States without being deported. Because residency is the bar these potential borrowers need to clear to get these loans in the FHA handbook, there is speculation that DACA’s restoration could make them eligible again, depending on how it is worded. “If there is a Dreamer Executive Order, it could have an immediate impact on DACA policy at FHA,” said Chappelle.

What kind of regulator can Biden get past a GOP Senate?

November 10th, 2020|

WASHINGTON — Progressive Democrats had hoped a Joe Biden presidency would mean the selection of tough regulators to revive aggressive enforcement efforts and unwind Trump deregulation. But the tight margin in the Senate could complicate the appointment process. Even though Biden was declared the winner of the presidential race Saturday, Republicans are close to maintaining control of the Senate. If they hold on, it would give GOP leaders the final say on approving the incoming president’s nominees for Treasury secretary and the financial regulators. As a result, observers say, Biden would likely choose more moderate leaders for the Treasury Department and the regulators, giving comfort to bankers who had feared the potential of a “blue wave” election. He may also seek to avoid the Senate confirmation process altogether, some said, by naming interim regulatory chiefs under federal rules for acting appointments. “The basic outcome is that it means the nominees will tend to be more moderate,” said J.W. Verret, an assistant professor of law at George Mason University and a former GOP congressional staffer. Following Biden’s election, the guessing game has already begun on who will be his pick as Treasury secretary. Some have mentioned Federal Reserve Board Gov. Lael Brainard as a possible candidate. Sen. Elizabeth Warren, D-Mass., a leader of the progressive left who had challenged Biden for the Democratic nomination, has reportedly pitched herself as a pick for Treasury. Gary Gensler, left, has reportedly been tapped to vet financial regulatory appointments for the Biden transition team. Fed Gov. Lael Brainard has been mentioned as a potential choice for Treasury secretary in the new administration. Bloomberg News Meanwhile, Biden could have a vacancy to fill atop the Office of the Comptroller of the Currency, and many expect him to fire Consumer Financial Protection Bureau Director Kathy Kraninger thanks to a Supreme Court case empowering presidents to replace CFPB chiefs at will. On Monday, Bloomberg News reported that the Biden transition team had tapped Gary Gensler, an alum of Goldman Sachs and Treasury who formerly ran the Commodity Futures Trading Commission in the Obama administration, along with KeyBank executive Don Graves to vet financial regulatory appointments. Observers said they expect a heavier consumer focus at the financial regulators under a Biden administration even with relatively moderate nominees. “My gut feeling … is that you will see a change of tone at the top, a significant change of tone,” said Camden Fine, president and CEO of Calvert Advisors and former head of the Independent Community Bankers of America. “Biden will appoint persons who will enact what I would just in general terms call the Democratic philosophy, which is more consumer protection, tougher regulation for Wall Street, tougher capital regulations particularly for the too-big-to-fail banks, all of those kind of things.” But the party breakdown in the Senate could set up contentious confirmation battles over Biden’s financial policy nominees. Republicans effectively hold a one-seat advantage in the Senate, but it could come down to a few undecided races to determine ultimately which party has the majority. Sen. Thom Tillis, R-N.C., has a clear lead in his contest against a Democratic challenger, but the race isn’t declared over yet. The elections for both Georgia Senate seats, meanwhile, are headed for runoffs. If the GOP holds its majority, Biden’s picks for the industry’s various regulatory bodies may require a more moderate approach to clear the Senate, said Bradley Rinschler, managing partner at the Dallas hedge fund Down Range Capital Management. That means that it would be less likely Warren could become Treasury secretary — a selection that Rinschler said “would be a major punch to investors.” “[Warren at Treasury] is the most feared thing by the banking industry,” Rinschler said. Researchers for Goldman Sachs agreed that were the Senate to remain “majority Republican, … the status quo will largely persist, when it comes to bank regulation, as any nominees to run agencies will need to win support of some Republicans for confirmation.” Similar to the choice for Treasury secretary, Republicans are unlikely to back a CFPB director that they see as too extreme. Analysts widely agree that Biden may move quickly to fire Kraninger, the bureau’s current director, following the high court’s decision allowing presidents to fire CFPB chiefs even if there is no cause. But whom the new administration picks to be Kraninger’s successor would depend on various factors. Senate Republicans may balk at a progressive pick such as Rep. Katie Porter, D-Calif., a former law professor at the University of California, Irvine School of Law, who studied under Warren. A more moderate candidate to lead the bureau, for example, would be Chris Peterson, who lost the election to be Utah governor and was a special adviser to former CFPB Director Richard Cordray. A different pending Supreme Court case could enable Biden similarly to fire the head of the Federal Housing Finance Agency. Some analysts believe the incoming administration could remove FHFA Director Mark Calabria simply using the CFPB case as precedent. Biden will also have the opportunity to nominate one member to the National Credit Union Administration board when Todd Harper’s term expires in August. However, Kyle Hauptman is still waiting on full Senate confirmation to fill Mark McWatters’ expired seat. If that remains stalled, Biden could quickly reshape the board’s political make-up by nominating a second Democrat. But it remains to be seen if Senate Republicans would approve new NCUA members. Alternatively, the Biden team could punt on nominations seen as controversial and try to implement policy through interim regulatory appointments that would avoid the need for Senate confirmation. Jeremy Kress, an assistant professor of business law at the University of Michigan, said Biden could use the Federal Vacancies Reform Act to fill regulatory posts if the Republicans in the Senate won’t confirm his nominees. The FVRA allows a president to nominate an acting head to an agency if the individual has already been confirmed by the Senate or if the person is a senior employee at the agency. “The Biden administration is going to have to staff those positions,” Kress said. “If the Republican Senate refuses to confirm the Biden administration’s choices, the FVRA can be a powerful tool to install new leaders on an acting basis.” A Senate stalemate over financial regulatory appointees would be nothing new. The nominations for several of former President Obama’s appointments languished in the Senate over opposition from Republicans, who did not have the majority but were able to block confirmations under rules at the time — which have since been overturned — requiring 60 votes. But previous administrations had an easier time of moving nominees through an opposing Senate. Aaron Klein, a former Treasury official and Capitol Hill staffer, pointed to the early part of President George W. Bush's administration, when the Banking Committee chairman, former Sen. Paul Sarbanes, D-Md., facilitated the confirmation of nominees. “Sarbanes moved most of Bush’s nominees fairly expeditiously," said Klein, policy director at the Brookings Institution's Center for Regulation and Markets. "But the Senate has changed a lot in 20 years. We will see if Republicans give President Biden the same authority to assemble his team that Democrats gave President Bush when they controlled the Senate early in the Bush presidency.” Allissa Kline, Jon Prior, Kate Berry and Laura Alix contributed to this article.

Forbearance rate tumbles downward as jobs pick up

November 9th, 2020|

After a moderate decline of 7 basis points the week before, the number of mortgages in coronavirus-related forbearance fell 16 basis points between Oct. 19 and 25, according to the Mortgage Bankers Association. Home loans in forbearance plans represent 5.67% — approximately 2.8 million homeowners — of all outstanding mortgages, down from 5.83% and 2.9 million a week earlier. The share of forborne loans at independent mortgage bank servicers decreased to 6.19% from 6.27%, while depositories fell to 5.6% from 5.86%. “With declines in the share of loans in forbearance across the board, the data this week align well with the positive news from October’s jobs report, which showed a gain of more than 900,000 private sector jobs, and a 1 percentage point decrease in the unemployment rate,” Mike Fratantoni, the MBA’s senior vice president and chief economist, said in a press release. “A recovering job market, coupled with a strong housing market, is providing the support needed for many homeowners to get back on their feet.”Forbearances fell at every loan type but conforming mortgages — those purchased by Fannie Mae and Freddie Mac — continued leading the recovery. This contingent decreased for the 22ndstraight week to 3.49% from 3.66%. Forbearance in Ginnie Mae loans — Federal Housing Administration, Department of Veterans Affairs and U.S. Department of Agriculture Rural Housing Service products — slipped to 7.95% from 8.13%. Private-label securities and portfolio loans in forbearance — products not addressed by the coronavirus relief act — went down to 8.7% from 8.82%. CARES Act expirations are responsible for many forbearance exits, opening possible issues for servicers to patch up. “Servicers are still having difficulties reaching borrowers who have reached the six-month point of their forbearance period,” Fratantoni said. “Servicers are required to get borrowers’ consent to extend forbearance beyond six months. Homeowners who continue to be impacted by hardships related to the pandemic should contact their servicer.” A 22.25% share of all forborne mortgages sit in the initial forbearance stage while 75.99% shifted to extended plans and the remaining 1.76% re-entered forbearance after exiting previously. Forbearance requests as a percentage of servicing portfolio volume held from the week previous at 0.1%. Call center volume as a percentage of portfolio volume rose to 8.1% from 6.7%. The MBA’s sample for this week’s survey includes a total of 50 servicers with 26 independent mortgage bankers and 22 depositories. The sample also included two subservicers. By unit count, the respondents represented about 74%, or 37.2 million, of outstanding first-lien mortgages.

What Sheila Bair brings to table as chair of Fannie Mae

November 9th, 2020|

Sheila Bair, as head of the Federal Deposit Insurance Corp. during the financial crisis, oversaw the resolution of more than 300 failed banks that went into receivership. Now, she’ll play a major role in tackling one of the last problems left undone from that era: getting the mortgage giant Fannie Mae out of federal conservatorship. Bair will become chair of Fannie’s board next week, slightly more than a year after joining the government-sponsored enterprise as a director. The choice was surprising given her past criticisms of the structure of Fannie and Freddie Mac as private companies that enjoyed an implied government backing — which became explicit when the Treasury rescued the companies at a price tag of more than $191 billion in 2008. She takes the job as the company’s regulator, the Federal Housing Finance Agency, has started the process of untethering Fannie and Freddie from government control. “She’s going to have a 360-degree perspective on the future of the GSEs that few other people could possibly bring,” said former acting FHFA Director Ed DeMarco, who once worked with Bair at the Treasury Department and now chairs the Housing Policy Council, an industry trade group. “Someone who ran the FDIC through the financial crisis is going to be well suited to guide the future of Fannie Mae,” former acting FHFA Director Ed DeMarco says of Sheila Bair, who will become chair of Fannie Mae on Nov. 20. Fannie denied a request for an interview with Bair and declined to comment beyond the announcement last week of her new position. The FHFA also declined to comment. Bair joined Fannie’s board in August 2019, about four months after Mark Calabria was appointed to run the FHFA. In his first months on the job, Calabria and the Treasury announced an end to a controversial arrangement that prevented Fannie and Freddie from keeping their profits and swept that money into government coffers instead. Under the new arrangement, the companies are allowed to retain a portion of their earnings in preparation for finally exiting government control. But the details of what a new mortgage system will look like and how — or even when — the two companies will get there have not been ironed out. Bair’s seat at Fannie is a unique point of contact to work with FHFA on how to navigate the financial and regulatory challenges ahead. “Both Sheila and Director Calabria are independently minded,” DeMarco said. “But both, I expect, will be very direct and be constructive from both sides in terms of the discussions that will have to go on in order to chart whatever that future path looks like.” While he was director of financial regulation studies at the conservative think tank Cato Institute, Calabria argued in a 2015 paper for borrowing a page out of the FDIC’s book to resolve the conservatorships of Fannie and Freddie. He even cited Bair’s testimony and her work at the FDIC resolving failing banks and thrifts under a “virtually identical” authority that FHFA has in handling the GSEs. The big question in housing policy circles is whether the Biden administration would take a new direction. Calabria’s tenure could be cut short as the Supreme Court is expected to rule on whether a president can replace the FHFA director. Calabria has indicated that many of his plans related to Fannie and Freddie’s conservatorship could take the remainder of his term, which expires in 2024. However, a new FHFA director could cease the effort. If the high court keeps Calabria in his post, however, a Senate that looks to remain starkly divided after the elections this year may not be able to pass legislation, according to Jaret Seiberg, a policy analyst with Cowen’s Washington Research Group. The election “takes off the table the ability of Congress to enact legislation that would prevent FHFA from ending the conservatorship,” Seiberg said. “That was a real possibility with a blue sweep.” Bair’s FDIC tenure was widely praised, but some of her decisions in the heat of the financial crisis were criticized, including the extent to which her agency covered losses incurred by private-equity investors and other acquirers who swept in to take over the operations of failed banks, such as BankUnited in Florida. After taking advantage of its government guarantee, the investor group that ultimately took the reborn bank public earned a $500 million windfall for investors that drew criticism at the time. However the government ultimately resolves its handling of Fannie and Freddie, the stakes are higher, said Ken Thomas, president of Miami-based Community Development Fund Advisors. Speculators could potentially pocket an even bigger payday if the companies were to exit government control. Thomas noted that “Fannie Mae is so much bigger and more important to our housing industry and overall economy.” Fannie needs “some savvy Wall Streeters on … [its] side of the negotiating table when they exit conservatorship” to help anticipate all potential market ramifications, he said. For her part, Bair has agreed with most GSE watchers that the government needs to maintain a role in ensuring that homeownership is within reach for more Americans. And while she has attacked the “quasi-governmental status” of Fannie and Freddie, she has called on Congress to settle the question outside of administrative actions. “The goal must be to clarify once and for all which functions should be governmental, and which are strictly subject to the discipline of the marketplace,” Bair said in a 2010 speech. To DeMarco, Bair brings a past record to Fannie that could reassure skeptics that the company would avoid the risky practices that landed it in conservatorship to begin with. “Someone who ran the FDIC through the financial crisis is going to be well suited to guide the future of Fannie Mae,” DeMarco said.

FBC Mortgage Review: A Florida Lender with a Simple Loan Process

November 9th, 2020|

Posted on November 9th, 2020 Today we’ll take a look at FBC Mortgage, which is a Florida-based mortgage lender that does a ton of business in its home state. In fact, they originated nearly $2 billion in home loans in the Sunshine State last year, which accounted for roughly 60% of their overall loan volume. They also recently struck a deal with the University of Central Florida (UCF) to be the field sponsor at the “Bounce House.” So it’s safe to say that if you live in Florida, there’s a good chance you’ve heard of FBC Mortgage. Either way, read on to learn more. FBC Mortgage Fast Facts Direct-to-consumer retail mortgage lender Founded in 2005 in Orlando, Florida Licensed in 48 states nationwide (excluding Hawaii and New York) Funded over $3 billion in home loans during 2019 Refer to themselves as a top-20 national mortgage lender Also operate correspondent and wholesale lending divisions FBC Mortgage is somewhat middle-aged for a mortgage company, having been around for about 15 years. Compare the Top 10 Mortgage Refinance Options Near You Select your state to get started State The name is related to their past affiliation with the Florida Bank of Commerce, hence the initials FBC. During their relatively short time in existence, the company changed hands twice but came full circle. First, it was sold to privately-owned investment bank Sterne Agee Group, Inc. in 2012, then three years later it reacquired itself. That excitement aside, today the independent nonbank lender has roughly 1,000 employees nationwide and funds billions in home loans annually. Last year, nearly 80% of their total loan volume consisted of home purchase lending. So it’s clear they are partnered with lots of real estate agents and home builders. But they also offer mortgage refinances, including rate and term refis and cash out refis, which accounted for the remainder of their lending. As noted, a good chunk of their business is done in Florida, but they’re also very active in nearby Georgia and Texas, and as far away as Arizona and California. How to Apply with FBC Mortgage You can call them directly or simply apply online via their digital mortgage process Their online app known as SimpleLoan.com allows you to get pre-approved in just 8 minutes Applicants can import and upload key financial documents and generate a pre-approval letter after completion Your designated mortgage professional (or loan officer) will contact you within 24 hours of loan submission To get started, you head over to the FBC Mortgage website and click on Apply Now. It will ask if you’re working with a loan officer. If yes, enter their name to be directed to their personal webpage, at which point you can apply for a mortgage immediately without any human interaction. If no, you’ll simply be ported over to the same loan application and be connected with a loan officer after you begin. It’s possible to search for a nearby branch or loan officer using the directory on their website as well. FBC Mortgage has a digital mortgage process known as SimpleLoan, which lets users apply from a computer, smartphone, or tablet. Once you create an account, you can import your pay stubs, W-2s, bank statements, and other key financial documents. You can also scan and upload documents necessary to meet any conditions on your loan. And review any pending mortgage tasks required to close your loan. Once your loan in submitted, you can review your loan details at any time, lock your loan, get real-time status, or contact your loan officer if you have any questions. They say you can get pre-approved for a home loan in as little as eight minutes, which I believe is the same amount of time as Rocket Mortgage. All in all, they appear to be using the latest technology to make applying for a mortgage quick and easy. Loan Programs Offered by FBC Mortgage Home purchase loans Refinance loans: rate and term, cash out, streamline Renovation loans (FHA 203k) and construction loans Foreign national loans Conventional conforming home loans Jumbo home loans Government-backed loans: FHA, USDA, and VA Reverse mortgages Portfolio loans Fixed-rate and adjustable-rate options with various loan terms available FBC Mortgage Rates FBC Mortgage does not publicize its mortgage rates on its website or elsewhere as far as I know. While slightly unfortunate, it doesn’t mean their rates are higher than the competition. We really don’t know unless you contact them for a quote. The same goes for their lender fees, which don’t seem to appear on their website. As such, it is recommended to get pricing before you apply to see how competitive they are relative to other mortgage lenders you’re considering. You should have a good idea of pricing before you proceed to ensure you don’t leave money on the table. Of course, pricing is just one of many factors when deciding on a mortgage company to work with. One must also consider things like customer satisfaction, and a lender’s ability to close, and close on time. FBC Mortgage Reviews On Rate Your Lender, they have a 4.8-star rating out of 5 based on roughly 12,000 customer reviews. And 95% of customers say they would recommend FBC Mortgage. On Birdeye, they’ve got a 4.1-star rating out of 5 based on 200 reviews. On LendingTree, they have a perfect 5-star rating, but it’s only based on a small handful reviews. All 100% of customers on that review site recommend FBC. There are also individual loan officer ratings on Zillow if you want to research specific people to work with, given the fact that they employ hundreds of loan originators. They are an accredited business with the Better Business Bureau, and have been since 2011. They currently hold an A+ rating with the ratings company. Their customer reviews on the BBB aren’t great, but that’s typical of the BBB website. FBC Mortgage Pros and Cons The Pros Offer a digital mortgage application Can apply directly from their website without human interaction Lots of different loan programs to choose from Free mortgage calculators on site Mostly excellent customer reviews A+ BBB rating The Cons Not licensed to lend in Hawaii or New York Do not publicize their mortgage rates or lender fees They don’t appear to service their own loans (photo: Anthony Quintano)

If a Mortgage Lender Reaches Out to You, Reach Out to Other Lenders

November 9th, 2020|

A lot of homeowners are looking to refinance their mortgages at the moment. That’s abundantly clear based on the record volume of refis expected this year, per the MBA. And while mortgage rates are in record low territory, thus making the decision to refinance an easy one for most, it still pays to shop around. [&hellip The post If a Mortgage Lender Reaches Out to You, Reach Out to Other Lenders first appeared on The Truth About Mortgage.com.

Despite hesitant would-be sellers, home buying sentiment is improving

November 9th, 2020|

While historically low mortgage rates continued to fuel a hot housing market, uncertainty around coronavirus response and uncertainty ahead of the election kept consumer confidence in check in October, according to Fannie Mae. The Home Purchase Sentiment Index rose again to 81.7 last month, up slightly from 81 in September. However, the index trails the year-ago level of 88.8, given in part a drop in seller enthusiasm seen last year.Selling sentiment had a net positive score of 24 percentage points in October, a 6-point improvement from September, but a 17-point drop year-over-year. Seller optimism stands at 59%. Consumer attitude for buying a home skewed positive by 25 percentage points. The share of "good time to buy" hit 60%, jumping 9 points month-to-month and 4 percentage points from October 2019. About 49% of borrowers expect mortgage rates to stay the same in the next 12 months while 32% predict them to increase and 11% to decrease. The net share who forecast rising rates fell 6 percentage points from September and 4 percentage points from the year before. "To date, the HPSI has recovered over 60% of its COVID-19 pandemic loss, reflecting the bright spot that the mortgage market has been in the economy," Doug Duncan, senior vice president and chief economist at Fannie Mae, said in a press release. Meanwhile, the two measures of sentiment related to employment weakened. Job loss concerns heightened in October, with the net portion of consumers not worried falling to 58%. That's down 9 percentage points month-over-month and 14 points year-over-year. In correlation, the net share of households reporting a significantly higher income from the past 12 months shrunk to 3%, declining 4 percentage points from September and 13 points from October 2019. A growing faction of survey respondents forecast home prices to drop in the next year. October's 20% net share of growing home price expectations fell 4 points from September and 7 points from the year earlier. "The continuing evolution of the pandemic and the 2020 election outcomes may have longer lasting and unexpected impacts on consumer sentiment, as we saw following the 2016 elections, and we expect both factors will shape the housing market over the coming months," Duncan said.

Originator customer satisfaction rises, but tech issues persist

November 9th, 2020|

While customer satisfaction with mortgage originators has improved overall, increased problems in communications and the use of automated tools have been masked by low interest rates, J.D. Power said. "It's been a complicated year for the mortgage industry," Jim Houston, managing director of consumer lending and automotive finance intelligence at J.D. Power, said in a press release. "Between surging customer volumes on the origination side, an influx of customer inquiries on the servicing side and a workforce that has been completely displaced by the pandemic, resources have been stretched to their limits.""That strain is showing up in slower loan processing times, missed opportunities to communicate and unreliable self-service tools. While some of these shortcomings may have been opportunities in prior years, current market conditions and customer satisfaction metrics indicate that mortgage originators need to look hard at fixing them if they want to stay viable," Houston said. Ironically, the 2019 originator survey found that a higher volume of business reduced customer service satisfaction. Because of low interest rates, 2020 is likely to end up as the best year ever in terms of origination volume, according to Fannie Mae's latest projection. The overall industry average score increased to 856 from 850 in 2019. Rocket Mortgage by Quicken Loans remains at the top for the 11th consecutive year, at 883, up three points from a year ago, followed by Bank of America and Chase both at 860. Bank of America's score was 17-point improvement over their 2019 number, while for Chase it is a 10 point gain. "J.D. Power's recognition is further confirmation we are consistently meeting our clients' needs," Jay Farner, its CEO, said in a separate press release. "This accolade comes after we experienced record-breaking loan volume in the first two quarters of 2020." Rocket also scored highest in the J.D. Power mortgage servicer study released in July. Last year's Nos. 2 and 3 ranked originators, Fairway Independent Mortgage and Guild Mortgage were not in this year's rankings because these companies did not generate enough consumer responses. At the other end of the 17 mortgage originators ranked this year was Penny Mac, ranked lowest at 773, followed by Freedom Mortgage at 817 and Flagstar at 821. Also scored but not ranked because they only serve veterans, current service members and their families, were USAA at 887, Veterans United at 873 and Navy Federal Credit Union at 867. Amid social distancing measures, the number of borrowers using self-service channels for loan applications and approvals increased by five percentage points, while a corresponding decrease was tracked in in-person, telephone and email contact with customers. But increased use of self-service portals did not correlate to higher satisfaction scores with them. Borrower satisfaction with those tools was down 10 points in this year's survey compared with 2019. Frequency of communications from the lender remained a key concern of applicants, as it was one year ago. "The more lenders communicate with customers during the application, closing and onboarding processes, the more customer satisfaction improves," J.D. Power said. "Customers with the highest level of satisfaction (929) receive daily communications from their lender. However, this occurs just 11% of the time." J.D. Power conducted the study between June and August and the results are based on responses from 4,300 customers who originated a purchase or refinance mortgage within the past 12 months.

JPMorgan relaxes mortgage curbs with U.S. housing prices on rise

November 9th, 2020|

JPMorgan Chase is going on the “offensive” in mortgages as home prices rise across the country, said Marianne Lake, the bank’s chief executive for consumer lending. “In the case of home lending in particular, we’ve walked back some of our constraints in a reflection of the fact that we’ve seen home prices continue to improve,” Lake said at a virtual investor conference Monday. “We have loosened some of our criteria there,” she said, without elaborating.Low interest rates and a “generally solid economy” are fueling a surge in refinancing activity and propelling the purchase market, which is estimated at about $1.3 trillion this year, Lake said, adding that homeownership rates are up about 4% from last year, and up 5% among customers between the ages of 35 and 44, many of whom may be migrating away from denser urban centers amid the coronavirus pandemic. “Just to put that in context, in terms of the purchase market, that would be similar in size to the housing boom back in 2005 and 2006,” Lake said. “There’s no question that the last decade has been a quite challenging decade for home lending for the industry, and we were not an exception. A lot of that is in the rear-view mirror. I feel like we’re more on the offensive than the defensive.” Lake, who’s overseen all of consumer lending for about 18 months, has been imparting a simple strategy to middle managers: Cut costs and sell more mortgages to “core” customers who already have a primary banking relationship with the bank. JPMorgan has lowered headcount and sought to automate and digitize its home-loan business to appeal to more borrowers. Profitable business Signs of a turnaround in home-loan originations were showing even before the pandemic hit, with the part of JPMorgan’s retail business that offers mortgages to consumers — either when they walk into a branch, or when they call or apply online — becoming profitable in the first month of the year for the first January in five years, Bloomberg reported in February. Read more: JPMorgan Sees a Mortgage Revival After Years of Quiet Losses JPMorgan had $1.71 billion in revenue from its home-lending business in the third quarter, up 17% from a year earlier. Firmwide, origination volume rose 23% this year through September, to $96.4 billion. With coronavirus cases rising globally and questions about the path of the economic recovery, Lake said the bank is closely monitoring the environment. JPMorgan executives will be keeping an eye on whether the pandemic continues to compel younger customers to flee crowded urban centers for areas where homes offer more space to work from home. “We are seeing that that younger cohort of customers is possibly the customer that is looking to migrate away from the more dense urban centers to less dense centers — particularly we’re seeing that in Manhattan,” Lake said. “I suspect we will see more of that. It’s a bit of a watch item rather than a reality.”

FSOC leaves mortgage markets uncertain

November 9th, 2020|

The Financial Stability Oversight Council’s recent comments on the Federal Housing Finance Agency’s proposed capital rule for Fannie Mae and Freddie Mac reinforced aspects of the proposed rule but left market participants uncertain about key issues. For instance, FSOC’s endorsement of FHFA’s use of bank-like regulatory capital definitions and structure suggests that this approach will be retained in the final rule. FSOC also observed that the capital “buffers” in the proposed risk-based framework should be risk-based, as they are in the bank framework (a point made by many market participants). However, elements of FSOC’s statement raise questions for market participants trying to anticipate a post-conservatorship secondary mortgage market, should the incoming Biden Administration’s FHFA go through with the GSEs’ exit from governmental control. Three stand out. First, market participants are concerned with FHFA’s and FSOC’s intentions with credit risk transfer, a critical housing finance reform made in conservatorship. By selling credit risk to investors, CRT diversifies the sources of private capital and broadens the universe of investors that absorb credit losses. CRT investors monitor and assess mortgage credit risk so the financial system is not solely reliant upon the risk management judgments of the GSEs. Further, CRT permits pricing transparency previously absent in the GSE market. CRT should reduce the GSEs’ required risk-based capital since the risk is transferred away, with CRT investors providing the capital backstopping the transferred credit risk. Yet, FHFA’s proposal provides meager capital reduction for CRT. If capital relief is limited, the overall cost of capital – equity plus CRT – would increase, thereby removing the incentive for CRT. Since FSOC’s duty is identifying and reducing systemic risk, FSOC should be a strong CRT proponent. Indeed, Treasury Secretary Mnuchin and Fed Chairman Powell repeatedly have supported CRT as an effective means to transfer risk from the GSEs. Surprisingly, FSOC makes no mention of CRT in its formal statement. Surely this panel of regulators understands that FHFA’s proposed rule would render CRT ineffective and that, without CRT, the market would revert to the previous concentration of risk in and opacity of pricing by the GSEs. FSOC doesn’t address FHFA’s reservations with CRT, as expressed in the proposed rule, where FHFA notes CRT’s limitations compared to common equity. Yet, Fannie Mae’s and Freddie Mac’s failure in 2008 arose from their underpricing and under-estimating credit risk, combined with insufficient capital. They retained almost all credit risk on nearly $5 trillion of mortgages. CRT, like the reinsurance market, uses market mechanisms to distribute rather than warehouse credit risk. FHFA has the autho