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

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Homebuyers prefer permanent buydowns rather than temps

February 6th, 2023|

Permanent mortgage rate buydowns are the tool of choice for most homebuyers to combat unaffordability, with relatively few turning to the temporary offerings that are now in vogue, Black Knight said.In the third week of January, 57% of home buyers that locked in that week paid at least 0.5 points or more to reduce their mortgage rate; a mere 3% used a temporary buydown program, Black Knight's latest Mortgage Monitor reported. Of those that took a permanent buydown, 44% paid a full point and nearly one-quarter paid two or more points.Purchases made up 81% of rate locks during that week with an average payment for a rate lock buydown of 1.16 points. At the same time, cash-out refinance borrowers paid an average of 2.06 points."If that seems high, consider that back in September and October of last year, as many as 71% borrowers paid points with 43% paying two or more points," said Ben Graboske, Black Knight data & analytics president in a press release. "Prior to the pandemic-era housing boom, borrowers in 2018-2020 paid 0.5 points with a corresponding cost of around $1,500 — as compared to $4,300 today and as high as $6,900 last fall."The uptick in the use of permanent buydowns mirrors activity in 2018 and 2019, another time when affordability was challenged, but that was a blip compared with their use today, said Andy Walden, Black Knight's vice president of enterprise research."The simple reason is the magnitude of the impact of rising home prices and interest rates in 2022, which pushed affordability to a more than 35-year low," Walden said. "Permanent buydown activity has eased modestly alongside rates and home prices in recent months but remains a popular option in today's market."While temporary buydowns have been used in the past, recently they were all but nonexistent until the second half of last year, Walden added.As mortgage rates topped 7% in November, more lenders publicized temporary buydown offerings to bring in customers, including United Wholesale Mortgage and Rocket, or other programs that lowered interest rates for a short period of time, such as Newfi's graduated payment non-qualified mortgage product.More recently, UWM brought out a promotion that allows the mortgage broker at its discretion to drop the interest rate by up to 40 basis points on an individual loan. The broker has the capability to use that tool up to a total of 125 basis points across their entire UWM pipeline."Such products may offer an opportunity for prospective homebuyers to temporarily sidestep today's affordability challenges for those who anticipate increased incomes and/or easing of rates in the future, in any case," Walden explained.Analysts at Bank of America Securities also looked at the Black Knight Optimal Blue lock data and found that on Jan. 31, a wide range existed for the rate borrowers received, ranging from a low of 4.5% to a high of 7.75%, with a median of 6%. That is slightly below the latest Freddie Mac Primary Mortgage Market Survey 30-year fixed rate average of 6.09%."We continue to believe peak mortgage rates are behind us and survey rate will drop to at least 5.25% by year-end 2023; risk is drop occurs sooner and deeper, down to 4.5%-5.0% range, in 2023," the B of A Securities report by Chris Flanagan and Henry Navarrete Brooks said.That means affordability for those getting a rate below 6% is better than the National Association of Realtors index."Borrowers with a combination of higher than median income and lower than median rate are doubly advantaged relative to the broad affordability metric, making them more likely to transact than the median borrower," Flanagan and Brooks said. "Key takeaway: due to distribution effects on mortgage rates, income, and wealth, housing activity has potential to surprise to the upside."They currently predict 0% home price appreciation for 2023, but with mortgage rates falling, the risk to that outlook is to the upside.While the 10-year Treasury initially dropped in reaction to the 25 basis point increase in the Fed Funds rate, the yields have risen back above 3.6% as of Monday morning due to the stronger-than-expected jobs report.Zillow's rate tracker put the 30-year fixed at 5.99% as of Monday morning, up 5 basis points from Friday and 29 basis points from Thursday morning.Purchase rate lock activity increased 64% in the fourth week of January from the first week, Graboske pointed out. "On the surface, it may seem the market has been stirred by a full point decline in interest rates and home prices coming off their peaks — but it's not that simple."Home prices are down 5.3% from their June 2022 peak."But affordability still has a stranglehold on much of the market, with the monthly mortgage payment on the average-priced home more than 40% higher than it was this time last year," said Graboske. "While up, purchase locks were still running roughly 13% below pre-pandemic levels for the last full week of the month."

HMDA reporting requirement extends to more banks

February 6th, 2023|

The Office of the Comptroller of the Currency informed banks, which it oversees, that changes have been made to Home Mortgage Disclosure Act reporting requirements.Going forward, the loan volume reporting threshold is set at 25 closed-end mortgage loans originated in each of the two preceding calendar years, according to a bulletin published on the agency's website in early February. The changes were first announced by the Consumer Financial Protection Bureau in mid-December.This marks a sharp change from the 100-loan threshold set previously by a contested 2020 HMDA rule. Going forward, more depository institutions will have to file HMDA data. The Home Mortgage Disclosure Act requires lenders to report mortgage application and origination activity on an annual basis and is one of the main tools used by regulators to uncover Fair Housing Act lending violations.The modifications to the rule, which were made following a court decision last year, revert the reporting requirements to the original 2015 CFPB regulation that established loan volume thresholds. It has been changed at least four times since 2015, with the frequent alterations prompted by banks arguing that the provisions set forth by the government watchdog have been financially "burdensome." Critics against the 2020 version of the rule, which raised the reporting obligation for banks, argued that it created an exception to HMDA's collection and reporting requirements for a class of up to 40% otherwise covered financial institutions, resulting in a loss of data.The lawsuit that upended the 2020 regulation was lodged by the National Community Reinvestment Coalition, several fair-housing organizations, and the City of Toledo.The coalition challenged the CFPB's 2020 rule as being arbitrary and capricious, contrary to the law, and exceeding the CFPB's statutory authority under the Administrative Procedure Act. Specifically, the lawsuit argued that data the CFPB relied on to justify the change to its reporting threshold was faulty. In mid-2022, a federal judge partially sided with the plaintiffs and stated that the CFPB acted unlawfully in issuing a 2020 rule exempting many mortgage lenders from reporting HMDA data.Following the decision, the NCRC issued a statement that "public data on home mortgage lending is crucial to combating modern-day redlining and other forms of illegal discrimination.""This ruling partially overturns a Trump-era rule that blocked a significant portion of the mortgage industry from reporting information about who they were approving and denying for loans," said Jesse Van Tol, president of NCRC, in a written statement. "By recognizing that the prior administration had been arbitrary and capricious, and bringing sunlight back into mortgage lending data, the court helps to vindicate the federal government's longstanding efforts to deliver equality of opportunity."In announcing the reversal, the OCC said it doesn't intend to assess penalties for failures to report closed-end mortgage loan data on reportable transactions conducted from 2020 to 2022 for affected banks that meet Regulation C requirements.The OCC in its bulletin also added that examinations conducted in affected banks regarding HMDA reportable transactions from 2022, 2021, or 2020 "will be diagnostic to help banks identify compliance weaknesses" and that collection and submission of 2023 HMDA data "will provide affected banks with an opportunity to identify gaps in and make improvements to their HMDA compliance management systems."

Judge dismisses CFPB's redlining lawsuit over 'marketing discrimination' in home loans

February 6th, 2023|

A federal judge dismissed a redlining lawsuit filed by the Consumer Financial Protection Bureau against a Chicago mortgage lender, calling the case "flawed," and rejecting the bureau's argument that discrimination in home loans applies to prospective applicants. On Friday, Judge Franklin U. Valderrama of the U.S. District Court for the Northern District of Illinois, ruled that the lawsuit against Townstone Financial Inc., must be dismissed because the language in the Equal Credit Opportunity Act applies only to home loan applicants, not to prospective applicants. The distinction is important because it could limit the CFPB's authority to file redlining cases, experts said. Judge Valderrama rejected the CFPB's allegations that Townstone's President and CEO Barry Sturner's remarks on a radio show had discouraged prospective applicants in Chicago from applying for home loans."The Bureau seeks to improperly expand the reach of ECOA to reach 'prospective applicants,' to regulate behavior before a 'credit transaction' even begins, and to create affirmative advertising and hiring requirements, which cannot be squared with the unambiguous language of the statute," the judge wrote.  Rohit Chopra, director of the Consumer Financial Protection Bureau. Photographer: Ting Shen/BloombergTing Shen/Bloomberg The judge also ruled that the comments amounted to free speech. "Contrary to the First Amendment of the United States Constitution, the Bureau seeks to regulate the content and viewpoint of protected speech and does so in a way that is unconstitutionally overbroad and vague both as applied to Townstone and facially," Valderrama wrote. Still, the dismissal of the CFPB's case may have a limited impact because the Department of Justice and the Department of Housing and Urban Development are the two main federal agencies, along with the CFPB, that typically file redlining cases under both ECOA and the Fair Housing Act, some experts said. The CFPB declined to comment on whether it plans to appeal. The case was dismissed with prejudice, meaning the CFPB cannot file the same case again. Lawyers for Townstone said the ruling could have a more far-reaching impact than just fair lending cases. Steve Simpson, senior attorney at Pacific Legal Foundation, said the district court did not give deference to the CFPB's allegations that lenders can be liable for discriminating in marketing to potential borrowers."It kind of drives a truck through the centerpiece of what the CFPB — and by extension the DOJ — have used in a lot of their fair-lending cases, which we call "marketing discrimination," because it's a ridiculous legal theory," Simpson said. "But even beyond that, the case has implications for administrative law and separation of powers cases going on across the country, even outside the fair-lending context."Judge Valderrama, a Trump appointee, specifically pushed back against the issue of "Chevron deference," a doctrine borne of a 1984 U.S. Supreme Court case that granted federal agencies a wide berth in interpreting ambiguous congressional statutes. Chevron deference has come under significant scrutiny by several justices on the Supreme Court that have expressed skepticism of administrative agencies. In dismissing the case, Judge Valderrama wrote: "The scope of liability created by an expansion of ECOA to include 'prospective applicants' is unreasonable and unworkable. When a statute is unambiguous, agency regulations, or statutory interpretations are not entitled to deference. To the extent [Regulation B] and/or the Bureau attempt to regulate behavior relating to 'prospective applicants,' no deference should be given to Reg. B or the Bureau's interpretation."The CFPB's investigation of Townstone began in 2017 and the company was forced to downsize from a mortgage lender to a mortgage broker because of the cost of five years of defending itself, lawyers said. "It took so many resources to fight this government overreach," said Richard Horn, co-managing partner at Garris Horn LLP. "The power to investigate is the power to destroy and government overreach has a huge impact on companies."

Figure Technologies CEO cuts its funding targets, mulls spin offs

February 6th, 2023|

Mike Cagney, the former chief executive officer of lending giant SoFi, is searching for investors for his latest startup, Figure Technologies Inc. The company, which builds financial products on a blockchain, is also seeking to spin off some product lines as it navigates a dramatic industry downturn.Two years ago, when investors' fintech frenzy was at its peak, Cagney raised $200 million for Figure. The company at the time was valued at $3.2 billion, gaining it entrance into a rarified club of multibillion-dollar startups. The culture among employees was known to be hard-charging, and at least occasionally, hard-partying too. But recently, things have gotten tougher. In the last few months, several senior leaders have left Figure, including the president and chief financial officer; it scrapped an attempt to take its lending business public through a special purpose acquisition company; and executives slashed their targets on an ambitious fundraising effort.The company is currently seeking to raise $100 million, according to people familiar with the matter who asked not to be identified because the discussions were private. That's one-third the sum it initially planned. Figure is not in any serious deal talks at the moment, the people said, and the startup is likely to delay raising money rather than agree to a down round at a lower valuation."We're just dealing with a lot of headwinds in the industry right now," Cagney said in an interview. "It's a very hard market." Figure and Cagney declined to comment on the funding efforts, which have not been previously reported. Figure is one of countless once-hot startups now suddenly forced to contend with an icy environment for venture capital, particularly in the world of crypto. But the company is higher-profile and better funded than most.Cagney left Social Finance Inc. in 2017, under a cloud of allegations over a toxic and "sexually charged corporate culture" at the company, according to a lawsuit. Cagney also admitted that he had had consensual sexual relationships with female subordinates. Cagney said at the time he would not tolerate harassment at SoFi and said he resigned to avoid "distraction from the company's core mission." Despite the scandal, Cagney was quickly able to raise money for his next venture, and Figure brought in more than $400 million from investors including Peter Thiel's Mithril Capital and crypto firms like Digital Currency Group, according to PitchBook data. Figure builds lending, payment and other traditional financial products on Provenance, a blockchain it created, promising to offer faster and cheaper options than the status quo. The company said it gained traction with its lending product, and that it's also brought on big customers for other offerings. For example, Apollo Global Management is using Figure's blockchain to sell stakes in a fund. Last year, Figure appeared to be on track to raise $300 million, according to people familiar with the matter. But by September, as the market cooled on crypto, the startup was struggling to hit its fundraising goals. Figure cut its target by two-thirds. Last month, in another setback to Figure's endeavors to access more cash, the startup abandoned efforts to take its lending product public via a reverse merger with a mid-sized mortgage bank. The transaction was supposed to serve as a major milestone and strategic inflection point for the startup. Cagney said that the company is not currently planning layoffs. But he also said that if it's able to, Figure would complete a significant restructuring. "We are looking at spinning our markets business and potentially our payments business out from our lending business," he said. Cagney said that Figure was financially well-positioned: The startup was profitable on an adjusted basis during the third quarter of last year and lost about $1 million during the fourth quarter. Meanwhile, dozens of employees have left Figure over the last year, including the chief marketing officer and the vice president of communications. In December, President Asiff Hirji and Chief Financial Officer Sean Sievers also both quietly exited.Asked about his departure in an interview with Bloomberg, Hirji spoke highly of Figure. He described the startup as a holding company for blockchain businesses that "quite honestly shouldn't be together" but all represent what he thinks could be "trillion-dollar" opportunities. Hirji said high turnover was related to this diffuse structure because people, including himself, would often leave Figure once a product was built and their work on it was accomplished. "Lots of people have come in and out as the company has evolved," Hirji said. Figure is known among employees to have a high-pressure corporate culture. Some former staffers also complained about the at times high spending that went along with it. Last May, Figure co-founder June Ou, who is married to Cagney, led a company offsite for engineers to Las Vegas, flying out roughly 200 people for a long weekend packed with activities, company meetings at the Venetian hotel and a party at Tao nightclub, which Figure rented. While perhaps not unusual by previous eras' standards of crypto excess, a few former employees who did not attend took umbrage when their full bonuses didn't materialize that summer, said people familiar with the matter. The company declined to comment on the characterization of its culture, the offsite or the bonuses.

5 housing markets where it's cheaper to buy than rent

February 6th, 2023|

High home prices have driven many prospective borrowers to rent, but escalating monthly rates have evened the playing field in some of the nation's larger metros.Today it's cheaper to rent in 45 of the nation's 50 largest housing markets, a ratio that has grown significantly since the end of 2021, according to Realtor.com. Mortgage rates, which nearly doubled in the past year, and home prices fading from a record-high in June caused homeownership costs to grow 37.4% in 2022, more than 10 times faster than rent growth over the same period. The typical monthly starter home payment in December was almost $800 higher than the median rental price of $1,712, the real estate firm found.Those who want to own property can find competitive homeownership opportunities in five Rust Belt markets. The locales offer average mortgage payments below the national average of nearly $2,000, and in some cases, under $1,000 a month."If you're a renter trying to decide if it's better to sign another lease or buy a home this year, market conditions are one factor to consider, but it's far more important to think about what you want and need from a home," said Danielle Hale, chief economist at Realtor.com. "How much flexibility or stability do you see fitting with your lifestyle over the next five to seven years?"Realtor.com ranked the top 50 metros by comparing the monthly cost for a starter home, ranging from a median-priced studio to a two-bedroom listing, to the median rental price for a similarly-sized property. Home costs were projected at a 7% mortgage rate and included property taxes, insurance and homeowners association fees. 

15-Year Fixed vs. 30-Year Fixed: The Pros and Cons

February 5th, 2023|

It’s time for another mortgage match-up: “15-year fixed vs. 30-year fixed.”As always, there is no one-size-fits-all solution because everyone is different and may have varying real estate and financial goals.For example, it depends if we’re talking about a home purchase or a mortgage refinance.Or if you’re a first-time home buyer with nothing in your bank account or a seasoned homeowner close to retirement.Ultimately, for home buyers who can only muster a low down payment, a 30-year fixed-rate mortgage will likely be the only option from an affordability and qualifying standpoint.So for some, the argument isn’t even an argument. It’s over before it starts.But let’s explore the key differences between these two loan programs so you know what you’re getting into.15-Year Fixed vs. 30-Year Fixed: What’s Better?The 15-year fixed and 30-year fixed are two of the most popular home loan products available.They are very similar to one another. Both offer a fixed interest rate for the entire loan term, but one is paid off in half the amount of time.That can amount to some serious cost differences and financial outcomes.While it’s impossible to universally choose one over the other, we can certainly highlight some of the benefits and drawbacks of each.As seen in the chart above, the 30-year fixed is cheaper on a monthly basis, but more expensive long-term because of the greater interest expense.The 30-year mortgage rate will also be higher relative to the 15-year fixed to pay for the convenience of an additional 15 years of fixed rate goodness.Meanwhile, the 15-year fixed will cost a lot more each month, but save you quite a bit over the shorter loan term thanks in part to the lower interest rate offered.15-Year Fixed Mortgages Aren’t Nearly as PopularThe 15-year fixed is the second most popular home loan program availableBut only accounts for something like 15% of all mortgagesMainly because they aren’t very affordable to most peopleMonthly payments can be 1.5X higher than the 30-year fixedThe 30-year fixed-rate mortgage is easily the most popular loan program available today, holding a 70% share of the market.Meanwhile, 15-year fixed loans hold about a 15% market share.The rest are adjustable-rate mortgages or other fixed-rate mortgages like the lesser-known 10-year fixed.While this number can certainly fluctuate over time, it should give you a good idea of how many borrowers go with a 15-year fixed vs. 30-year fixed.If we drill down further, about 90% of home purchase loans are 30-year fixed mortgages. And just 6% are 15-year fixed loans. But why?Well, the simplest answer is that the 30-year mortgage is cheaper, much cheaper than the 15-year, because you get twice as long to pay it off.Most mortgages are based on a 30-year amortization schedule, whether they are fixed or not (even ARMs), meaning they take 30 full years to pay off.The 30-year fixed is the most straightforward home loan program out there because it never adjusts during this industry standard 30-year term.Shorter-Term Mortgages Are Too Expensive for Most HomeownersThe lengthy mortgage term on a 30-year mortgage allows home buyers to purchase expensive real estate without breaking the bank, even if they come in with a low down payment.But it also means paying off your mortgage will take a long, long time…possibly extending into retirement, or pushing it back even further.This enhanced affordability explains why it’s heavily advertised and touted by housing counselors and mortgage lenders alike.Simply put, you can afford more house with the 30-year fixed, which explains that 90% market share when it’s a home purchase.Meanwhile, the 15-year fixed-rate market share is significantly higher on refinance mortgages.The reason is borrowers don’t want to restart the clock once they’ve already paid down their loan for a number of years.It’s also more affordable to go from a 30-year fixed to a 15-year fixed because your loan balance will be smaller after several years. And ideally interest rates will be lower as well.This combination could make a 15-year loan more manageable, especially as you get your bearings when it comes to homeownership.Despite the overwhelming popularity, there must be some drawbacks to the 30-year mortgage, right? Of course there are…15-Year Mortgage Rates Are A Lot Lower15-year mortgage rates are lower than 30-year mortgage ratesHow much lower will depend on the spread which can vary over timeIt fluctuates based on the economy and investor demand for MBSYou may find that 15-year mortgage rates are 0.50% – 1% cheaper at any given timeFirst off, you get a discount for a 15-year fixed vs. 30-year fixed in the form of a lower interest rate.Even though both offer fixed rates, the cost is lower because you get less time to pay off the mortgage.For that reason, you’ll find that 15-year mortgage rates cost quite a bit less than those on a 30-year loan product.In fact, as of February 2nd, 2023, mortgage rates on the 30-year fixed averaged 6.09% according to Freddie Mac, while the 15-year fixed stood at 5.14%.That’s a difference of 0.95%, which should not be overlooked when deciding on a loan program.In general, you may find that 15-year mortgage rates are about 0.50% – 1% lower than 30-year fixed mortgage rates. But this spread can and will vary over time.I charted 15-year fixed mortgage rates since 2000 using Freddie Mac’s June average, as seen above.Since that time, the lowest spread compared to the 30-year was 0.31% in 2007, and the highest spread was 0.88% in 2014.In June of the year 2000, the 15-year mortgage rate averaged 7.99%, while the 30-year was a slightly higher 8.29%.So the 15-year has been enjoying a wider spread lately, though that could narrow over time.Monthly Payments Are Higher on 15-Year MortgagesExpect a mortgage payment that is ~1.5X higher than a comparable 30-year fixedThis isn’t a bad deal considering the loan is paid off in half the timeJust make sure you can afford it before you commit to itThere isn’t an option to make smaller payments once your loan closesWhile the lower interest rate is certainly appealing, the 15-year fixed-rate mortgage comes with a higher monthly mortgage payment.Simply put, you get 15 less years to pay it off, which increases monthly payments.When you have less time to pay off a loan, higher payments are required to repay the balance.The mortgage payment on a $200,000 loan would be $386.10 higher because it’s paid off in half the amount of time.Despite the lower interest rate on the 15-year fixed, the monthly payment is about 32% more expensive.As such, affordability might be a limiting factor for those who opt for the shorter term.Take a look at the numbers below, using those Freddie Mac average mortgage rates:30-year fixed payment: $1,210.70 (interest rate of 6.09%)15-year fixed payment: $1,596.80 (interest rate of 5.14%)Loan Type30-Year Fixed15-Year FixedLoan Amount$200,000$200,000Interest Rate6.09%5.14%Monthly Payment$1,210.70$1,596.21Total Interest Paid$235,852.00$87,317.80Okay, so we know the monthly payment is a lot higher, but wait, and this is the biggie.You would pay $235,852.00 in interest on the 30-year mortgage over the full term, versus just $87,317.80 in interest on the 15-year mortgage!That’s more than $148,000 in interest saved over the duration of the loan if you went with the 15-year fixed as opposed to the 30-year mortgage. Pretty substantial, eh.You’d also build home equity a lot faster, as each monthly payment would allocate much more money to the principal loan balance as opposed to interest.But there’s another snag with the 15-year fixed option.  It’s harder to qualify for because you’ll be required to make a much larger payment each month, meaning your DTI ratio might be too high as a result.For many borrowers stretching to get into a home, the 15-year mortgage won’t even be an option. The good news is I’ve got a solution.Most Homeowners Hold Their Mortgage for Just 5-10 YearsConsider that most homeowners only keep their mortgages for 5-10 yearsThis means the expected savings of a 15-year fixed mortgage may not be fully realizedBut these borrowers will still whittle down their loan balance a lot faster in the meantimeNow obviously nobody wants to pay an additional $148,000 in interest, but who says you will?Most homeowners don’t see their mortgages out to term. Either because they refinance, prepay, or simply sell their property and move. So who knows if you’ll actually benefit long-term?You may have a well-thought-out plan that falls to pieces in 2-3 years. And those larger monthly mortgage payments could come back to bite you if you don’t have adequate savings.What if you need to move and your home has depreciated in value? Or what if you take a pay cut or lose your job?No one foresaw a global pandemic, and for those with 15-year fixed mortgages, the payment stress was probably a lot more significant.Ultimately, those larger mortgage payments will be more difficult, if not impossible, to manage each month if your income takes a hit.And perhaps your money is better served elsewhere, such as in the stock market or tied up in another investment, one that’s more liquid, which earns a better return.Make 15-Year Sized Payments on a 30-Year MortgageIf you can’t qualify for the higher payments associated with a 15-year fixed home loanOr simply don’t want to be locked into a shorter-term mortgageYou can still enjoy the benefits by making larger monthly payments voluntarilySimply determine the payment amount that will pay off your loan in half the time (or close to it)Even if you’re determined to pay off your mortgage, you could go with a 30-year fixed and make extra mortgage payments each month, with the excess going toward the principal balance.This flexibility would protect you in periods when money was tight. And still knock several years off your mortgage.There are biweekly mortgage payments as well, which you may not even notice leaving your bank account.It’s also possible to utilize both loan programs at different times in your life.For example, you may start your mortgage journey with a 30-year loan, and later refinance your mortgage to a 15-year term to stay on track if your goal is to own your home free and clear before retirement.In summary, mortgages are, ahem, a big deal, so make sure you compare plenty of scenarios and do lots of research (and math) before making a decision.Most consumers don’t bother putting in much time for these mortgage basics, but planning now could mean far less headache and a lot more money in your bank account later.Pros of 30-Year Fixed MortgagesLower monthly payment (more affordable)Easier to qualify at a higher purchase priceAbility to buy “more house” with smaller paymentCan always make prepayments if wantedGood for those looking to invest money elsewhereCons of 30-Year Fixed MortgagesHigher interest rateYou pay a lot more interestYou build equity very slowlyIf prices go down you could fall into an underwater quite easilyHarder to refinance with little equityYou won’t own your home outright for 30 years!Pros of 15-Year Fixed MortgagesLower interest rateMuch less interest paid during loan termBuild home equity fasterOwn your home free and clear in half the timeGood for those who are close to retirement and/or conservative investorsCons of 15-Year Fixed MortgagesHigher payment makes it harder to qualifyYou may not be able to buy as much houseYou may become house poor (all your money locked up in the house)Could get a better return for your money elsewhereAlso see: 30-year fixed vs. ARM

Snow Way! Timely tips for winter weather snow removal

February 4th, 2023|

Remember when your landlord took care of things like snow removal? Now, as a homeowner, it’s all up to you. Here’s what you need to know about this winter ritual.   KNOW THE LOCAL LAWS Is there a sidewalk in front of your home? In some communities, you’re responsible for getting it cleared within a few hours after snowfall stops. Even if there’s no rule where you live, keeping it clear for your neighbors is a nice thing to do. Continue reading Snow Way! Timely tips for winter weather snow removal at Movement Mortgage Blog.

20 residential depository lenders with the largest wholesale volume in Q3

February 3rd, 2023|

The top five lenders in our ranking have a combined wholesale volume of more than $27 billion at the end of Q3. In a difficult quarter, some lenders still saw growth between Q2 and Q3, with one seeing in increase of 104.3%.Scroll through to see which residential depository lenders made the top 20 and how they fared in Q3.

Majestic Home Loan closes shop

February 3rd, 2023|

RMK Financial Corp., which also does business as Majestic Home Loan, is closing its doors.The California-based wholesale lender, which was founded in 1997, laid off most employees in mid-January via Skype and closed shop on January 31, sources familiar with the matter said. Over 60 employees were impacted.The company did not respond to multiple requests for comment.According to employees let go, the announcement that the lender would be shutting its doors came unexpectedly. Those impacted by layoffs in mid-January received their final paycheck, but did not receive severance pay.At the end of 2022, Majestic was actively bringing on new employees. In December, the company brought on board close to a dozen account executives. In a LinkedIn post, Michele Turcich, a national account executive at Majestic, noted that the company made the decision to shut down due to a "legacy issue" and wished the "team the best of luck in their future endeavors."While the company wouldn't confirm what the "legacy issue" was, the lender has faced a slew of enforcement actions from state and federal regulators spanning over half a decade.In 2021, the lender entered into a consent order with Oklahoma's department of consumer credit, which found that they failed to provide a comprehensive list of all active mortgage originators, and did not submit quarterly financial conditions as required by the state. A few years prior, in 2016, Majestic settled with the state of Kentucky for using four unregistered loan processors, violating state law. Meanwhile, eight years ago the lender was slapped with a $250,000 fine from the Consumer Financial Protection Bureau for false advertising. At the time, the CFPB claimed that through marketing the lender led consumers to believe that the company was affiliated with the U.S. government.RMK allegedly mailed print advertisements to more than 100,000 consumers in several states, using the names and logos of the Department of Veterans Affairs and the Federal Housing Administration in a way that falsely implied that the advertisements were sent by the VA or FHA, or that the company or the advertised mortgage products were endorsed or sponsored by the VA or FHA. 

Title partnerships abound in early 2023

February 3rd, 2023|

Zimmer Financial Services Group has started Iron Title, an agency whose leadership team includes former First American executives.Iron Title already has begun operations in Florida, and will be expanding into strategic markets nationwide in the coming months.Its CEO, Judd Hoffman, is the former president of First American Title's direct division. He is joined by Philip Wilson, the chief operating officer and Trenton Steindorf as senior vice president, both of whom were executives with First American Financial. Most recently, Wilson was senior division president at Stewart Title, and Steindorf served as assistant vice president of strategic initiatives at Orange Coast Title."We see the value in the human side of the title process — in delivering white-glove service to all parties of a transaction," said Hoffman. "We are recruiting people who believe in this, and investing in the best AI-driven technology to scale the high-touch experience."Other Zimmer entities include: Ategrity Specialty Insurance Co., an insurer in the excess and surplus market; Sequentis Reinsurance; Carrick Specialty Holdings, which provides reinsurance and run-off management solutions; and Zimmer Partners, a research-driven, multibillion dollar investment adviser.

Mortgage job numbers drop further in annual revision

February 3rd, 2023|

Nonbank mortgage employment in 2022 was even lower than initial estimates suggested, the Bureau of Labor Statistics found after its annual adjustment for company filings.The revised payroll count shows the figures for the number of people on mortgage banker and broker payrolls were overestimated by 10,000 positions or more each month, with steeper declines seen earlier in the year than previous numbers indicated.The latest statistics show 354,000 people were employed by the industry in December, down from a revised 358,700 the previous month and 401,200 a year earlier.Presenting a contrast to the underestimated figures for mortgage employment was the surprising strength of the overall figures for U.S. jobs, which the BLS reports with less of a lag."Despite the announced layoffs in big tech, Wall Street and the mortgage industry, total job gains have been more significant," noted Lawrence Yun, chief economist at the National Association of Realtors in an emailed statement.The addition of 517,000 U.S. jobs overall in January far exceeded consensus estimates for a gain of 185,000 and unemployment dropped to a 54-year low of 3.4%.Those job gains could boost some housing activity, but in the short term, "mortgage rates matter more," said Yun."Robust job data will raise the prospect of consumer price inflation and the need for a more aggressive monetary policy to rein in inflation. So just as mortgage rates were trending down toward 6%, there could be a temporary rise," Yun said.Weak wage growth could also limit the extent to which strong employment will increase investment in housing."While it's nice to see more people getting jobs with fatter paychecks, it's hard to ignore the fact that those wage gains have been negative when adjusted for inflation," Beth Ann Bovino, U.S. chief economist at S&P Global Ratings, said in an emailed statement.Despite the surprising strength in overall employment, Yun noted that some hope monetary policy officials could be getting near the end of their tightening cycle."Rents are expected to calm down due to active apartment construction. That will help lower the broader consumer price inflation and halt Fed rate increases by summer. Mortgage rates can then go below 6%," he said.However, Bovino said the most recent job numbers generally make it likely "the Fed will keep rates at their exit rate higher for longer.""This may be a good time for markets to rethink their expectation of a rate cut later this year," she said.

Mortgage rates continue to trend lower

February 3rd, 2023|

The Federal Reserve raised interest rates again at its last meeting, hiking the federal funds rate by 25-basis points. This is the eighth consecutive increase since March 2022 but was also the smallest increase. While that gave investors some hope that the Fed will continue to slow down its quantitative tightening (QT) measures, the Fed remains hawkish in its approach saying “ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.” Essentially, don’t look for the Fed to lower the overnight lending rate any time soon. Continue reading Mortgage rates continue to trend lower at Movement Mortgage Blog.

PennyMac profits in tough market, but by less than in recent quarters

February 3rd, 2023|

PennyMac Financial reported a profit for the fourth quarter due to strong servicing results but its net income was weaker than in comparable fiscal periods.The company earned $38 million in the fourth quarter of 2022. That compared to $135.1 million the previous quarter.A year earlier, PennyMac Financial earned $173.1 million during the fourth quarter.When adjusted for non-recurring items such as a one-time tax rate change, PennyMac's earnings were slightly better than the consensus estimate from Zacks Investment Research but missed the estimate from Seeking Alpha.Gain on sale margins were thinner than Keefe Bruyette & Woods expected, likely due to shifts in the loan channel mix. Wedbush, too, had predicted higher earnings, by underestimating expenses and origination revenues. These factors outweighed what analysts said were higher-than-expected gains in servicing.However, the servicing segment pretax income was down from $145.3 million in the prior quarter at $75.6 million in the fourth quarter, and also marked a decline from $126.1 million in the fourth quarter of 2021, the company reported. Executives noted that the servicing portfolio, which grew by 8% since the same time last year to $551.7 billion in unpaid principal balance, gives the company an edge in the market."The growth of our servicing portfolio continues to differentiate PFSI from its competition," said David Spector, chairman and CEO, in the company's earnings call.Despite the fact that earnings missed some estimates for the quarter, analysts generally remained optimistic about PennyMac's competitive position in a challenging market for both servicing and originations."We believe that PFSI is in a solid position to take market share in the coming quarters," analysts at Wedbush said, noting PennyMac's position in third-party origination origination channels, which companies like Wells Fargo and Guaranteed Rate have been exiting.The company also engaged in a stock repurchase of 1.1 million common shares at an average price of $46.99 each, representing a reduction from the third quarter when it bought back 1.9 million at $51.13 per share"Repurchase levels were down meaningfully from the third quarter as we prefer to maintain flexibility around potential risks and opportunities in the evolving market environment," Spector said.The company's real estate investment trust affiliate reported a net loss of $4.7 million or 7 cents per share on a diluted basis for the fourth quarter. That was below the average 39-cent earnings per share estimate of analysts surveyed by Zacks for PennyMac Investment Trust. It compared to EPS of 1 cent in the third quarter of 2022, and a loss of $0.28 a year earlier.

ICE Mortgage Technology sees 4Q loss, but recurring revenue gains

February 2nd, 2023|

Intercontinental Exchange's mortgage technology unit posted a fourth-quarter loss, but reported strength in sales of its Encompass loan-origination software and its pivot toward subscription-based revenues.The mortgage arm of Atlanta-based ICE saw a $6 million operating loss in a quarter characterized by ongoing contraction in originations. The total represented a 138% decrease from third-quarter profits of $16 million, while coming in 107% lower than the $86 million garnered in the final three months of 2021.    For the full year 2022, though, ICE Mortgage technology recorded operating profit of $57 million. That number reflected an 86.6% decline from $397 million in 2021.But company officials said investments made in marketing its various subscription-based services put it in a strong position for an eventual normalization of a still-turbulent mortgage market."Our view has been that when you have this significant stable of customers — the 3,000 lenders that are on our platform and utilizing our services — there's a tremendous opportunity to cross-sell," said Benjamin Jackson, president of the parent company and chair at ICE Mortgage Technology, in an earnings call. "A lot of the banks, credit unions, nonbank originators — they're using this time to invest in infrastructure."  ICE leaders said a predictable business model would help steer the company toward longer-term growth, noting the particular increase of Encompass customers turning to its AIQ [Automation, Insights, Quality] underwriting system."One of the things that's really driving that recurring revenue growth is the success we have in continuing to sell our AIQ platform into that customer base," Jackson said.Although overall revenues at ICE Mortgage Technology came in lower on both a quarterly and annual basis, the recurring share increased to $164 million in the fourth quarter, up 0.6% and 10% from $163 million three months earlier and $149 million a year ago. For the full year, recurring revenue jumped 16.3% to $643 million from $553 million.   Full quarterly mortgage-segment revenue decreased to $249 million, down 9.8% and 28% from $276 million in the third quarter and $346 million in the final three months of 2021. Meanwhile, for all of 2022, revenue fell almost 19.8% to $1.13 billion from $1.4 billion in 2021. Mortgage technology operating expenses came in at $255 million for the quarter and $1.1 billion for the year.The company also noted positive signals in sales of Encompass in the fourth quarter across all types of its lending clients: banks, nonbank originators, brokers and credit unions. Jackson said it was 2022's strongest quarter in terms of sales to new customers."We also saw a lot of new startup companies coming to us. With the unfortunate backdrop of people getting downsized in this mortgage environment, several of those impacted employees are becoming entrepreneurs, starting up their own mortgage shops and we're very well positioned to win that business," he said.But the severity of last year's sudden market shifts didn't leave ICE unscathed either."We've seen some clients consolidate, gone through M&A," Jackson said. "We've seen some cancellations due to those factors, so that has created some headwinds into the business."With ICE in the midst of trying to execute a merger with fellow technology provider, Black Knight, company officials offered no status updates on negotiations. They also did not address any of the recent pushback the deal has received from Congress or other industry leaders. Black Knight is scheduled to release its fourth-quarter and full-year earnings on Feb. 28.  

Wells Fargo cuts 140 positions from correspondent lending team

February 2nd, 2023|

Wells Fargo handed 140 pink slips to employees in its Springfield, Illinois office in mid- January, according to a Worker Adjustment and Retraining Notification (WARN) filed with the state.Personnel impacted by the layoffs were part of the bank's correspondent lending team and were a result of Wells Fargo exiting that channel, a spokeswoman from the California-based bank confirmed.The reduction, first reported by The State Journal-Register, took place on Jan. 11, a day before the bank officially announced its exit from correspondent lending and its plans to reduce its servicing portfolio. Per the publication, severance and career assistance was provided to impacted employees.Plans for a mortgage pullback have been in the works since last year, with a Bloomberg report in August noting that Wells Fargo was in the midst of shrinking its vast mortgage empire.In announcing its exit from the correspondent channel, the depository noted that the measure will help to "reduce risk in the mortgage business by reducing its size and narrowing its focus." A company spokesperson declined to give a timetable for winding down its correspondent lending channel or reducing its servicing portfolio. Analysts have said that the bank's decision to exit correspondent lending and reduce the size of its mortgage servicing portfolio will have residual effects on both segments, as well as on the secondary market. And as the top-ranked mortgage lender withdraws from a portion of the mortgage business, some have wondered who will step in to fill the void.In the meantime, Wells Fargo is turning its attention to "serving bank customers, as well as individuals and families in minority communities."One such initiative is broadening its Special Purpose Credit Program. The bank's SPCP, which initially included a $150 million investment to refinance loans for minority homeowners, will now include purchase loans. The bank is also in the process of hiring additional mortgage consultants in communities of color.

Fannie Mae adding timing restriction for cash-out refis in April

February 2nd, 2023|

Government-sponsored enterprise Fannie Mae has added a new timing restriction for cash-out refinances that will become mandatory on April 1 following a similar move by competitor Freddie Mac.Fannie has updated its selling guide to require any first-liens the refi pays off to have a note date at least 12 months earlier than that of the new mortgage. It'll also continue to require at least one borrower to have been on the title to collateral property at least a half-year before the new loan's disbursement date, with some exceptions.Freddie Mac's similar change is set to go into effect for mortgages with settlement dates on or after March 7.When timing restrictions are set on refinances, it's often an attempt to prevent excessive churning of loans. The GSEs also may want to manage the risks related to equity withdrawal in a market with some softening in housing prices.The addition of the restrictions is occuring amid broader changes at the two government-related mortgage investors, which back a significant number of the mortgages originated in the United States. These changes include a fee hike for cash-outs that went into effect this month. Adding the new restriction related to the timing for cash-outs increases the concern for consumers in that market, which has been under an increasing amount of pressure, said Mat Ishbia, CEO of United Wholesale Mortgage. Not only are cash-out borrowers facing new GSE restrictions related to timing and pricing, but the loans also have been less desirable because many existing first-lien borrowers got their mortgages when rates were lower in 2020 and 2021."Cash-outs are more expensive, cash-outs are harder to do…these things are making it harder for the cash-out refinance for consumers," Ishbia noted in a recent online video commentary.The number of borrowers that locked rates for cash-outs in 2022 was down 90.04% from the year before, as compared with a 67.45% annual decline for the market as a whole, according to Mortgage Capital Trading's most recent index reading. The contrast in year-over-year numbers moderated a bit in December as a near-term rate drop occurred, and potentially because of some interest in getting into the cash-out market ahead of the fee hike. The cash-out fee adjustment stems from a broader overhaul of GSE pricing aimed at reducing borrowing costs for lower-income borrowers while subsidizing the discounts with hikes for other loans. The broader pricing grid changes go into effect in May.While lenders and brokers have appreciated the price breaks for some borrowers, they've expressed disappointment with the fact that the agency regulating the GSEs has had to add costs for other consumers. The Federal Housing Finance Agency has defended that as necessary for adhering to the GSEs' capital requirements, which are aimed at ensuring their financial soundness.Mortgage industry leaders have expressed some hope the FHFA could revisit those requirements in light of their concerns about their impact on mortgage pricing.The National Association of Mortgage Brokers, for example, has issued a statement about the change in loan-level price adjustments indicating that while it "understands the difficult decisions which face FHFA…NAMB feels the pending LLPA fees changes will have a significant impact on homeowners, especially the middle-income borrowers.""The LLPA fees' increase will result in fewer families being able to purchase and refinance their homes in many cases," said Ernest Jones Jr., board president of the association, in an emailed statement.Overall, Ishbia said he sees the FHFA's changes as ones that are going to "hurt some borrowers, help some borrowers."Do I love how they handled it? Not really, but I do understand what they're trying to do. It's just hard to hurt some of these consumers that are doing things the right way to help some of those who need a little extra help," he said.

Meet the new banking lawmakers

February 2nd, 2023|

WASHINGTON — Both the Senate Banking Committee and the House Financial Services Committee have officially named their members, including several big names from the past election cycle, among them a few with deep financial industry experience. Although it's a divided Congress, a few financial policy priorities are expected to make it through the partisan gridlock that's gripped Capitol Hill for the last few years. There's agreement broadly on housing priorities, noted by the committee ranking member Tim Scott, R-S.C., in his recently released policy priorities, which could mean movement is possible on those issues. And on digital assets, Scott — who has made relatively few statements on financial policy in general, and on crypto in general, during his time in Congress — said in those priorities that Congress should work toward a "bipartisan regulatory framework." These are the new lawmakers in both committees that will debate and weigh in on those topics. 

With FOMC hike baked in, mortgage rates sink

February 2nd, 2023|

Mortgage rates moved down another four basis points this week, as the markets anticipated the 25 basis point increase the Federal Open Market Committee announced on Wednesday.The Freddie Mac Primary Market Survey for Feb. 2 found the average for the 30-year fixed rate mortgage at 6.09%, down from 6.13% one week prior. The 15-year FRM averaged 5.14%, compared with 5.17% for Jan. 26. For the same week in 2022, the rates were 3.55% and 2.77% respectively.Rates, which have now dropped four weeks in a row, are down nearly a full percentage point from their peak at 7.08% on Nov. 10."According to Freddie Mac research, this one percentage point reduction in rates can allow as many as three million more mortgage-ready consumers to qualify and afford a $400,000 loan, which is the median home price," Sam Khater, its chief economist, said in a press release.Any further FOMC cut is likely to go "meeting-by-meeting," said Fannie Mae Chief Economist Doug Duncan, in a discussion last week with National Mortgage News reporters. But given that this latest increase was "well advertised," the mortgage market already baked it into current loan pricing.Duncan expects another 25 basis point reduction at the next meeting.The short-term rates controlled by the FOMC should peak at about 5% by March, added Mike Fratantoni, chief economist at the Mortgage Bankers Association, in a statement."But long-term rates, including 30-year mortgage rates are a function of market expectations for the path of the economy," Frantoni said. "And investors are betting that the economic slowdown and the Fed's eventual victory over inflation will result in lower rates over time."The MBA's current forecast is for the 30-year FRM to end the year close to 5%."[It's] premature to declare an outright victory, but it is a positive sign that we only saw 0.25 points and we're here without job claims breaking," said Dan Richards, executive vice president of Flyhomes Mortgage, in a statement. "In the short term, we shouldn't see much movement in mortgage rates based on [Wednesday's] hike." However, yields on the 10-year Treasury sank after the announcement, and spreads to the 30-year FRM are already abnormally large, which could bring further drops.The 10-year closed at 3.53% on Tuesday. By noon on Thursday, it was down to 3.36%."If evidence over the coming months suggests that inflation is on a consistent downward trend, mortgage rates may continue to decline and activity in the housing market will pick up — just in time for spring home-buying season," said First American Deputy Chief Economist Odeta Kushi in a statement. "If high inflation proves more stubborn, especially in the service sector, the Fed may respond by further tightening the screws on monetary policy, putting upward pressure on mortgage rates."Zillow's rate tracker put the 30-year FRM at 5.7 on Thursday morning, down 22 basis points from one week prior and 9 basis points from the previous day."Waning economic indicators and fears that the Fed may go too far in its battle against inflation are likely driving the decline," said Orphe Divounguy, senior macroeconomist at Zillow Home Loans, in a statement issued Wednesday night.Keefe, Bruyette & Woods is also looking at the FOMC pausing after one more rate hike."Despite [Fed Chairman Jerome] Powell's statement that ongoing rate hikes would be appropriate, the press conference was interpreted as dovish, which resulted in risk-on sentiment; stocks rallied, the yield curve steepened, and notably, mortgages outperformed their hedges and [primary-secondary] spreads tightened 12 basis points," a note from KBW's Bose George said.Mortgage clients of the law firm of Polunsky Beitel Green, while also expecting a 25 basis point increase in March, are now hoping the Fed is positioned to pause rate hikes then, rather in May."While interest rate-sensitive businesses like auto sales and mortgage companies may welcome this development, it could indicate that the long-predicted recession may be here sooner rather than later," said Marty Green, a principal at the firm.Both the 10-year yield and mortgage rates are falling because the markets are perceiving an increased risk of recession. "Upcoming releases on wage growth, the services industry and inflation expectations are likely to keep mortgage rates volatile, but additional signs of weakness in economic data should continue to apply downward pressure," Zillow's Divounguy said. 

Essent buying title insurance companies for $100M

February 2nd, 2023|

Essent Group agreed to purchase the title insurance subsidiaries of Finance of America's Incenter business for $100 million, the latest company looking to find synergies between the two businesses."Title insurance is a natural complement to our MI business with relatively low and stable loss ratios historically," said Mark Casale, Essent's chairman and CEO, in a press release. "The acquisitions add a team of seasoned title professionals to Essent and provide a platform to leverage our capital position, lender network and operational expertise across an adjacent real estate sector as we continue to expand our franchise."But Essent could have spent the money in a different fashion rather than move into a new vertical."We would note that smaller title companies often sell for between 6-8 times EBITDA, so we expect any accretion [for Essent] from the deal to be modest," said Bose George, an analyst with Keefe, Bruyette & Woods, in a research note. "We also would note that this capital could also have been used for buybacks, which likely would have been just as accretive."Agents National Title Holding Co. is an underwriter that can do business in 44 states. Incenter acquired the company in 2017 at an undisclosed price.The prior year, Incenter purchased title and settlement services provider Boston National Title, also for an undisclosed price. At that time, Incenter management said it was looking to be an end-to-end services provider.But Finance of America has been revamping its operations, exiting the forward mortgage origination business, while concentrating on home equity lending and the reverse mortgage sector, including the pending purchase of American Advisors Group."FOA's strategic direction and long-term growth initiatives are centered on providing an innovative suite of solutions to help Americans achieve their retirement goals through the use of their home equity," Graham Fleming, interim CEO, said in a press release. "Today's transaction is part of our continued execution of this strategy which is supported by some of the industry's most powerful macro themes."Currently only Radian Group actively has its hands in both pies, upping its presence in title following its 2018 purchase of what was then called Entitle Direct, now Radian Title Insurance. That purchase came 15 years after Radian tried to introduce a title insurance alternative product called Radian Lien Protection but ran into regulatory objections in California.Neither Agents nor Radian hold significant market share among title insurers. Through the first nine months of this year, Agents wrote $75.8 million in premiums for a 0.43% share, ranking it 13th among all underwriters, according to the American Land Title Association (for this purpose, holding companies with multiple underwriters are reported as a single business). Radian did $21.4 million for a 0.12% share, putting it at No. 19.But other times, the combination of these two lines has been unsuccessful. For example, Old Republic International, the third largest title underwriter with a 15.54% share, currently operates a mortgage insurance business that has been in run-off status since 2011. Several times, former chairman CEO Aldo Zacaro looked to bring the unit back to operating status but those plans never came to fruition.In 2003, the now-defunct mortgage insurer PMI Group sold its American Pioneer Title Insurance Co. to Fidelity National Financial.Goldman Sachs is Essent's financial advisor, while Credit Suisse Securities (USA) did the same for FOA. The transaction is subject to regulatory approvals.

Rocket Mortgage loans now offered to a community bank's customers

February 1st, 2023|

Nashville, Tennessee-based Fourth Capital Bank integrated Rocket Mortgage's digital loan application process onto its digital banking platform, the companies announced Tuesday.The collaboration is made possible through Rocket's partnership with Q2 Holdings, a Texas-based fintech that offers third-party products to community banks and credit unions. A variety of technology products are housed in Q2's marketplace platform, which the company describes as an "app store-like experience" allowing "financial institutions [to] evaluate, select and deploy applications from a catalog of pre-integrated third-party products with no up-front investment."Fourth Capital Bank is the first depository to incorporate Rocket Mortgage onto its banking platform from Q2's marketplace. In this collaboration, customers of Fourth Capital will have access to Rocket Mortgage and the Michigan-based lender will take "care of everything related to the loan and servicing.""Rather than trying to build a mortgage lending service ourselves from scratch, we launched the award-winning Rocket Mortgage solution through Q2's Innovation Studio Marketplace," said Brian Heinrichs, CEO of Fourth Capital Bank, in a written statement.The partnership between Q2 and Rocket Mortgage was unveiled in mid-August, at the same time that Santander Bank announced that its customers could get home loans through a separate arrangement with Rocket. Rocket's partnership with Q2 creates another avenue for the Michigan-based lender to beef up its origination business and possibly attract new customers to its other services and products, which include auto loans, rooftop solar systems and personal loans. The lender has also touted its Rocket Money application, formerly known as TrueBill, as being key to making contact with future first-time homebuyers. The lender's application includes millions of members who don't have mortgages with the lender. "That could literally be a game changer for how a mortgage company does business on the purchase side," said Brian Brown, chief financial officer at Rocket Companies, during a webinar hosted by Fitch Ratings in January. "So that diversification is a big deal."

Powell to Congress: Fed can't protect economy from U.S. debt default

February 1st, 2023|

WASHINGTON — Federal Reserve Chair Jerome Powell delivered a clear message to Congress on Wednesday afternoon: raise the debt ceiling — or else.During a press conference after this week's Federal Open Market Committee meeting, Powell said lawmakers should not count on the central bank being able to save the government from widespread defaults and their potential ripple effects."There's only one way forward here, and that is for Congress to raise the debt ceiling so that the United States government can pay all of its obligations when due," he said. "Any deviations from that path would be highly risky and no one should assume that the Fed can protect the economy from the consequences of failing to act in a timely manner." Jerome Powell, chairman of the Federal Reserve, said Wednesday that Congress should not assume the central bank has adequate measures to combat the challenges that would result from failing to raise the debt ceiling.Bloomberg News The discussion of the Fed's role in averting a debt crisis comes as congressional negotiations for raising the debt limit — an act that would allow the U.S. government to borrow more to pay down existing debts — stands at an impasse. Treasury Secretary Janet Yellen has projected that the country has already reached its debt limit and is poised to begin defaulting on obligations by June.Several unorthodox proposals about how the government might deal with an immovable debt ceiling that were first discussed more than a decade ago have resurfaced in recent weeks. They include the issuance of a trillion-dollar coin and the Treasury directing the Fed to buy up troubled government debt.Powell declined to say whether the Fed would take part in any of these extraordinary actions should the Treasury Department direct it to. "In terms of our relationship with the Treasury, we are their fiscal agent," he said, "and I'm just going to leave it at that."Powell acknowledged that the Fed's efforts to combat inflation, which include reducing its holdings of U.S. sovereign debt by $60 billion per month, could be at odds with efforts to prolong the government's solvency. But, he said, he expects the debt issue to be resolved before it intersects with the Fed's monetary tightening."I don't think there's likely to be any important interaction between the two because I believe Congress will wind up acting as it will and must in the end to raise the debt ceiling in a way that doesn't risk the progress we're making against inflation and the economy and the financial sector," he said. In the meantime, he said, the Fed will monitor the flow of funds between the Treasury's general account, money market funds, reserves at the central bank and the Fed's overnight reverse repurchase facility.During this week's FOMC meeting, the Fed increased its benchmark interest rate by a quarter of a percentage point, following through on its promise to ease the rate at which it tightens monetary policy.The 25-basis-point hike is the Fed's most modest rate increase since last March, when it launched its effort to combat runaway inflation. Powell attributed this small rate bump to the Fed's confidence that disinflation has started to take hold in the economy.The modest adjustment was largely expected by financial market participants and was signaled during the final meeting of 2022, when Powell said the FOMC would no longer be concerned about racing to move monetary policy into restrictive territory but rather determining how long to keep it there.In its official statement, the Federal Open Market Committee acknowledged that inflation has "eased somewhat but remains elevated." It also amended the opening lines of its statement, which largely remained unchanged from meeting to meeting last year, to remove references to supply chain shocks related to COVID-19 as driving forces of inflation. "We understand — I personally understand well — COVID is still out there," Powell said, nodding to the fact that he tested positive for the virus last month. "But it's no longer playing an important role in our economy. … People are handling it better, and the economy and society are handling it better now."During this week's meeting, the FOMC also reaffirmed its long-run goals of maintaining "maximum employment, stable prices, and moderate long-term interest rates." As part of that reaffirmation, the committee said it would keep its annual inflation target at 2%. The typically innocuous strategy statement came as some economists and monetary policy experts have suggested that a higher target figure could be appropriate, given slowing population growth projections in the U.S.

Senate Democrats ask FHFA to review nonperforming loan programs

February 1st, 2023|

WASHINGTON — A group of Senate Banking Democratic lawmakers  asked the Federal Housing Finance Agency to review Fannie Mae and Freddie Mac's nonperforming loan and reperforming loan sales programs. Sens. Sherrod Brown of Ohio, the chairman of the Senate Banking Committee, Jack Reed of Rhode Island, Tina Smith of Minnesota, Ron Wyden of Oregon and Elizabeth Warren of Massachusetts said that nonperforming loans are typically sold off to large investors, which means that homeowners could be forced out of their homes. In the letter to FHFA Director Sandra Thompson, the lawmakers said that around 60% of the nearly 115,000 nonperforming loans sold off to large investors resulted in the displacement of the homeowner.  Senate Banking Committee chair Sherrod Brown, D-Ohio, was joined by some of his Democratic committee colleagues in calling for the Federal Housing Finance Agency to review Fannie and Freddie's practice of selling nonperforming home loans to investors.Bloomberg News "In the case of nonperforming loans, FHFA and the Enterprises hoped that sales to new owners would offer borrowers on the verge of losing their homes assistance beyond what the Enterprises could provide," the lawmakers said in their letter. "Unfortunately, nonperforming and reperforming loan sales can also put borrowers' loans in the hands of investors who do not share the same housing mission obligations as the Enterprises." Those purchasers have included single-family rental housing businesses, such as Pretium, and private equity firms like Lone Star Funds, the senators said. "With a severe shortage of available and affordable housing for aspiring homeowners, it is critical that the Enterprises remain committed to keeping families in the homes they have and to keeping our housing stock in the hands of individual homeowners, not institutional investors," the letter said. "Based on data reported from the Enterprises and the Federal Housing Finance Agency (FHFA), it is not clear that the nonperforming and reperforming loan sales programs meet that standard."

Angel Oak Capital brings $581M private-label deal to market

February 1st, 2023|

Angel Oak Capital Advisors issued its first securitization of 2023, with a significant portion of the underlying loans coming from its affiliate Angel Oak Mortgage.The transaction consists of 1,073 loans with an unpaid principal balance of approximately $580.5 million. The average original credit score is 736, with an original average loan-to-value ratio of 71.1%, and a non-zero debt-to-income ratio of 32.2%."Strong institutional investor interest and attractive spread tightening are supportive of the overall non-agency RMBS market that we believe could see a resurgence in 2023," said Namit Sinha, chief investment officer of private strategies at Angel Oak Capital Advisors, in a press release. "We intend to play a larger role in this space in the coming months, depending on market conditions."However, analysts that follow the private-label securitization business believe this market could sink even further this year when compared with 2022, they said in December forecasts, although some outlooks issued in early January were more hopeful.Angel Oak Mortgage contributed $241.3 million of the loans. This is the first securitization that it has participated in alongside other Angel Oak units since the real estate investment trust went public in June 2021, it said in a press release.This securitization, along with loan sales that took place in November and the conversion of $286 million to non-mark-to-market later that month, has reduced Angel Oak Mortgage's whole loan warehouse debt by approximately 51% and its mark-to-market percentage of total warehouse debt by approximately 62% since the end of third quarter of 2022. It reported a loss of $83.3 million for that quarter."This demonstrates further execution of the steps previously outlined in our strategic plan to reposition our portfolio, improve liquidity, reduce risk, and protect our capital structure," said Sreeni Prabhu, Angel Oak Mortgage's CEO and president. "We are pleased to return to the securitization market, and we look forward to executing additional securitizations in the coming months while reinvesting capital into recently originated, higher coupon loans."Angel Oak Home Loans, which now houses the consumer direct and correspondent businesses, and Angel Oak Mortgage Solutions, the wholesale production unit, together originated over 90% of the loans in the securitization, a Fitch Ratings note on the deal said. Angel Oak Home Loans sold its retail branch network in November.Fitch rated six of the tranches, with only the A-1 class at "AAAsf." This tranche has a balance of $434.5 million."Although the borrowers' credit quality is higher than that of AOMT transactions securitized in 2022 and 2021, the pool's characteristics resemble those of non-prime collateral, and, therefore, the pool was analyzed using Fitch's nonprime model," the rating agency noted in its report. AOMT made six issuances last year, the final one in September.Approximately two-thirds, 67.4% were non-qualified mortgage loans, while the remaining 32.6% were investment properties not subject to the ability-to-repay rule.The pool contains 128 loans over $1 million, with the largest with a balance of $3.5 million. Meanwhile, 38 of the loans in the securitization are eligible to have been purchased by Fannie Mae or Freddie Mac, Fitch said.Among the negative drivers for Fitch's ratings was unsustainable home prices."Fitch views the home price values of this pool as 8.1% above a long-term sustainable level (vs. 10.5% on a national level as of January 2023, down 1.7% since last quarter)," the rating report said. "Underlying fundamentals are not keeping pace with the growth in prices, resulting from a supply/demand imbalance driven by low inventory, favorable mortgage rates, and new buyers entering the market."In addition, three of the five adjustable rate mortgages in the deal are tied to Libor, although the securitization's bonds do not have any exposure to that index.

Fed slows rate hikes, signals further increases are coming

February 1st, 2023|

The Federal Reserve slowed its drive to rein in inflation and said further interest-rate hikes are in store as officials debate when to end their most aggressive tightening of credit in four decades.Policymakers lifted the Fed's target for its benchmark rate by a quarter percentage point to a range of 4.5% to 4.75%. The smaller move followed a half-point increase in December and four jumbo-sized 75 basis-point hikes prior to that.The unanimous decision by the Federal Open Market Committee was in line with financial market expectations."The committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time," the Fed said in a statement issued after the two-day policymaking meeting, repeating language it has used in previous communications.In a sign that the end of the hiking cycle may be in sight, the committee said the "extent of future increases" in interest rates will depend on a number of factors including cumulative tightening of monetary policy. It had previously tied the "pace" of future increases to those factors.In another shift from its last statement, the Fed noted that inflation "has eased somewhat but remains elevated," suggesting policymakers are growing more confident that price pressures have peaked.That compares with prior language where officials simply stated price growth was "elevated."U.S. stocks extended declines and Treasury yields rose after the statement. Powell BriefingChair Jerome Powell will hold a press conference at 2:30 p.m. Washington time to expand on the FOMC's decision and on its assessment of the economy.Investors will be watching to see if Powell pushes back against market expectations that the Fed will it end its tightening campaign soon and cut rates later in the year as inflation eases and economic growth slows.At their prior meeting in December, 17 of 19 policymakers forecast that they'll increase rates to 5% or above this year, with none looking for cuts. There were no fresh forecasts published on Wednesday.Some Fed officials sounded more hopeful last month that they can achieve a soft landing of the world's largest economy, bringing down inflation without crashing the U.S. into a recession. White House officials and the International Monetary Fund are also voicing more optimism.Most private economists though don't think the Fed will get by without pushing the U.S. into a downturn. Forecasters surveyed by Bloomberg in January put the probability of a contraction over the next year at 65%.After initially dismissing a surge in prices as temporary, Fed policymakers have been scrambling to get control of runaway inflation before it becomes embedded into the economy, lifting rates sharply from levels close to zero as recently as a year ago.They're also reducing the Fed's balance sheet at a record clip, withdrawing hundreds of billions of dollars from the financial system.Price TargetWhile policymakers have had some success in reining in inflation — the Fed's favorite gauge slowed to a year-on-year rate of 5% in December from 7% in June — they've been loath to declare victory until they're confident price rises are on track to return to their 2% price target.Powell has zeroed in on the labor market as a source of potential inflationary pressure, arguing that demand for workers is outstripping supply and that wages are rising too quickly to be consistent with the Fed's 2% inflation target.Officials got some welcome news on that front as they began their two-day meeting Tuesday, with the Labor Department reporting that a broad gauge of wages and benefits slowed in the final three months of 2022.Another reading on the jobs market arrives Friday, when the government releases the employment report for January. Payrolls growth is forecast to have slowed to 190,000 last month from 223,000 in December while unemployment may have ticked up to 3.6% from 3.5%.The Fed's repeated rate increases have taken a toll on the US economy. Hammered by a steep rise in mortgage rates, the housing market has slumped, with new home sales declining in 2022 to their lowest level in four years.Manufacturing has also hit the skids, hurt by a slowdown in the global economy and a shift in consumer spending away from goods to services. Industrial production has dropped for three straight months.However, consumer expenditures, the bulwark of the economy, have generally held up in the face of sky-high inflation, as households drew on savings built up during the pandemic and saw incomes boosted by a vibrant jobs market.But there were signs of fraying as 2022 drew to a close. Adjusted for changes in prices, personal spending dropped 0.3% in December, with outlays for services stagnating, the first month without an increase since January 2022.

Homeowner Assistance Fund applications paused in Pennsylvania

February 1st, 2023|

The Pennsylvania Housing Finance Agency has put new applications for the state's Homeowner Assistance Fund program on hold so it can manage the distribution of the money itself rather than through a vendor.The move follows allegations that the response times of the vendor handling payments have been excessively slow, in part due to problems communicating with servicers. That was reported first by Spotlight PA, a news outlet backed by a coalition of local publications."As part of the transition, the third-party vendor will be responsible for fully completing applications that have been partially disbursed but are pending additional payments by March 31, 2023. This will allow for a clean transition between systems for audit and control purposes. All other applications will be processed by PHFA," the agency said in a press release.Outside of that transitional work, the PHFA's administration of the federal funds, which are distributed at the state level, will begin on Feb. 6. It will be using a new system and call center to process applications and handle inquiries and information that will be sent to program participants. Existing applicants will not need to start new applications."The decision by PHFA to fully administer the program will better leverage the agency's deep knowledge of Pennsylvania's housing market and its broad network of mortgage lenders, community partners, and housing counseling agencies," the agency said.Pennsylvania received $350 million from the Homeowner Assistance Fund for administration and distribution. The money was intended to help ease the transition away from foreclosure-related restrictions instituted during the pandemic to help homeowners weather related hardships. The state has disbursed $89.6 million in funds to homeowners so far.The administrative difficulties with the Pennsylvania program are a wake-up call, pointing to the need to prioritize communications related to the HAF program not only for those administering it at the state level, but also for cash-strapped mortgage companies, which can benefit from the receipt of the funds when they're used to cover delinquent loan payments.Servicers have been warned by the Consumer Financial Protection Bureau and the Federal Housing Finance Agency that they bear responsibility for ensuring the assistance helps homeowners as intended.The Federal Housing Administration, which backs loans made to particularly vulnerable borrowers with lower incomes, has also indicated that servicers are responsible for ensuring HAF relief is applied where needed.HAF funds are used commonly to cover delinquent mortgage payments but also may be used for other housing expenses like utilities or taxes.Complications related to the distribution of HAF money and communication with mortgage companies have not been limited to Pennsylvania.A woman in Florida recently discovered her servicer had not received some of her HAF payments, and it was later found they'd been funneled to the wrong mortgage company, according to a report by Orlando-area news outlet WKMG.

Mortgage activity decreases for first time in 2023

February 1st, 2023|

Weekly mortgage application volume shrank for the first time this year with purchases and refinances both slowing, according to the Mortgage Bankers Association.The MBA's Market Composite Index, a measure of weekly loan applications based on surveys of association members, decreased a seasonally adjusted 9% for the period ending Jan 27 after accelerating by 7% and 28% earlier in the month. Compared to the same week last year, activity came in 62% lower.  "Overall application activity declined last week despite lower rates, which is an indication of the still volatile time of the year for housing activity," said Joel Kan, MBA's vice president and deputy chief economist, in a press release.The seasonally adjusted Purchase Index fell 10% week over week and still sat 41% below levels of a year ago. But various reports tracking year-end activity, including new-home and pending sales, also showed 2022 closing out with an uptickAlthough winter is typically the slowest time of year for home buying, "purchase activity is expected to pick up as the spring home buying season gets underway, bolstered by lower rates and moderating home-price growth," according to Kan."Both trends will help some buyers regain purchasing power," he said.The Refinance Index dropped 7% from the previous week, and with current interest rates still far above early 2022 readings, volumes were 80% lower on an annual basis. The share of refinances relative to total applications also declined to 31.2% from 31.9% one week prior. With borrowers locked into low interest rates having little incentive to refinance, they were more likely to turn to home equity loans last year, which saw a steep increase, according to new research from TransUnion.Meanwhile, adjustable-rate mortgages took a larger share of activity in the MBA survey in spite of decreasing rates, rising to 6.7% of total volume from 6.5%, the first weekly uptick this year.MBA's seasonally adjusted Government Index contracted last week by a larger margin than overall activity, contributing to a smaller percentage of federally backed applications. Federal Housing Administration-backed loans accounted for 12% of total volume, edging upward from 11.9% seven days earlier. But the share of loans guaranteed by the Department of Veterans Affairs shrank by more than one percentage point to 11.9%, compared to 13% the previous week, while U.S. Department of Agriculture-sponsored applications took the same 0.6% slice. Average loan amounts recorded on applications remained relatively flat overall, with purchase sizes up refinances down both by less than half of 1%. The average purchase size climbed up 0.4% to $416,800 from $415,000 week over week, while mean refinance amounts inched downward 0.1% to $269,000 from $269,300. The average size across all new loan applications for the week came in at $370,700, up by 0.6% from 368,500 a week earlier.Loan-application sizes have gradually increased in early 2022 at the same time interest rates slide in the other direction. "Mortgage rates declined for the fourth straight week and have now fallen almost 40 basis points over the past month," Kan said."The spread between mortgage rates and the 10-year Treasury has been abnormally wide since early 2022. Further narrowing of that spread is expected to put downward pressure on mortgage rates in the coming months," Kan added.  The contract interest rate of the 30-year fixed mortgage with conforming balances of $726,200 or less averaged 6.19%, down 1 basis point from 6.2% seven days earlier. Points decreased to 0.65 from 0.69 for 80% loan-to-value ratio loans. The average rate for 30-year fixed jumbo mortgages exceeding the conforming amount saw the only weekly increase, climbing to 5.99% from 5.92%. Points increased to 0.48 from 0.41. The FHA-backed 30-year fixed contract rate averaged 6.18%, falling 4 basis points from 6.22 a week earlier. Points decreased to 0.99 from 1.1 for 80% LTV mortgages.The average contract rate of the 15-year fixed mortgage took a similar drop to 5.5% from 5.54% week over week, with points increasing to 0.73 from 0.51.Meanwhile the contract interest rate of 5/1 ARMs averaged 5.38% compared to 5.44% a week earlier. Points saw no change, remaining at 0.83. 

Movement strengthens East Coast operations with the appointment of Co-Regional Directors Koss and Hayes

February 1st, 2023|

INDIAN LAND, S.C. – Movement Mortgage (Movement), the nation’s sixth-largest retail mortgage lender, is excited to announce the hiring of Co-Regional Directors Brian Koss and Ryan Hayes to head up the Network Region that is located throughout the East Coast. With over three decades in the mortgage industry, Koss (NMLS 12489) spent the last sixteen years as an executive vice president at Mortgage Network, based in Danvers, MA. His extensive knowledge of the Northeast market and his history of training and mentoring hundreds of talented loan officers have set him apart from the competition and earned him a reputation as a leader in the industry. Continue reading Movement strengthens East Coast operations with the appointment of Co-Regional Directors Koss and Hayes at Movement Mortgage Blog.

Home equity lending surges as consumers consolidate debt

February 1st, 2023|

Home equity lending rose over the course of the past year as high interest rates kept borrowers away from traditional mortgage originations, according to a new TransUnion report.The number of new lines of credit secured by home equity increased to 405,646 year-over-year, up 41% from 286,925, TransUnion reported in its latest Credit Industry Insights study, which records originations with a one-quarter lag.The origination of home equity loans also surged in the third quarter of 2022, reaching a high not seen in over a decade. The loan count for the period was 322,537 for closed-end home equity products, representing a high not seen since 2010. It compared to 220,144 a year earlier, representing a 47% year-over-year gain.                                                                                                                                                     "HELOCs and home equity loans continue to grow at unprecedented levels," said Joe Mellman, senior vice president and mortgage business leader at TransUnion, in a press release.The increase comes despite the fact that some measures suggest homeowners' equity has been growing at a slower pace, plus traditional mortgage originations dropped by 56% to around 1.5 million loans from 3.4 million units between the third quarter of 2022 and 3Q 2021."Lenders who will benefit from this trend are those who have the ability to identify and reach homeowners who have equity available to tap and who also, either carry high interest rate debt that can be consolidated or own older homes that may warrant improvements," Mellman said.How long the trend will persist will depend on what stance federal monetary policymakers take going forward, said Michele Ranieri, vice president of U.S. research and consulting, in the TransUnion report."If more moderate rate hikes continue, it would be a good sign that the increases havebeen working, and that some relief from high inflation may be on the horizon. Until then, we fully expect consumers to continue to look to credit products such as credit cards, HELOCs and unsecured personal loans to help make ends meet," Ranieri said.

Home price slowdown hasn't improved affordability outlook

January 31st, 2023|

While the surge in home prices has slowed substantially from the heights of last year, home buyers' affordability concerns are not abating.Single-family home values increased 8.2% on an annual basis in November, according to the latest price index from the Federal Housing Finance Agency. Although the pace of rising prices was still running above the compound annual growth rate of 7.5% reported by the FHFA since January 2012, it slowed from October's 9.8% jump and came in considerably lower than  the 17.8% surge in November last year.On a month-over-month basis, though, housing costs have remained flat, and in November, they slipped downward nationwide by 0.1% compared to October. "U.S. house prices were largely unchanged in the last four months and remained near the peak levels reached over the summer of 2022," said Nataliya Polkovnichenko, supervisory economist in FHFA's division of research and statistics, in a press release.Prices increased in all regions compared to a year ago. The increases ranged from 2.4% in the U.S. Census Bureau's Pacific division to 12% in the South Atlantic region, with the former consisting of three West Coast states, Hawaii and Alaska, and the latter stretching from Maryland to Florida.But between October and November, the Pacific division saw the largest falloff in price (1.1%),  with the Mountain region coming in 0.8% lower. In contrast, prices grew on a monthly basis in some other regions. They rose by 0.5% in the West North Central division and 0.3% in the West South Central, East North Central and Middle Atlantic regions.The latest FHFA numbers reflect similar trends reported this week in the S&P CoreLogic Case-Shiller price index, although the year-over-year gain in November came in slightly lower, while monthly decreases were steeper. The Case-Shiller report found housing prices that month down by 2.5% from an early summer peak.While wide agreement exists that home prices softened in the latter half of the year, perceptions regarding affordability haven't increased correspondingly. Much of current buyer sentiment can be laid on higher mortgage rates, which had the effect of pushing payments higher and dampening homeowner interest in selling."While higher mortgage rates have suppressed demand, low inventories of homes for sale have helped maintain relatively flat house prices," Polkovnichenko said.The sluggishness and lack of availability has been noticed by buyers, based on recent survey research from the National Association of Realtors.Between third and fourth quarters last year, expectations that the home search would become easier fell from 37% to 24%. At the same time, a record high 87% of respondents in NAR's survey reported they could afford less than half the homes in their markets, rising from 69% three months earlier, even though mortgage rates consistently headed downward in November and December. NAR's research was conducted in mid December, weeks after interest rates had hit fourth-quarter peaks.In another housing report, researchers from First American found affordability, or home buying power, plummeted 60% year over year in November. The title and closing services provider's Real House Price Index factors in mortgage rates and household income changes to determine consumer buying power in the residential real-estate market. Even though income increased from November 2021, "it was not enough to offset the affordability loss from higher mortgage rates and still-strong nominal house price growth," according to First American Chief Economist Mark Fleming. Similar to FHFA's findings, no states reported a decrease in annual "real" home prices. But "real estate dynamics are local," Fleming said, noting that cities where costs leaped considerably in the pandemic years of 2020 and 2021, such as San Francisco and Phoenix, are now among the markets seeing prices fall rapidly. First American deemed such cities "overvalued," with median existing-home sale prices exceeding house-buying power. "There are exceptions to this relationship, but generally it seems that the most overvalued markets are correcting the fastest," he said. 

New York Community quickly downsizes its newly bought mortgage unit

January 31st, 2023|

New York Community Bancorp is slashing part of its newly acquired mortgage business in an effort to cut costs during what's expected to be another challenging year for mortgage lending.The Long Island-based company, which completed its twice-delayed acquisition of Flagstar Bancorp eight weeks ago, announced Tuesday that it is closing 69% of Flagstar's retail home lending offices and shifting to a branch footprint-only model. It has also continued an ongoing reduction in the number of mortgage origination-related workers to 800, down from a high of about 2,100 in 2021.New York Community expects to incur $12 million to $13 million in one-time restructuring costs — mostly in the form of severance pay, but also as a result of early terminations of lease and vendor agreements, executives said during the company's fourth-quarter earnings call. New York Community, which closed its $2.6 billion purchase of Flagstar eight weeks ago, is moving fast to shrink the mortgage unit it acquired.Adobe Stock Last year, prior to the close of the deal, Troy, Michigan-based Flagstar cut mortgage costs as loan originations slowed in a rising rate environment. Those moves included trimming the company's mortgage workforce by 7% at the end of the third quarter.While Flagstar made attempts to rightsize the business, those efforts turned out to not be enough, given the gloomy outlook for the mortgage industry, New York Community CEO Thomas Cangemi said on the call. Annual origination volume is expected to fall 25% in 2023 after dropping 46% last year, he said."They've been cutting and cutting and cutting [but] at the end of the day, we … wanted to make sure that this business is not losing any money," Cangemi said. "We're not going to be losing money in the current environment."The goal here was not to bleed," he added.New York Community's restructuring announcement follows reports by HousingWire and the Detroit Free Press that the $90.1 billion-asset company was laying off hundreds of mortgage workers in a retreat from direct-to-consumer mortgages.On Tuesday, a New York Community spokesperson did not immediately respond to questions seeking additional details about the cuts. Flagstar's website lists 94 home loan centers, including in states such as Massachusetts, Connecticut, North Carolina, Illinois, Colorado and Washington that have no Flagstar or New York Community branches.Together, New York Community and Flagstar operate 395 branches in nine states — New York, New Jersey, Michigan, Florida, Wisconsin, Ohio, Indiana, California and Arizona.New York Community is one of several banks making changes to its mortgage business as higher rates have slowed borrower demand. Wells Fargo, one of the most active mortgage lenders in the nation, laid off hundreds of mortgage workers last year and exited correspondent lending.Citigroup trimmed its mortgage staff last fall as the market cooled, and BayFirst Financial Corp., a community bank in St. Petersburg, Florida, said last fall that it would discontinue its nationwide network of residential mortgage production offices, citing a "precipitous decline in mortgage volumes and the uncertain outlook for mortgage lending over the coming quarters."Earlier this month, North American Savings Bank in Kansas City, Missouri, said it would close its consumer direct mortgage business and lay off an unspecified number of employees. New York Community's Cangemi said that making "these types of significant restructuring efforts" was a "difficult decision," but he argued that there will be a silver lining when mortgage activity rebounds."With this magnitude of the business and our presence, we have an opportunity to really drive revenue at the appropriate time if there's a resurgence … in the mortgage business," he said.The $2.6 billion acquisition of Flagstar is the largest deal in New York Community's history. Announced in April 2021, the acquisition was originally expected to close during the fourth quarter of that year, but it wound up being extended twice as the two companies awaited regulatory approval and sought a charter conversion for the would-be combined entity.Now that the merger is complete, New York Community Bancorp will remain the parent company, while the banking subsidiary will be known as Flagstar. Executives have said the Flagstar name better reflects the company's expanded geography.During a planned rebranding event in early 2024, all nine bank brands that currently operate under the New York Community umbrella will be rebranded as "Flagstar."Excluding mortgage restructuring expenses, the company is still aiming to achieve $125 million in cost savings as a result of the acquisition. About half of that total is expected to show up this year, Cangemi said.A major goal of the acquisition was to transform New York Community, which historically has operated as a thrift, into a traditional commercial bank with fuller banking relationships, a lower-cost deposit base and a more diversified loan portfolio.During the fourth quarter, noninterest-bearing deposits rose to 21% of total deposits, up from 9% in the prior quarter, largely because of the addition of Flagstar. On the loan side, New York Community's long-standing multifamily lending portfolio shrank to 55.3% of total loans, down from 76% in the third quarter, due to the Flagstar deal.Commercial and industrial loans grew to 17.8% of the company's loan portfolio, up from 10% the previous quarter.

Senators press Silvergate on FHLB loan in the wake of FTX collapse

January 31st, 2023|

WASHINGTON — A bipartisan group of senators asked Silvergate, the bank connected to the failed crypto exchange FTX, if the bank knew about the exchange's alleged misuse of customer funds, and how it plans to use the $4.3 billion it received from the Federal Home Loan Bank of San Francisco late last year. The letter, sent by Sens. Elizabeth Warren, D-Mass.,  Roger Marshall,  R-Kan., and John Kennedy, R-La., references American Banker's reporting which describes how Silvergate used the Federal Home Loan Bank system as a lender of last resort, shoring up its liquidity after the collapse of FTX. Bloomberg first reported the letter. The senators asked Silvergate if the bank intends to use the $4.3 billion it received from the Federal Home Loan Bank of San Francisco to support the financing of housing, or how the bank otherwise intends to use the funds.  Senator Elizabeth Warren, D-Mass., let a bipartisan group of lawmakers in a letter to Silvergate Bank about its use of Federal Home Loan Bank advances after its deposit base shrank at the end of 2022. Bloomberg News In the letter, the group of lawmakers said they were "disappointed" by the bank's "evasive and incomplete response" to a previous inquiry about Silvergate's alleged lack of robust risk management practices. In Silvergate's response to the lawmakers' initial letter, the bank cited supervisory confidential information for not being able to disclose more details. The Senators' letter in reply did not accept that excuse."This is simply not an acceptable rationale," the letter said. "As members of Congress with enshrined oversight responsibilities, we are happy to work with you to address the confidential nature of any material in your possession. But both Congress and the public need and deserve the information necessary to understand Silvergate's role in FTX's fraudulent collapse, particularly given the fact that Silvergate turned to the Federal Home Loan Bank as its lender of last resort in 2022." Silvergate's answers "reveal that Silvergate had risk management and due diligence processes in place" and that the bank "did, in fact, fail miserably," to protect itself against the risk of FTX, and to fully answer the lawmakers' original questions, the letter said. "They reveal that neither the Federal Reserve nor Silvergate's independent auditors were able to identify what we now know were extraordinary gaps in Silvergate's due diligence process," according to the senators' letter. "And they revealed that Silvergate has not held its top risk manager, Mr. Pearson, responsible for these failures. However, the remainder of your letter did not provide the additional information we requested – information that Congress needs in order to understand how and why these failures occurred." The lawmakers asked that Silvergate respond by Feb. 13, and to include if they discovered that the bank had identified any wrongdoing by FTX and its affiliate Alameda. 

FHA expands availability of pandemic loss-mitigation options

January 31st, 2023|

The Federal Housing Administration has broadened the parameters for its COVID-19 loss mitigation options while suspending others, and is also adding incentive payments for servicers.The relief previously only available to people with pandemic hardships has been opened up to all borrowers with imminent defaults, including non-occupants. Due to this expansion, the administration and Department of Housing and Urban Development have suspended Home Affordable Modification Program, pre-foreclosure sale and deed-in-lieu options it previously had available for those without COVID-19 hardships.In addition to expanding the range of eligible borrowers, the FHA is increasing the maximum partial claim amount for two programs to 30% from 25%. That increase will be applied to the  COVID-19 recovery standalone partial claim and modification programs.Servicers can optionally adopt the policy changes related to COVID-19 recovery options any time between now and April 30, when they become mandatory.Mortgage companies will only receive incentive payments when borrowers are able to successfully complete options. Claims must be submitted within 60 days of the execution date.Payments range from $250 to $1,000 depending on the type of option completed, with a deed-in-lieu option at the lower end of the scale and a recovery modification closer to the upper end. Title-related expenses may be reimbursed in the case of a modification.The changes follow a push to make some of the temporary loss mitigation programs extended to borrowers with pandemic-related hardships permanent at the Consumer Financial Protection Bureau and the Urban Institute, a think tank with ties to current and former housing officials.

Housing market cools with prices down 2.5% from June peak

January 31st, 2023|

The U.S. housing slump stretched into a fifth month, sending a measure of prices down 2.5% from a peak in June.Prices also fell roughly 0.3% in November from a month before, according to a seasonally adjusted data of national prices from S&P CoreLogic Case-Shiller.Last year's run-up in mortgage rates cast a chill on the housing market, leading to the worst annual slide in sales of previously owned homes in more than a decade.That's pressured prices, particularly in parts of the country such as San Francisco where affordability was already stretched. Prices in that California city were down 1.6% from a year earlier, its biggest year-over-year price decline in more than a decade."As the Federal Reserve moves interest rates higher, mortgage financing continues to be a headwind for home prices," Craig Lazzara, managing director at S&P Dow Jones Indices, said in a statement. "Economic weakness, including the possibility of a recession, would also constrain potential buyers. Given these prospects for a challenging macroeconomic environment, home prices may well continue to weaken."Prices are still higher than a year ago as homeowners benefit from the ripple effects of an extended pandemic boom that broke records in many parts of the US. Growth, however, has been slowing. Prices were up 7.7% annually in November, down from the 9.2% gain in October.In recent weeks, borrowing costs have eased, with the average on a 30-year fixed mortgage dropping to 6.13% in late January, according to Freddie Mac. Brokerage and data company Redfin recently pointed to signs that buyer interest might be picking up again, with pending deals on the rise in December and other measures of demand climbing.Realtor.com Senior Economist George Ratiu noted that the housing market has adjusted since November, with the number of homes for sale ticking up and price growth moderating even more."The demand-supply dynamics have placed buyers on a stronger footing at the start of 2023, providing them much-needed leverage at the negotiation table," Ratiu said.

Cenlar names Jim Daras as sole CEO

January 31st, 2023|

Cenlar FSB, a bank whose primary business is mortgage subservicing, named D. James "Jim" Daras as its sole CEO, ending the shared power arrangement it established after Greg Tornquist's retirement.Daras also retains the president's title he took on last August when he was originally named as co-CEO with Robert Lux. James "Jim" Daras is Cenlar's new CEO Lux remains at Cenlar in the chief operating officer position, focusing on its operations and reporting to Daras.Tornquist, besides being president and CEO, was also Cenlar's chairman. At the time of his retirement, the Ewing, New Jersey-based company split the roles and appointed David Applegate as chairman."Jim is an accomplished and exceptional executive leader with a great deal of experience who will ensure Cenlar continues its commitment to providing high quality service to our customers," Applegate said in a press release.Daras first joined Cenlar in 1985 and stayed until 1990, as its chief financial officer. He moved to Dime Bancorp in New York, where he was an executive vice president until 2001.From 2001 until his return to Cenlar in 2015, Daras worked with several venture capital firms investing in financial services companies, including Loan Servicing Solutions in 2007 where he served as CEO.When he first returned to Cenlar, Daras was appointed the company's executive vice president and chief risk officer.In 2019, Daras moved to an advisory capacity before returning full time in 2022 as executive vice president to manage the company's banking functions."I am thrilled and honored to have been named CEO at this point in Cenlar's journey," said Daras. "Cenlar was built on collaboration, expertise, client and homeowner care and the ability to transform itself during each part of its journey, and I am confident in Cenlar's long-term success."However, in October 2021, Cenlar entered into a consent order with the Office of the Comptroller of the Currency, which cited it for having inadequate risk management controls commensurate with the bank's size.

CoreLogic, Guaranteed Rate, Stewart, HUD make leadership moves

January 31st, 2023|

Left to right: Don MacKillop, Carol Burke, Rob Pommier Mobility Market Intelligence, a provider of business intelligence data and tools for mortgage and real estate industries, appointed Rob Pommier, Don MacKillop and Carol Burke regional directors of enterprise sales. In their new roles with the Salt Lake City-based company, they will lead efforts to grow MMI's national client base and increase brand awareness and adoption of the company's products across different business segments in the mortgage ecosystem.After recently serving as a strategic executive at point-of-sale software platform SimpleNexus, Pommier will be responsible for building MMI's Western U.S. presence. With a background in both lending and technology, he held prior roles at housing- and finance-related businesses, such as Altisource, Fiserv and OpenClose, earlier in his career. MacKillop will oversee the Central region of the country, and like Pommier, joins MMI from SimpleNexus, where he was a senior account executive. He previously worked in sales management at fintechs LoanLogics, Capsilon and Byte Software. Burke will be in charge of Southern markets and comes to the company with broad knowledge of all aspects in home lending thanks to roles at Top of Mind and Lenders One.

First Internet Bank ending consumer-direct mortgage operations

January 31st, 2023|

Another lender is ending its consumer mortgage business following the massive decline in application activity.First Internet Bank, a digital depository, is shutting its direct-to-consumer operations in the first quarter this year, its parent company said in a fourth quarter earnings report last week. The firm spent the last 60 days cutting expenses including sales, marketing and payroll but couldn't reach a breakeven point, CEO David Becker said in an earnings conference call."It fell off so dramatically that we couldn't make sense out of it to have that kind of a loss for that long a period of time," he said last week.The lender reported $$408.7 million in residential mortgage balances in the fourth quarter, an 11% gain over the prior period and a 6.5% increase from the same time in 2021. Of that $408.7 million, $24 million was in home equity loans, the bank reported. The depository is shifting its origination efforts to floating rate loan products, commercial construction and small business lending.It's the latest pullback by a mortgage player in the new year as lenders reckon with volume down approximately 54% year-over-year, although activity has been slightly elevated in recent weeks. Other companies pulling back mortgage business or cutting payroll include Louisiana-based Renasant Bank, Rocket Mortgage and USAA.First Internet Bancorp didn't say whether it laid off mortgage professionals, but Becker suggested employees are departing."And as you know, the market nationally is just blowing up," he said. "So there's not a lot of great opportunities, staring them in the face in the industry they've been a part of for years."The mortgage exit is expected to reduce First Internet Bancorp's total annual non interest expenses by approximately $6.8 million. At the same time, the move will increase annualized pre-tax income by approximately $2.7 million, with 80% of the benefit realized this year. The exit is also expected to incur pre-tax expenses of approximately $3.3 million in the first and second quarters of this year. In the fourth quarter, First Internet Bancorp reported net income of $6.4 million; for the year, the bank reported net income of $35.5 million. That was a decline from $48.1 million in net income in 2021.First Internet Bancorp was founded in 1999 by Becker and claims to be the first state-chartered, FDIC-insured business to operate entirely online. It is headquartered in Fishers, Indiana, 25 minutes north of Indianapolis, and counts 279 employees on LinkedIn.

Lender Credits: The Opposite of Paying Points on Your Mortgage

January 31st, 2023|

Mortgage Q&A: “What is a lender credit?”If you’ve been shopping mortgage rates, whether for a new home purchase or a refinance, you’ve likely come across the term “lender credit.”These optional credits can be used to offset your closing costs. But they will bump up your interest rate in the process.Let’s learn more about how they work and if it makes sense to take advantage of them.Jump to lender credit topics:– How a Lender Credit Works– What Can a Lender Credit Be Used For?– Lender Credit Limitations– Borrower-Paid vs. Lender-Paid Compensation?– Lender Credit Example– A Lender Credit Will Raise Your Mortgage Rate– Does a Lender Credit Need to Be Paid Back?– How to See If You’re Getting a Lender Credit– Is a Lender Credit a Good Deal?– Lender Credit Pros and ConsHow a Lender Credit WorksMortgage lenders know you don’t want to pay any fees to get a home loanSo they offer “credits” that offset the customary closing costs associated with a mortgageCredits can be applied to things like title insurance, appraisal fees, and so onYou don’t pay those costs out-of-pocket, but wind up with a higher mortgage rateEveryone wants something for free, whether it’s a sandwich or a mortgage.Unfortunately, both cost money, and one way or another you’re going to have to pay the price as the consumer.When you take out a mortgage, there are lots of costs involved. You have to pay for things like title insurance, escrow fees, appraisal fees, credit reports, taxes, insurance, and so on.Lenders understand this, which is why they offer credits to cover many of these costs. This reduces your burden and makes their offer appear a lot more attractive.However, when you select a mortgage that offers a credit, your interest rate will be higher to absorb those obligatory costs.Simply put, you pay less money upfront to get your loan, but more over time via a higher rate/payment.What Can a Lender Credit Be Used For?You can use a lender credit to pay virtually all closing costsIncluding third-party fees such as title insurance and escrow feesAlong with prepaid items like property taxes and homeowners insuranceIt may allow you to get a mortgage with no out-of-pocket expensesWhen you purchase a home or refinance an existing mortgage, lots of hands touch your loan. As such, you’ll be hit with this fee and that fee.You need to pay title insurance companies, escrow companies, couriers, notaries, appraisers, and on and on.In fact, closing costs alone, not including down payment, could amount to tens of thousands of dollars or more.To eliminate all or some of these fees, a lender credit can be used to cover common third-party fees such as a home appraisal and title insurance.It can also be used to pay prepaid items including homeowner’s insurance and property taxes.But remember, while you don’t have to pay these fees at closing, they are still paid by you. Just over time as opposed to at closing out-of-pocket.Lender Credit LimitationsA lender credit can’t be used toward down payment on a home purchaseNor can it be used for reserves or minimum borrower contributionBut the credit may reduce the total cash to closeMaking it easier to come up with funds needed for down paymentWhile a lender credit can greatly reduce or eliminate all of your closing costs when refinancing, the same may not be true when it involves a home purchase.Why? Because a lender credit can’t be used for the down payment. Nor can it be used for reserves or to satisfy minimum borrower contribution requirements.So if you’re buying a home, you’ll still need to provide the down payment with your own funds or via gift funds if acceptable.The good news is the lender credit should still reduce your total closing costs.If you owed $10,000 in closing costs plus a $25,000 down payment, you’d maybe only need to come up with $25,000 total, as opposed to $35,000.Indirectly, the lender credit can make it easier to come up with the down payment since it can cover all those third-party fees and prepaid items like taxes and insurance.This frees up the cash for the down payment that might otherwise go elsewhere.It can also make things a little more manageable if you have more money in your pocket as you juggle two housing payments, pay movers, buy furniture, and so on.Lastly, note that if the lender credit exceeds closing costs. Any excess may be left on the table.So choose an appropriate lender credit amount that doesn’t increase your interest rate unnecessarily.If money is left over, it may be possible to use it to lower the outstanding loan balance via a principal curtailment.Borrower-Paid vs. Lender-Paid Compensation?First determine the type of compensation you’re paying the originatorWhich will be either borrower-paid (your own pocket) or lender-paid (higher mortgage rate)Then check your paperwork to see if a lender credit is being appliedThis can cover some or all of your mortgage closing costsBut wait, there’s more! Back before the mortgage crisis reared its ugly head, it was quite common for loan officers and mortgage brokers to get paid twice for originating a single home loan.They could charge the borrower directly, via out-of-pocket mortgage points. And also receive compensation from the issuing mortgage lender via yield spread premium.Clearly this didn’t sit well with financial regulators. So in light of this perceived injustice to borrowers, changes were made that limit a loan originator to just one form of compensation.Nowadays, commissioned loan originators must choose either borrower or lender compensation (it cannot be split).Many opt for lender compensation to keep a borrower’s out-of-pocket costs low.Lender-Paid Compensation Will Also Increase Your Mortgage RateWith lender-paid compensation, the bank essentially provides a loan originator with “X” percent of the loan amount as their commission.This way they don’t have to charge the borrower directly, something that might turn off the customer, or simply be unaffordable.So a loan officer or mortgage broker may receive 1.5% of the loan amount from the lender for originating the loan.On a $500,000 loan, we’re talking $7,500 in commission, not too shabby, right? However, in doing so, they’re sticking the borrower with a higher mortgage rate.While the commission isn’t paid directly by the borrower, it is absorbed monthly for the life of the loan via a higher mortgage payment.Simply put, a mortgage with lender-paid compensation will come with a higher-than-market interest rate, all else being equal.On top of this, the lender can also offer a credit for closing costs, which again, isn’t paid by the borrower out-of-pocket when the loan funds.Unfortunately, it too will increase the interest rate the homeowner ultimately receives.The good news is the borrower might not have to pay any settlement costs at closing, helpful if they happen to be cash poor.This is the tradeoff of a lender credit. It’s not free money. In reality, it’s more of a save today, pay tomorrow situation.An Example of a Lender CreditLoan type: 30-year fixed Par rate: 3.5% (where you pay all closing costs out of pocket)Rate with lender-paid compensation: 3.75%Rate with lender-paid compensation and a lender credit: 4%Let’s pretend the loan amount is $500,000 and the par rate is 3.5% with $11,500 in closing costs.You don’t want to pay all that money at closing, who does? Fortunately, you’re presented with two other options, including a rate of 3.75% and a rate of 4%.The monthly principal and interest payment (and closing costs) look like the following based on the various interest rates presented:$2,245.22 at 3.5% ($11,500 in closing costs)$2,315.58 at 3.75% ($4,000 in closing costs)$2,387.08 at 4% ($0 in closing costs)As you can see, by electing to pay nothing at closing, you’ll pay more each month you hold the loan because your mortgage rate will be higher.A borrower who selects the 4% interest rate with the lender credit will pay $2,387.08 per month and pay no closing costs.That’s about $72 more per month than the borrower with the 3.75% rate who pays $4,000 in closing costs.And roughly $142 more than the borrower who takes the 3.5% rate and pays $11,500 at closing.So the longer you keep the loan, the more you pay with the higher rate. Over time, you could wind up paying more than you would have had you just paid these costs upfront.But if you only keep the loan for a short period of time, it could actually be advantageous to take the higher interest rate and lender credit.Alternatively, you could shop around until you find the best of both worlds, a low interest rate and limited/no fees.A Lender Credit Will Raise Your Mortgage RateWhile a lender credit can be helpful if you’re cash poorBy reducing or eliminating all out-of-pocket closing costsIt will increase your mortgage interest rate as a resultYou still pay those costs, just indirectly over the life of the loan as opposed to upfrontIn the scenario above, the borrower qualifies for a par mortgage rate of 3.5%.However, they are offered a rate of 4%, which allows the loan originator to get paid for their work on the loan. It also provides the borrower with a credit toward their closing costs.The loan originator’s lender-paid compensation may have pushed the interest rate up to 3.75%, but there are still closing costs to consider.If the borrower elects to use a lender credit to cover those costs, it may bump the interest rate up another quarter percent to 4%. But this allows them to refinance for “free.” It’s known as a no closing cost loan.In other words, the lender increases the interest rate twice.  Once to pay out a commission, and a second time to cover closing costs.While the interest rate is higher, the borrower doesn’t have to worry about paying the lender for taking out the loan. Nor do they need to part with any money for things like the appraisal, title insurance, and so on.Does a Lender Credit Need to Be Paid Back?The simple answer is no, it doesn’t need to be paid backBecause it’s not free to begin with (it raises your mortgage rate!)Your lender isn’t giving anything away, they’re simply saving you money upfront on closing costsBut that translates into a higher monthly payment for as long as you hold the loanNo. As the name implies, it’s a credit that you’re given in exchange for a slightly higher mortgage rate.So to that end, it’s not actually free to begin with and you don’t owe the lender anything. You do in fact pay for it, just over time as opposed to upfront.Remember, you’ll wind up with a larger mortgage payment that must be paid each month you hold your loan.As shown in the example above, the credit allows a borrower to save on closing costs today, but their monthly payment is higher as a result.This is how it’s paid back, though if you don’t hold your loan for very long, perhaps due to a quick refinance or sale, you won’t pay back much of the credit via the higher interest expense.Conversely, someone who takes a credit and keeps their mortgage for a decade or longer may pay more than what they initially saved at the closing table.Either way, you indirectly pay for any credit taken because your mortgage rate will be higher. This means the lender isn’t really doing you any favors, or providing a free lunch.They’re simply structuring the loan where more is paid over time as opposed to at closing, which can be advantageous, especially for a cash-strapped borrower.Check Your Loan Estimate Form for a Lender CreditAnalyze your LE form when shopping your home loanTake note of the total closing costs involvedAsk if a lender credit is being applied to your loanIf so, determine how much it reduces your out-of-pocket expenses to see if it’s worth itOn the Loan Estimate (LE), you should see a line detailing the lender credit that says, “this credit reduces your settlement charges.”It’s a shame it doesn’t also say that it “increases your rate.”  But what can you do…Check the dollar amount of the credit to determine how much it’s doing to offset your loan costs.You can ask your loan officer or broker what the mortgage rate would look like without the credit in place to compare. Or compare various different credit amounts.As noted, the clear benefit is to avoid out-of-pocket expenses. This is important if a borrower doesn’t have a lot of extra cash on hand, or simply doesn’t want to spend it on refinancing their mortgage.It also makes sense if the interest rate is pretty similar to one where the borrower must pay both the closing costs and commission.For instance, there may be a situation where the mortgage rate is 3.5% with the borrower paying all closing costs and commission. And 3.75% with all fees paid thanks to the lender credit.That’s a relatively small difference in rate. And the upfront closing costs for taking on the slightly lower rate likely wouldn’t be recouped for many years.The Larger the Loan Amount, the Larger the CreditIt should be noted that the larger the loan amount, the larger the credit. And vice versa, seeing that it’s represented as a percentage of the loan amount.So borrowers with small loans might find that a credit doesn’t go very far. Or that it takes quite a large credit to offset closing costs.Meanwhile, someone with a large loan might be able to eliminate all closing costs with a relatively small credit (percentage-wise).In the case of borrower-paid compensation, the borrower pays the loan originator’s commission instead of the lender.The benefit here is that the borrower can secure the lowest possible interest rate, but it means they pay out-of-pocket to obtain it.They can still offset some (or all) of their closing costs with a lender credit, but that too will come with a higher interest rate.  However, the credit can’t be used to cover loan originator compensation.If you go with borrower-paid compensation and don’t want to pay for it out-of-pocket, there are options.You can use seller contributions to cover their commission (since it’s your money) and a lender credit for other closing costs.[Are mortgage rates negotiable?]Which Is the Better Deal? Lender Credit or Lower Rate?Compare paying closing costs out-of-pocket with a lower interest rateVersus paying less upfront but getting saddled with a higher interest rateIf you take the time to shop around with different lendersYou might be able to get a low interest rate with a lender credit!There are a lot of possibilities, so take the time to see if borrower-paid compensation will save you some money over lender-paid compensation, with various credits factored in.Generally, if you plan to stay in the home (and with the mortgage) for a long period of time, it’s okay to pay for your closing costs out-of-pocket. And even pay for a lower rate via discount points.You could save a ton in interest long-term by going with a lower rate if you hold onto your mortgage for decades.But if you plan to move/sell or refinance in a relatively short period of time, a loan with a lender credit may be the best deal.For instance, if you take out an adjustable-rate mortgage and doubt you’ll keep it past its first adjustment date, a credit for closing costs might be an obvious winner.You won’t have to pay much (if anything) for taking out the loan. And you’ll only be stuck with a slightly higher interest rate and mortgage payment temporarily.As a rule of thumb, those looking to aggressively pay down their mortgage will not want to use a lender credit, while those who want to keep more cash on hand should consider one.There will be cases when a loan with the credit is the better deal, and vice versa. But if you take the time to shop around, you should be able to find a competitive rate with a lender credit!Lender Credit Pros and ConsNow let’s briefly sum up the benefits and downsides of a lender credit.BenefitsCan avoid paying closing costs (both lender fees and third-party fees)Less cash to close needed (frees up cash for other expenses)May only increase your mortgage rate slightlyCan save money if you don’t keep your mortgage very longDownsidesA lender credit will increase your mortgage rateYou’ll have a higher monthly mortgage paymentCould pay a lot more for the lack of closing costs over time (via more interest)Loan may be less affordable/more difficult to qualify for at higher interest rateRead more: What mortgage rate should I expect?

Banks say CFPB's data access rule ratchets up liability risks

January 30th, 2023|

Banks and credit unions are raising concerns about data security risks and oversight of third-party partners as the Consumer Financial Protection Bureau crafts rules around how much control consumers have over their own financial data.The CFPB is in the midst of writing a rule that will determine how financial institutions make data available to consumers on request. Banks say the rule could create an uneven playing field because financial firms are supervised and examined by regulators for compliance with consumer protection laws while hundreds of large technology and nonbank fintechs are not. The explosive growth of data aggregation services has created risks for consumers that could result in uneven enforcement, banks say."Nonbanks are increasingly providing financial products and services, yet their activities are largely unsupervised by the Bureau," said Brian Fritzsche, vice president and regulatory counsel at the Consumer Bankers Association. Fritzsche and Shelley Thompson, CBA's vice president and associate general counsel, wrote a comment letter last week stating that the CFPB "does not adequately oversee these nonbank participants even though they compose a significant, continuously growing segment of the market for consumer financial products and services."  Rohit Chopra, director of the Consumer Financial Protection Bureau, is in charge of a rulemaking that will determine how much control consumers have over their own financial data.Ting Shen/Bloomberg The 1033 rule — so named for the section of the Dodd-Frank Act that authorizes it — is viewed as one of the most important rulemakings that will be completed under CFPB Director Rohit Chopra. The bureau released an outline of its plan in October, and is expected to issue a proposal later this year with a rule finalized in 2024. Last year, eight bank trade groups petitioned the CFPB to define data aggregators as larger participants subject to regulatory supervision. Some experts think the bureau will issue a so-called larger participant rule before it completes its data-access rule, sometimes referred to as an "open banking rule."Though the language of the statute is focused on information about a consumer's use of a product or service, bankers are concerned that the rule appears to be one-sided and anti-competitive because it comes from the view that only banks hold data that consumers want access to, with no requirements that nonbank financial firms such as mortgage lenders or buy now/pay later companies provide consumers the same data access to banks. Ryan Miller, vice president of innovation policy at the American Bankers Association, wrote that "without regular and ongoing supervision of larger data aggregators and data recipients, implementation of Section 1033 will increase the risk of harm to consumers and competition." The CFPB listed more than 100 questions last year in an advance notice of proposed rulemaking that the final rule is supposed to answer, including: Does the consumer understand what is happening to their data? How can the consumer revoke access after initially consenting for their data to be used? And will the data be monetized for additional downstream uses? Millions of consumers have already provided third-party firms access to their bank account transaction data that banks and credit unions say puts them in a bind. Although the Gramm-Leach-Bliley Act allows consumers to opt out of having their data shared, experts say consumers rarely read the small typeface buried in agreements with fintechs and data aggregators."Consumers should be given control over how much and what type of data they choose to share," said Andrew Morris, senior counsel for research and policy at the National Association of Federally-Insured Credit Unions. Consumers should know "exactly what data a third party will be requesting on their behalf, for what purpose it is being used [and] how frequently it will be accessed," he said. Consumers also should be given information on how long their data will be stored, with whom it might be shared and under what conditions including how the consumer can exert any rights they may have if their data is lost or stolen, he said.Rampant fraud in payments has forced banks and credit unions to sound the alarm about liability risk. The CFPB's 71-page outline, released as part of a small business advisory review panel, makes no mention of liability. Banks and others want the CFPB to create clear guidelines around which entity is responsible if a consumer suffers any loss or harm. Liability should travel with the data, many argue, to ensure that third-party technology companies are responsible for any crime, hack or other loss or harm to consumers. "Data providers should not be required to make data available to any third party that is unwilling to accept liability for loss or harm that results after the data leaves the data provider's portal," said Paige Pidano Paridon, senior vice president and senior associate general counsel at the Bank Policy Institute.Many experts agree that consumers have little or no understanding of the way bank account transaction data is accessed by scraping the information with a consumer's login credentials. Some banks such as JPMorgan Chase have eliminated screen scraping and now route all inquiries from third-party apps through a secure application programming interface instead of allowing companies to collect data through screen-scraping. The CFPB has suggested that it could set a specific date beyond which screen-scraping would be banned. But some experts suggest that cutting off screen-scraping would be problematic, akin to when the Federal Communications Commission in 2009 required televisions stations to switch from analog to digital-only transmission."Permissioned login approaches generally serve as a fallback option when a financial institution does not have an API, which is common for smaller institutions," said Penny Lee, CEO of the Financial Technology Association. Another bone of contention appears to be whether the CFPB has enough manpower to oversee data aggregators and other third-parties. It is unclear if the CFPB has any mechanism to determine if third-parties are abiding by a consumer's specific request around data-sharing. In December, the CFPB announced that it planned to create a registry of nonbanks that have been subject to state or local orders or judgments to police lawbreakers. The CFPB also said last year that it will conduct supervisory exams of nonbank fintech companies that pose risks to consumers."Regulatory standards to discourage screen scraping can help mitigate fraud and account takeover risks," Morris said. "The CFPB might explore regulatory incentives to abandon screen scraping and establish minimum data security standards for third parties."

SoFi's bank charter drives positive outlook, but layoffs hit tech unit

January 30th, 2023|

SoFi Technologies said the benefits of its bank charter outweighed home loan and student loan challenges and helped its fourth-quarter performance while it also announced layoffs in its technology unit. The San Francisco-based neobank's earnings beat analyst expectations, as the company announced product development, new-member growth and balance sheet growth. SoFi's deposits have grown to $7.3 billion from $1 billion over the last year, and the company has been able to use those deposits to fund loans, unlike other fintechs without bank charters. Its lending net interest income exceeded noninterest revenue for the first time in its history. "We've been in an all-out sprint over the last five years to build out our digital product suite to meet our members' needs for every major financial decision in their lives, and all the days in between," CEO Anthony Noto said Monday on the earnings call. "The benefits of our strategy result in a uniquely diversified business, [which] combined with a national bank license, not only position SoFi to be the winner that takes most…but also provide greater durability through the market cycle."SoFi's net revenue was $443 million in the fourth quarter, up from $419 million in the third quarter, marking the seventh consecutive quarter of record adjusted net revenue. At midday Monday its stock had risen more than 12% to $6.68While SoFi's balance sheet resiliency and new-member sign-ups were bright spots in the quarter, the technology unit, which has been a key investment area for the last three years, is still a work in progress. CFO Chris LaPointe announced layoffs from the technology unit, which a company spokesperson said in a post-earnings email represented less than 5% of SoFi's total employee base.The neobank has been refining its technology provider strategy as it seeks to increase the quality of its partners and to unify two recently acquired companies: Technisys, a cloud-native bank infrastructure provider that it acquired and integrated early last year, and Galileo, a payment processor SoFi bought in 2020 that provides an API platform for fintechs. LaPointe said on the call that SoFi was focused on partnering with well-capitalized companies, and expanding products in categories like B2B and fraud protection. Technology unit revenues were up about 60% from the prior quarter.Jefferies analyst John Hecht wrote in a note that SoFi was positioned for a profitable year, with rapid member growth. Robert Wildhack, an analyst at Autonomous Research, wrote in an analyst note that the company's fourth quarter results were "solid," and its 2023 outlook is ahead of current consensus. The fintech lender has also been "investing aggressively" in its financial services segment, which provides offerings like checking, savings and cash management, and expects the line of business to turn a profit in 2023 after nearly breaking even in the fourth quarter. SoFi plans to increase product development for cross-buying opportunities, as total members of 5.2 million are up 51% from the previous year. "When you think about the reach of [SoFi's] product lineup, it's pretty vast," Michael Perito, an analyst at Keefe, Bruyette & Woods, said in an interview earlier this month. "I think the name of the game is, 'We need to get our customers using as many of these products as they can.'"LendingClub, another fintech lender with a bank charter, announced in reporting earnings last week that it was exiting two lines of business, and holding more loans on its balance sheet because of the economic environment. SoFi is also holding more loans on its balance sheet, though its product diversity also provides streams of revenue that LendingClub can't tap.

Why the “It’s the 2008 Housing Crisis All Over Again” Argument Falls Short

January 30th, 2023|

There’s been a lot of buzz lately regarding another 2008 housing crisis unfolding in 2023.I’m hearing the phrases underwater mortgage and foreclosure again after more than a decade.To be sure, the housing market has cooled significantly since early 2022. There’s no denying that.You can mostly thank a 6% 30-year fixed-rate mortgage for that. Roughly double the 3% rate you could snag a year prior.But this alone doesn’t mean we’re about to repeat history.Goldman Sachs Forecasts 2008 Style Home Price Drops in Four CitiesThe latest nugget portending some kind of massive real estate market crash comes via Goldman Sachs.The investment bank warned that four cities could see price declines of 25% from their 2022 peaks.Those unfortunate names include Austin, Phoenix, San Diego, and San Jose. All four have been hot places to buy in recent years.And it’s pretty much for this reason that they’re expected to see sharp declines. These markets are overheated.Simply put, home prices got too high and with mortgage rates no longer going for 3%, there has been an affordability crisis.Properties are now sitting on the market and sellers are being forced to lower their listing prices.A 6.5% Mortgage Rate By the End of 2023?Of course, it should be noted that Goldman’s “revised forecast” calls for a 6.5% 30-year fixed mortgage for year-end 2023.It’s unclear when their report was released, but the 30-year fixed has already trended lower since the beginning of 2023.At the moment, 30-year fixed mortgages are going for around 6%, or as low as 5.25% if you’re willing to pay a discount point or two.And there’s evidence that mortgage rates may continue to improve as the year goes on. This is based on inflation expectations, which have brightened lately.The last couple CPI reports showed a decline in consumer prices, meaning inflation may have peaked.This could put an end to the Fed’s interest rate increases and allow mortgage rates to fall as well.Either way, I believe Goldman’s 6.5% rate is too high for 2023. And that might mean their home price forecast is also overdone.Mortgage Performance Remains “Exceptionally Healthy”A new report from CoreLogic found that U.S. mortgage performance remained “exceptionally healthy” as of November 2022.Just 2.9% of mortgages were 30 days or more delinquent including those in foreclosure, which is near record lows.This represented a 0.7 percentage point decrease compared with November 2021 when it was 3.6%.And foreclosure inventory (loans at any stage of foreclosure) was just 0.3%, a slight annual increase from 0.2% in November 2021.At the same time, early-stage delinquencies (30 to 59 days past due) were up to 1.4% from 1.2% in November 2021.But on an annual basis mortgage delinquencies declined for the 20th straight month.One big thing helping homeowners is their sizable amount of home equity. Overall, it increasedby 15.8% year-over-year in the third quarter of 2022.That works out to an average gain of $34,300 per borrower. And the national LTV was recently below 30%.Negative Equity Remains Very LowDuring the third quarter of 2022, 1.1 million mortgaged residential properties were in a negative equity position.This means these homeowners owe more on their mortgage than the property is currently worth.Back in 2008, these underwater mortgages were a major problem that led to millions of short sales and foreclosures.And while negative equity increased 4% from the second quarter of 2022, it was down 9.8% from the third quarter of 2021.If downward pressure remains on home prices, I do expect these numbers to worsen. But considering where we’re at, it’s not 2008 all over again.The CFPB Wants Lenders to Make Foreclosure a Last ResortBack in 2008, there wasn’t a Consumer Financial Protection Bureau (CFPB). Today, there is.And they’re being tough on lenders and mortgage servicers that don’t treat homeowners right.Last week, they also released a blog post urging servicers to consider a traditional home sale over a foreclosure. This is possible because so many homeowners have equity this time around.But even before it gets to that point, servicers should consider a “payment deferral, standalone partial claim, or loan modification.”This allows borrowers to stay in their homes, especially important with rents also rising.The main takeaway here is that lenders and servicers are going to be heavily scrutinized if and when they attempt to foreclose.As such, foreclosures should remain a lot lower than they did in 2008.Today’s Homeowners Are in Much Better Positions Than in 2008I’ve made this point several times, but I’ll make it again.Even the unfortunate home buyer who purchased a property in the past year at an inflated price with a much higher mortgage rate is better off than the 2008 borrower.We’ll pretend their mortgage rate is 6.5% and their home value drops 20% from the purchase price.There’s a very good chance they have a 30-year fixed-rate mortgage. In 2008, there was an even better chance they had an option ARM. Or some kind of ARM.Next, we’ll assume our 2022 home buyer is well-qualified, using fully documented underwriting. That means verifying income, assets, and employment.Our 2008 home buyer likely qualified via stated income and put zero down on their purchase. Their credit and employment history may have also been questionable.The 2022 home buyer likely put down a decent sized down payment too. So they’ve got skin in the game.Our 2022 buyer is also well aware of the credit score damage related to mortgage lates and foreclosure.And their property value will likely not drop nearly as low as the 2008 buyer. As such, they will have less incentive to walk away.Ultimately, many 2008 home buyers had no business owning homes and zero incentive to stay in them.Conversely, recent home buyers may have simply purchased their properties at non-ideal times. That doesn’t equal a housing crash.If mortgage rates continue to come down and settle in the 4/5% range, it could spell even more relief for recent buyers and the market overall.Oddly, you could worry about an overheated housing market if that happens more so than an impending crash.When I would worry is if the unemployment rate skyrockets, at which point many homeowners wouldn’t be able to pay their mortgages.

Consumer credit resilient even as debt, delinquencies rise

January 30th, 2023|

Credit scores, particularly among borrowers in the mortgage market, have held up relatively well as inflation has risen, though some other indicators point to potential strain.VantageScore's measure, which isn't commonly used for mortgages right now but could be in the future, showed on average consumers' credit standing was stable on a consecutive-month basis at 696 in December.At the same time, consumer debt levels have been rising, and signs of strain on payments are emerging, according to VantageScore's monthly CreditGauge report.For mortgages, the average balance in December was $251,800, compared to $236,900 a year earlier and $250,500 in November.The average balance for other categories of consumer credit other than personal loans rose as well, with the number for auto loans increasing to $22,900 from $222,800 a month earlier and $21,300 in December 2021. For credit cards, the average balance owed rose to $5,900 from $5,600 the previous month and $5,200 a year earlier.The average amount owed on personal loans remained stable on a consecutive month basis at $16,700. However, it was still up from $15,300 in December 2021.A rise in non-mortgage debt levels has implications for home loans. Consumer debt-to-income levels have arguably been used as an indicator of payment risk for single-family financing, and two key secondary market investors recently adjusted some of their fees linked to DTIs.Delinquency rates tracked by VantageScore rose but remained below pre-pandemic levels.Mortgages late by 30-59 days jumped 10 basis points to 0.7% from 0.6% in November, and were up from 0.49% a year earlier. In January 2020, the equivalent delinquency rate was 1.22%.Home loans 60-89 days late inched up to 0.2% of the total from 0.18% a month earlier, and were elevated compared to 0.12% a year ago. At the beginning of 2020, the 60-89 day delinquency rate was 0.43%.Finally, mortgages late by 90-119 days rose a basis point on a consecutive month basis to 0.08% of the total, up from 0.05% a year earlier. The 90-119 day mortgage delinquency rate was 0.17% in January 2020.Increases in delinquency rates across consumer credit have been most prominent in the 30-59 days past due category, with late payments in non-mortgage loan types nearing pre-pandemic levels. Credit card delinquencies were only a basis point lower than their January 2020 number at 0.61% in December. The short-term delinquency rate for personal loans was 0.88%, compared with 0.95%. For auto financing, it was 2.06%, compared with 2.16%.Even longer-term past dues exhibited some signs of trending up in December.This was not only true in the VantageScore numbers, but in some others. Last month Fannie Mae, a large mortgage-related government investor known for generally having strong loan performance recorded its first uptick in its serious delinquency rate since August 2020.To be sure, the increase in the Fannie number was only a single basis point (0.65% compared to 0.64% the previous month) and could be an aberration. However, it was striking in that the downtrend in this area had been very consistent up to that point. In January 2020, Fannie's serious delinquency rate was 0.66%.Freddie Mac, another government-related mortgage investor that's similar to Fannie but a little smaller, had a stable serious delinquency rate of 0.66% in December 2022 compared to 0.6% in January 2020.

Fairway investing in its reverse mortgage lending business

January 30th, 2023|

Fairway Independent Mortgage is investing what it termed "unprecedented resources" in its reverse mortgage business at a time when massive dislocation is taking place in the sector.The company finished 2022 as the nation's seventh largest originator of Federal Housing Administration Home Equity Conversion Mortgages, with 2,747 endorsements, according to Reverse Market Insight. That was up from 1,688 in 2021.But the company that by far was the largest HECM originator, American Advisor Group, agreed to be acquired by the fourth most active, Finance of America, in December. Just weeks prior, Reverse Mortgage Finance, which ended the year as the No. 5 lender even after all but shutting down its operations, filed for bankruptcy. AAG also laid off workers, as did No. 8 Open Mortgage. "Removing silos from the business and leading from the street has helped us become the No. 3 purchase lender in the country and close over $42 billion last year in a challenging market — now we bring that practical approach to reverse in a big way," Len Krupinski, chief operating officer, said in a press release.As part of the change, Fairway is decentralizing its operations for reverse mortgages, moving away from the "strongly centralized" model it had been using.Another step is the creation of a Reverse Advisory Council, which is composed of the top leadership from Fairway's sales, operations and support teams.The company is promising its branches increased regionalized support services for these loans."We're ready to serve a new phase of reverse assisting both loan officers and our senior homeowners," said Mike Daryanani, national sales support director. "The changes we're implementing are all about making the experience for reverse borrowers faster and easier." Fairway declined to provide additional details about the changes to the reverse mortgage program.All of Fairway's HECM production is retail and it is the third largest originator in this channel. It is also the leading originator of HECM for purchase mortgages, according to RMI's data."Combining experienced reverse mortgage professionals with the excellence of Fairway's retail platform has always been our path towards mainstreaming the reverse mortgage," said Peter Sciandra, vice president of secondary marketing for reverse. "With this infusion of both financial and sweat equity, Fairway has its sights set not only on No. 1 in the industry, but bringing reverse mortgages to an entirely new audience."

Latest USAA employee reduction impacts mortgage unit

January 30th, 2023|

USAA eliminated an unspecified number of jobs in late January, with some of the employees impacted working in the company's mortgage department.A spokesman for the Texas-based company confirmed that a reduction round took place, but wouldn't provide further details."In order to continue exceptional service to our members, we sometimes make hard business decisions to ensure we are adapting to our members' needs and changes in the marketplace," said Brad Russell, the company's spokesperson, in a written statement. "Sometimes that means investing more heavily in growth areas and scaling back or stopping work in others."Changes in the mortgage marketplace have been palpable, with elevated mortgage rates and economic uncertainty impacting origination volume and the bottom line of companies in the industry. As a result, dozens of banks, nonbanks and mortgage vendors have implemented right-sizing measures to stay afloat.This is at least the second reduction round at USAA. In August, job cuts took place at its depository subsidiary USAA Federal Savings Bank. The company's information technology, client advising and human resources divisions were affected by the reductions."Anytime employees are impacted, we treat them with care and dignity — and support them in finding another position at USAA or elsewhere," added Russell. The company, a financial services firm that serves current and former military families through an online platform, employs nearly 35,000 people in total. USAA also seems to be actively hiring, with over 158 positions currently open via its website.USAA would have been 2022's top mortgage originator in terms of customer service, according to the latest J.D. Power survey. It scored a 797, well ahead of Rocket Mortgage's 750. But because it doesn't serve the general public, it was not eligible to be ranked.The company has been in hot water with federal regulators for risk-management issues for years. Most recently, the Office of the Comptroller of the Currency called the company out for discriminatory practices in USAA's auto lending unit. A year prior, the OCC and the Financial Crimes Enforcement Network hit the company with a $140 million penalty for failing to set up an adequate anti-money-laundering program and file timely reports on suspicious transactions.And in 2020, the OCC fined USAA $85 million for risk-management issues and for violating laws that protect military members from financial harm. 

Fed's Wall Street clash sets stage for Powell's hawkish message

January 30th, 2023|

Jerome Powell and Wall Street are headed for another face-off this week as the Federal Reserve seeks to slow its inflation-fighting campaign without signaling a readiness to stop.Despite 2022's slew of interest-rate hikes from Chair Powell and colleagues, financial conditions are the loosest since last February as investors bet fading inflation will allow the central bank to soon cease raising borrowing costs and then cut them later this year.That's likely wishful thinking as far as Powell is concerned and he has a clear incentive to push back against the trade given rising stocks and bonds could fan the very price pressures he wants to restrain.Such a backdrop means Powell is expected to balance this week's likely 25 basis-point increase in rates with a stern message that the step down in size from the past six hikes doesn't diminish his commitment to reducing inflation to 2%. It stood at 5% in December. He may even be willing to roil the upbeat markets if that's what it takes to make his point."He can just send a hawkish message," said Ethan Harris, head of global economics research at Bank of America Corp. "I don't think he's going to want the markets rallying out of this meeting. He doesn't want to throw more gasoline on this kind of optimistic spin" fueling the markets.Powell has sometimes struggled to get markets to take him at his word. In July, investors divined a policy pivot from his post-meeting press conference even though he stressed the need to keep raising rates. That then gave rise to a strikingly hawkish speech by Powell the following month at the Fed's Jackson Hole conference to hammer the message home.Fed officials' look set to raise rates by a quarter-point to a 4.5% to 4.75% range, following a half-point hike last month and four straight 75 basis-point increases, representing the most aggressive tightening campaign in four decades.Still, financial conditions are now looser than in March when policymakers began to raise rates and minutes of their December meeting show that this was already on their minds. Officials noted that an "unwarranted" easing in conditions would complicate their task of restoring price stability.Dallas Fed President Lorie Logan, speaking on Jan. 18, cautioned that policy could respond if financial conditions ease further in response to a slower pace of rate increases."If that happens, we can offset the effect by gradually raising rates to a higher level than previously expected," she said.Traders are firmly pricing in a quarter-point rate hike at the upcoming meeting, with a second move of the same size largely set for the March meeting. Traders expect a peak policy rate around 4.9% by May and June, falling to below 4.5% by the December meeting and with further cuts indicated during 2024.By contrast, the central bank's December forecasts showed 17 of 19 officials projecting rates above 5% this year, with two of them above 5.5%."They need a greater tightening of financial conditions than they're seen," said Sonia Meskin, Head of US Macro at BNY Mellon. "The Fed has struggled with this particular issue throughout 2022 and it seems that the struggle is now being continued into 2023. They are worried about it."Financial conditions are critical to the Fed's effort to reduce growth below its long-term trend in the face of a resilient economy. Gross domestic product expanded at a 2.9% annualized rate in the final three months of 2022, while initial unemployment claims fell to the lowest since April in a sign of a continued tight labor market."The Fed will deliver a hawkish press conference," said Gargi Chaudhuri, the head of iShares investment strategy for the Americas at BlackRock Inc. "I imagine Chair Powell pushes back on the number of cuts priced in by the market before the end of this year. The tight labor market is giving them the opportunity do so."There are several ways tight conditions reduce growth, and if taken far enough, can induce a recession. Rising mortgage rates cool off the housing market, and higher lending rates can make corporate investments more expensive. A stronger dollar hurts manufacturing by making exports more pricier and imports cheaper. And lower stock and bond prices can help restrain consumer spending through a wealth effect.With the exception of Logan's comments, policymakers have not gone out of their way to discuss financial markets."There has not been a concerted effort on the committee to push back against looser financial conditions," said Steve Bartolini, portfolio manager fixed income at T. Rowe Price. "I would be surprised if Powell does not push back, and likely against the market pricing in rate cuts for the back half of his year."Powell's press conference could be tricky as he will need to acknowledge that the inflation outlook has improved – one of the factors driving recent gains in stock and bond prices — while stressing the need for still higher rates to bring inflation down to the Fed's 2% target.The goal now is "to keep the financial markets from pricing in a premature pause and lean against the bond market's expectation of rate cuts in the second half of 2023, which would lead to further unwanted easing in financial conditions," said Kathy Bostjancic, chief economist at Nationwide. "You are leaning against the markets becoming too dovish. That is another reason for him to stay resolutely hawkish and to say that inflation is still our number one concern.

American Pacific Mortgage eyes further expansion

January 27th, 2023|

California-based American Pacific Mortgage continues to expand its market footprint, announcing Thursday an asset purchase of Lend Smart Mortgage, LLCMinnesota-based Lend Smart Mortgage has close to 30 branches nationwide, with its presence mainly stretching across the midwest. The terms of the asset purchase were not disclosed. According to APM's spokeswoman, 27 branches will be brought on board, with 107 loan officers in total. APM is integrating Lend Smart by way of a "divisional model" where the Minnesota-based lender gets to retain its name, leadership and brand, accessing mortgage products and technology offered by APM."Through our divisional model, APM has experienced exponential growth over the past two years," said Bill Lowman, CEO of American Pacific Mortgage in a written statement.Lowman noted that APM has "attracted several well-known and established companies" that "want to plug into the APM engine…without losing their identity."Lend Smart Mortgage will provide APM with "production outlets in areas where APM is actively growing," the company's CEO said. That includes states like Minnesota and Arizona. In announcing its acquisition of Lend Smart Mortgage, APM said that it is open to bringing more branches onboard."Independent mortgage bankers seeking a similar divisional opportunity can contact Lowman for more information," APM's press release said. In the past two months, APM has been making strides to scoop up branches from defunct lenders, picking up close to 40 branches from Finance of America. Additionally, a chunk of employees were brought onboard from AmeriFirst Financial, which stopped funding loans in late December. Lowman speaking on a Mortgage Pro's 411 podcast in January gave some insights into his business strategy in 2023, including a focus on market share."This is a cyclical business, there's always ups and downs… and how [companies] navigate those transitions are the ones that are going to gain market share,"  said Lowman. "We have to measure ourselves by not comparing volume because it's going to be way off and instead measure ourselves on market share."

Amerisave defamed laid off employees, suit claims

January 27th, 2023|

Laid off employees of AmeriSave Mortgage Corp. are slamming the lender in a class action lawsuit, claiming the firm disparaged workers following a mass termination and that it owes them a combined millions of dollars.The complaint, including accusations of fraud and negligence, was elevated this week by attorneys for Amerisave from a California state court to the U.S. District Court for the Eastern District of California. Eleven plaintiffs suggest a class as large as 140 impacted workers are entitled to damages exceeding $43 million. "Plaintiffs also contend that AmeriSave falsely told third-party industry professionals, recruiters (and) hiring managers that putative class members had been terminated because putative class members had 'not gotten the job done' or did 'not meet performance goals,'" wrote attorney David Syme of Syme Law Firm in the original complaint filed in November.Recourse sought for the entire possible class includes $26 million in unpaid and future wages; $2 million in Worker Adjustment and Retraining Notification penalties; $7 million for emotional distress among other alleged damages. A spokesperson for AmeriSave Friday said the company doesn't comment publicly on pending litigation, and attorneys for the parties didn't return requests for comment. The Atlanta-based lender closed its wholesale channel last October and at the time laid off an unspecified number of workers. No WARN was filed in California according to public records, a violation, claims former employees citing state law.Plaintiffs based in California, Oregon and Nevada allege a mass firing by AmeriSave between last July and August, which largely impacted workers hired in the previous three months. The move came despite management's alleged suggestion earlier in the year that the firm had a $1.5 billion "war chest" to insulate it from market woes."They said the upcoming 'rough times' would eliminate the competition, and leave AmeriSave in a dominant position," wrote Syme. "AmeriSave actually used this explanation as a 'feature and benefit' and a recruiting tool."AmeriSave also falsely indicated in Nationwide Multistate Licensing System records that terminated employees were fired "for cause," which some workers discovered only when their new employers notified them, the suit said. While a firing for a lack of production is common, it's not recognized as "for cause," Syme wrote. "This sort of notation gives rise to speculations that the true cause might have been rape, or sexual harassment, workplace violence, theft or other serious, or even criminal issues," he wrote. The lender also allegedly communicated similar falsehoods to recruiters, telling them the fired employees had "not gotten the job done." AmeriSave laid off employees in a similar manner in 2011, the suit said, and counsel asserted that it could produce witnesses who would testify to the prior instances. AmeriSave was founded in 2002, and last February said it funded more than $36 billion across nearly 130,000 refinances and purchase loans in 2021. Some of the over 20,000 mortgage professionals laid off across the industry last year have filed similar WARN and unpaid wage complaints, although the AmeriSave suit contains some of the more scathing accusations. A federal bankruptcy judge last week granted class-action status to former employees of First Guaranty Mortgage Corp. who allege WARN violations in the firm's sudden shutdown last June. Ex-workers allegedly burned by Sprout Mortgage's shutdown last July are also reportedly nearing a settlement over their wage claims.

PacWest restructuring Civic Financial Services' operations

January 27th, 2023|

PacWest Bancorp is restructuring its operations as it looks to exit silos and unify its business lines. That includes making changes at its Civic Financial Services mortgage lending business."PacWest has a long history of acquisitions that brought us great customers and talented employees, but also very processes and different cultures," said Paul Taylor, who recently took over as president and CEO, on the company's fourth quarter earnings call. "Now the time is right to focus on coming together to function even more uniformly and efficiently as one company." Mark Yung, PacWest's executive vice president and chief operating officer is now in charge at Civic. William Tessar, who had remained at Civic following its Feb. 1, 2021 acquisition, has left the company according to Mortgage Professional America.Requests for further comment from PacWest and Civic have yet to be returned.PacWest is integrating Civic into its operations, as the parent company had been "hands off" with that business since the acquisition, Taylor said."The one thing we know is that there's a lot more overhead than there should be so we expect significant savings from that entity," he continued. "And right now we're looking at all the products that they offer and determining which ones of those products we'll hang on to and go forward with."The changes will make Civic more profitable and lower its risk profile for PacWest, the parent of Pacific Western Bank. Fitch Ratings downgraded PacWest in August.Prior to the acquisition, PacWest was a purchaser of Civic's production and so while it likes those assets, it is just a matter of finding the right size for the business within that risk profile.Civic's loan portfolio is approximately 10% of PacWest's earning assets and management wants to shrink that, Taylor said."The markets are opening up a little better in the [non-qualified mortgage] area," Taylor said. "And we are looking at trying to sell some of that portfolio just to bring it down."The corporate restructuring is taking place as PacWest reported fourth quarter net income of $39.6 million, down from $122.2 million in the third quarter and $136 million in the fourth quarter of 2021. Full year earnings of $404.3 million declined approximately 33% from nearly $607 million for 2021.PacWest took a $29 million impairment related to goodwill on its fourth quarter earnings as part of the Civic restructuring.It acquired Civic in an all-cash transaction at an undisclosed price. At the time of the deal, PacWest recognized $125.4 million of goodwill related to Civic, according to a Securities and Exchange Commission filing.Civic, which specializes in financing non-owner occupied residential properties, originated $713 million during the fourth quarter, compared with $831 million for the third quarter and $480 million for the fourth quarter of 2021.In addition, PacWest is shutting down its small balance multifamily lending business. However, during the call, management made it clear the company will remain in customer-based multifamily originations. Additionally, the company is exiting premium financing.During the fourth quarter, PacWest sold $1 billion of securities at a loss of $49 million in order to pay down its Federal Home Loan Bank borrowings.

LendUS agrees to settlement in data breach lawsuit

January 27th, 2023|

Mortgage lender LendUS reached a settlement this week to resolve a legal case tied to a 2021 cyber attack that revealed personal identifiable information of customers and employees.Without admitting wrongdoing, the company, which was acquired by CrossCountry Mortgage in mid 2022, will pay an undisclosed amount to settle the lawsuit. CrossCountry declined to provide further details regarding the settlement. "LendUS was not part of CCM at the time of the alleged infractions. We do not comment on matters prior to acquisition," a company spokesperson said in a statement. In multiple incidents between February and March 2021, an unauthorized individual was able to gain access to files belonging to LendUS that held personal information of consumers, including, but not limited to, Social Security and driver's license numbers, financial and payment card account information and online account credentials. LendUS determined its system had been compromised in December that year and began notifying affected parties in early 2022. The lender also established a dedicated call center and offered free credit monitoring to individuals whose data had been compromised. Shortly after notices were sent, attorneys filed a lawsuit in the Northern District of California, alleging the company failed to use "reasonable" security procedures to prevent the breach and was "negligent" in not detecting it for nine months. Plaintiffs Evangelia Remoundos, John Biegger and Anne Biegger sought to represent those impacted.The infraction at LendUS, which was based in Alamo, California, is one of several cyber fraud events that have occurred at mortgage lenders and servicers since 2021. Companies, including KeyBank, Lower and subsidiaries of Bayview Asset Management all were named last year in various lawsuits surrounding breaches that revealed personal information. LendUS has also been listed as a defendant in multiple other legal actions filed against the lender or its predecessor, RPM Mortgage, in the last decade. In April last year, CrossCountry acquired LendUS for an undisclosed amount.In a public statement announcing the breach last February, LendUS said it had implemented safeguards and additional technical security measures and was providing more training to its staff.According to the terms of the settlement, LendUS will reimburse members represented in the lawsuit up to $500 for documented data breach losses and lost time. Consumers who became victims of fraud or identity theft as a result of the breach are eligible for payments of up to $2,500.All members of the lawsuit are also eligible to receive three years of free identity theft protection, which Includes $1 million worth of fraud insurance. 

Debt default would make Lehman bankruptcy 'look like a walk in the park'

January 27th, 2023|

WASHINGTON — If Congress can't agree to a debt ceiling fix, Wall Street could face apocalyptic consequences. Banks and other financial firms benefit from the longstanding assumption that the United States will always pay its debts. Treasuries underpin the entire world's financial system because of that stability, and changing that assumption could create a far-reaching domino effect that touches everything from overnight repo transactions to home mortgage prices. The United States stared down the barrel of debt default during the Obama administration in 2011, but averted complete disaster with just days to spare. Still, the standoff hit markets, and led to a downgrade of U.S. debt by S&P Global, giving the financial world a taste of what could happen with this go-around. And the risk of brinkmanship leading to an actual default is substantially higher this time, experts agree. The conservative Republican holdouts who fought Rep. Ken McCarthy's bid to be House speaker have little consensus on what they want out of debt ceiling negotiations with President Biden and Democratic lawmakers, and it's unlikely that McCarthy has the political sway to keep them in line for a vote.  House Speaker Kevin McCarthy, R-Calif., faces a difficult challenge in determining what his fractious caucus would seek in exchange for raising the debt ceiling. Failing to raise the debt ceiling would lead to unprecedented financial turmoil, experts agree.Bloomberg News Even Wall Street — which has become increasingly tolerant of Washington's antics since the near-crisis in 2011 — is beginning to take notice. JPMorgan CEO Jamie Dimon said last week that the creditworthiness of the United States should be "sacrosanct," and that questioning it "should never happen,"  while Goldman Sachs economists in a recent note said that the debt ceiling is "going to be a problem." "Most large financial institutions feel like they need to engage in contingency planning on the assumption that you can't really know if brinkmanship will be resolved this time around," said David Portilla, head of the bank regulatory practice at Cravath, Swaine & Moore. The falloutThe exact consequences of a debt default — which wouldn't happen until the country is unable to pay its bills on a so-called "X-date" sometime this summer — are murky to both forecasters and the Treasury Department. It's an untested theory, since the United States has never intentionally defaulted on its debt before. "Bank holding companies and the markets in general tend to assume that treasury securities are risk-free with relatively understood market behavior and volatility; if those assumptions prove incorrect, there could be significant consequences that are hard to fully know in detail in advance," Portilla said. But there is little question that a default would be disastrous for financial firms and for financial stability writ large. "I think from the layman's view of it, Treasury defaulting on its debt payments would make the Lehman bankruptcy look like a walk in the park on a sunny day," said Ed Groshans, senior research and policy analyst at Compass Point Research & Trading. Should the Treasury Department be unable to pay its loans, investors would demand much higher rates in the future to loan money to the government. That could lead to a spiral, where it becomes more and more expensive for the government to borrow money, and Congress would have to raise the debt ceiling at an even faster clip in the future. Treasury markets are another big concern. In a repurchase — or repo — agreement, a firm such as a broker-dealer may need cash to finance its operations. They can offer a Treasury security to another party in exchange for cash with the agreement that the original broker-dealer will repurchase the Treasury security in the future with some nominal interest markup. The current expectation is that a repo agreement can "roll" overnight, which means that if a broker-dealer repos out Treasury securities to raise cash for its own financing needs, and tomorrow repurchases them, they can do the same thing again. Essentially, they use short-term financing to fund long-term assets. If people believe that Treasuries are going to default, those Treasuries are no longer desirable collateral. Fees for repo transactions could rise, or there could be a big shift in how broker-dealers find short-term financing. "Treasuries are generally seen as essentially risk-free investments when they're held as a placeholder before capital is deployed elsewhere," Portilla said. "That assumption not being true could be destabilizing."Deposits at banks could also be hugely affected. If, suddenly, investors decided that Treasuries were no longer risk-free, they would likely seek out non-risk-bearing investments, and banks could see an inflow of deposits. This would be a roughly similar situation as March 2020, when the Treasury markets nearly ground to a halt and bank deposits rose precipitously. While this would increase some business at banks, which have recently struggled to attract deposits, it would come as the Federal Deposit Insurance Corp. has said it's worried about keeping the Deposit Insurance Fund to the statutory minimum. So a sudden influx of deposits could actually pose a financial stability risk if the FDIC doesn't have enough in its fund to bail out failed banks, especially during a time of economic stress. Even home borrowing rates and energy prices would feel the sting, said Groshans.The mortgage market is broadly based on the ten-year Treasury yields, he said, and generally the higher that 10-year Treasury rates go, the higher that home mortgage rates will climb. That's true in reverse, as well:  Lower yields on 10-year Treasury notes translate into lower mortgage interest rates for homebuyers. "If people get nervous and they think the Treasuries are going to default and they sell it, the yield on those Treasuries will rise," Groshans said. "If we use the current spread, and if people pull out of Treasuries, I think we're looking at mortgage rates closer to 10%." It would also result in simply less capital in the financial markets, Groshans said. Treasuries have typically served as collateral, and making that less stable would make it more expensive to fund other financial instruments and investments. "Whoever supplied me with that collateral, I would say either take that collateral back or I'm going to do a margin call," Groshans said. "You could start to see that, liquidity that's in the system could get called back from those margin calls and there would be less capital sloshing around in the system, so less investment in general." The Fed's new moral hazardInitially, containing the fallout of a debt default would fall to the Federal Reserve. In 2011, Fed officials — including now-Treasury Secretary Janet Yellen — discussed the possibility, and the central bank's options in the event of a default. Specifically, the officials discussed purchasing defaulted Treasury bonds. This could calm the fears of bondholders and keep markets functioning until the Treasury is able to resume payments. But that's not likely to happen, experts say. "Frankly, I think they'd do the platinum coin before they did that," said Lou Crandall, chief economist at Wrightson ICAP. "I'm not even sure that's legal."For one, it would present the Fed with another moral- hazard predicament, propping up an industry because of its importance to the financial system. "It is critical that money funds manage their liquidity without extraordinary assistance even in difficult circumstances, and that designing a facility to provide liquidity to money funds, as suggested in the memo, without generating substantial moral hazard would be very difficult," an official said during the 2011 meeting. Fed Chair Jerome Powell, during another period of debt ceiling uncertainty in 2013, called the idea of buying out defaulted Treasury bonds "loathsome." "I'm just saying that these are decisions you really, really don't ever want to have to make," he said. "It's a terrible decision to have to make."

Ginnie Mae will shorten repooling times for RPLs next month

January 27th, 2023|

Next month, Ginnie Mae will follow through with a plan announced last year to reduce the 180-day waiting period for returning reperforming loans to mortgage-backed securities pools.Alanna McCargo, president of the housing agency, had promised that the change to the pandemic era policy would be put in place during the first quarter of this year. It will become effective on Feb. 2.As of then, borrowers must make three timely payments in the months just ahead of the issuance date for the mortgage-backed securitization involved in the new pooling. That date must also be a minimum of 120 days from the last point at which the loan was delinquent.The announcement "demonstrates Ginnie Mae's continued commitment to providing programs and options to issuers that maintain the strength and liquidity of the government mortgage market," McCargo said in a press release. Other details around the parameters for the new policy were pending at deadline.The move is in line with Ginnie Mae's ongoing review of policy changes implemented during the pandemic with the aim of seeing whether they should be discontinued, updated, made permanent or reversed.Other examples include an exemption from its pre-pandemic delinquency threshold that the government bond insurer recently extended.McCargo has also considered the possibility of a permanent a liquidity facility that could help issuers in times of stress, limiting counterparty risk.The Community Home Lenders of America recently renewed the call for such a facility in a letter to McCargo, noting that a "more robust, flexible and permanent" version of the Pass-Through Assistance Program that Ginnie introduced in April of 2020 would reduce issuer risk.Use of the PTAP proved to be limited because lower rates instituted during the pandemic sparked a refinancing wave that returned cash to mortgage companies, helping servicers cover payments they had to advance for delinquent borrowers.More recently, however, rates have been higher and Ginnie has in at least one instance had to step in and seize servicing due to the bankruptcy of a nonbank issuer in the specialized Home Equity Conversion Mortgage market.An expanded PTAP could help nonbank Ginnie issuers in particular because they "are essentially acting as a banker to borrowers that miss mortgage payments, by making required advances" but lack funding and liquidity resources depositories have, the association said.

Recession or not, mortgage market is starting to come back strong

January 27th, 2023|

The United States economy continues to produce mixed signals about whether or not the country is headed for a recession. This past week the Commerce Department reported that the United States’ gross domestic product (GDP) grew by 2.9% in Q4—only slightly higher than the 2.8% GDP prediction from investors.  Yields on Treasury notes rose after the release of the report with the 10-year yield climbing 2 basis points to 3.485%. The yield on the 2-year Treasury note also increased, moving up by 3 basis points to 4.166%. Continue reading Recession or not, mortgage market is starting to come back strong at Movement Mortgage Blog.

Pending home sales rise to cap otherwise disappointing year

January 27th, 2023|

U.S. pending home sales unexpectedly rose in December for the first time in seven months, wrapping up an otherwise poor year for a housing market battered by higher mortgage rates. The National Association of Realtors index of contract signings to purchase previously owned homes increased 2.5% last month to 76.9, according to a release Friday. The median estimate in a Bloomberg survey of economists called for a 1% decline.For all of last year, contract signings decreased more than 20% as demand weakened on the heels of aggressive interest-rate hikes by the Federal Reserve. Consumers' views of homebuying conditions are hovering near historic lows, based on University of Michigan survey data.Recent data, however, have shown some signs that demand is stabilizing as borrowing costs and prices retreat."This recent low point in home sales activity is likely over," Lawrence Yun, NAR chief economist, said in a statement. "Mortgage rates are the dominant factor driving home sales, and recent declines in rates are clearly helping to stabilize the market."Pending sales rose in two of four regions in the month, led by a 6.4% gain in the West and a 6.1% pickup in the South.Pending home sales are often looked to as a leading indicator of existing-home purchases as properties typically go under contract a month or two before they're sold. The index is based on a sample that covers about 40% of multiple listing service data each month.

Wells Fargo holds CEO Scharf's pay at $24.5 million for 2022

January 27th, 2023|

Wells Fargo kept Chief Executive Charlie Scharf's pay at $24.5 million for 2022, a year in which both profit and stock tumbled and the bank continued to grapple with the fallout from a raft of scandals. Charles Scharf. Al Drago/Bloomberg Scharf's package comprised $2.5 million of salary and $22 million in incentives, according to a filing on Thursday. The CEO asked the board not to give him a raise because of the work left to be completed in overhauling the company.Still, the panel credited him with addressing risk, control and regulatory issues as well as other improvements to its business."The board expressed strong confidence in Mr. Scharf's leadership in driving the continued transformation of Wells Fargo and values his ongoing contribution and commitment to our shareholders, customers, communities and employees," the bank said in the filing.The U.S. lending giant earned $13.2 billion in net income last year, down 39% from 2021. Results were marred by two quarters of steep operating losses tied to ongoing legal and regulatory issues including a December settlement with the Consumer Financial Protection Bureau. The firm remains under a Federal Reserve-imposed asset cap limiting its size to its level at the end of 2017.Shares fell 13.9% in 2022, though it fared better than the 24-firm KBW Bank Index for a second consecutive year.Rival JPMorgan Chase left longtime CEO Jamie Dimon's pay flat at $34.5 million for last year, while Morgan Stanley cut CEO James Gorman's 2022 compensation 10% to $31.5 million.

FHFA's watchdog reviews disclosures related to internships

January 27th, 2023|

The Federal Housing Finance Agency's Office of Inspector General recently found some lapses in reporting have occurred since the FHFA implemented policies aimed at weeding out undisclosed employee ties in internships.However, the corrective policies implemented at the office's recommendation in 2019 still met their goal because the FHFA requires both interns and employees to disclose ties, and the former did even when the latter didn't, according to a report by the office of IG Brian Tomney.The findings came after a review of 49 interns brought onboard between October 2020 and July 2022 as part of the agency's Pathways program for college students and recent graduates. Two of these interns had ties to agency employees."Neither of the two FHFA employees who had an applicable relationship complied with the Nepotism and Fraternization Policy's requirement that they disclose it," Wesley M. Philips, senior policy advisor, and Patrice Wilson, senior investigative evaluator, said in the report.The FHFA was nevertheless aware of the program participants' employee ties because "a separate agency policy requires Pathways interns to disclose whether they are related to existing employees and that, in the present case, the interns had complied with that policy."Improper influence related to opportunities available to college students has had a higher profile in the public discourse since a group of parents, including some celebrities, were found guilty of paying a man to guarantee university admissions for their kids through fraud and bribery.That college admissions scandal made headlines in 2019, and in the same year, the inspector general's office found that although it had directed the FHFA to develop a policy related to the hiring of relatives after an anonymous hotline tip in 2011, the agency had not done so.In 2011, the FHFA found that nine of 32 interns hired that summer were relatives of employees.Relatives of FHFA employees aren't prohibited from working for the agency "when there is no direct reporting relationship and the relative is not in a position to influence or control the participant's appointment, employment, promotion or advancement within the agency."The disclosure policies were drawn up after the IG's office found in the 2019 report that some employees had exercised actions it equated with improper influence, as defined by federal law."We identified two instances in which FHFA employees [names redacted] advocated for, or otherwise interceded, on behalf of their relatives who were seeking paid summer internships at FHFA, and we identified three instances in which FHFA hiring officials and an employee awarded preferential treatment to relatives of their fellow employees," the IG said in that report.The Department of Housing and Urban Development also identified problems with improper influence and took action to address them in the latter half of the past decade.In the most recent report by the FHFA's watchdog, Philips and Wilson appear satisfied that the current procedures in place have discouraged improper influence."We believe the Nepotism and Fraternization Policy's employee disclosure requirements are clear and help ensure the integrity of the intern hiring," they said.Philips and Wilson said the IG's office will keep an eye on the agency's internship program and related disclosures."We are not reopening any of the recommendations from our 2019 Management Alert because FHFA adhered to its corrective actions," they said. "However, we believe that FHFA has a responsibility to ensure that employees who have an applicable relationship with Pathways interns comply with the Nepotism and Fraternization Policy's disclosure requirements, and we will monitor its efforts to do so."

White House rental protections may create opportunities for lenders

January 26th, 2023|

The Federal Housing Finance Agency has a role in the Biden Administration's rental housing initiative and multifamily lenders should benefit.As the regulator of the government-sponsored enterprises, it will be looking at Fannie Mae's and Freddie Mac's activities that promote renter protections, the White House fact sheet on the initiative stated."As part of our work on the White House Tenant Protection Interagency Policy Council, FHFA will conduct a public stakeholder engagement process to identify tangible solutions for addressing the affordability challenges renters are facing nationwide, particularly among underserved communities," Director Sandra Thompson said in statement issued in response to the Biden Administration announcement. "Our process will be transparent and seek broad participation from diverse voices."Common ground exists between the White House and the FHFA to get Fannie Mae and Freddie Mac involved in implementing its housing policies, said Evan Blau, a partner at the law firm of Cassin & Cassin who represents lenders in the financing of multifamily properties with an emphasis on affordable housing.The FHFA's 2023 scorecard for the GSEs requires that 50% of their multifamily lending this year be "mission driven." Based on the combined 2022 volume, that is a substantial amount of financing, Blau added.Last year, Fannie Mae and Freddie Mac together financed $142 billion in multifamily mortgages for over one million units. "If the same activity holds in 2023, this would mean an investment in approximately 700,000 affordable units," the White House Fact Sheet stated.That total was below the FHFA's cap on multifamily activity for the GSEs, which was a combined $156 billion. This year, the regulator reduced the cap to $150 billion or $75 billion each."What the White House is doing is finding the synergy between the common goals of the White House, FHFA, Fannie and Freddie and I think everyone obviously is aligned in the right direction and that's creating products that are geared towards generating [and] financing more affordable housing," Blau said.Fannie Mae and Freddie Mac have already embraced that mission critical aspect. "In the last five years, we've seen them come out with these fantastic products that are geared specifically towards affordable housing," Blau said. "This is really just a continuation of what we've seen in the past, which is this interplay of the various agencies — FHFA, Fannie and Freddie — in terms of their goals."The Mortgage Bankers Association expects an 11% year-over-year decline in multifamily lending volume as the sector faces the same forces that will limit single-family originations, the trade group said earlier this month.It predicted $393 billion of multifamily lending volume this year, down from a projected total of $439 billion for 2022. The total includes all investor sources, not just Fannie Mae and Freddie Mac. In 2021, multifamily mortgage originations totaled a record $487.3 billion.Blau agreed that interest rates and the U.S. economy will dictate multifamily lending activity this year. But he noted that within that framework, the Biden administration's announcement is a positive for the finance side of the business."The agencies have the runway to metaphorically land as many planes as they can within their framework and within their volume caps," he said. While the economy will need to settle as it is likely heading towards what some are expecting to be a mild recession, "I do think [the administration's initative] will lead to more loans being made in the affordable housing field," as the GSEs look to make their FHFA goals," Blau said.Agency lenders have built out their infrastructure in the last 5-10 years to handle complex affordable housing deals. "We're seeing extremely sophisticated transactions being done by Fannie and Freddie lenders that are around the products that Fannie and Freddie have developed with FHFA's oversight," Blau noted.He expects even more creativity from the GSEs going forward when it comes to affordable housing and the lenders themselves are well-equipped to handle the additional volume and deal flow."Increasing the supply of affordable rental housing is the best way to solve the ongoing affordability crisis, and MBA is committed to working with the Administration, Congress, and other policymakers on safe and sound policies at the federal and state level that encourage development and keep financing and construction costs in check," President and CEO Bob Broeksmit said in a statement. "We will examine the Administration's actions in greater detail and participate in a constructive and collaborative approach to help tenants and increase safe and affordable multifamily housing."As part of that 2023 scorecard, FHFA asked Fannie Mae and Freddie Mac "to explore the feasibility of expanding tenant protections for properties they finance and to identify strategies and activities that would facilitate a greater amount of affordable rental housing supply," Thompson said in her statement. "FHFA will continue to evaluate the Enterprises' role in providing tenant protections and advancing available affordable housing opportunities for those in need."

Black Knight adds borrower-facing collections technology

January 26th, 2023|

Black Knight released new automation consumers can use to explore options if they experience hardships that cause them to start falling behind on their payments.The new borrower-facing technology has both a call management function for consumers who want to work with customer support representatives or they could choose to explore their options online independently.The new product "lets those customers see what options they have right from the get-go," said Sandra Madigan, chief digital officer, Black Knight, in an interview."To the extent that you can't call a borrower at 8 o'clock at night, or they have set their preferences for email-only communication or text only, all that works together seamlessly to give that borrower the ability to self-manage and figure out what the best option is," she said.The move coincides with a slight pickup in short-term borrower hardships. That pickup has been seen primarily in the Federal Housing Administration-insured market serving lower-income households with relatively thin buffers against financial hardship, but has not been seen as prominently in loans guaranteed by the Department of Veteran Affairs or purchased by government-sponsored enterprises Fannie Mae and Freddie Mac."We're not seeing anything in the GSE portfolios yet, but there has been an uptick in the FHA portfolio," said Doug Duncan, Fannie's chief economist. "VA also not yet."At the same time, cash-strapped mortgage companies have been looking for more efficient and compliant ways to handle early borrower distress.Call center work tracked by the Mortgage Bankers Association inched up in the group's latest Loan Monitoring Survey, suggesting related automation more of a priority to the extent to which companies will or can spend on it.As a percentage of servicing portfolio volume, call activity rose to 25.1% in December from 24.6% the previous month, with the average speed to answer increasing to 1.3 from 1.2 minutes. Call abandonment rates also inched up, increasing to 3% from 2.8% as handle times lengthened to 8.2 minutes from 8.1. Call handle times were last this high in June of last year.Black Knight's core industry-facing servicing system has an exceptionally broad user base, and Intercontinental Exchange, a provider of origination automation that also has widespread industry use, plans to acquire it.The development of the latest servicing technology is in line with Black Knight and ICE's plan to focus on customer experience across both sides of the mortgage process.The new collections product integrates both with Black Knight's core Mortgage Servicing Platform (MSP) system, its Servicing Digital automation for consumers and its loss mitigation system.Black Knight recently released a set of application programming interfaces aimed at making external technology integrations more efficient, starting with APIs for Servicing Digital.Those APIs are being extended more broadly throughout Black Knight's technology ecosystem in areas that will eventually include collections.

Mortgage payment amounts surged 39% in 2022

January 26th, 2023|

New home buyer payments increased by almost 39% in 2022, but borrowers saw some relief toward the end of the year thanks to lower interest rates, the Mortgage Bankers Association said.The national median payment recorded on new buyer applications declined for a second straight month to $1,920 in December, 2.9% below November's amount of $1,977, according to the MBA's Purchase Applications Payment Index, known as PAPI. "There was a slight improvement in home buyer affordability last month as mortgage rates fell by 37 basis points from November," said Edward Seiler, MBA's associate vice president of housing economics and executive director of the Research Institute for Housing America, in a press release.But as lenders encountered ongoing affordability headwinds and interest-rate spikes throughout 2022, the median went up by $534 for the full year, representing a 38.8% increase. MBA's PAPI, introduced last February, measures new monthly mortgage payments relative to income across time, using data from the association's weekly applications survey. The national PAPI score came in at 159.5 in December, down from 164.2 a month earlier, after hitting a series high in October. Higher numbers represent decreased affordability.A mostly steady decline in interest rates at the end of the fourth quarter led to improvement for home buyers, as purchase amounts in December headed in the opposite direction for a second consecutive month. The median purchase size inched up one percentage point in December to $300,000, Seiler said. But between early November and the end of 2022, the average 30-year conforming rate among MBA lenders decreased from its peak of 7.14% to 6.58%, a trend the association predicts will continue."MBA expects both mortgage rates and home-price growth to soften, which along with cooling inflation, should help bring more prospective buyers into the market during the spring home buying season," Seiler said.Overall affordability improved across loan categories last month, as well as among white, Black and Hispanic households. Conventional loan applications saw the median payment amount decrease to $1.954, a 2% drop month over month from $1,994. But December's number was 35% higher compared to one year earlier, when the median was $1,447.Mortgage payment sizes for FHA borrowers similarly declined by 1.8% to $1,602 from $1,631 in November. But on an annual basis, the median amount accelerated by almost 50% from 1,070.States that saw an influx of new residents over the past three years saw the lowest levels of affordability last month, despite seeing lower PAPI scores from November. Nevada, Idaho and Arizona led the country with scores of 259.2, 248.4 and 219.2, respectively. Utah followed at 213.9, and Florida rounded out the "top" five with a reading of 204.7.The latest index also included a new dataset looking at payments based off of results from MBA's monthly Builder Application Survey. In December, the median monthly payment seen on applications for newly built single-family constructions came in at $2,399, representing an increase of 36% from $1,770 a year earlier.

Sprout Mortgage reportedly in settlement talks with laid off employees

January 26th, 2023|

Sprout Mortgage is addressing some of the fallout from its shutdown last summer, discussing settlements with former employees and certain business partners but not cooperating with other lenders. The former East Meadow, New York-based business faces five federal suits from workers and mortgage firms over its alleged failure to make payments in the months leading to its July closure. In one of them, the company is working on a settlement with former staff who sued for three weeks of owed back pay, a compromise that would represent a rare concession for mortgage professionals impacted by mass layoffs last year. Ninety-six former Sprout employees have joined the lawsuit in the U.S. District Court for the Eastern District of New York, according to court records. The complaint accuses CEO Michael Strauss of instructing personnel not to issue paychecks for a two-to-three-week period last June and July."Without revealing confidential information, I can report that the attorneys had a substantive discussion over the documents that defendants have produced concerning Defendant Strauss's ability to contribute to a settlement," wrote attorney Scott Simpson of Menken Simpson & Rozger, on behalf of plaintiffs, in a filing Tuesday.Counsel also discussed Strauss' claim of insolvency but didn't disclose further details, and didn't describe any proposed settlement amounts. Simpson suggested an update would be filed next week. Strauss and attorneys for the parties didn't respond to inquiries this week.  Sprout is approaching settlements in two other business disputes, according to federal court records. The firm consented to a $475,000 judgment against it from New Jersey-based non-QM firm Family First Funding, in a dispute over Sprout's alleged default on a $5.1 million loan purchase. Another non-QM lender, California-based New Wave Lending Group, is suing Sprout in a New York federal court for $6 million, seeking recourse for the company's alleged failure to purchase $32 million of loans. The sides have reached consensus on one portion of New Wave's claims, according to a filing earlier this month.Sprout meanwhile filed a counterclaim Tuesday in a lawsuit in New York federal court from Merchants Bank of Indiana, which accuses Sprout of failing to remit a $1.2 million loan payoff to the bank. Counsel for MBIN last week asked a judge to deny Sprout's counterclaim because of its late responses to court deadlines."Merchants has serious concerns about collectability, including what Sprout has done with the payoff for the Ganz Loan," wrote attorney John Waller of Dinsmore & Shohl on behalf of MBIN, referring to the financing at the center of the lawsuit.An attorney for Sprout Tuesday filed a counterclaim, denying MBIN's breach of contract accusation and accusing the bank of never remitting $810,000 owed to Sprout for a loan trade commitment from a mortgage originated in May. Sprout is also allegedly not cooperating in a suit from warehouse lender FirstFunding, which is seeking $262,500 in dues unpaid following an August agreement. FirstFunding, a subsidiary of First American Financial Corp., provided Sprout a warehouse funding facility that was $175 million at the time of Sprout's shutdown.An attorney for FirstFunding in December wrote to the court that Sprout stopped cooperating in September. A federal judge earlier this month ordered counsel for FirstFunding to show cause by Jan. 31 to continue the case, citing a lack of prosecution efforts. Attorneys in all of the cases didn't respond to requests for comment this week.Strauss in August quietly registered a new company, Smart Rate Mortgage, in Jacksonville, Florida, according to the Nationwide Multistate Licensing System. Smart Rate was granted a license to originate loans in Illinois in November, and Strauss is listed as a principal loan originator. The registration was first reported by HousingWire.Smart Rate's website includes loan application forms but does not include other details. The company's phone number returned a dead dial tone this week and a message to the firm's email address was unreturned.The embattled Strauss in 2009 agreed to pay a $2.45 million settlement with the Securities and Exchange Commission over his alleged role in the demise of American Home Mortgage. The SEC charged him with engaging in accounting fraud and misleading investors in his CEO role in the lead up to the lender's collapse at the onset of the Great Financial Crisis. Strauss neither admitted nor denied the allegations in agreeing to the settlement, and was barred from serving as an officer or director of a public company for five years.

There Is No Free Mortgage

January 26th, 2023|

You’ve heard the term “no free lunch.” Well, the same is true of home loans. There is no “free mortgage.”Sure, banks and lenders will offer deals that make it look that way. They’ll give you a mortgage without closing costs. Or without points.But that doesn’t mean it’s free. At the end of the day, everything has a cost.It’s simply how you pay for it that changes. And in the mortgage world, you’ve got options.You can accept a higher mortgage rate and pay nothing out-of-pocket. Or save each month via a lower interest rate instead.Zero Origination Fee Doesn’t Mean Free MortgageFirst things first. A zero origination fee doesn’t mean your mortgage is free. It just means the bank, lender, or mortgage broker isn’t charging an origination fee.An origination fee is an upfront fee that is charged to the borrower to provide compensation to the originator.Some mortgage companies charge it, others don’t. However, those that do not can still (and likely will) earn a commission a different way.Remember, nobody is taking time out of their day to help you get a mortgage without making money.That would be nice, but that’s just not how life works. And why shouldn’t someone get paid?If they’re helping you apply for and fund your home loan, they should be compensated. It’s actually hard work.Lender-Paid Compensation on MortgagesMany mortgage brokers get paid via lender-paid compensation. This means the lender pays them instead of the borrower.For the record, borrower-paid compensation is also an option. But it’s typically not the option chosen.Why? Because most borrowers would rather not pay a mortgage company or broker thousands of dollars out-of-pocket.So they opt for lender-paid instead. The way this works is simple. The lender has a rate sheet with slightly higher mortgage rates that factor in this compensation.For example, the borrower might be quoted a 30-year fixed rate of 6.5% with no fees whatsoever. It’s not a free mortgage.It’s a mortgage that has the fees built in. The higher interest rate covers the fees that would normally be paid by the borrower upfront.And instead of paying upfront, you pay over time. How? Via the higher interest rate.If you paid closing costs upfront and commission out-of-pocket, your mortgage rate might have been 6% or lower.A Free Mortgage Example$450,000 Loan AmountNot-Free MortgageFree MortgageMortgage Rate6%6.5%Origination Fee$4,500$0Closing Costs$2,250$0Total Upfront Cost$6,750$0Monthly P&I Payment$2,697.98$2,844.31Monthly Savings$146.33Now let’s compare those two options. The no cost mortgage with a 6.5% rate, and the 6% rate with out-of-pocket costs.The monthly payment on a $450,000 loan amount at 6% is $2,697.98 on a 30-year fixed mortgage.It’s $2,844.31 on the same loan at the higher 6.5% rate. That’s a difference of $146.33.Does that mean the mortgage with no fees is free? Or does it mean you have you pay nearly $150 extra each month?Similar to the no free lunch analogy, there’s always a cost. It’s just how/when it’s paid, not if it’s paid.However, that doesn’t necessarily mean one is a better or worse deal. You’ve got to do the math and decide.A Free Mortgage Can Be a Better or Worse DealNow to determine if free is better than not free. At least when speaking of upfront costs.Remember, the free mortgage is about $150 extra per month. But we need to consider the closing costs on the not-free mortgage.If our hypothetical borrower got the 6% rate, they had to pay lender fees at closing. And third party fees too, such as escrow, title insurance, appraisal, etc.Let’s pretend they paid 1% in commission to the loan originator and another $2,250 in closing costs. That’s $6,750.So while they’ll save about $150 per month, they’re “in the hole” $6,750 versus the free mortgage borrower.But each month, they’ll dig themselves out of that hole. This happens via a lower payment and less interest paid. Lower-rate mortgages result in less interest. And more paid toward principal.In order to get in the black, or pay off those upfront costs, it would take about 40 months of mortgage payments.After that, the 6% mortgage rate holder is winning. They’ve paid off the closing costs and are saving each month thereafter.It Depends How Long You Keep Your Mortgage, and What Happens to Rates in the MeantimeAs you can see, time is a big factor in the free vs. not-free mortgage equation. The borrower who opts for the not-free mortgage must keep the mortgage for a while.If they don’t, they leave money on the table. They never fully realize the monthly savings paid for at closing.This means if they sell or refinance the mortgage, they don’t win. At least in terms of those closing costs they paid for.So you need a plan when you take out a mortgage. Think about how long you expect to keep the house. And perhaps the mortgage too.But note that mortgage rates are subject to change. They can even change daily.If you pay closing costs out of pocket AND discount points today for an even lower rate, it might not work out.You might find that 30-year fixed rates are back below 5%. And whatever you paid will be gone if/when you refinance to that new lower rate.So the free mortgage gives you a little bit of insurance policy. It’s not as cheap monthly, but you can refinance at will if rates improve. You can also sell your home at will.Oh, and you can pay it off early too to reduce the interest expense as well.

Mortgage rates decline for third week in a row

January 26th, 2023|

Mortgage rates continued to slide this week, moving in an opposite direction from the benchmark 10-year Treasury, which rose as much as 15 basis points during the past seven days, Freddie Mac reported.Its Primary Mortgage Market Survey for the week of Jan. 26 found the average for the 30-year fixed rate loan fell by 2 basis points to 6.13% compared with the prior period and 35 basis points from the first week of 2023. For the same week last year, the 30-year FRM was at 3.55%. The drop in the 15-year FRM was even larger, down 11 basis points to 5.17% from 5.28% for the week of Jan. 19. A year ago, this rate was at 2.8%.Freddie Mac changed its methodology and now uses applications submitted to Loan Product Advisor to determine its results rather than a lender survey.Zillow, whose tracker is based on offers made through its mortgage marketplace, reported both of those rates increased 3 basis points as of Thursday morning from the prior week, to 5.9% and 4.93% respectively.Part of the variation can be explained by the larger-than-normal spread between the 30-year FRM and the 10-year Treasury. Typically the difference between the two is 250 basis points. The 10-year Treasury opened at 3.49% on Thursday morning, a gap of 264 basis points compared with the Freddie Mac survey and 240 basis points from the Zillow tracker.Zillow's increase is a result of the market looking ahead to next week's updates on monetary policy and the labor market, Orphe Divounguy, senior macroeconomist at Zillow Home Loans said in a statement issued Wednesday night."The end of China's zero-COVID policy, lower inflation in Europe and in the U.S., and evidence of enduring labor market strength all suggest that the risk of a recession may be waning."That changed perception regarding a recession limits how far mortgage rates could fall, Divounguy continued. But the economic outlook remains cloudy."Indeed, data released this week from the Conference Board and the S&P Global Flash US PMI Composite Output Index suggest that a recession is still very much a possibility," Divounguy said. "Investors will be keeping a close eye on the [personal consumption expenditures] price index, the January jobs report, and the Fed — as the FOMC meets next week — for more clarity on the state of the economy and the central bank's plans."Home purchase demand is thawing as a result of lower mortgage rates, said Sam Khater, Freddie Mac chief economist in the press release. "Potential homebuyers remain sensitive to changes in mortgage rates, but ample demand remains, fueled by first-time home buyers."New home sales rose for the third consecutive month, which was attributed to falling rates, the federal government reported on Thursday morning. However, this report is not adjusted for canceled contracts."Lower mortgage rates, builder incentives, and a lack of existing-home inventory might make new homes attractive enough to entice more buyers," First American Deputy Chief Economist Odeta Kushi said in a commentary on the new home sales report. "The latest uptick in builder confidence is a sign that builders believe lower mortgage rates may lift demand."On Wednesday, the Mortgage Bankers Association's Weekly Application Survey revealed that activity increased for the third consecutive week."Borrower demand, thanks to lower mortgage rates, continues to rise in early 2023," Bob Broeksmit, the MBA's president and CEO said in a Thursday morning statement. "Purchase demand is still below year-ago levels, but lower rates and improving affordability are favorable developments for the housing market heading into the spring."

Mortgage delinquency rates drop for the 20th consecutive month

January 26th, 2023|

Despite some economic uncertainty, the overall delinquency rate remained "near a historic low" in November, falling for the 20th consecutive month, per a report by CoreLogic published Thursday.A mere 2.9% of all mortgages in the nation were in some stage of delinquency in November, a 0.7% decrease year-over-year, according to the data vendors' loan performance insights report.The foreclosure rate was also at a record low of 0.3% two months ago.By category, early-stage delinquencies (30 to 59 days past due) slightly grew to 1.4% in November, up from 1.2% in the same month in 2021. The adverse delinquency rate (60 to 89 days past due) slightly ticked up to 0.4% up from 0.3% in 2021, while the share of serious delinquencies (90 days or more past due) dipped to 1.2% in November 2022, down from 2% year-over-year.The report also found that all 50 states posted annual declines in overall delinquency rates in November, with Louisiana (down 1.9%) , Alaska (down 1.6%)  and Hawaii (down 1.3%) reporting the largest declines.And though the overall delinquency rate has declined, late borrower payments slightly grew in November, with 18 metro areas reporting an increase, up from six metro areas in October.The top three areas for mortgage delinquency gains year- over- year were Cape Coral-Fort Myers, Florida (up 3.1%), Punta Gorda, Florida (up 2.9%) and Bloomsburg-Berwick, Pennsylvania (up 0.6%), the data vendors report said.However, the slight increase in late borrower payments shouldn't be a cause for alarm. Home equity growth has created a cushion for most homebuyers "[positioning them] to weather a shallow recession," the report argues. "More than a decade of home price increases has given homeowners record amounts of equity, which protects them from foreclosure should they fall behind on their mortgage payments," said Molly Boesel, principal economist at CoreLogic.Equity increased by 15.8% year-over-year in the third quarter of 2022, for an average gain of $34,300 per borrower, per the data vendor.

Home sales eke out gain to cap disappointing year on rates

January 26th, 2023|

Sales of new U.S. homes rose for a third month in December, wrapping up an otherwise disappointing year in which soaring borrowing costs stifled demand and weighed on the economy.Purchases of new single-family homes increased 2.3% to an annualized 616,000 pace after a downward revision to the prior month, government data showed Thursday. The median estimate in a Bloomberg survey of economists called for a 612,000 rate.Some 644,000 houses were bought in 2022, the smallest annual total in four years, as aggressive monetary policy tightening by the Federal Reserve pushed mortgage rates up sharply. Combined with prices that were slow to decline, home-buying conditions late last year were the worst in a generation.Still, the residential real estate market is starting to stabilize. Mortgage rates continue to retreat and are back below 6% while prices are cooling. Builder sentiment rose this month for the first time since 2021. D.R. Horton Inc., one of the largest US builders, reported quarterly results this week that beat expectations while expressing optimism about future demand.The government's report showed sales climbed in two of four regions, led by a more than 35% jump in the Midwest. Sales dropped in the Northeast and West.The report, produced by the Census Bureau and the Department of Housing and Urban Development, showed the median sales price of a new home rose 7.8% from a year earlier to $442,100.Housing InventoryThere were 461,000 new homes for sale as of the end of last month, though the majority remain under construction or not yet started. The number of homes sold in December and awaiting the start of construction — a measure of backlogs — increased to the highest since March.The number of completed homes that were sold in December declined.The weakening in housing last year weighed on the economy. The government's initial estimate of fourth-quarter gross domestic product showed residential investment subtracted 1.29 percentage points from growth. New-home purchases account for about 10% of the market and are calculated when contracts are signed. They are considered a timelier barometer than purchases of previously-owned homes, which are calculated when contracts close. Still, the new-homes data are volatile. The report showed 90% of confidence the change in sales ranged from a 16.2% decline to a 20.8% increase.

U.S. economy expands at a faster-than-expected 2.9% pace

January 26th, 2023|

The U.S. economy expanded at a healthy pace in the fourth quarter, though an extended salvo of Federal Reserve interest-rate hikes is seen jeopardizing growth prospects this year.Gross domestic product increased at a 2.9% annualized rate in final three months of 2022 after a 3.2% gain in the third quarter, the Commerce Department's initial estimate showed Thursday. Personal consumption, the biggest part of the economy, climbed at a less-than-forecast 2.1% pace.Median projections in a Bloomberg survey of economists called for a 2.6% rise in GDP and a 2.9% advance in spending. About half of the GDP increase reflected inventory growth, while government spending matched the biggest gain since early 2021.The report also showed some signs of stress for American consumers whose wages have failed to keep up with inflation and continued to encourage them to draw down savings accumulated from government pandemic-relief programs. The burden of elevated prices and higher borrowing costs is mounting, pointing to a tenuous outlook for the economy.The latest Bloomberg monthly survey shows economists see the economy shrinking in the second and third quarters, putting 65% odds on a recession in the coming year.Recent data show cracks are developing more broadly. Retail and motor vehicle sales data showed households are starting to retrench, the housing market continues to weaken and some businesses are reconsidering capital spending plans. As the Fed continues to hike interest rates to ensure inflation is extinguished, housing and manufacturing have deteriorated quickly while industries including banking and technology are carrying out mass layoffs. The GDP report showed the personal consumption expenditures price index, a key inflation metric for the Fed, rose at an annualized 3.2% rate in the fourth quarter, down from a 4.3% pace in the prior three months. The core index that excludes food and energy climbed at a 3.9% rate compared with 4.7% paces in the prior two quarters. Monthly data for December will be released Friday.The moderation in price pressures is consistent with forecasts that the Fed will further scale back its tightening campaign next week, when it's expected to raise rates by 25 basis points. Policymakers boosted the benchmark rate by 50 points in December after 75 basis-point hikes at their previous four meetings.

Delinquencies climb upward to close the year

January 25th, 2023|

Mortgage delinquency rates increased in December to close out the year, but still sat below its mark at the end of 2021, new data from Black Knight showed.A growing number of missed early payments drove the overall rate upward, but more serious defaults of 90 days or more dropped on both a monthly and annual basis, according to the housing data and analytics provider's December First Look report.Delinquencies as a share of serviced loans increased to 3.08% from November, representing a total of 1.65 million mortgages. The number includes all loans more than 30 days past due but not in foreclosure and came in higher by approximately 41,000. But year-over-year, the rate fell by about 9% or 146,000.The monthly uptick appeared tied to a rise in early defaults, as accounts which were delinquent by 90 days or more declined by 5,000 and 401,000 on both a monthly and annual basis to 545,000 loans. Forty-four states saw serious delinquencies fall compared to November, with Florida being a notable exception. With many homeowners in the Sunshine State still dealing with damages from Hurricane Ian, the number of seriously delinquent mortgages there climbed by 8,700.While the monthly rise might catch the attention of servicers, the general health of the typical U.S. homeowners appears on more solid footing compared to the same point a year ago, with the national rates lower.Black Knight's December data largely corresponds to trends reported earlier this month by the Federal Housing Finance Agency, which found early-stage defaults up among loans held by Fannie Mae and Freddie Mac, but drops in more serious delinquencies and completed foreclosure-prevention activity. But servicers will be tracking the trajectory of defaults in the coming months, particularly for mortgages originated in the last 12 months With the housing market slowing and depreciating the values of some properties, Black Knight previously reported more than 250,000 loans originated in 2022 were already underwater at the end of the third quarter.Meanwhile, in another sign of how rising interest rates have affected borrowers, prepayment activity dropped to 0.39%, with single-month mortality falling to a third consecutive low mark since Black Knight began tracking the data in 2000. Although low prepayment rates may benefit servicers with increased revenue over the long term in the form of more accrued interest on the one hand, they could also point to signs that households are facing tighter finances. A higher concentration of noncurrent mortgages occurred in the Southeast, with states in the area accounting for three of the top five spots in delinquency rates. Mississippi led the nation at 6.87%, ahead of Louisiana at 6.33%. Oklahoma, West Virginia and Alabama followed at 5.16%, 4.92% and 4.91% respectively.

Renasant Bank cuts mortgage division by 30%

January 25th, 2023|

Renasant Bank reduced the headcount of its mortgage division by 30% since December 2021, said Mitchell Waycaster, CEO of the Tupelo, Mississippi-based bank, during the company's fourth quarter earnings call Wednesday. Renasant Bank joins a mounting list of banks, nonbanks and mortgage technology vendors that have downsized their workforce in reaction to a contracting mortgage market. The reduction was driven by mortgage market volatility, which Waycaster called "not a surprise or a secret." It is unclear what positions were impacted or the exact number of employees let go. Renasant did not immediately respond to a request for comment. However, Waycaster pointed out that he sees positive signs emerging in the mortgage market. For one, Renasant is currently doing some "strategic hiring." "The disruption in the market has created an opportunity for hiring and I reckon that that's a little bit counter to maybe what the trend should be," the company's CEO said.Origination volume also seems to be rebounding. Since the beginning of the year, the depositories pipeline grew by 30%, increasing from $100 million to $130 million."There are some signs that that production is coming back, but it's variable on rate, and it's variable on product and inventory," said Waycaster. "All of those just feel a little bit volatile right now, but we feel good with where we're positioned." Overall, Renasant Corporation, parent company of the bank, reported a "solid" net income of $46.3 million for the fourth quarter, up 25% from the fourth quarter of 2021 where the company reported a net income of $37 million, but slightly lower than $47 million in the third quarter of 2022.The bank's mortgage division generated $500 million in interest rate lock volume, a decline from $600 million in the third quarter of 2022.  Renasant's gain on sale margin came in at 1.64%, up 61 basis points on a linked quarter basis.Noninterest income for service charges on deposit accounts was $10.45 million during the fourth quarter, slightly higher than $10.22 million in the third quarter. The company's wealth management and insurance lines of business "produced steady results" of a combined $7.7 million.The company also completed its acquisition of Republic Business Credit in New Orleans.The deal, which closed Dec. 30, marked the second acquisition of a specialty lender in 10 months. In March, Renasant paid an undisclosed sum for Southern Commercial Finance, an asset-based lender in Birmingham, Alabama. That transaction added about $28 million of loans to Renasant's balance sheet. Republic has approximately $100 million of assets.

Most Gen Zers feel a mortgage is out of reach: survey

January 25th, 2023|

Lenders need to be preparing today to meet the needs of new-to-credit consumers that may come up several years down the road, TransUnion said.In the United States, 5.8 million consumers opened their first credit product in 2021 with another 3 million during the first half of 2022. That was on top of 6.1 million in 2019 and 5.1 million in 2020.TransUnion defined a new-to-credit consumer as one without a prior history in their file that took out their first traditional credit product.Those include credit cards, auto loans, home loans, personal loans, student loans and retail store card accounts. In 2021, 59% of people in this category opened a credit card as their first product, followed by an auto loan 13%, and a private labeled store card, 8%, according to the report, Empowering Credit Inclusion: A Deeper Perspective on New-to-Credit Consumers. However, "the new credit consumers of today are going to be the mortgage borrowers of tomorrow and tomorrow might be five or 10 years [away]," said Charlie Wise, head of global research and the co-author of the study, in an interview. "But this is the first step to building the credit history and the credit score that is going to be needed to get a mortgage."The study looked at new-to-credit borrowers starting in 2019 and if a U.S. consumer opened a new trade line in the next two years, the next product was also likely to be a credit card. Once again, this is allowing consumers to build a track record that will allow them to get a mortgage at the time that is right for them, Wise said.But survey respondents thought that they would have some difficulty in obtaining home financing as part of their future credit needs.When asked which credit products they don't feel they have access to, "the No. 1 answer is mortgage; 32% of those [new credit consumers] said I don't have access to mortgage today," Wise noted.For 2021, Gen Z was the largest segment of new-to-credit consumers at 59%, the oldest of which are approximately 28 years old and not quite yet in prime home buying age, Wise said. They were followed by millennials (21%), Gen X (12%) and baby boomers (7%). The younger consumers recognize that building a credit profile is something that is going to take some time. "This is something that younger borrowers in particular are already thinking about as a reason to practice good credit habits," he said.To determine if these new-to-credit consumers were making their payments, the study looked at those who opened a subsequent credit card during the following two years and the delinquency performance after six months on the second debt product.In the near prime and prime credit score bands — where many NTC consumers fall early in their credit journeys — their delinquency rate was comparable to, or even better than, more established credit-served consumers, TransUnion said.For the study in the U.S., TransUnion used the VantageScore 4.0 model, which defines near prime borrowers with scores between 601 and 660, with prime at 661 or higher.To reach these new-to-credit borrowers in the future, debt providers must tailor the experience to meet their early stage needs."Lenders need to understand which credit products are most needed and valued by NTC consumers as their first product and over their initial two-year journeys," the report said. "In addition to availability of the right products, convenience, fast approvals/funding, relevant benefits, appropriate credit lines and pricing are all important considerations."Increased use of alternative data to assess the creditworthiness of these borrowers is also required. "Banks, credit unions and other financial institutions who use alternative data while providing products, channels and a positive onboarding process, will likely be the ones who succeed in building loyalty with this segment of the population," said the report's other co-author Michele Raneri, head of U.S. Research at TransUnion, said in a press release.Initiatives to increase the use of alternative data in underwriting for thin credit file borrowers has recently picked up steam.This includes the announcement by Federal Housing Finance Agency Director Sandra Thompson at Mortgage Bankers Association annual convention in Nashville back in October of updates to the credit scoring models the government-sponsored enterprises can use in their automated underwriting systems.Just prior to the MBA convention, another credit repository, Equifax added alternative data to its mortgage credit reports."This data can also be used to identify lower-risk borrowers and provide better terms and pricing — which are cited as top reasons NTC consumers don't accept the offers they receive," the report noted.Lenders need to conduct frequent reviews of their portfolios of new-to-credit borrowers, in large part for potential product cross-selling opportunities as well as building brand loyalty and retention, it found.However, cross-selling activity needs to be conducted carefully, as Wells Fargo's recent pitfalls have shown.It is important to ask your customers what their goals are in their lives, rather than just pushing products, Wise said. "Lenders ought to be understanding the needs of the consumers where they are, what they need and positioning the right products for them."

Redfin slump worsens as housing-market risks weigh on stock

January 25th, 2023|

Redfin Corp. shares sank further Wednesday as the outlook for the housing market weakens.  Shares of the digital real estate company fell as much as 16% Wednesday after Needham & Co Inc. analyst Bernie McTernan cut his housing market forecast for 2023 and lowered revenue estimates for Redfin and its peers Zillow Group Inc. and Compass Inc. McTernan said in a note Wednesday that he is "taking a more conservative approach" to Redfin's future market share gains, especially in 2024."We think management has the right sense of urgency to get the cost structure in the right spot (layoffs, price increase) but it is unclear how much further there is to go on these measures, making market growth and market share gains increasingly important," McTernan wrote in a note.Total volume for U.S. home sales is expected to be down 18% this year from a year ago, according to McTernan, who previously forecast a 10% decline. Higher mortgage rates and home prices have driven housing affordability to 15-year lows, according to the note. "Worsening macro conditions could put our estimates to the test, and worsen the affordability issues while housing supply remains tight," the note said. "We think revenue growth is more necessary to drive Z and RDFN equity higher, and we think will be difficult with November and December existing home sales down YoY -36% and -37%, respectively," McTernan wrote. Among the digital real estate companies, McTernan said Compass "remains top pick in the space," citing the company's recent cost-cutting efforts as helping. Compass rose as much as 2.9%, while Zillow was down as much as 7.8% Wednesday.

Justin Andrews To Lead Retail Branch Partner Channel at Movement Mortgage

January 25th, 2023|

[KIRKLAND, WASHINGTON – January 25, 2022]  — Movement Mortgage, the nation’s sixth-largest retail mortgage lender, is excited to announce the addition of Justin “Juice” Andrews as director of branch partnerships. This newly created position will focus on developing and growing Movement’s retail branch partner channel. Andrews has worked in the home finance industry for twenty-five years, most recently as the senior vice president of business development at Hometown Lenders in Huntsville, Alabama. Continue reading Justin Andrews To Lead Retail Branch Partner Channel at Movement Mortgage at Movement Mortgage Blog.

Mortgage applications increase for third straight week

January 25th, 2023|

Mortgage activity continued its early-year upswing, with both conventional and government loan application volumes increasing last week, according to the Mortgage Bankers Association. A week after it surged by nearly 28%, the MBA's Market Composite Index, a measure of weekly application activity based on surveys of association members, jumped again by a seasonally adjusted 7% for the seven-day period ending Jan. 20. This week's index includes an adjustment for the Martin Luther King Jr. holiday. Although volumes were up for the third week in a row, activity was still running almost 54% slower on a year-over-year basis.Borrowers benefited from an ongoing decline in mortgage rates, which also dropped for a third straight week. "Overall applications increased with both gains in purchase and refinance activity," said Joel Kan, MBA's vice president and deputy chief economist, in a press release. The seasonally adjusted Purchase Index climbed 3%, thanks to elevated business in the conventional market. Despite the increase, current home buying activity remains "tepid," according to Kan, with weekly volume lower by 39% on a year-over-year basis.But recent renewed interest in purchases, as well as the direction of rates and housing costs, is encouraging news ahead of the spring home buying season."If rates continue to fall and home prices cool further, we expect to see potential buyers come back into the market. Many have been waiting for affordability challenges to subside," Kan said.Inflation and the Federal Reserve's response to it will determine where and when the housing market finally settles, Odeta Kushi, First American deputy economist, recently said in a research statement."Once mortgage rates peak, home sales volume and price declines will stabilize. That all depends on what the Fed chooses to do in the coming months and whether inflation begins to decline." she said. The Refinance Index also rose 15% from seven days earlier but came in 77% below year-ago levels, as most borrowers were already locked into lower interest rates, Kan said. The share of refinances relative to overall volume also increased to 31.9% from 31.2% a week earlier.As mortgage application volumes have increased, a corresponding jump in average loan sizes so far this year is also taking place. The average amount recorded on new purchase applications came in 3.4% higher compared to the previous week, rising to $415,000 from $401,300. The mean refinance size climbed up 2.5% to $269,300 from $262,700. The average across all applications last week saw a 2.9% increase to $368,500 from $358,100.With rates decreasing in recent months, interest in adjustable-rate mortgages have waned as well. The ARM share further slipped last week to 6.5% from 6.6%. During the fourth quarter, adjustable-rate mortgages were garnering over 10% of volume for a brief period at the height of the rate surges. The share of federally sponsored activity in relation to total volume came in a notch higher overall, but noticeable changes were seen in the types of government loans sought. Federal Housing Administration-backed applications made up 11.9% of activity, falling from 13% a week earlier. But Department of Veterans Affairs-guaranteed mortgages increased their share by a slightly larger margin, increasing to 13% compared to 11.8% seven days prior. Volumes coming from the U.S. Department of Agriculture program remained at 0.6% week over week.Meanwhile, mortgage rates for most loan types decreased again among MBA lenders last week, according to Kan.The contract interest rate for the 30-year fixed mortgage with conforming balances of $726,200 or less averaged 6.2%. One week earlier, the rate came in at 6.23%. Points for 80% loan-to-value ratio loans increased to 0.69 from 0.67. The average 30-year fixed-contract jumbo mortgage rate for loans exceeding the conforming amount took an even larger 18 basis-point drop to 5.92%, compared to 6.08% seven days prior. Points increased to 0.41 from 0.4.The FHA-backed 30-year fixed rate mortgage slipped 4 basis points to an average of 6.22% from 6.26% the previous week, with points increasing to 1.1 from 1.05.The average contract interest rate of the 15-year fixed mortgage similarly decreased 4 basis points to 5.54% from 5.58%. Points decreased to 0.51 from 0.54 for 80% LTV loans.But the only increase of the week was for the average contract interest rate of 5/1 ARMs, which  climbed 13 basis points to 5.44% from 5.31%. Points also increased to 0.83 from 0.74.

Why school districts matter when buying a home

January 25th, 2023|

We help a lot of people buy homes. And one of the conversations we hear a lot between prospective homebuyers and real estate agents is what type of impact a school district has on the value of a home and the quality of life they can expect.  To be sure, school districts play an important role in influencing prospective homebuyers’ decision-making. Those most interested in living in better school districts are families with school-aged children or those planning on starting families in the future. Continue reading Why school districts matter when buying a home at Movement Mortgage Blog.

The 10 top markets for first-time homebuyers in 2023

January 25th, 2023|

Newcomers to the market still face mortgage rates above 6% and lofty home prices, but they can secure strong investments in some up-and-coming towns minutes away from major metropolitan centers, according to Realtor.com. "For those with a bit of flexibility in where they live, there are markets where young buyers can find not just a relatively affordable home, but a neighborhood that offers a mix of economic opportunity and lifestyle amenities," said Danielle Hale, Realtor.com chief economist, in a press release.The real estate firm's 10 best markets for first-time homebuyers features listings with the strongest combination of inventory, young residents, limited commutes and encouraging price trends (find Zillow's top 10 list for first-time homebuyers here). The locales in the list feature commutes under 30 minutes and plenty of local entertainment with an above-average amount of food and drink establishments and residents between ages 25 and 34. Most importantly, each town in the ranking features price-to-income ratios under the national average of 5.1, and forecasted home price growth compared to the national expected decline of 14.1%. Some of last year's top markets returned to the list, but former hotspots like Florida and Rocky Mountain metros fell behind North and East Coast locales. Realtor.com ranked towns with an expected population of at least 5,000 residents this year, and used its own housing data between December 2021 and November of last year. The ranking also utilized federal population and labor data and combined statistics for average food and beverage establishments per 1,000 residents, with the national average at 5.3.

VA introduces process to weed out appraisal bias

January 24th, 2023|

As the federal government pushes forward with its initiative to clamp down on appraisal bias, housing agencies are rolling out additional tools to do so. The Department of Veterans Affairs is the latest to announce further resources to help identify discriminatory bias during the appraisal process.The VA is buckling down on valuation bias by making changes to its oversight policies and urging the program's certified appraisers to take training on fair lending.Its "enhanced" oversight procedures now include a multilayered review process. If discriminatory bias is confirmed, an appraiser "will be subject to removal," from VA's home loan program, per a circular published in mid-January."This is a new automation that we're building into our VA appraisal technology where an appraisal is scanned and if there is subjectivity and bias then the VA would have the ability to further review," said John Bell, deputy director of loan guaranty service at the VA and author of the circular, in a written statement. "We have always had oversight of appraisals in our review process, this is just an additional resource to ensure every veteran is treated fairly when purchasing a home."The department already has tools in place that can be used to challenge an appraisal such as a reconsideration of value (ROV) process and VA's tidewater policy, which allows "interested parties to provide additional sales data that may support the contract price." But the latest procedures will allow the VA to specifically tackle discriminatory bias.In a newly introduced three-pronged process, an initial review takes place on an appeal and if the department indicates that there is potential discriminatory bias, the file gets escalated for a second review. Following an escalated review, if discriminatory bias is confirmed "the appraiser will be subject to removal as a VA-approved appraiser." After that, the department will "refer the case to the proper enforcement agencies for further investigation," the VA's circular said.The changes "will better enable the VA to identify discriminatory bias in home loan appraisals and act against participants who illegally discriminate based on race, color, national origin, religion, sex (including gender identity and sexual orientation), age, familial status, or disability," the circular said.The VA's memo also reminded appraisers of Fannie Mae's form 1004, the Uniform Residential Appraisal Report, where they certify to not having "present or prospective personal interest or bias with respect to the participants in the transaction." And it urged appraisers to take "training on appraisal bias, fair housing, and fair lending."If discriminatory bias is uncovered and an appraiser has not taken such training, the "VA and other enforcement agencies may consider a participant's unwillingness to take the training as a relevant factor in any inquiry," the department's memo said.During a hearing held by the Federal Financial Institutions Examination Council's Appraisal Subcommittee (ASC) on Tuesday, Mike Fratatoni, chief economist at the Mortgage Bankers Association, noted that the trade group applauds the VA's move to modernize its appraisal process, but noted "that some additional work" needs to be done.The trade group has urged the VA to align its process more closely "with those of the FHA and the housing government-sponsored enterprises — Fannie Mae and Freddie Mac — to the greatest extent possible."In early January, the Department of Housing and Urban Development introduced proposed changes to its appraisal process, which includes an update to the FHA's reconsideration of value (ROV) process by including an option for borrowers to request another appraisal if they believe the original's results are skewed by racial bias.It is also looking to include specific guidance to process and document a borrower-initiated review of appraisal results. Feedback from the industry will be accepted until Feb. 2. 

Guaranteed Rate adds special purpose credit program in 6 markets

January 24th, 2023|

Guaranteed Rate is the latest lender to bring a special purpose credit program to market, providing up to $8,000 in assistance to underserved potential homebuyers.Specifically, the Chicago-based lender will provide a minimum of $5,000, along with an additional 1% of the sales price or $3,000, in down payment and closing cost assistance.The SPCP is currently available for first-time home buyers currently living in specific census tracts of six metropolitan areas — Atlanta, Baltimore, Chicago, Detroit, Memphis and Philadelphia. But the funds can be used for a purchase anywhere in the country."The barrier to entry for most renters who want to buy homes is the sizable down payment and initial repair or improvement costs," said Kasey Marty, Guaranteed Rate's executive vice president of secondary marketing. "This program helps tear down these barriers and open more doors to the houses, neighborhoods and lifestyles of our customers' dreams, an investment that will help build a foundation for generations to come."Additional features include improved pricing for nontraditional loans, a title insurance credit for certain properties and the removal of area median-income requirements.This new program is in addition to Guaranteed Rate's expansion of its Language Access Program last September created to deliver communication to applicants entirely in Spanish.In general, SPCP programs have gotten additional interest in the lending community following the Department of Housing and Urban Development's clarification in December 2021 that participation will not cause an inadvertent fair housing violation.Freddie Mac said it took the first steps towards creating one of these programs last September, aiming to introduce it this year. Meanwhile, Fannie Mae plans to test appraisal reimbursement through a SPCP.Among the lenders that now offer a SPCP are Legacy Home Loans, Bank of America and Rocket Mortgage. In the wake of its recent legal settlement with the Department of Justice, City National Bank will be launching special-purpose credit programs for commercial loans and residential mortgages that will target underserved populations in Los Angeles as well as New York, Georgia, Nevada and Tennessee.Wells Fargo said it is expanding its $150 million SPCP to refinance minority homeowners to now include purchase loans as part of the bank's announcement that it is shutting down the correspondent lending channel..

Chopra: It's time to revisit 'byzantine' regulatory regime for home appraisals

January 24th, 2023|

Regulators are gearing up to take a closer look at the "byzantine" regulatory structure overseeing the real estate appraisal profession.During a hearing on appraisal bias on Tuesday morning, Consumer Financial Protection Bureau Director Rohit Chopra turned the spotlight on the profession's rulemaking entity: the Appraisal FoundationChopra noted that the small nonprofit writes the standards for home valuation throughout the country and is funded by individual appraisers who must pay for access to the rules as well as by member organizations that pay fees. Because of its status as a private organization, he said, the foundation is not accountable to its stakeholders or any higher governmental agency. Rohit Chopra, director of the Consumer Financial Protection Bureau, questioned the Appraisal Foundation's "weird" regulatory role in setting standards for home appraisers during a hearing on appraisal bias.Bloomberg News "I guess I just want to ask others on the panel," Chopra said. "Does this arrangement seem weird?"Junia Howell, a sociologist who researches racial bias in home appraisal and a witness for the hearing, agreed that the regulatory regime is unique. She added that changes to it could help address discriminatory practices by appraisers."There is not really a single other regulatory structure like this in the country and maybe even in the world, so by the pure definition of the word 'weird,' yes," Howell said. "If you're also insinuating, is there a moral problem to it, I would suggest that yes, there needs to be a different structure that possibly increases some of the accountability" for the profession.When, how and how frequently rules are issued by the Appraisal Foundation has become a point of frustration for working appraisers in recent years. Many feel the organization has prioritized sales of its Uniform Standards of Professional Appraisal Practice, or USPAP, materials over the wellbeing of the profession. Others take issue with how state licensing boards implement and interpret the foundation's rules. Chopra said the mounting issues in the profession warrant at least additional attention from the regulatory bodies that make up the Appraisal Subcommittee."Not many people really understand how this byzantine system works, and I think it is something we really need to think about — about whether it's appropriate for this type of fee structure, and for there to be payments, including related to governance," he said. "I think that raises a lot of questions for the subcommittee, for the regulators and, potentially, for future hearings."David Bunton, president of the Appraisal Foundation, said in a written statement that the organization would work with the agencies on the Appraisal Subcommittee to address instances of bias in home valuation, which he acknowledged has impacted the general public's ability to trust the profession."Appraisal bias is a serious issue that undermines trust in the appraisal profession, and our boards have been collaborating with federal and state regulators to revise the standards and qualifications to ensure that it is crystal clear that discrimination is prohibited under the Uniform Standards of Professional Appraisal Practice and that appraisers receive necessary education on fair housing laws," Bunton wrote. "We appreciate the candor regulators have shown throughout these efforts, and we are committed to continuing to work with federal and state regulators to find solutions to root out bias and discrimination in the appraisal profession and to fulfill our congressionally authorized role to write and maintain standards and qualifications that uphold public trust." The discussion of the Appraisal Foundation came in the waning moments of an event hosted by the Federal Financial Institutions Examination Council's Appraisal Subcommittee, which oversees state appraisal licensing boards to ensure they implement the rules written by the Appraisal Foundation. The subcommittee includes representatives from the CFPB, Federal Reserve, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency, National Credit Union Administration, Federal Housing Finance Agency and Department of Housing and Urban Development. The purpose of the hearing was to explore issues of racial bias in home appraisal, which has emerged as a pillar of the Biden administration's push to root out systemic inequality. The topic has also become a focal point for regulators in Washington the past two years amid a rash of high-profile valuation discrepancies involving Black homeowners. Among the witnesses at the event were Paul Austin and Tanesha Tate-Austin, a Black couple that owns a home in Marin City, California, just outside of San Francisco. In January 2020, the Austins sought to refinance their home to take advantage of low interest rates and use the equity to cover home renovations, Tate-Austin said.After their initial appraised value came back lower than they expected, the Austins removed all evidence that they lived in the home and had a white friend stand in for them during a subsequent appraisal and pretend to be the homeowner — a practice that has come to be known as "whitewashing." The report, completed by a different appraiser, pegged the home's value at nearly $1.5 million, roughly $500,000 more than the initial appraisal. Tate-Austin said her family's experience highlights long-running discriminatory practices in Marin City specifically and in the real estate sector nationally."This issue is more than just one bad actor," she said. "It is systemic and requires a systemic solution."Chopra said there is no one fix for addressing discrepancies in home valuations. Even switching to automated valuation models, or AVMs — an idea floated by some panelists and witnesses — would not erase the human biases that have long favored certain neighborhoods over one another and skewed pricing trends accordingly. He also noted that while the topic of the day was addressing undervaluation of homes, historically, overvaluation has been a much bigger issue for banks and the broader financial system."I reflect a lot on how the regulators and the industry both fell short when it came to the financial crisis and one piece of that was, I think, some of the incentives around overvaluation," Chopra said. "And overvaluation can be a real, real big problem."Because of these twin risks, Chopra said, the focus for any adjustments to appraisal practice should focus on "accuracy," rather than urging appraisal to move higher or lower. FHFA Director Sandra Thompson made a similar point during the event: "I do want everyone to understand that, from FHFA's perspective, the issue is not higher values, it's fair values. And we want to make sure that takes place across the board."Chopra's remarks on the risks involved with overvaluation were welcomed by rank-and-file appraisers. Some worry that recent government actions to address bias will have the net impact of forcing appraisers to err on the side of valuing properties higher to avoid triggering complaints, a trend they say would erode their independence and put lenders at risk. Kipp Berdiansky, an appraiser in northern California, said that Chopra's views seemed "fair and balanced," and that he appreciated the director's acknowledgement of the limitations of AVMs. Yet, while Berdiansky would welcome a more streamlined regulatory regime for the appraisal profession, he told American Banker he is skeptical that one would have a meaningful impact on racial inequalities that manifest in home values. Like many appraisers, Berdiansky argued that homes in minority-majority neighborhoods tend to have lower values than their counterparts in predominantly white areas because of market realities. While some of those realities are tied to deeper systemic issues, such as racial wealth and income gaps, he said, they are beyond the reach of appraisers or their rulemakers to address."The byzantine structure of the Appraisal Foundation has nothing to do with appraisal bias and with race," he said. "If [Chopra] is suggesting that somehow reorganizing that will, quote-unquote, fix the other problem, that's crazy."

Loan modifications at GSEs dropped, but signs of early distress emerge

January 24th, 2023|

Foreclosure-prevention activity dropped for the sixth time in seven months in October for Fannie Mae and Freddie Mac-backed loans, but signs of early-stage borrower distress have emerged.Completed foreclosure-prevention actions on loans held by the government-sponsored enterprises declined 10% to 18,833 in October from 20,885 a month earlier, according to the Federal Housing Finance Agency. The total also represented a far steeper fall of over 71% from 65,735 a year earlier, as scores of mortgages exited forbearance relief plans introduced by the government at the start of the COVID-19 pandemic. Prevention actions encompass a variety of possible plans to assist borrowers, such as loan modifications, forbearances and payment deferrals, as well as short sales. One of the most common actions, completed loan modifications, fell by 14% to 6,500 in October, down from 7,524 a month earlier. After a sharp ramp-up between October 2021 to March 2022, modifications have followed a similar pattern of gradual decreases in subsequent months. Approximately 57% of modifications completed in October involved extended loan terms. Plans with principal forbearance made up 12% of all modifications during the month.Meanwhile, payment deferrals granted also dropped to 8,200 from 9,141 month over month, a decline of 10%. A year earlier, deferrals were approximately 560% higher at 45,965.The latest Fannie Mae and Freddie Mac data reflect broader trends seen on mortgage performance throughout the industry, showing a more stable pattern among distressed loans returning over the past few months. The Mortgage Bankers Association's Loan Monitoring Survey reported a consistent forbearance rate of 0.7% over the last three months. But an uptick in early-stage delinquencies seen in FHFA's October data continued trends from the third quarter and could register greater concern among servicers if numbers don't come down in following months. Loans past due by 30 to 60 days increased 11% between September and October to 263,989. At the same time the number of newly initiated forbearances increased 34% to 18,432 from 13,739.A likely cause of the sharp one-month rise in early delinquencies and new forbearances came from the aftermath of Hurricane Ian, which swept across Florida at the end of September. However, even though overall forbearance numbers increased almost 4% to 81,556 from 78,432, they made up only 0.26% of GSE loans serviced.The volume of loan modifications and other forms of servicer aid to borrowers may also see some further adjustments going forward compared to the pre-pandemic era. Even though servicers' assistance for homeowners affected by COVID-19 is approaching its end, the Consumer Financial Protection Bureau updated procedures last week to make pandemic relief options permanent. "We understand these streamlined options have been very successful in keeping consumers in their homes, and note that COVID-19 will continue to impact families, even beyond the national emergency," the CFPB wrote on its website.    

Unpacking the FHFA's zig-zag on multifamily housing goals

January 24th, 2023|

On December 21, the Federal Housing Finance Agency published a final rule on multifamily housing goals for Fannie Mae and Freddie Mac for 2023 and 2024.  There are three categories of multifamily goals: low-income units, very low-income units, and, since 2015, low-income units in small (5-50 unit) properties.  This final rule incorporates comments on a proposed rule, published on August 18.  However, in something of a zig-zag, in the final rule FHFA went on to state that there was little need for the third goal at this time, an unusual statement for a financial regulator in a regulation.The Housing and Recovery Act of 2008 established FHFA as the regulator of Fannie Mae and Freddie Mac, as well as the Federal Home Loan Bank System. One of FHFA's responsibilities under HERA is the establishment of certain affordable housing goals for the enterprises' funding of mortgages on both single-family (1-4 unit) and multifamily (5 or more unit) properties. Specifically, on the multifamily side, HERA called for goals for low-income families (income no greater than 80 percent of area median income or AMI) and very low-income families (income no greater than 50 percent of AMI.) FHFA's first multifamily goals, for 2010 to 2011, were expressed as minimum numbers of low-income units and very low-income units financed in each year.  The annual low income and very low-income goals for Fannie Mae exceeded those for Freddie Mac. Parity was established in 2015, when the low-income goal was 300,000 units for each enterprise for 2015 to 2017, rising to 315,000 each for 2018 to 2021, before jumping to 415,000 for 2022. Similar patterns prevailed for Fannie Mae's very low-income goal and Freddie Mac's goals.FHFA was very aggressive in setting the housing goals for 2022, increasing the low-income goal for Fannie Mae by 32 percent, to 415,000 units; the very low-income goal by 47 percent, to 88,000 units; the low-income small multifamily goal for Fannie Mae by 70 percent, from 10,000 units in 2021 to 17,000 units in 2022. For Freddie Mac, the low-income small multifamily goal was raised 130 percent, from 10,000 units in 2021 to 23,000 units in 2022. This disparity in the 2022 goals was despite the fact that both enterprises are active in the same market.Goals for 2023 to 2024 vs. goals for previous yearsAfter setting very aggressive goals for 2022, FHFA backed off considerably in setting the multifamily goals for 2023 to 2024. One major change was a switch from unit-based goals to percentage-of-business goals. For example, the low-income goal, 415,000 units for 2022, will be 61 percent of all units financed for 2023 to 2024, with similar changes in the other goals.  One advantage of this approach is that the goals expand or contract with changes in the market, and the majority of commenters supported this change.An important question is how the 2023 to 2024 goals compare with those in effect for 2022 and prior years. FHFA does not explicitly address this question, given that the 2023 to 2024 goals are expressed in percentage terms while those for 2022 and prior years were expressed in numbers of goal-qualifying units. But, as expected, there is clearly a strong relation between these two measures, and FHFA includes tables showing performance under both metrics. For example, in 2016, Fannie Mae financed 352,000 low-income multifamily units, 63.7 percent of all its multifamily units. By 2020, low-income volume was up to 442,000 units, or 70.9 percent of all multifamily units. The figures for Freddie Mac and the other two goals for Fannie Mae are similar.Of course, enterprise multifamily volume is impacted by many factors besides FHFA's housing goals. And the fact that both enterprises' performance have generally exceeded the goals by wide margins implies that the goals have played a minor role in the enterprises' multifamily business. The reductions in the multifamily goals for 2023 to 2024 suggest that these goals will have little, if any, impact on the GSEs' multifamily operations in future years.

How the Fed Could Benefit from Lower Mortgage Rates

January 24th, 2023|

The Fed has played a major role in consumer mortgage rates over the past decade and change.Back in 2008, they began purchasing hundreds of billions in mortgage-backed securities (MBS). This was known as quantitative easing, or QE for short.The goal was to drive interest rates lower and increase the money supply. Doing so would boost economic activity, aka lending, and help us out of the Great Recession.But there were consequences to such a plan – namely something called inflation.The Fed also knew it couldn’t hold onto these assets forever, but how would they unload without riling the markets?Quantitative Easing Led to Raging InflationThe Fed conducted four rounds of quantitative easing, which involved buying both MBS and U.S. treasuries.The final round of QE extended all the way into 2020 as the COVID-19 pandemic dislocated the world economy.In the process, mortgage rates hit all-time record lows. The 30-year fixed dipped as low as 2.65% during the week ending January 7th, 2021, per Freddie Mac.And the 15-year fixed fell to 2.10% on July 29th, 2021. These low rates were unprecedented.They were so cheap that they set off a housing market frenzy, with home prices rising nearly 50% from late 2019 to mid-2022.Clearly this was unhealthy growth, and a symptom of easy money.Fed Finally Takes Action to Cool the Housing MarketThe Fed realized that they had an inflation problem. They also realized housing demand had gotten completely out of control.Folks were buying homes for any price, thanks in huge part to the record low mortgage rates on offer.It wasn’t just a housing supply issue, as some had pointed out. This meant they had the power to cool off the overheated housing market, simply by reversing course.Once they finally took notice, quantitative tightening (QT) was implemented in mid-2022. It works the exact opposite way of QE.Instead of buying, they’re letting these securities run off. And this means unloading treasuries and MBS, albeit at a reasonable rate with caps in place.Without a big buyer of MBS, supply increases, bond prices drop, yields rise, and consumer mortgage rates go up.No one could have guessed how much they’d rise in such a short period. That too was unprecedented.Mortgage rates essentially doubled in a year, the first time that has happened on record.The 30-year fixed ended 2022 at an average of 6.42%, up from about 3.11% a year earlier, per Freddie Mac. Mission accomplished.Home Prices Peak and Begin to FallOnce the reality of much higher mortgage rates set in, the housing market stalled and began to fall.It began with decelerating year-over-year gains, which were in the double-digits. And eventually led to month-over-month declines.The latest report from CoreLogic shows home prices increased 8.6% in November 2022 compared with November 2021.But on a month-over-month basis, were down 0.2% in November 2022 compared with October 2022.They’re currently still expected to rise 2.8% from November 2022 to November 2023.However, individual markets have seen much bigger declines, especially if you consider peak prices that might not be captured in the data.Zillow recently pointed out that home values were actually lower than last December in Austin (-4.2%), San Francisco (-2.0%), and Seattle (-0.6%).This has caused a lot of people to ring the alarm bells, calling for another housing market crash.But wait…Low Mortgage Rates to the Rescue?While much higher mortgage rates made 2022 an awful year for home buyers, real estate agents, and mortgage industry workers, 2023 might be better.Sure, it seemed as if we were on the precipice of a crash, but it was mostly driven by substantially higher mortgage rates.At their worst, 30-year mortgage rates climbed above 7% in late 2022, but there’s been some serious relief since.The 30-year fixed is back around 6%, and if you’re willing to pay discount points, rates in the low-5% range aren’t out of the question.Aside from this being psychologically better, lower rates boost affordability and allow home sellers to fetch higher asking prices.This means the spring home buying/selling season might actually be decent. It also means forecasts for home prices to rise year-over-year could hold up.Of course, holding up is a lot different than years of double-digit gains.But it does represent a healthier housing market, which we should all be happy about.Inflation May Have PeakedIf you look at the last few CPI reports, it appears inflation may have peaked. We’re not out of the woods, but there are positive signs.At the same time, the Fed may also be done raising its own target fed funds rate. The prime rate is dictated by the fed funds rate.This has increased HELOC rates for scores of homeowners. If/when the Fed stops raising and begins lowering their own rate, HELOC rates can come down.That will spell more relief for existing homeowners with these lines of credit.Perhaps more importantly, if inflation truly has peaked and is falling, long-term mortgage rates can come down too.Lower mortgage rates will buffer the housing market and limit any downward movement on home prices.These lower mortgage rates may even benefit the Fed!Okay, How Do Lower Mortgage Rates Benefit the Fed?I may have buried the lede, but we got here eventually.Remember, the Fed has a ton of MBS on its balance sheet. At last glance, around $2.6 trillion.They’re currently letting $35 billion in MBS mature and “run off.”Since QT began in June 2022, its MBS holdings have fallen by roughly $67 billion, or about 2.5%. That’s apparently too slow.Here’s the problem the Fed is facing. With current mortgage rates significantly higher than the rates on all those MBS, no one is refinancing their mortgage or selling their home.So most of these MBS aren’t getting paid off. This may force the Fed to outright sell the MBS, which would likely be bad for rates.But if mortgage rates drop back to more reasonable levels, we might see an uptick in home sales, mortgage refinancing, and so on. If that happens, the associated MBS get paid off.This would allow the Fed to unload their trillions in MBS a lot faster. And that could benefit the Fed without upsetting the markets.So in a sense, the Fed could begin to root for lower mortgage rates. Not 2-3% rates, but rates in the 4-5% range.Read more: 2023 Mortgage Rate Predictions

Ocwen CEO and president Glen Messina also appointed chair

January 24th, 2023|

Glen Messina, Ocwen Financial's president and CEO, is adding the board chair title effective immediately, the company announced.Former Treasury official Phyllis Caldwell, who served as Ocwen's non-executive chair since February 2016, plans to remain on the board and seek reelection as an independent director at the next annual meeting."My decision to step down as chair follows ongoing discussion with the board focused on balancing the needs of maintaining continuity and succession planning," Caldwell said in a press release. "Glen has developed a tremendous track record at Ocwen and our decision to have him assume the role of Chair reflects the confidence and trust we have in him, as well as the entire executive leadership team."Messina joined Ocwen as president and CEO following its October 2018 acquisition of PHH, a transaction to help the West Palm Beach, Fla.-based company comply with a series of regulatory settlements that required it to change its mortgage servicing platform to Black Knight's MSP. The related case with the Consumer Financial Protection Bureau, which was filed in 2017, was remanded by the Eleventh Circuit Court of Appeals back to a lower court last April. At that time of the merger, Messina was no longer PHH's president and CEO, having resigned in June 2017.As a result of Messina taking the chair position, Ocwen's board appointed Kevin Stein as lead independent director. He currently is an independent consultant, but among his past positions were stints as a managing director in the Financial Institutions Group of Barclays; a partner and group head of depository investment banking at FBR & Co.; and as a member of the leadership team of GreenPoint Financial (a New York thrift that several mergers later is now part of Capital One)."Kevin's track record as a board member and his extensive background in mortgage and investment banking make him the ideal person to serve in this role," Caldwell said.

Debt-limit fight risks early end to Fed quantitative tightening

January 24th, 2023|

The Federal Reserve's quantitative-tightening program risks being propelled toward an early end as U.S. politicians bicker in Washington over raising the national debt limit, according to some economists and bond market participants.By shrinking its bond portfolio by up to $95 billion a month, the central bank is draining liquidity from the US financial system — complementing its interest rate hikes in the battle to control inflation. An early end to QT could therefore provide the U.S. economy with some relief.Through a complex series of reactions, constraints imposed on the Treasury Department by the debt limit could end up amplifying some of the impact of QT later this year. The U.S. Capitol dome is seen reflected in a window of the Library of Congress in Washington, D.C., U.S., on Tuesday, Feb. 15, 2022. Senators have until Friday to pass a continuing resolution to fund the government or face a federal government shutdown, as lawmakers continue crafting an omnibus spending bill for the rest of the fiscal year. Photographer: Sarah Silbiger/Bloomberg Commercial bank reserves parked at the Fed form a part of the U.S. financial bedrock, and when the Fed's first foray with QT caused them to shrink in 2018 and 2019, stocks saw declines and money markets seized up. Dynamics caused by the debt limit could have the effect of a more rapid shrinking of reserves later this year — potentially bringing forward the end of QT, even if the U.S. avoids a default."It's a complicating factor — because we just don't know how all these things are going to net out against each other," said Blake Gwinn, head of U.S. rates strategy at RBC Capital Markets. "There's really two major sources of uncertainty around this process. We don't know what the right level of reserves is," nor how long it will take to get there, he said. And the debt limit "adds uncertainty around the pace at which we're getting to that end level."It all makes for a big change from just weeks ago, when the Fed concluded that its bond-portfolio runoff was "proceeding smoothly," according to minutes of the December policy meeting.That runoff process can shrink liquidity via two major channels: bank reserves and the so-called reverse repurchase facility, or RRP, which serves as a parking place for money market funds. It can make a difference which one shrinks, because reserves are viewed by economists as having a more powerful role in supporting credit in the economy.When the Treasury draws down its cash pile and has to start restraining its sales of government securities later this year, there will be less Treasury-bill supply for money market funds. That means they'll likely need to park more in the reverse-repo facility.What could then happen is that the other channel affected by Fed QT — bank reserves — end up shrinking faster."All of this cash is going to be put to work in the Fed's RRP facility," said John Velis, a foreign-exchange and macro strategist at BNY Mellon. "That will bring down reserves, as it's a mirror image."And "if reserves get dangerously low, you could start to see some hiccups" in markets, he warned.Fed Chair Jerome Powell hasn't recently offered any update to the central bank's anticipated QT timeline. He said last July that the Fed's model suggested it could run for two to two and a half years before bank reserves got down to a "new equilibrium" level after they surged during pandemic-era Fed easing.Federal Reserve Bank of New York President John Williams said last week that policymakers are taking a look at risks surrounding the debt limit and potential volatility to reserve balances."Clearly, those are things that we're studying, making sure that we think through," he told reporters. Still, he didn't anticipate an earlier end to QT than expected, pointing to the surfeit of funds in the RRP facility that can still be worked down. "It's a process that's going to take time and obviously we'll be watching carefully," he said.Subadra Rajappa, head of U.S. rates strategy at Societe Generale, said that "if money does not begin to flow out of the reverse repo program, as the Fed expects, reserves may become scarce."Warning signDallas Fed President Lorie Logan, who previously oversaw balance-sheet management at the New York Fed, noted last week that the Fed's new standing repurchase facility, which allows firms to borrow cash as needed, could serve as a backstop if reserves suddenly fall too low.That's an untested facility, and is subject to caps, but could potentially serve as an early-warning sign of that reserves are getting scarce.Banks' reserve balances at the Fed already have dropped by around $900 billion, to around $3.1 trillion. In the near term, they're likely to see some increase as the Treasury works down its cash balance at the Fed. Once that process is done, they're likely to resume their decline.Some Fed watchers had anticipated an end to the bond-portfolio runoff at some point this year even before the latest debt-ceiling drama unfolded. That's part of a broader debate over whether the Fed will have to abandon monetary tightening and shift toward easing, amid widespread expectations of a recession kicking in.Tricky solutionIronically, what could have an even more powerful impact on bank reserves is an ultimate end to the debt-ceiling impasse. Once the Treasury has a free hand, it's likely to unleash a massive series of bill sales in order to raise cash — mopping up so much that it could cause a sharp contraction in bank reserves.T-bill supply could surge by some $500 billion to $800 billion over several months, observers say.At the same time, reserves may get a boost if banks begin to compete more intensely for deposits, drawing cash away from money funds and the reverse repo facility, said Derek Tang, an economist with LH Meyer who expects QT to last until 2024. It's a scenario more Fed officials have pointed to in the past week."The Fed seems more confident that the market will do the job of redistributing liquidity where it's needed," said Tang.

Why the GSEs' new fees may be tricky to implement

January 24th, 2023|

The price breaks for certain LTVs appear to address the fact that lower income borrowers often can't afford large down payments and also might have a lower credit score because they're prone to be late when hardships strain their finances.The mortgage industry and the GSEs have historically added fees for these loans since a low credit score indicates higher the risk of delinquent payments. Also, lower down payments are considered to reduce a borrower's incentive to repay.Fannie, Freddie and the FHFA are experimenting with cutting some fees for loans in this category likely because of affordable and equitable housing advocates' view that such pricing is the equivalent of unfairly charging people with less money more, making it tougher to build wealth.But that move could serve to redistribute the number of borrowers who get those loans versus the mortgages secured by the Federal Housing Administration. Due to a combination of pricing and underwriting parameters, FHA generally has reached further down the credit and income spectrum than Fannie and Freddie.Broeksmit has shown some concern about adverse selection affecting the FHA's government-insured book of business, as has the Community Home Lenders of America, but not everyone agrees that'll be the outcome.The risk to the FHA could be mitigated by a premium cut the industry has heavily lobbied for and could be justified given the strength of its insurance fund, Scott Olson, the latter trade group's executive director, said in an emailed statement."An FHA fee cut would complement this action on GSE pricing, avoid any unintended consequences of FHA adverse selection, and further an agenda of equitable housing and access to mortgage credit," Olson said. What the shift in FHA's, Fannie's and Freddie's books of business will be like ultimately remains to be seen.

What Is the Easiest Type of Mortgage to Get?

January 23rd, 2023|

Mortgage Q&A: “What is the easiest type of mortgage to get?”Relative to other types of loans, it can be difficult to get approved for a mortgage.After all, mortgage lenders typically require a tri-merge credit report, steady income and employment, and assets in the bank.They don’t just take your word for it like they might on a credit card application.All of those items must be documented to ensure you’re a creditworthy borrower capable of financing a piece of real estate.Easiest Types of Mortgages to Get, Ranked1. FHA loan (lowest combination of credit score and down payment)2. Conforming loan (lower min. down payment but need 620 FICO)3. VA loan (zero down and no min. FICO but must be active duty/veteran)4. USDA loan (zero down, no min. FICO but must be rural location and there are income limits)5. Jumbo loan (usually need 10%+ down payment, 680+ FICO, and asset reserves)FHA loans are the easiest mortgage to get because of the 3.5% down payment and 580 minimum FICO score required.Conforming loans are a close second, despite a lower 3% minimum down payment, due to the higher 620 minimum FICO score required.Both USDA and VA loans don’t require a down payment and technically don’t have a minimum FICO requirement, but are more specialized products. Thus not as easy.Jumbo loans are typically the hardest to get because they are larger (loan amounts) and aren’t backed by Fannie/Freddie or the government.The Answer Depends on What Your Issue(s) Might BeBefore we get down to the nitty gritty, I should note that there isn’t a universal answer to this question.It depends what may make obtaining a home loan difficult to begin with.Are your credit scores not all that good? Do you have limited income? No money in the bank? Or perhaps a combination of all these items?The first thing you should do is self-evaluate. Take a look at your income (and employment history), your credit report (and scores), and your assets.Would you lend yourself a mortgage? Funnily enough, even if you wouldn’t, there’s probably a lender that would!Jokes aside, take the time to do this to see where you stand before you apply for a mortgage.Easy street isn’t necessarily the best avenue to take when it comes to home loan financing.Now let’s discuss particulars based on some common issues.If You Lack a Down Payment for a MortgageIf down payment funds are your problem, there are plenty of zero down home loan options out there.The two most common are VA loans and USDA loans. However, these are reserved for military/veterans and those buying in rural areas, respectively.Assuming either of those are YOU, the down payment is no longer a hurdle. They allow 100% financing.Even if you don’t qualify for those loan types, there are credit unions that offer zero down mortgages.And many state housing finance agencies that offer grants and down payment assistance.Some private lenders also offer grants. Rocket Mortgage launched “Purchase Plus” in late December.It offers up to $7,500 in closing cost credits for first-time home buyers to use toward their mortgage costs.Purchase Plus is available in specific census tracts in Atlanta, Baltimore, Chicago, Detroit, Memphis and Philadelphia.And Guaranteed Rate just launched a “Special Purpose Credit Program” in the same cities that provides up to $8,000 in assistance to underserved borrowers.That’s a minimum of $5,000 in down payment and closing cost assistance, and up to an additional 1% of the sales price (or $3,000).Many Types of Mortgages Only Require a 3-3.5% Down PaymentEven if you don’t qualify for zero down financing, conforming loans backed by Fannie Mae and Freddie Mac only require 3% down.Conforming loans are the most common type of mortgage, offered by pretty much every bank and lender in the nation.Fannie Mae’s offering is known as HomeReady Mortgage, while Freddie Mac’s is called Home Possible.Both require a minimum FICO score of 620, which is pretty low and what some would consider easy to qualify for.Additionally, they allow for boarder income so roommates/renters can contribute to your income to help qualify for the loan.If you don’t have a 620 FICO score, there’s the FHA loan, which requires a minimum score of 580 with 3.5% down payment. Or as low as 500 if you can muster 10% down somehow.If Your Credit Scores Are Low…If you’ve got decent income and assets, but your credit scores are a problem, you still might be in luck.For example, there is no minimum credit score requirement for VA loans, per the VA.But individual lenders will still impose their own limits, which may be 580 or higher. Still, that’s very accommodating.The USDA home loan program also doesn’t impose a minimum credit score, but most lenders want a 640 FICO or higher.As mentioned above, Fannie Mae and Freddie Mac require a minimum 620 FICO. However, it’s possible to get approved with a lower score if you have a co-borrower with higher scores.And the FHA only requires the 580 FICO for max financing (3.5% down).So you’ve got several very liberal options to choose from that approve those with pretty low credit scores.If Your Income Is Limited…If income is your problem, you may still not have any issues as most home loan types are also pretty flexible in this department too.With regard to your debt-to-income ratio (DTI), a conforming loan backed by Fannie Mae will allow a DTI ratio as high as 50%.The FHA can go even higher, to a staggering 56.9%. The VA doesn’t have a maximum DTI, and can also go quite high depending on the circumstances.USDA loans are generally stricter and want a DTI of 41% or lower, but may allow up to 46%.Even if income is an issue for you, there’s the possibility to use a co-borrower or boarder income to help you qualify.[What Mortgage Has the Best Rate?]If You Are Recently Employed…While income is one thing, employment history is another. Mortgage lenders are happy you’re making what you’re making.But they want to know that you’ll be making that money consistently into the future. Mortgages can last 30 years, remember?This means they typically want to see a two-year employment history to consider the income stable.But once again, there are exceptions to the rule and it’s often possible to qualify with less than two years employment. Or even one year.Across all loan types, a letter of explanation and supporting documentation may allow for limited employment history.For example, a recent graduate may qualify for a mortgage if employment is likely to continue. Same goes for a medical school graduate (see physician mortgages for more on that).Ultimately, there are lots of ways around the typical two-year requirement if you can demonstrate employment stability.It also helps if you have good credit and/or money in the bank to offset such a risk.Jumbo Loans Are Probably the Hardest Mortgages to Qualify ForWhile I’ve hopefully highlighted the fact that most mortgages are actually pretty easy to qualify for, there’s one category that isn’t.I’m talking about jumbo loans, which exceed the conforming loan limit. These loans are offered by jumbo lenders, and are often backed by the companies themselves.But here’s the thing – the 2023 conforming loan limit is $726,200. And the high-cost loan limits (for expensive areas of the country) are a whopping $1,089,300!In other words, most folks don’t need a jumbo loan anyway.If you do, expect higher down payment requirements, higher minimum FICOs, and larger reserve requirements.After all, you’re asking to borrow a lot of money, so you better be good for it.This might entail a minimum down payment of 10-20%, FICO scores of 680 and up, lower DTI ratios, and several months of reserves in the bank.If You Have to Ask What Is the Easiest Type of Mortgage to Get…Those who read the sections above should realize it’s fairly easy to qualify for a mortgage.Credit score requirements are super low across all loan types. And DTI ratios are also very forgiving in most cases.The same goes for employment history and asset/reserve requirements.And the fact that you can often employ gift funds or a co-borrower to help qualify is the icing on the cake.But if you have to ask the question, you may want to reassess your decision to rent vs. buy.There’s a reason all these minimum requirements are in place. And there’s a reason why it takes around a month to get a mortgage.It’s a big deal and the decision shouldn’t be taken lightly. Additionally, those who are adequately prepared should qualify for the lowest mortgage rates with the best terms.So instead of focusing on easy, focus instead on how to qualify for the best rate.Read More: 21 Things That Can Push Your Mortgage Rate Higher

Rocket Mortgage cuts 50 positions

January 23rd, 2023|

Rocket Mortgage handed pink slips to "roughly 50 employees" last week, a company spokesperson confirmed.The reduction round comes two weeks after Rocket announced it had cut 20 employees from its marketing team. "As is common practice in all companies, Rocket regularly looks at the priorities of the business and what roles are needed to achieve those goals," said Aaron Emerson, spokesman for Rocket Mortgage, in a written statement.He pointed out that the recent reduction is minimal, representing "less than one quarter of one percent of the roles in the company." "These decisions are never taken lightly, but are only made harder by the over-sensationalization of eager trade media," Emerson said. The Detroit-based megalender would not confirm what teams or roles were impacted by the reduction.Other recent initiatives by the lender include a reshuffling of upper management following months of low origination activity in the market at large. Rocket Mortgage promoted Mike Fawaz as its new executive vice president of Rocket Pro TPO, while Austin Niemiec became Rocket Mortgage's chief revenue officer.Despite current market hurdles, the lender sees a path forward in capitalizing on purchase business from first time-homebuyers by way of its personal finance application, said Brian Brown, chief financial officer at Rocket Companies, during a webinar hosted by Fitch Ratings in January.The lender's Rocket Money application, formerly known as TrueBill, includes millions of members who don't have mortgages with the lender. "That could literally be a game changer for how a mortgage company does business on the purchase side," Brown said. "So that diversification is a big deal."In the third quarter the lender ceded the throne of top originator to United Wholesale Mortgage, which bested its total quarterly mortgage loan volume by $7.9 billion according to their earnings reports. Rocket originated $25.6 billion during the most recent period, compared with $34.5 billion in the previous quarter and $88 billion one year prior. UWM reported third quarter volume of $33.5 billion.

Mortgage forbearance establishes a floor

January 23rd, 2023|

In December, the forbearance rate for home loans remained at 0.7% for the third month in row, suggesting that it has hit a floor, according to the Mortgage Bankers Association."New forbearance requests and re-entries continue to trickle in at about the same pace as forbearance exits," said Marina Walsh, MBA's vice president of industry analysis, in a press release.Although the consistency of the forbearance rate might mean its bottoming out in the wake of a pandemic during which it was applied to on an unusually broad basis, its future course isn't necessarily predictable.The Consumer Financial Protection Bureau recently said it expects servicers to continue to be proactive in offering forbearance and other streamlined loss mitigation for financial hardships beyond those experienced due to COVID-19.Also, forecasts suggest the U.S. will enter a weaker economic environment this year, intensifying the need for workouts."Forbearance remains an option for struggling homeowners and its usage may continue, especially if unemployment increases as expected," said Walsh. "MBA is forecasting for the unemployment rate to reach 5.2% in the second half of 2023, up from its current level of 3.5%."While the MBA's Loan Monitoring Survey has shown a degree of stability, the trade group continues to see what it has termed "pockets of weakness" in its numbers.The government-backed loans that get securitized through the Ginnie Mae market once again exhibited weaker performance, because those mortgages tend to be taken out by first-time homebuyers with lower incomes and less of a financial buffer against hardships."There was some deterioration in the performance of Ginnie Mae loans," Walsh noted.The share of loans in Ginnie securitizations that were current at the end of the latest monthly reporting period fell by 42 basis points in December to 93.43% from 93.85% the previous month. In comparison, the share of current loans for other investor types was largely flat or higher.The equivalent metric for mortgages sold to government-sponsored enterprises Fannie Mae and Freddie Mac was 98.24%, down just 4 basis points from the previous month. A smaller share of private loans were current at 90.14%, but this number was up from 89.5% in November.The MBA introduced some new data points in its most recent report, including some numbers on the share of loans that were current for different product types after completed workouts.For Federal Housing Administration-insured loans, this metric was 72.62% in December, down from 73.79% the previous month. For mortgages guaranteed by the Department of Veterans Affairs, the equivalent number was 75.74% compared to 76.11% in November. FHA loans and VA mortgages are the two main types of government-backed loans in the Ginnie Mae market.In comparison, the share of loans backed by Fannie and Freddie that were current after completed workouts were also falling but roughly 10 percentage points higher than the FHA's, while the percentages for the conventional mortgages outside that market were more similar to the FHA numbers.The MBA includes payment deferrals or partial claims, permanent modifications and combinations thereof in its definition for completed workouts. Modifications allow servicers to reconstitute the terms of loans to address long-term changes in borrowers' ability to repay, and deferrals or partial claims permit normal payments to resume while forborne amounts are set aside to address at a later date.

With regulatory spotlight on bias, appraisers worry about losing their independence

January 23rd, 2023|

Appraisal bias is a hot topic in Washington, but those in the field fear the treatment is worse than the disease. Laura Buckman/Bloomberg As the Biden administration's effort to root out bias among home appraisers marches on, those in the field worry the push could undermine their independence.Since the White House launched the Property Appraisal and Valuation Equity, or PAVE, Task Force in June 2021, there have been two congressional hearings on the matter and draft legislation from Rep. Maxine Waters, D-Calif., the former chair of the House Financial Services Committee, that would impose federal oversight over the appraisal profession. Democrats no longer control the House, so the odds of legislative changes to appraisal regulation are slim, but regulators remain fixated on the issue. On Tuesday morning, Consumer Financial Protection Bureau Director Rohit Chopra, Housing and Urban Development Secretary Marcia Fudge and Federal Home Finance Agency Director Sandra Thompson are set to participate in a hearing on the topic of racial bias in home valuation. The hearing will be hosted by the Federal Financial Institutions Examination Council's appraisal subcommittee, the agency tasked with overseeing state regulation of appraisers and appraisal management companies. Already some of the most significant changes on the matter have come from those agencies. Last October, the FHFA launched a public database of aggregated and anonymized appraisal data that shows, among other things, trends in "undervaluation" — when homes are appraised below their contractual price. Earlier this month, HUD proposed a policy change that would make it easier for homeowners to challenge appraisals they believe were skewed by racial bias.More reforms are expected as various agencies work through findings from the PAVE Task Force and other efforts, such as Tuesday's hearing. But, as Washington once again shines a spotlight on appraisal bias, working appraisers are concerned the government's efforts will erode some of the safeguards implemented by the Dodd-Frank Act of 2010 and, ultimately, end up pressuring appraisers to err on the side of higher valuations. Such a trend could put both banks and other lenders as well as borrowers in harm's way. Mary Cummins, a Los Angeles-based real estate appraiser, said the FHFA's focus on undervaluation is creating pressure for appraisers to sync their findings with contract pricing. However, she said, this type of outside influence is illegal and something Congress sought to eliminate with Dodd-Frank, which bars lenders from discussing valuations with appraisers. "It shocks the conscience that the government is now the one pressuring, influencing the appraiser to come in at or above contract value with some borrowers," Cummins said, adding that the focus on getting higher valuations in lower-income areas could lead to poorer borrowers being saddled with underwater mortgages in down markets."You would be doing a cruel disservice to these people to come in high. They would end up upside down with a huge mortgage payment they may not be able to afford," she said. "Did the government learn nothing from the Great Recession?"The issue of bias in appraisal rose to national prominence during the pandemic, as ultralow interest rates and a red-hot housing market led to a surge in sales and refinancings. During that boom, some Black homeowners found their properties were appraised for less than similar ones in majority-white neighborhoods.In several high-profile instances, Black homeowners received more favorable appraisals after having white friends or family members stand in for them during home inspections and by removing all traces that a home has Black inhabitants. In some cases, the price disparities were in the hundreds of thousands of dollars. While lawmakers, agency heads and advocates have beat the drum for reforms in the valuation process in the wake of those revelations, working appraisers throughout the country have been perplexed by the idea that racial bias is so widespread in their field that it warrants regulatory action."This is a hard profession to get into, and I don't think most appraisers would do anything crazy to jeopardize their livelihoods," Debra Herbert, a residential appraiser in Metro New Orleans, said, noting that appraising below contract value often leads to loans falling through. "If you are tanking deals left and right for a lender, they're going to stop using you. There are plenty of other appraisers they can call, especially if you are intentionally trying to keep sales from going through."Herbert said there could be some bad actors in the profession who deliberately try to undervalue properties to harm borrowers of color, but like many appraisers, she believes doing so would require a substantial amount of additional work and still be easily detected. The appraisal process consists of two primary components: an in-home inspection and a price analysis using comparable properties, also known as comps. While the in-home component of the appraisal identifies features of a home that could influence value incrementally — such as interior renovations or the presence of new appliances — the bulk of the valuation is determined by the property's location and size, with comps used as benchmarks.Some advocacy groups have indicated that comp selection could be influenced by biases, if appraisers were to pick comps in different neighborhoods in accordance to the subject property owner's race. But rank-and-file appraisers say the opportunities for bias to come into play are few and far between when identifying like properties. Most tend to look for homes for sale in the immediate vicinity, only crossing neighborhood lines for homes that are significantly different from their nearest neighbors and giving lower weighting to farther away properties. In instances where comps are picked in other neighborhoods, the racial makeup of those neighborhoods are not overtly considered, six appraisers from various states told American Banker this week."To be biased, you'd have to intentionally go out of your way, because everything I've been taught and have done for the last almost 20 years is what the guidelines told us to do as far as distance of comps," Nicole Curcio, an appraiser in Rochester, New York said, adding that for urban properties, appraisers keep their search radiuses to one mile or less. "I can guarantee if I put a comp in a report that's sold on the secondary market and it's 1.01 miles away from the subject property, that's going to get a red flag and then it's going to come back to me with all kinds of questions."Other common practices further narrow the window for bias. Appraisers typically only see homeowners when inspecting for refinancing loans or home equity lines of credit. In instances of sale, properties are usually vacant. Also, many appraisers select their comps — which must be photographed as part of an appraisal report — before going to a property for a walk-through, to avoid making multiple trips. More appraisers are inclined to believe that wildly errant valuation reports are the result of negligence or incompetence, rather than racial prejudice.Still, regardless why a home is appraised well below market value, undervaluing a property can have significant impact on homeowners looking to tap into the equity in their homes, Julia R. Gordon, HUD's federal housing commissioner, said, adding that racial bias is just one of several reasons why homeowners can contest a valuation under FHA's latest policy proposal."We noticed this gap, where it wasn't really clear, if you were a borrower, how you should go ahead and speak up, how to raise your hand," Gordon said. "What this new policy does is it provides a process for the borrower to raise their hand to the lender. Then the lender has to decide what to do about it."However, some see this initiative putting more pressure on appraisers to inflate values. Jeremy Bagott, a California-based appraiser, said since many appraisers do not know the race of the parties involved, they will be inclined to appraise higher to avoid risking a complaint."Appraisers need a safe space to provide honest value opinions if America's $11 trillion mortgage market is to function like a true market. Imagine if stock analysts were subject to the same tactics. You would never again trust the valuation of any stock," Bagott said. "That safe space is disappearing for real estate appraisers. They are being arm-twisted, through regulatory means, to play ball. That's a recipe for a market bubble."Tuesday's hearing begins at 10 a.m. at the CFPB's headquarters in Washington. The various participating agency heads will sit on a panel. Witnesses include Dr. Junia Howell, a visiting assistant professor of sociology at the University of Illinois-Chicago, Paul Austin and Tenisha Tate-Austin, homeowners from Marin, Calif.; Michael Fratantoni, senior vice president of research and technology and chief economist at the Mortgage Bankers Association; and Craig Steinley, president of the Appraisal Institute.The event is the first public hearing hosted by the appraisal subcommittee on racial bias."The Appraisal Subcommittee is pleased to have this opportunity to approach and assess the structural issue of bias in the appraisal industry in an objective and constructive manner," Appraisal Subcommittee's Director Jim Park said in a written statement. "The ASC's role in the industry positions us well to lead this conversation and to continue to move work on this issue forward."

What does the future look like for crypto lenders?  

January 23rd, 2023|

Five years ago, the nascent crypto lending market looked promising. Crypto lenders like Salt Lending, Celsius Network, BlockFi, Voyager Digital, Nexo and Unchained Capital were meeting a demand among digital-asset investors who wanted a tax-free return on their money. They had already weathered a crypto downturn and were confident their future looked bright. In the past year, Celsius, Voyager and BlockFi have filed for Chapter 11 bankruptcy and have been sued by former customers and partners. New York Attorney General Letitia James filed a lawsuit against Celsius CEO Alex Mashinsky for allegedly defrauding hundreds of thousands of investors out of billions of dollars worth of cryptocurrency. The Securities and Exchange Commission has sued BlockFi, Genesis Global Capital and Gemini Trust Co. over their crypto lending programs, claiming they violate investor protection laws.  But in spite of these setbacks, some observers believe there is life left in the concept of crypto lending and that the industry will go on. "My sense is that there's still a future for the product," said Joseph Silvia, a member of the law firm Dickinson Wright in Chicago. "I think we'll find that the more conservative lenders are going to be the ones that make it through this interim period where you do have bankruptcies, failures and volatility." "I don't think the industry is dead," he said."Is the crypto lending industry doomed? I don't think so," said Robert Le, a crypto analyst at Pitchbook. "What I think will happen is that there needs to be rules and regulations in order for these lenders to come back, because most of them were fully unregulated products."Crypto lenders are going to have to have to wait until there are some rules and regulations in place before they can really start marketing the products, he said. "I don't think financial regulators are going to sit around and let them continue doing this for much longer," Le said. "There is much more scrutiny on these providers right now."For instance, the way Celsius advertised to everyday consumers made it seem the firm was providing a regulated banking product, he noted. "They even mentioned the FDIC on their web page because the cash in the account was held at an FDIC-insured bank, but that's just cash," Le said. "The crypto is not treated as cash. I think there was a lot of misinformation and poor marketing just because it's in such an unregulated environment." Celsius, Salt Lending, Gemini, BlockFi, Nexo and Voyager Digital did not respond to a request for comment.Some forms of crypto lending have more of a likelihood of survival than others.One flavor of crypto lending: Using digital assets as collateralThere are different kinds of crypto lending. In one version, people who have bought bitcoin or another cryptocurrency and want to hold onto it (sometimes called "hodlers," a term crypto enthusiasts latched onto after a bitcoin forum member mistakenly — some say drunkenly — wrote "I AM HODLING" in a 2013 exchange, but some say HODL now stands for "hold on for dear life") and yet want to use their money in some way, to make a luxury purchase or an investment, for instance. The borrowers use their crypto as collateral for a loan of fiat currency that they pay back with interest. The loans are typically smaller than the amount of cryptocurrency put up as collateral, and if the price of the cryptocurrency decreases, the lenders make margin calls to protect the loan. Crypto companies that offer this include Coinbase, Unchained Capital, Salt Lending, Nexo and Binance. This kind of crypto lending is like any other kind of secured lending and it's likely to survive. (Of these companies, only Unchained Capital responded to a request for an interview.)"One of the main reasons people take out these loans is that they don't want to sell" their cryptocurrency, "because that becomes a taxable event," Le said. "By taking out a loan, they don't have to pay any taxes, while they get to take advantage of some of their holdings. There's definitely still a demand for that."Le pointed to decentralized crypto lenders like Maker, Aave and Compound that are still growing. Crypto loans are performing well at Unchained Capital, according to CEO Joe Kelly. The company has made conservative decisions, he said, such as its choice to support only bitcoin and no other cryptocurrencies as collateral and to lend at a 50% loan-to-value ratio that in early 2021 it dropped to 40%. Unchained Capital's approach of lowering loan-to-value ratios for its loans makes sense, Silvia said."They're being more conservative about it," he said. Clients of Unchained Capital are long-term bitcoin holders who have been through cycles before, Kelly said. It does not rehypothecate, "so any collateral that comes in stays put," he said. "It's only ever moved in a liquidation scenario or sometimes the price runs up and clients can redeem some portion of the collateral."Unchained has about 4,000 customers, Kelly said; around 80% are mass affluent and high-net-worth individuals, and the rest are family offices and businesses. Unchained Capital lets customers hold the private keys to their bitcoin and puts it in a vault maintained by a partner, Kingdom Trust, that acts as key agent for the loans."Once that bitcoin's in that vault, Unchained can't control it," Kelly said. "We can't move it around. The clients hold the keys." A typical loan is around $100,000. Interest rates on the loans are currently 14% to 15%, though historically they have run from 10% to 13%. Customers use these loans to invest in other companies or to buy real estate or cars, Kelly said. As the value of bitcoin dropped last year, Unchained Capital made several margin calls. "But all of it was done with success, so we were pretty fortunate to get through all that," Kelly said. The company's cost of capital has gone up. "That's probably true across the board for everybody."Unchained Capital does not lend bitcoin out. "I think that is where a lot of folks could get in trouble," Kelly said. "It's really tough to have good risk management practices on actually lending out the assets, not to mention the custody risks." Another form of crypto loan: Lending out deposited cryptocurrencyIn a second version of crypto lending, consumers deposit cryptocurrency with a company that lends it out to others, often hedge funds, in return for regular interest payments. BlockFi, Celsius Network and Genesis Global Capital are among the companies that do this. The companies sometimes call these deposits high-interest savings accounts, which has been a red flag for regulators because a "savings account" has a specific regulatory definition. BlockFi, Celsius and Genesis did not respond to a request for an interview.In 2021, several state regulators told BlockFi to stop offering this product. The state agencies said they were concerned about the emergence of BlockFi and other startups like it that seek to reinvent traditional financial products without working within the law or established regulatory frameworks. They noted that the BlockFi account is not a bank savings account backed by the FDIC, nor is it an investment covered by the Securities Investor Protection Corp. It's actually an unregistered security that leaves investors exposed to risk, according to these officials. BlockFi did not respond to a request for an interview, but in a statement at the time said the BlockFi Interest Account is not a security and should not be regulated as one.There is demand for this kind of crypto lending, too, Le said."If you are a Celsius or a BlockFi, you are playing on both sides of the market," he said. "You are accepting crypto from users who depositing it, and then you're lending it out to those who are looking for loans. In a sense, that's net interest, so you want to play both sides. It's a good business model."The market crash is partly to blame for these crypto lenders' troubles, Le noted. "If you deposited one bitcoin into Celsius and you borrowed $50,000 and the price of bitcoin dropped down to $35,000, you're not going to pay back the $50,000 loan," he said. "You'd rather just keep it, and then Celsius can liquidate your bitcoin at $35,000. Essentially that was happening across the entire platform and that's why Celsius, BlockFi and Voyager faced that insolvency." Some of these companies have been hacked, too, he added.The SEC has come after BlockFi, Gemini Trust and Genesis Global Capital, saying they are offering securities without registration. (Gemini also did not meet a request for an interview in time for this story.) "Through this unregistered offering, Genesis and Gemini raised billions of dollars' worth of crypto assets from hundreds of thousands of investors," the SEC wrote in its complaint against the two companies in mid-January.Genesis and Gemini had an agreement under which Gemini offered its customers an opportunity to loan their crypto assets to Genesis in exchange for interest. Beginning in February 2021, Genesis and Gemini began offering the Gemini Earn program to retail investors. In November 2022, Genesis announced that it would not allow Gemini Earn investors to withdraw their crypto assets, because Genesis lacked sufficient liquid assets to meet withdrawal requests following volatility in the crypto asset market. At the time, Genesis held about $900 million in investor assets from 340,000 Gemini Earn investors. Gemini terminated the Gemini Earn program earlier this month. "Crypto lending platforms and other intermediaries need to comply with our time-tested securities laws," SEC Chair Gary Gensler said in a statement. "Doing so best protects investors. It promotes trust in markets. It's not optional. It's the law."Two years ago, Coinbase was planning to offer a crypto lending product called Lend that would have let customers earn interest on select assets, starting with 4% interest on USD Coin. In September 2021, the SEC sent the company a Wells notice, warning it not to launch the product. Coinbase did not respond to a request for an interview in time for this article.Despite all the recent upsets, it's unlikely regulators will shut down the crypto lending market entirely, Silvia said. "I think this area of the market is going to be creative enough to work with regulators and legislators, and find different scenarios where they can provide value and gain market share," he said.

MISMO creates API standard to find local conforming limits

January 23rd, 2023|

The Mortgage Industry Standards Maintenance Organization has approved an application programming interface standard that allows users to search for conforming mortgage area loan limits based on a property's postal code and county name.This standard is called the FIPS Code Lending Limit API Specification. FIPS is short for the Federal Information Processing Standard, a five digit code that identifies counties and county equivalents.It has achieved "candidate recommendation" status, which means it has been thoroughly reviewed by a wide range of organizations and industry participants as part of the approval process.While the Federal Housing Finance Agency annually publishes a nationwide loan limit along with a greater ceiling for loans made in high-cost areas, which are being sold to Fannie Mae or Freddie Mac, individual counties can have their own maximum between those amounts.For example, Eagle County, Colorado is the only county in the nation with a one-unit loan limit of approximately $1.075 million for 2023, while Napa County, California is near $1.018 million. Those with the lowest limits for high-cost areas are two New York State counties, Dutchess and Orange, which have a $726,525 limit. In total for 2023, 60 counties fall between $726,200 and $1.09 million, according to an FHFA spreadsheet.Currently, there's no standard mechanism for lenders to easily access this information, MISMO said."The FIPS Code Lending Limit API Specification is MISMO's latest effort to define industry-wide standard interfaces for common business functions," said Jan Davis, acting president of MISMO, in a press release. "This specification will guide the user through how to build lending limit API requirements, using the MISMO API Toolkit, for searching lending limits, and optionally the FIPS state and county codes, based on the postal code and county name of any property."Other products created through the API Toolkit are the Mortgage Insurance Estimated Rate Quote API and the Mortgage Insurance Activation API, the organization's recently released 2022 annual report disclosed.The FIPS Code Lending Limit API Specification package includes a comprehensive information guide; a sample business analyst template to serve as a guide; a fillable, customizable business analyst template; and the relevant YAML (a programming language) files.MISMO does not have a similar API for Federal Housing Administration-insured mortgages. Loan limits for the FHA program also vary by county.

How lenders are using education to reach tomorrow's borrowers

January 23rd, 2023|

While housing agencies and community organizations have mandatory counseling and education coursework used to qualify for specific grants or down-payment assistance, many informational, typically free, educational programs presented by lenders or realtors are open to a wide set of consumers at various stages of mortgage preparedness. And many people are using them to take steps toward homeownership. Although the seminars and webinars are not new in mortgage marketing strategy, they are a form of outreach that appears far from being tapped to their potential. Industry professionals who don't capitalize on the benefits of these tools could miss out on the pipeline of business it brings down the road. Frequently, consumers seek out the presentations because they are apprehensive about directly approaching a bank or lending office with questions.Sarah Prater, a loan officer at Gold Financial Services in Stillwater, Oklahoma, who has been offering her "Market Shmarket" course since 2020, sees "a huge sense of resistance or fear" from those new to the home processing buying or who haven't made a purchase in a long time. "Some of that is driven by, I think, all of the overabundance of information," she said."One of the things that I've found that's very common is that people are afraid to ask questions because they feel it's a stupid question. They have this thought like when you go to a job interview — it's one shot, you have to make your best impression. Anything you say can be used against you," she said. Carolyn Morganbesser, assistant vice president of mortgage originations at Affinity Federal Credit Union, headquartered in Basking Ridge, New Jersey, has heard her share of unexpected questions during her presentations. Among Affinity's educational offerings are a four-part home buying webinar series Morganbesser leads covering topics from credit to closing costs. "The last one that we did, I had a senior," she said. "The question was can senior citizens get 30-year mortgages, and of course, they can." The range of questions posed highlights the knowledge gap among many potential buyers nervous about mortgages, an issue seminars and video presentations end up addressing because the information is difficult to find elsewhere.      "As an industry, we are not doing a great job answering those questions," said Ginger Bell, CEO of edumarketing.com, a Beaverton, Oregon-based company that produces and edits branded online video explainers and podcasts for mortgage and real estate businesses. Bell's background working in training operations for several home lenders helped lead her to found edumarketing.com in 2019."Consumers do want to learn, so providing them with the information that they're looking for is important," Bell said. "And it doesn't have to just be the soundbites. Consumers are looking for this information, and they are digesting it."The COVID-19 pandemic accelerated growth of video education tools and drove home the need for more professionally produced work, Bell said. It also coincided with the explosive growth of TikTok, the video app highly popular with millennials and Gen Z.The increased popularity of TikTok drove Linthicum, Maryland's NFM Lending to create an influencer division specifically developed to appeal to younger consumers and teach them about home buying. Adding loan officer Scott Betley, also known as That Mortgage Guy on TikTok, to its team last year, NFM now has 10 influencers, who generate between 2,000 to 4,000 exclusive leads a month from their videos, according to Greg Sher, NFM's chief business development officer.   Like seminars, the educational videos created by NFM influencers are aimed at finding the home buyer early and helping develop brand trust, while also serving as a means to gather a consumer's data when they sign up to follow a creator. NFM found 97.5% want to purchase a home as opposed to renting."Eighty-seven percent of them don't have a real estate agent yet. That's how early we're getting to them in the process," Sher said.But an additional benefit of video is the capability to quickly act on information provided by followers and design targeted campaigns to "meet them where they're at," Sher said."If it's six months out or greater, we take them down on a longer journey. If it's anything before six months, we start to get in front of them and educate them and tell them what they need to do to get ready."Videos on YouTube and social media also have the power of shares and recirculation to quickly expand a client base beyond what may have first been imagined as well, Bell said.A newer client of hers, who only became licensed in October 2021, found himself receiving queries from several individuals he had never interacted with nor targeted. Eventually, he learned they had found him from his videos forwarded by his network."He's 30-something and sharing it out with his friends, and his friends are sharing it with their parents, and the parents are in turn, calling him," Bell said. Despite video education's potential with the growth of YouTube and TikTok, its current use among home lenders is miniscule  — "maybe 1%" of the industry, Bell estimates. Taking the curious consumer from the point of a webinar or video viewing to homeownership is often a long-term project, requiring ongoing outreach. When NFM determines that one of its influencers' followers won't qualify for a mortgage right away, it provides them with another video training tool, which adds incentives to take a loan with them when they complete the course."If the credit score is below 570, we put them into an educational program that we built through a mobile app called Home Stretch," Sher said. The app includes a library of more than 80 videos shot, produced and edited by NFM. "When they're done watching all the videos, they graduate and we give them a $500 lender credit toward a purchase," Sher said.While informational classes and videos are most commonly focused on educating the first-time buyer, they could be the first seeds planted that lead companies to be top of mind for future return business. Some companies also cover other real estate topics on consumers' minds, such as home selling, a subject Morganbesser said Affinity will feature in seminars to its nationwide membership base in 2023.Edumarketing.com has helped design videos discussing more specialized subjects. "We had a video script that we did a few months back that was on what to do about your mortgage when you're going through a divorce that our clients had huge responses to, because those are the questions that people have," Bell said.Home buyer training helps set the stage to build financial wellness, resulting in the type of satisfied potential repeat customers that businesses value.  "The main question I get asked the most is 'Is it too early to attend these webinars?'" Morganbesser said. "To which my answer is always, 'It's never too early.' It's never too early because you're learning. You're preparing. You're getting your ducks in a row."

U.S. bond market flouting inflation looks increasingly vulnerable

January 23rd, 2023|

There's growing concern that the bond market has written down inflation risk too far.A sharp decline in yields over the past two months is mainly due to falling inflation expectations. That means that so-called real yields, which are protected from inflation, have declined less than their nominal counterparts. Their lagging performance reflects shrinking demand for protection against rising prices.The broader bond market is also signaling that a Federal Reserve policy rate peak short of 5% will be enough to cause a recession, requiring rate cuts totaling half a point during the second half of the year. Some argue there's no longer much margin for error. A pick up in demand for this week's auction of 10-year inflation-protected Treasury notes suggests investors are beginning to listen."For months now people have had the conviction that inflation is behind us and so there's been a big rush into bonds," said Ben Emons, senior portfolio manager at NewEdge Wealth. If China reopening causes an inflation pop or a recession doesn't materialize, it's going to be a problem.The relative yields of real and nominal Treasuries reveal the expected average rates of increase for consumer prices over the term of the notes. For 10-year notes, they reached the lowest level of the past year this week, 2.09%. The five-year breakeven inflation rate dropped to 2.13%, within a basis point of last year's low."In bonds our kryptonite is inflation," said Jack McIntyre, portfolio manager at Brandywine. "Our thesis is that peak inflation is in the rear view mirror and we suspect by mid-year or later there will be evidence the economy is really weakening and inflation is melting. A lot of tightening is still set to hit the economy at a time when it is already slowing. At this point I don't see a reason to be bearish on bonds."Those assumptions have helped propel the broader Treasury market to a 3.1% return so far this month, a historic rebound from last year's 12.5% loss. Yields across the nominal curve have declined as much as 44 basis points, led by the five-year. Five- to 30-year yields are below 3.8%."The bond market has got off to a very hot start this year and it should cool down," said Alan Ruskin, chief international strategist at Deutsche Bank. "There is a constraint on how low Treasury yields can fall from here if the Fed goes to 5%."A competing view on inflation is that breakeven rates "once again appear significantly cheap" based on trends in commodity prices and credit spreads, as JPMorgan Chase & Co. inflation strategist Phoebe White said in a Jan. 19 report. Fed Governor Christopher Waller Friday said financial markets were too optimistic on how quickly inflation will recede.Inflation, Waller said, "is not going to just miraculously melt away."In one sign that investors are having second thoughts, they flocked to Thursday's auction 10-year Treasury Inflation Protected Securities, or TIPS. The auction drew a yield of 1.22% — about 4 basis points below it was trading at the bidding deadline, a sign demand exceeded expectations. Primary dealers were awarded a record low share of 7.6%, sidelined by customer bids. Total bids were 2.79 times the amount on offer, the highest ratio since 2019. Interest-rate strategists at TD Securities this week recommended investors wager on an increase in the two-year breakeven inflation from around 1.95% to to 2.65%. Progress on inflation reflects mainly goods prices, while the growth rate for services other than housing "is likely to be sticky on the way down," Priya Misra, TD's head of global rates strategy said in a note.The inflation rate for personal consumption expenditures excluding food and energy, which the Fed favors over the consumer price index, rose 4.7% year-on-year in November. The December reading Friday is forecast to fall to 4.4%. TIPS breakevens target the consumer price index, which tends to run hotter than PCE."I think yields are a bit too low here, pricing in too severe a recession in 2023," said Michael Arone, chief investment strategist at State Street Global Advisors' US SPDR business. "And I buy into the fact that inflation will continue to roll over and pretty strongly this year, but it will remain above the Fed's target. So I don't believe the Fed will be cutting rates in 2023."

ICE-Black Knight deal likely to go through, analysts say

January 20th, 2023|

The regulatory obstacles are not likely to derail Intercontinental Exchange's purchase of Black Knight, analysts at Keefe, Bruyette and Woods said following a conversation with executives at Boston Consulting Group."The conversation reaffirmed our constructive views around several aspects of the proposed transaction, including: 1) the deal has a greater than 50% probability of closing despite a likely lawsuit from the Federal Trade Commission; 2) Black Knight's Empower loan origination system will likely be divested, but should see ample buyer demand; and 3) both parties remain committed to the transaction," the KBW report, dated Jan. 19, said.However, on Friday afternoon, a notice on Seeking Alpha cited a CTFN report that both companies have engaged bankers on possible divestitures in order to gain FTC approval of the transaction, which apparently drove a large spike in Black Knight's stock price.Just before 2:30 eastern time on Friday, Black Knight was trading at $58.49 per share, following opening that morning at $58.61, according to Yahoo Finance. Within the next hour, it hit its high for the day of $60.55.Representing Boston Consulting Group at the session was Micah Jindal, managing director, and David Lowman, senior advisor. KBW's hosts were Ryan Tomasello, who covers Black Knight, and Kyle Voigt, the analyst for ICE.A poll of investors attending the session found a 71% average probability of an FTC lawsuit and a 62% average probability of a successful closing, compared with the current market-implied 25%-to-35% likelihood of the transaction happening.Given the FTC's "exhaustive diligence" around the transaction, along with any uncertainty around the implications of a potential divestiture of Empower, including if the deal could go through before such a sale were to happen, the panel concluded it is unlikely it would close in ICE's first half of 2023 time frame.In addition, "BCG did not see much relevance in the content or timing of Maxine Waters' recent letter to the FTC," the report declared. However, industry observers like former Mortgage Bankers Association CEO David Stevens believe the letter could drive the FTC to demand even more extensive divestitures besides Empower or halt it altogether."Time is not on the side of the transaction and I think the longer it goes the worse it plays out," Stevens said in December after the letter was released.At the time the deal was announced last May, ICE executives said they had no plans to sell Empower, the second most used LOS, because it serves a different market than its own Encompass, the No. 1.Ironically, Black Knight just got a huge win as loanDepot will be integrating its proprietary system, mello, with Empower.On the servicing side, even though ICE does not already operate a technology platform, concerns have been expressed by people, including Mike Cagney, whose fintechs Figure Technologies and Provenance blockchain have a relationship with Black Knight competitor Sagent. In an opinion article, Cagney compared the combination to what happened with Taylor Shift concert tickets as a result of the Ticketmaster-Live Nation merger.The panelists in the BCG discussion came away from it feeling less concerned about the near-term threat to the MSP platform from Sagent."Healthy competition also bodes positively for the FTC's review of the merger (or ICE and Black Knight's defense of the merger in court)," the report said.But the likelihood that mortgage volume will continue to shrink in 2023 is the bigger challenge the parties need to overcome."From a fundamental perspective, we came away feeling modestly more negative around headwinds for Black Knight and ICE from the depressed mortgage outlook, including a weak sales environment and potential share shifts in the origination and servicing markets," the report said. "BCG cited their forecast for $1.5 trillion of mortgage originations in 2023, below industry forecasts in the $1.7 trillion-$1.9 trillion range."The report came out before Fannie Mae released its January outlook for $1.64 trillion in 2023 mortgage production.

Better.com SPAC partner asks for more time to complete merger

January 20th, 2023|

The company seeking to take lender Better.com public is asking its shareholders to extend its merger deadline.Aurora Acquisition Corp. will hold a meeting to vote on whether to extend the merger deadline from March 8 to Sept. 30 of this year, according to a Securities and Exchange Commission disclosure filed Thursday. The special purpose acquisition company said it needs more time to complete the business combination first announced in May 2021."After careful consideration of all relevant factors, our board has determined that the extension proposal is advisable and recommends that you vote or give instruction to vote 'FOR' such proposal," the filing said.If the merger isn't completed by the deadline, the SPAC will shutter, ending Better.com's clearest path to Wall Street. The filing didn't say when the meeting would be held, and a representative for Aurora didn't return a request for comment.Better, which is coming off a difficult year of massive layoffs and federal lawsuits from former employees, is still committed to the business combination, a source familiar with the company said Friday."The company is on a comeback tear," the sources said in a statement. "Customer volume this month is up 60% or more as the market comes back, and the management and investors are feeling good that 2023 will be a growth year."The lender hasn't disclosed its financial performance since reporting a $327.7 million loss in the first quarter of 2022 via a July SEC filing by Aurora. Better lost $303.8 million in all of 2021, and has trimmed its one-time payroll of over 10,000 employees by at least 72%. The SPAC merger deadline was already extended last August, which pushed the date from last December to March. Aurora and Better at the time also said they were discussing alternative financing arrangements in which the lender would remain private, and Better also amended nine-figure funding arrangements with sponsors Novator Capital and SoftBank. Better said it was also cooperating with an SEC probe over lawsuit accusations it misled investors. The complaint from former second-in-command Sarah Pierce is pending in a New York federal court, as well as a countersuit from Better against Pierce over an alleged debt owed.If the SPAC doesn't complete its merger, Aurora will wind down operations and within 10 business days redeem public shares and Novator private placement shares, it said.Better is the rare lender still engaged with a SPAC, as the once-hot "blank check" companies have faded in popularity over the past year with declining stock values and less frequent initial public offerings.

Top Mortgage Lenders in DC

January 20th, 2023|

Now it’s time to check out the top mortgage lenders in DC, the capital of the United States.In 2021, nearly 800 mortgage companies originated roughly $139 billion in home loans in The District.That was one of the bigger totals for a state, even though the District of Columbia isn’t actually a stateAnyway, there can be only one…top mortgage lender to rule the rest. And as you may have guessed, it was Rocket Mortgage.Some local companies made the top-10 lists as well. Read on to see who.Top Mortgage Lenders in DC (Overall)RankingCompany Name2021 Loan Volume1.Rocket Mortgage$8.4 billion2.Pennymac$6.4 billion3.Freedom Mortgage$5.5 billion4.Truist$5.4 billion5.Wells Fargo$5.1 billion6.loanDepot$4.7 billion7.Mr. Cooper$3.3 billion8.McLean Mortgage$3.1 billion9.Intercoastal Mortgage$3.1 billion10.UWM$3.1 billionIn 2021, Rocket Mortgage led the District of Columbia with a solid $8.4 billion funded, per HMDA data from Richey May.They were trailed by Los Angeles-based Pennymac with $6.4 billion, which is a top correspondent lender.In third was Freedom Mortgage with a close $5.4 billion, followed by Truist with $5.1 billion and Wells Fargo with $4.7 billion.The bottom half of the top 10 included loanDepot, Mr. Cooper, McLean Mortgage, Intercoastal Mortgage, and United Wholesale Mortgage.Both McLean Mortgage and Intercoastal Mortgage can be considered local companies as both call Fairfax, Virginia home.Always good to see some homegrown lenders shake it up with the big national brands.Top Mortgage Lenders in Washington DC (for Home Buyers)RankingCompany Name2021 Loan Volume1.Truist$2.5 billion2.Pennymac$2.4 billion3.McLean Mortgage$1.9 billion4.Wells Fargo$1.8 billion5.Intercoastal Mortgage$1.7 billion6.Chase$1.4 billion7.Caliber Home Loans$1.4 billion8.Atlantic Coast Mortgage$1.4 billion9.U.S. Bank$1.4 billion10.George Mason Mortgage$1.3 billionIf we focus on home buyers, the list changes quite a bit, both with new names and a new order.In first was Truist with $2.5 billion funded, not a big surprise as home buyers often turn to banks over nonbank lenders for an important home purchase.However, Pennymac was a very close second with $2.4 billion funded, followed by McLean Mortgage with $1.9 billion.Home buyers also seem to like using local options as it probably gives them peace of mind.In fourth was Wells Fargo with $1.8 billion, and Intercoastal Mortgage rounded out the top five with $1.7 billion.Others included in the top 10 were Chase, Caliber Home Loans, Atlantic Coast Mortgage, U.S. Bank, and George Mason Mortgage.They all had surprisingly close home purchase totals to one another.Top Refinance Lenders in DC (for Existing Homeowners)RankingCompany Name2021 Loan Volume1.Rocket Mortgage$7.1 billion2.Freedom Mortgage$4.5 billion3.Pennymac$4.1 billion4.loanDepot$4.0 billion5.Wells Fargo$3.1 billion6.Truist$2.8 billion7.Mr. Cooper$2.5 billion8.UWM$2.0 billion9.Navy FCU$1.9 billion10.Newrez$1.8 billionWhat about existing homeowners looking to a refinance a mortgage? Well, that list was different too.Like the overall list, Rocket Mortgage was king with $7.1 billion funded. That was a good chunk of their overall volume.In second was Freedom Mortgage with $4.5 billion, known as a VA loan specialist.Pennymac took third with $4.1 billion, followed closely by loanDepot with $4 billion and Wells Fargo with $3.1 billion.The rest of the best included Truist, Mr. Cooper, United Wholesale Mortgage, Vienna, VA-based Navy FCU, and Newrez.It’s not uncommon for existing homeowners to use out-of-state lenders for a refinance, which sums up this list.The Best Mortgage Lenders in Washington DCNow let’s talk about the best mortgage lenders in the District of Columbia based on customer reviews.As always, I turn to Zillow to check out customer reviews. For DC, it’s a bit unique as none of the lenders are actually in DC.But they are local companies in nearby states, including Maryland and Virginia.McLean Mortgage comes in with an excellent 4.99/5 score from nearly 3,000 customer reviews, which is basically unbeatable.Chevy Chase-based Forbright Bank has the second largest number of reviews (about 1,500) and a 4.82/5 rating. Pretty solid.Then there’s Bethesda, Maryland’s Presidential Bank and its superior 4.99/5 rating, which is obviously nearly flawless. That’s from about 750 reviews.McLean-based Aurora Financial has a similar number of reviews but a 4.7/5 rating, while Navy Federal Credit Union has a 4.22/5 from just over 100 reviews.There’s also Bethesda-based Mortgagestar, which has a perfect 5/5 rating from over 200 reviews and Alexandria, VA-based Potomac Trust Mortgage’s 4.91/5.So plenty of good options for a home loan in The District. Don’t forget to include local mortgage brokers in your search as well.

Fed can shrink reserves by $2 trillion without missing a beat: Waller

January 20th, 2023|

Federal Reserve Governor Christopher Waller said roughly $2 trillion of reserves could be taken out of the banking system without disrupting banks.Waller discussed monetary policy and his views on the economy during an hourlong event Friday afternoon hosted by the Council on Foreign Relations. During the event, he said the Fed could reduce its balance sheet significantly before the supply of reserves became a binding constraint. "We have the standing reverse repo facility and everyday firms are handing us over $2 trillion in liquidity they don't need. They give us reserves, we give them securities. They don't need the cash," Waller said. "It sounds like you should be able to take $2 trillion out and nobody will miss it, because they're already trying to give it back and get rid of it." Federal Reserve Gov. Christopher Waller said Friday that the Fed could likely draw down its balance sheet by $2 trillion without impacting banks' reserves or the Fed's monetary policy trajectory.Bloomberg News At the height of the COVID-19 pandemic, the Fed expanded its balance sheet rapidly by purchasing Treasury securities and mortgage-backed securities to help support the U.S. economy. Between March 2020 and March 2022, it more than doubled its holdings from $4.2 trillion of assets to nearly $9 trillion. When the Fed's assets grow, so do its liabilities. This includes reserves, which are deposits from commercial banks held at the central bank. As the Fed sheds assets, which it has been doing since last June, the supply of available reserves also diminishes. Some Fed watchers have cautioned the central bank not to go too far in its balance sheet reduction, noting that doing so could be detrimental to banks. Since the Fed began expanding its balance sheet as means for impacting monetary policy after the subprime mortgage crisis — a process known as quantitative easing — banks have come to rely on reserves more heavily to satisfy liquidity requirements.Since 2019, when a sudden shortage of reserves caused banks to flock to the Fed's overnight repurchase facility, the Fed has sought to maintain an "ample reserves" regime. While it is clear that the amount of reserves necessary to satisfy banks' liquidity needs is higher than it has been historically, Waller said the exact level required to ensure that reserves are ample.Before the pandemic, Waller said, reserves accounted for about 8% or 9% of U.S. gross domestic product. While he expects that rate to be slightly higher now, he said the Fed can shrink its balance sheet — which is currently about one-third of GDP — quite a bit before disrupting banks."We don't know exactly what the least amount of reserves [banks need], we kind of got shocked by that in 2019," he said. "Most likely what we do is we continue to shrink the balance sheet, reserves come down and we'll start slowing down as we approach maybe reserves being 10%, 11% of GDP and then we'll kind of feel our way around to see where we should stop."The Fed is reducing its balance sheet by $95 billion a month by allowing Treasury securities and MBS to mature without replacing them. During the event, Waller said he expected the Fed to keep monetary policy restrictive, both in the management of its balance sheet and when setting interest rates, for an extended period to make sure inflation does not return. While there are indications that the economy is heading in the right direction, as outlined by Fed Vice Chair Lael Brainard on Thursday, Waller said market expectations for an easing of monetary policy this year are misguided."The market has a very optimistic view that inflation is just going to melt away, the immaculate disinflation is going to occur, inflation is just going to come down very rapidly, and once that happens, there's no reason for the Fed to keep policy rates high and they'll start cutting rates," Waller said. "We have a different view, that inflation is not going to just miraculously melt away, it's going to be a slower, harder slog to get inflation down, and therefore we have to keep rates higher for longer."

Fintech nCino cuts 7% of workforce, CFO exits

January 20th, 2023|

Fintech nCino slashed 7% of its workforce, or 117 employees, on Wednesday.Some of the departing employees were from recently acquired SimpleNexus, a company spokesperson confirmed.A letter penned by Pierre Naudé, CEO of nCino, was circulated throughout the company  informing employees of the impending reduction. Employees impacted were notified within 15 minutes of Naude's letter being published."While difficult to share, I am announcing that we will be reducing the size of our nCino team by approximately 7%," wrote Naudé. "If you know me, you know I care deeply about our team members, and I speak for the entire [executive leadership team] when I say this is one of the hardest decisions we've made to date."The path forward for nCino, a provider of tech solutions for both the banking and mortgage industry is to "grow with purpose.""There will be challenges, but more importantly, there are exciting opportunities ahead. At nCino, we embrace the idea of being on a rocket ship. I still firmly believe in our trajectory and expect that these changes, while difficult, will set us up for long-term success," he added. As first reported by Port City Daily, those impacted received 12 weeks of severance pay, 2023 bonus eligibility, two weeks of career support and health benefits "for the defined severance period for US based employees and a lump sum payment for non-U.S. based employees." Equity vesting will be accelerated "such that any equity grants scheduled to vest on or before Aug. 1, 2023, will be fully vested," the Wilmington, North Carolina-based fintech said in a statement.On the same day, nCino announced that David Rudow, its chief financial officer, would be departing effective Jan. 31. Greg Orenstein, chief corporate development and strategy officer, will be taking on the role.A tough macroeconomic climate has put pressure on many fintechs and housing-related companies, causing layoffs and even company closures.In December UpEquity, a real estate startup, let go of close to 25% of its staff, while two other mortgage technology brands with cash-purchase business models, Orchard and Ribbon, also announced job cuts in late November in response to contracting volume. Meanwhile in early November, digital mortgage and fulfillment provider Promontory MortgagePath announced that it would be closing its doors due to "unprecedented and rapid mortgage market deterioration."

HUD proposes revamp of fair housing rule

January 20th, 2023|

The Department of Housing and Urban Development is proposing to update the "affirmatively furthering fair housing" rule, fulfilling a previously made promise to add an overarching but efficient framework that promotes ongoing progress toward its goal.The new proposal aims to make it easier "for local communities to identify inequities and make concrete commitments to address them," said Demetria McCain, principal deputy assistant secretary for fair housing and equal opportunity, in a press release.It would require the submission of "equity plans" that were designed to be streamlined versions of "assessments of fair housing" under the 2015 version of the rule, and would be both publicly available for review and submitted to HUD on a regular basis.The proposed revamp of the rule was designed to strike a balance between doing more to address persistent racial inequities in homeownership and tackling ongoing concerns related to the rule's administrative demands on municipalities."For decades, federal housing policies mandated racial segregation and encouraged market-wide discrimination against people of color. Those actions were intentional and their consequences are still felt today," said Mitria Spotser, federal policy director and vice president at the Center for Responsible Lending, in an emailed statement. "In issuing this proposal, HUD is moving us closer to fulfilling the promise made by the 1968 Fair Housing Act. While the rule has generally been less mortgage-specific and more far-ranging from a housing perspective than some other measures more specifically aimed at "fair lending" practices, it generally reinforces directives aimed at ensuring inclusive lending practices. The scope of an equity plan would include analysis of access to "services of reputable mortgage lenders," in addition to "fair and affordable credit" and equitable appraisal practices.Public comments can be submitted online or by mail in response to the AFFH advance notice of proposed rulemaking.

2024 will see a housing market rebound: Fannie Mae

January 20th, 2023|

Despite some positive economic indicators, the U.S. is still headed for a modest recession sometime in the first half of this year, Fannie Mae Chief Economist Doug Duncan said. But 2024 stands to be a better year for housing. In his latest forecast, Duncan predicts that in the fourth quarter of 2023, year-over-year gross domestic product will shrink by 0.6%, one-tenth of a percentage point less of a decline than projected in his December outlook. The fourth quarter of 2022's GDP change compared to the same time in 2021 was pushed upward to 0.8% growth from December's 0.4% estimate."There are economic signals pointing to recession but also signs that a 'soft landing' may be in the offing," Duncan said in a press release. "In our view, the balance still suggests a modest recession, particularly if the Federal Reserve maintains its focus on labor market tightness."Even with signs that the labor market is slowing, especially with several high profile layoffs like those at Google, Microsoft and Wayfair for example, overall employment remains robust as the December Bureau of Labor Statistics data showed, he continued."The market sees the Federal Reserve easing in the second half of the year, which can be interpreted either as a view that the recession is forthcoming or that the slowdown in inflation will lead to a less restrictive monetary posture," Duncan said. "If the latter occurs, the lower accompanying rates will likely set the stage for a pickup in housing activity going into 2024, as can be seen in our latest forecast."But if the Fed holds to its line and keeps raising short-term rates to make sure inflation does not surge again, "then the accompanying rate decline and associated revival in housing activity will likely be delayed," Duncan declared. "In either case, we expect 2023 to be a slow year for the housing market."His January forecast calls for $1.64 trillion in total originations this year, down from an estimated $2.34 trillion in 2022 and $4.57 trillion in 2021. The December outlook expected $1.67 trillion of mortgage production in 2023. Purchase volume could fall to $1.28 trillion in 2023 from $1.66 trillion a year ago, while the already depressed refinance business is expected to drop another 50%, to $356 billion from $683 billion.But even with his positive words for the housing market in 2024, Duncan cut his outlook for next year's mortgage activity to $1.97 trillion from $2.11 trillion in December's outlook.The latest forecast calls for $1.42 trillion of purchase, compared with $1.53 trillion one month prior.In January, Duncan forecast total home sales will drop over 21% this year versus 2022 to 4.52 million units on a seasonally adjusted basis, before rebounding in 2024 to 5.1 million units, a gain of nearly 13%. Those are down from December's prediction of 4.57 million units and 5.24 million units of total home sales respectively.

Economy in flux, but mortgage market sees positive activity

January 20th, 2023|

It was a rocky week for Wall Street as investors digested a host of economic data including weak retail sales, positive producer price index numbers and news of large layoffs at massive tech firms. It was mid-week when the S&P 500 posted its worst day in more than a month while the Dow Jones closed 600 points lower. Data from the Commerce Department showed consumer spending slowed by 1.1% in December as Americans struggle against inflation. Continue reading Economy in flux, but mortgage market sees positive activity at Movement Mortgage Blog.

LoanDepot invests in Black Knight loan origination system

January 20th, 2023|

Though some lenders have tabled tech initiatives until the origination landscape improves, other players in the market, like loanDepot, are enhancing their operating capacity.The Foothill Ranch, California-based lender announced Thursday that it is in the process of incorporating Black Knight's cloud-based Empower loan origination system.Migrating to the new LOS, which should be completed by 2024, is expected to reduce "the company's cost to produce." Last year, the overall cost to produce shot up as high as $10,637 per loan, cutting into profitability.Black Knight's LOS platform will be integrated with loanDepot's proprietary mello ecosystem, according to a press release. This integration "will support a seamless digital experience for customers, as well as provide greater ease and speed for the loanDepot professionals who serve them."Last year, the lender announced that its mello ecosystem would be spun out into its own digital division, headed by Zeenat Sidi. Mello operates as a complementary business to loanDepot's lending and servicing, and houses the lender's other mortgage-related businesses, including mellohome real estate services, mello insurance and mello title.Black Knight's LOS will relieve "loanDepot of the burden of maintaining their own independent backend loan origination system" allowing the lender to implement system upgrades or adjust parameters to meet specific compliance quickly and "less expensively," per an announcement from both companies.The migration is part of loanDepot's 2025 strategic plan, said Frank Martell, president of loanDepot, in a written statement. In an environment where a penny saved is a penny earned, Martell expects "gains" from switching to the cloud-based version of Empower.The company's president noted that the cloud-based LOS will "change the way [loanDepot runs] origination operations" and will improve speed to closing and quality, while "realizing substantial savings." According to a memo published by Keefe, Bruyette & Woods, this is a "material win" for Black Knight's Empower LOS, which has a market share of 10-15%, "and evidences some resiliency in appetite for technology upgrades from originators amid a very difficult backdrop in the mortgage market."The expanded relationship could add $15 to $20 million of annual revenue for Black Knight, per estimates from the investment banking company.

Existing home sales slide to cap biggest annual drop since 2008

January 20th, 2023|

Sales of previously owned U.S. homes fell in December to the slowest pace in over a decade, capping one of the housing market's worst years on record amid a rapid jump in mortgage rates.Contract closings decreased 1.5% to an annualized pace of 4.02 million last month, the slowest rate since 2010, the according to data from the National Association of Realtors out Friday. The median estimate in a Bloomberg survey of economists called for sales to drop to 3.95 million.The figures wrap a tumultuous year for the housing sector, in which transactions fell for a record 11 straight months. For all of last year, slightly more than 5 million existing homes were sold — a drop of 17.8% from 2021, the biggest annual slide since 2008.The Federal Reserve's most aggressive tightening campaign in a generation sent mortgage rates soaring in 2022 to the highest level in two decades, sidelining many prospective buyers.While borrowing costs have come off their peak in recent weeks, helping to boost builder sentiment, the outlook is still shaky. Separate data out this week showed new home construction declined in 2022 for the first time since 2009 while applications to build, a proxy for future construction, also fell in December."December was another difficult month for buyers, who continue to face limited inventory and high mortgage rates," Lawrence Yun, NAR's chief economist, said in a statement. "However, expect sales to pick up again soon since mortgage rates have markedly declined after peaking late last year."The number of homes available for sale fell to 970,000 in the month, the fewest since March. It would take 2.9 months to sell all the homes on the market, up from 1.7 a year earlier. Realtors see anything below five months of supply as indicative of a tight market.The median selling price was up 2.3% from a year earlier to $366,900, reflecting higher prices in all regions. The price gain was the smallest since May 2020, Yun said.Properties remained on the market 26 days in December compared with 24 days in November and 19 days at the end of 2021. Some 57% of homes sold were on the market for less than a month.Digging DeeperSales fell in three of four regions, while the West was unchanged from the prior monthFirst-time buyers made up 31% of purchases in December, up from NovemberCash sales represented 28% of total sales. Investors, who often purchase with cash and are therefore less sensitive to mortgage rates, made up 16% of the market, up from the prior monthSales of single-family homes dropped 1.1% from a month earlier to a 3.6 million pace, also the lowest since the end of 2010. Existing condominium and co-op sales were down 4.5%Existing-home sales account for about 90% of US housing and are calculated when a contract closes. New-home sales, which make up the remainder, are based on contract signings, and will be released next week

Fed's Williams says there's more work to do to cool inflation

January 20th, 2023|

Federal Reserve Bank of New York President John Williams said officials have not completed their aggressive tightening campaign to reduce stubborn price pressures."With inflation still high and indications of continued supply-demand imbalances, it is clear that monetary policy still has more work to do to bring inflation down to our 2% goal on a sustained basis," Williams said Thursday in prepared remarks for an event in New York with the Fixed Income Analysts Society, Inc.Fed officials lifted rates by a half-point in December, slowing down the pace of their moves following four 75 basis-point increases. The rate hike brought the target on the Fed's benchmark rate to a range of 4.25% to 4.5%, up sharply from near-zero levels last March.Investors expect the US central bank to raise rates by a quarter point at its next meeting on Jan. 31 - Feb. 1, followed by another similar increase in March, according to pricing of futures contracts. Several Fed officials speaking in recent days have endorsed using smaller 25 basis-point rate increases as a way to move more cautiously as they approach the end point for interest rates.Williams did not specify in his remarks how high he expects rates will need to go to calm price gains, or what size move officials should take when they meet in two weeks. The New York Fed chief said taming inflation will likely require "below trend" economic growth and a softening of the labor market. "But restoring price stability is essential to achieving maximum employment and stable prices over the longer term, and it is critical that we stay the course until the job is done," he said.His remarks echoed a speech made earlier Thursday by Fed Vice Chair Lael Brainard titled "Staying the Course to Bring Inflation Down."Policymakers see rates rising to 5.1% by the end of this year, according to median quarterly projections released by the Fed last month. Officials say they expect to hold rates at restrictive levels for some time to allow their actions to travel throughout the economy. Williams also noted that the central bank's balance sheet reduction plan is going smoothly and the Fed will keep shrinking holdings of mortgage-backed securities and Treasury securities as planned.Answering questions after the speech, Williams said it made sense to slow the pace of rate increases as officials got closer to the end of their tightening campaign. But he stressed that the ultimate peak for rates would be dictated by the data."I think what's important here is not what happens at each meeting but I think we've still got a ways to go," he said. "This is a period where we're getting a lot of new information."

HECMs saw greater pullbacks in endorsements at end of 2022

January 20th, 2023|

Home Equity Conversion Mortgages endorsements among reverse originators slowed toward the end of 2022 in what turned out to be a quarter they might prefer to forget.New endorsements in November totaled 3,270, a 6.6% decrease from October's figure of 3,500, with only three of the top 10 originators recording a monthly gain, according to new data released by Reverse Market Insight. Retail endorsements slipped 6%, while wholesale fell by 7.3%.  But the total number of endorsements on a 12-month trailing basis also came in at 61,205, an 18% year-over-year increase from 51,824.The contrasting data reflected much of the turbulence facing reverse originators both during the fourth quarter and full year 2022. In March, reverse-mortgage lenders saw numbers hit their highest levels in over a decade before dropping to a multiyear low just a few months later as interest rates rose.   November also ended with the bankruptcy of Reverse Mortgage Funding, one of the leading lenders in the segment. Before announcing it was filing for Chapter 11 at the end of the month, RMF had suspended new originations weeks earlier. But with a little over 8% of market share based on endorsements, the Bloomfield, New Jersey-based company still ranked as the fifth largest HECM originator up until the time of the announcement. Endorsements at RMF fell from 294 to 287 between October and November.While the full impact of RMF's departure might take time to become fully evident, an early look at Reverse Market Insight's December endorsements showed more softening ahead, with further monthly volume contraction of close to 15%. As the reverse mortgage market was still processing RMF's news, the nation's largest reverse mortgage lenders agreed to a major acquisition deal just days later, with No. 2 Finance of America Reverse purchasing leader American Advisors Group. Finance of America had previously discontinued all forward-lending business to focus on other channels, including reverse and commercial mortgages and home improvement.In November, AAG again led all originators with 720 endorsements, well ahead of Finance of America, which recorded 352. By comparison, October endorsements came in at 840 and 445, respectively for the two companies. Total market share year to date of both businesses combined was 43%, with 27% belonging to AAG and 16% to Finance of America. In third place with a 13.9% share was Longbridge Financial, who was one of the few originators to see numbers increase in November. Endorsements rose 2% to 450 from 441 a month earlier. In the weeks since the exit of Reverse Mortgage Funding, Ginnie Mae, a division of the Department of Housing and Urban Development who runs the government HECM program, stepped in to seize the portfolio of the bankrupt company and take over servicing of the loans, in order to minimize potential problems for customers.  

Why You May Want a 780+ FICO Score When Applying for a Mortgage

January 20th, 2023|

It used to be that a 720 FICO score was all you needed to ensure you qualified for the lowest rate on a mortgage. At least credit-wise.In other words, anything higher than a 720 FICO didn’t really matter, beyond bragging rights, and perhaps a safety cushion if your score dipped a bit prior to application.Then came the arrival of the 740 FICO threshold, making it slightly more difficult to qualify for the best rate when applying for a home loan.Now, Fannie Mae and Freddie Mac are upping the ante, and perhaps rubbing salt in the wounds of anyone interested in getting a mortgage.They have unveiled not one, but two new FICO thresholds for most conforming mortgages. A 760+ bracket and a 780+ bracket.A 780 FICO Score Matters for Mortgages NowIn case you’re not aware, mortgage lenders have pricing adjustments for all types of loan attributes.This can include property type, occupancy, loan type, loan-to-value ratio (LTV), credit score, and many others.Perhaps the biggest factor in loan pricing is the borrower’s credit score, as it plays a major role in potential default rates.Simply put, a borrower with a higher FICO score is entitled to better loan pricing on the basis that they’re a lower default risk. The opposite is also true.As noted, you only needed a 720 FICO score to qualify for the best pricing on a conforming mortgage back in the day.Then came the 740 tier, which made things a little harder.Now, Fannie Mae and Freddie Mac are going to require a 780 FICO if you want the very best pricing on your mortgage.Why Are Fannie Mae and Freddie Mac Upping Credit Score Requirements?In a nutshell, the FHFA, which oversees Fannie and Freddie, wants them to focus more on underserved borrowers.This means pricing adjustments have been shifted in favor of those more in need, while new pricing tiers have been introduced for all borrowers to boost capital for the GSEs.The FHFA believes that “developing a pricing framework to maintain support for single-family purchase borrowers limited by weal​th or income, while also ensuring a level playing field for large and small sellers…”In practice, this means borrowers with low FICO scores and/or limited down payments will often see their loan pricing improve as a result of favorable pricing adjustment changes.Conversely, traditionally strong borrowers (high FICOs, large down payments) may see their home loans get more expensive.While there are many changes coming, the biggest standout for me is the new tiers for credit scores, with a 760-779 category and a 780+ category.Prior to this change, which takes effect May 1st, 2023, a 740 FICO was all you needed.If you apply for a home loan once these changes are implemented, you’ll want at least a 780 credit score.Mortgage Pricing Will Get Worse for Many Borrowers with FICO Scores Between 700 and 779Current loan-level price adjustmentsNew loan-level price adjustmentsAs seen in the second chart above, a borrower with a 740 FICO and 80% loan-to-value (LTV) will see a credit score price adjustment of 0.875%.That compares to 0.375% for the borrower with a 780+ FICO and 80% LTV. It’s a .50% difference.On a $500,000 loan, that equates to $2,500 in increased upfront costs or perhaps a mortgage rate that is .125% higher.So the home buyer who puts down 20% and only has a 740 score (traditionally great credit) will either pay more in closing costs or receive a slightly higher rate.The somewhat good news is a borrower with a 780+ FICO will actually see their price adjustment fall from 0.50% (prior to this change) to 0.375%. See both charts.It’s bad news for others, such as a borrower with a 739 FICO score and 20% down, who will see costs rise 0.50%.Note that these adjustments apply to loans with terms greater than 15 years, aka 30-year fixed mortgages.If we’re talking cash out refinances, the credit score hit for a 780 borrower at 80% LTV will be 1.375%.Prior to this change, a less creditworthy 740+ FICO borrower got hit with the same price adjustments.Soon, the 740+ borrower who wants cash out up to 80% LTV will see their price adjustment rise to 2.375%.That 1% increase in fees is $5,000 on a $500,000 loan, or again, an even higher mortgage rate. Ouch.And refinances already don’t make a lot of sense given the sleep climb in rates lately.Do I Need a 780 FICO Score to Get a Mortgage?Before you get too worried, you don’t NEED a 780 FICO score to get a mortgage. In fact, the 620 minimum FICO score for conforming loans isn’t changing.However, if you WANT the best mortgage rate, you’ll need a 780+ FICO score. In short, a score 20 points higher.The change simply requires better credit scores to obtain the best pricing. It’s not locking anyone out.On the contrary, it’s making mortgages more affordable for those with lower credit scores. And even eliminating the “

Home price drop will lift purchase market, Rocket CFO says

January 19th, 2023|

The expected reduction in mortgage activity will force more industry consolidation, but prospective homebuyers will enjoy the collateral damage in the form of reduced home prices, a Rocket Companies leader said. Sky-high home values in the U.S. will decline up to 5% this year, according to a December analysis by Fitch Ratings. Meanwhile, industry projections suggest annual origination volume between $1.7 trillion and $1.9 trillion, less than half of the $4 trillion high reached in 2021. The declines, while painful, could prop up a robust purchase market for previously sidelined buyers. "Our general view is that a little bit of price decline is okay for the mortgage space," said Brian Brown, chief financial officer at Rocket Companies, in a Fitch webinar Wednesday. We'll need to watch it closely and think about credit and all the things that I know you guys are thinking about. But a 5% decline can actually be beneficial to first-time homebuyers."Soaring home prices and mortgage rates, which surpassed 7% over the past few months, prompted decades-low application activity, widespread layoffs, and a number of mergers and acquisitions. The market, however, has shown some recent signs of life, including an application surge to begin the year. First-time millennial buyers could pounce on falling home prices, Brown suggested. Today's consumers are well-qualified compared to those whose loans created the Great Financial Crisis, and experts consistently cite affordability as their biggest issue. Rocket is ready to capitalize on the first-time homebuyer pool it's gathered from its Rocket Money application, which includes millions of members who don't have mortgages with the lender. The personal finance software that keeps users in-house is a reason why Brown doesn't anticipate Rocket entering the busy M&A market."That could literally be a game changer for how a mortgage company does business on the purchase side," Brown said of the application. "So that diversification is a big deal."The Detroit-based megalender hasn't been immune to market woes, offering voluntary buyouts to employees last spring and more recent cuts. Rocket Money, formerly known as TrueBill, has been the company's only acquisition since going public in 2020, and Brown said the company has looked at acquisition opportunities but has yet to make any investments. Other large industry players have been active in the mortgage company marketplace, scooping up smaller lenders, if not swaths of outgoing employees of companies beset by the market's decline last year. Margin compression last year following a bountiful market was a main driver of last year's M&A activity, according to Stratmor Group. Consolidation will persist but at a slower pace, given the industry's built-up capital of the past few years, Brown said. Rocket, which was still profitable in the third quarter last year, itself touts $8.8 billion of liquidity and roughly $20 billion of warehouse financing. To monitor the health of lenders still operating, industry watchers should observe firms' abilities to meet covenant requirements, renew warehouse lines of credits and their activity in the mortgage servicing rights market, Brown said. The first MSR portfolio above $10 billion recently went up for bid, and even larger transactions are rumored to potentially enter the market in relation to Wells Fargo's mortgage pullbacks. The pool of MSR buyers however is limited among large companies, and any pullback from an institutional buyer could create more supply than demand impacting valuations. "Watch the cash flows because if you're required to sell those assets, to fund working capital, that can be a position which can be challenging because there's timing issues there," he said.

Ginnie Mae extends delinquency threshold exemption for COVID-19

January 19th, 2023|

Ginnie Mae has extended pandemic-related flexibilities around a threshold for late payments for the fourth time.The exemption for certain loans, which was due to expire at the end of January, will stay in place until at least July 31 for mortgage companies that work with the government bond insurer, which is an arm of the Department of Housing and Urban Development. "Ginnie Mae is continuously engaged with issuers to ensure that our policies support operational efficiency and promote working effectively with borrowers on loss mitigation efforts," Ginnie Mae Principal Executive Vice President Sam Valverde said in a press release. "These extended flexibilities are an appropriate response to the lingering effects of the pandemic on issuer operations."The government agency originally put the contingency in place in May 2020 and set it to expire at the end of that year. It was subsequently extended until July 31, 2021, then to Jan. 31, 2022 and Jan. 31, 2023. The government agency also is allowing the use of certain alternative audit procedures for on-site reviews to continue for the time being. However, Ginnie said it expects these to be discontinued "as soon as practicable for issuers whose fiscal years end beyond June 30."Ginnie Mae's role is to ensure mortgage-backed securities investors receive payments from securitized mortgages that are insured or guaranteed by other government agencies. It counts on mortgage companies to act as issuers for its securities.

FHFA makes further changes to Fannie Mae, Freddie Mac pricing

January 19th, 2023|

The Federal Housing Finance Agency is making changes to the pricing for home loans Fannie Mae and Freddie Mac buy. Separately, they are lowering a fee for commingled mortgage-backed securities.Previously planned price changes are now being codified in new matrixes with three base grids segmented for purchase, rate-term refinance, and cash-out refinance loans, recalibrated to new credit score and loan-to-value ratio categories, according to the FHFA's press release. Some additional granularity in pricing is also provided for loans with debt-income ratios greater than 40%, which may have upfront fees waived, capped or eliminated if borrowers meet other affordability criteria.All the changes are aimed at lowering loan costs for low- to moderate-income borrowers while partially offsetting those reductions with increased pricing for mortgages that serve higher-income consumers, like cash-out, high balance and second-home loans. Checks and balances are necessary because Fannie Mae and Freddie Mac must manage the balancing act of maintaining sufficient capital buffers against financial risks at the same time that they seek to fulfill an affordable housing mission."These targeted pricing changes will allow the enterprises to better achieve their mission of facilitating equitable and sustainable access to homeownership, while improving their regulatory capital position over time," FHFA Director Sandra L. Thompson said in the press release.The FHFA recently has made a number of moves aimed at striking the right balance between the two goals, which the new matrices will reflect.The latest changes follow the announcement of the rollback of certain upfront fees last fall, and requests to increase the area median income limit used to determine eligibility for price breaks, which in response is being boosted to 100% from 80%.Loan pricing updates will broadly become effective for mortgages delivered to and acquired by the government-sponsored enterprises starting on May 1.The Mortgage Bankers Association asked for some flexibility in the implementation date, noting that lenders may need some time to incorporate the matrixes into their pricing operations and assess their overall financial impact."FHFA's holistic review of the GSEs' up-front pricing framework has led to extensive reworking of the grids, and it will take some time to assess the full impact on borrowers and the market," Bob Broeksmit, president and CEO of the Mortgage Bankers Association, said in a press release. "Our initial review indicates that the new framework results in a modest net increase in overall pricing."Broeksmit, however, was cautiously optimistic about price breaks offered for low down payment programs — which he said he would like to see go even further — and the separate reduction in the commingled mortgage-backed securities fee, which will begin on April 1."While MBA continues to believe that there should not be any fee for commingled securities, we appreciate FHFA's receptiveness to industry feedback and its willingness to make an adjustment," Broeksmit said in a separate press release.That fee will be reduced from 50 basis points to 9.375.  Freddie Mac will apply the fee to collateral issued by Fannie Mae at the time that such collateral is being used for a new commingled security.Multiple trade groups have been concerned that the fee added last summer was undermining the uniform MBS structure because it contributed to the perception Fannie and Freddie's bonds aren't interchangeable. The UMBS was created in Freddie's favor.More adjustments to the UMBS fee may still be needed to protect the commingled securities' integrity, according to Michael Bright, CEO of Structured Finance Association, referring to the move as "an interim step.""We look forward to working with the FHFA on any additional measures needed to protect against a bifurcation of the UMBS security," Bright said in a press release.

Frost Bank revamps mortgage lending after 20+ years out of the market

January 19th, 2023|

The iPhone was years away from launching when Frost Bank disbanded its mortgage lending business in 2000.More than twenty years later, the San Antonio bank's mortgage business is coming back — and this time, customers can complete the whole process on their smartphones."We're an expanding company," said Bobby Berman, group executive vice president of research and strategy at Frost Bank, a unit of the $52.9 billion-asset Cullen/Frost Bankers. "Getting a home is an important transaction in someone's life. The technology is in a place where we could provide the right experience."The bank is hoping to differentiate itself by blending two philosophies that are sometimes seen in opposition: a highly digital experience, where users can apply for, monitor and pay for their loans online or by smartphone, and an emphasis on human service, where mortgage loan advisors will coach customers through the process. To reinforce its commitment to customer service, Frost is not paying commissions to its loan advisors and will service customers for the life of the loan; to make borrowing a slick digital experience, it designed a "smart" application that aligns questions to the borrower's situation and can be completed end-to-end on a smartphone.Frost decided to reenter mortgage lending about a year and a half ago.Previously, "it felt like a very transactional business to us," said Berman.The balance of human and digital is important because it captures changing demographics and rising expectations among borrowers. Customers will be able to complete the process end to end online or on their phones, including filling out the application, snapping photos of documents to upload, monitoring their loan status, and making payments once it is approved.The smartphone emphasis "is fairly unique, and especially good for Generation Z," said Tammy Richards, CEO of LendArch, a mortgage consulting firm. "This is the first group that is coming into the home-buying market that had cell phones when they were born."She has also seen research suggesting that experienced homebuyers who have worked with banks for a long time also favor smartphones, because they are used to the process. At the same time, some first-time homebuyers will appreciate the personal touch.Frost's mortgage application is smart, meaning it only asks for information relevant to the individual applicant. For example, if an applicant does not name a co-borrower, they won't see any further questions about co-borrowing.This is another new, and uncommon, aspect of mortgage loan applications, said Richards.Frost combined a front-end customer portal from cloud-based banking company Blend and a loan origination system and loan servicing software from homeownership software company Black Knight. At the outset, Frost turned to digital consulting company Infosys in 2021 to define its strategy. It has also integrated the mortgage software into its operating systems, meaning "everyone at the organization can tell where the customer is in the mortgage process," said Berman, including tellers and contact center agents.The bank brought on 80 new employees while building its mortgage business. That included business analysts, compliance experts, legal staff and technologists. The project also necessitated hiring loan advisors and staff to process, underwrite and service the loans. They will grow in ranks as lending increases."It's been like a startup," said Berman.The timing of these hires worked in Frost's favor. As mortgage refinancing went down in volume, "there have been a lot of really good people who lost their jobs at mortgage companies," said Berman. "We could be picky."Frost is currently taking applications from employees, and approved its first mortgage shortly after Christmas. "We had so many people working on this," said Bermam. "The mortgage loan advisor [for that first loan] was in tears." The bank expects to open the program to customers this year. Customers will be able to choose from three products: a standard mortgage, a jumbo loan and a "progress" mortgage for low- to moderate-income customers that does not charge private mortgage insurance and incorporates alternative data for underwriting.The final piece of the puzzle in Frost's new strategy is the absence of incentives. Mortgage loan officers will not earn commissions, which "changes the game from the start," said Berman. "We're trying to hire people who care about getting people in their homes, not about the dollar volume of the mortgage."It's an origination model that Richards expects to see more of."There are new models coming out that will make mortgages more accessible to all, less costly and more transparent," said Richards. "That is needed."

Mortgage rates hit lowest point since September

January 19th, 2023|

Mortgage rates moved down significantly this past week to their lowest level since mid-September, as the markets reacted positively to the latest inflation news, Freddie Mac reported.Its Primary Mortgage Market Survey for the week of Jan. 19 found the average for the 30-year fixed rate mortgage fell to 6.15%, a drop of 18 basis points from the prior week's 6.33%. That is the lowest it has been since the week of Sept. 15, 2022, when it crossed back above the 6% mark.For the same period last year, the 30-year FRM was 3.56%.The 15-year FRM fell to 5.28%, down 24 basis points from the prior week's 5.52% but still above 2.79% one year ago. "Rates are at their lowest level since September of last year, boosting both homebuyer demand and homebuilder sentiment," Sam Khater, Freddie Mac chief economist, said in a press release. "Declining rates are providing a much-needed boost to the housing market, but the supply of homes remains a persistent concern."The National Association of Home Builder/Wells Fargo Housing Market Index rose for the first time in January since December 2021.However, a potential stand-off in Congress on the nation's debt ceiling could push mortgage rates higher again, said a statement from Orphe Divounguy, senior macroeconomist at Zillow Home Loans, issued Wednesday night."The closer we get to the brink, the higher the risk of default," said a statement from Orphe Divounguy, senior macroeconomist at Zillow Home Loans, issued Wednesday night. "This could raise borrowing costs, including mortgage rates, thus hampering an already cold housing market."That's what happened the last time such a conflict took place, back in 2011. "Stock prices plunged, market volatility spiked, and mortgage rates increased as America's credit rating was downgraded for the first time," Divounguy noted. "A fight over raising the debt ceiling is likely to drag into the summer, and mortgage borrowers should expect rate volatility as a result."Zillow's own rate tracker had a 10 basis point week-to-week decline in the 30-year FRM as of Thursday morning, to 5.78%.So far, speculation about the debt ceiling has had limited impact on the 10-year Treasury yield, one of the benchmarks used to help price mortgages.On Jan. 11, the 10-year yield closed at 3.554%. It bounced around the next few days, ending up 3.535% on Jan. 17. But the following day, it plummeted to 3.375%. By noon eastern time on Thursday, the yield increased by just 2 basis points to 3.395%.

New-home mortgage apps decline for third time in four months

January 19th, 2023|

Mortgage applications to purchase a newly constructed home renewed their month-to-month decline in December, falling 5% from November, the Mortgage Bankers Association said.Compared with December 2021, application volume fell by 25.2%. That was the same percentage change year-over-year that was seen in November, the MBA's Builder Application reported. This data is not seasonally adjusted."The decline in activity was in line with single-family housing starts that were 32% lower than a year ago," Joel Kan, the MBA's deputy chief economist, said in a press release. "Higher mortgage rates and a weakening economy held back buyers at the end of last year."The average loan size sought to buy a new home increased approximately 1.8% to $399,555 in December from $392,465 in November. Conventional loans composed 69.1% of mortgages sought, followed by Federal Housing Administration at 20%, Veterans Affairs making up10.5% of the total and the remaining 0.3% were seeking a U.S. Department of Agriculture/Rural Housing Service product."In the new-home market, builder incentives such as price cuts, paying points and providing mortgage rate buy-downs are being used to bolster sales," First American Financial Deputy Chief Economist Odeta Kushi said in a commentary on December's housing starts data released on Thursday morning. "In many instances, these efforts are paying off and buyers are being enticed back."The MBA estimated that new single-family home sales were running at a seasonally adjusted annual rate of 641,000 units in December, a decrease of 2.9% from November's 660,000 units. On an unadjusted basis, the MBA approximated 45,000 new home sales during December, down 8.2% from 49,000 new home sales in November. But Kan was mildly positive about the future of new home sales activity, pointing to a January increase in the National Association of Home Builders/Wells Fargo Housing Market Index, the first month-to-month increase since December 2021, which he attributed to falling interest rates and increased traffic from potential buyers.But the rise to 35 from December 2022's 31 still has the index in territories last seen in mid-2012."The housing market is still in need of more starter and entry-level homes, especially when current demographic trends point to the potential for more younger households to enter homeownership in the near future," Kan said "New construction of these units will help these buyers entering the housing market."And with mortgage rates continuing to moderate and the traditional spring home purchase season approaching, "it's possible that the worst of the impact to sales is behind us," First American's Kushi said.

Mortgage Co-Borrower vs. Co-Signer

January 19th, 2023|

Today we’ll discuss the key differences between a mortgage co-borrower and a mortgage co-signer.While the two phrases sound pretty similar, and are sometimes used interchangeably, there are important distinctions that you should be aware of it considering either.In either case, the presence of an additional borrower or co-signer is likely there to help you more easily qualify for a home loan.Instead of relying on your income, assets, and credit alone, you can enlist help from your spouse or a family member.This may allow you to qualify for a larger loan amount, snag a lower interest rate, or even win a bidding war via a stronger offer.What Is a Mortgage Co-Borrower?A mortgage co-borrower is an individual who applies for a home loan alongside another borrower.Typically, this would be a spouse that will also be living in the subject property. To that end, they share financial responsibility and ownership, and are both listed on title.For example, a married couple may decide to purchase a home. They apply together as co-borrowers.Doing so allows them to pool together their income, assets, and credit history. Ideally, it makes them collectively stronger in the eyes of the lender and the home seller.This could mean the difference between an approved or rejected loa application, and even a winning vs. losing bid on a property.Just imagine a home seller who is deciding between two competing bids with their real estate agent.Do they go with the borrower just scraping by financially, or the married couple with two good jobs, two steady incomes, solid pooled assets, deep credit history, etc.Speaking of that income, two incomes could allow you afford more home.What Is a Mortgage Co-Signer?A mortgage co-signer is an individual who acts as a guarantor on a home loan and takes responsibility for paying it back should the borrower fail to do so.In that sense, the co-signer acts as a sort of safety net, and not an active participant.This means they don’t make monthly payments, nor do they reside in the subject property.Perhaps more importantly, they do not have ownership interest in the property. However, they share liability along with the borrower(s).To be blunt, they get all the potential bad without any of the good, i.e. ownership.But the whole point of a co-signer is to help someone else, so it’s not about them. A common example is a parent co-signing for a child to help them buy a home.Both their income and credit history can come into play to help their child get approved for a mortgage.For the record, someone with ownership interest in the property can’t be a co-signer. This includes the home seller, a real estate agent, or home builder. That would be a conflict of interest.Mortgage Co-Borrower vs. Mortgage Co-SignerWhat Are the Credit Score Impacts of Co-Borrowers and Co-Signers?As a co-signer, you are responsible for the loan for the entire term, or until it is paid off via refinance or sale.This means it’ll be on your credit report and any negative activity (late payments, foreclosure) related to the mortgage will carry over to you.There are also credit inquiries, though these usually have a minimal impact.However, it’s possible the on-time mortgage payments can help you credit over time, per Experian.The other issue is it may limit your borrowing capacity if you’re on the hook for the loan, even if you don’t pay it.Its presence could make it more difficult to secure your own new lines of credit or loans, including your own mortgage, if wanted, due to DTI constraints.If you’re a co-borrower on a mortgage, credit impact will be the same as if you were a solo borrower. There will be credit inquiries when applying for a mortgage.And the loan will go on your credit report if/when approved, and payment history will be reported over time.On-time payments can increase your score, while missed payments can sink your score.What About a Non-Occupant Co-Borrower?You may also come across the term “non-occupant co-borrower,” which as the name implies is an individual on the loan who does not occupy the property.On top of that, this person may or may not have ownership interest in the subject property, per Fannie Mae.This differs from a co-signer, who does not have ownership interest as indicated on title.But both must sign the mortgage or deed of trust, and will have joint liability along with the borrower.On FHA loans, a non-occupying co-borrower is permitted as long as they are a family member with a principal residence in the United States.If not a family member, or for 2-4 unit properties, a 25% down payment is required (max 75% LTV).Either way, the non-occupant co-borrower takes title to the property, unlike a co-signer who does not.Note that co-signers or non-occupant co-borrowers are not permitted on USDA loans.And for VA loans, a co-signer must be a spouse or active duty/veteran who resides in the property.Most lenders do not allow non-occupying co-borrowers on VA loans, though a “joint loan” may be an option.When Not to Use a Co-Borrower for a MortgageBelieve it or not, there are times when using a co-borrower could do more harm than good.The most common example is when the prospective co-borrower has poor credit, or even marginal credit.Because mortgage lenders typically consider all borrowers’ credit scores and then take the lower of the two mid-scores, you won’t want to add someone with questionable credit (unless you absolutely have to).For example, say you have a 780 FICO score and your spouse has a 680 FICO score. You plan to apply jointly because they’re your spouse.But then you find out that the mortgage lender will qualify you at the 680 score. That pushes your mortgage rate way up.In this case, you may not want to use the co-borrower unless you need them for income purposes.They can still be on title and get ownership in the property without being on the loan.How a Co-Borrower’s Higher Credit Score Can Make You Eligible for a MortgageRecently, Fannie Mae instituted a new method for determining eligibility when there’s a co-borrower.They take the median score of each borrower and combine them, then divide by two (the average).For example, imagine borrower 1 has scores of 600, 616, and 635. They’d typically use the 616 score and tell the borrower it’s not good enough for financing.Now suppose there is a co-borrower (borrower 2) with FICO scores of 760, 770, and 780.Fannie Mae will now combine the two median scores (770+616) and divide by two. That would result in an average median credit score of 693.This allows borrower 1 to comply with Fannie/Freddie’s minimum 620 credit score requirement (for conforming loans).Note that this is just for qualifying, and only if there’s a co-borrower. And it doesn’t apply to RefiNow loans or manually underwritten loans.Additionally, pricing (and mortgage insurance if applicable) is still determined by the representative credit score (616).So together you qualify, but the mortgage rate might be steep based on the lower credit score used for pricing.Note that not all lenders may allow a borrower to have a sub-620 credit score, regardless of these guidelines (lender overlays).How to Remove a Mortgage Co-Borrower or Co-SignerWhile it can be nice to have a mortgage co-borrower or co-signer early on, they may want out at some point.There are a variety of reasons why, possibly a divorce, possibly to free up their own credit.Fortunately, it can be done relatively easily via a traditional mortgage refinance.The caveat is that you’d need to qualify for the new home loan without them. Additionally, you’d want mortgage rates to be favorable at that time as well.After all, you won’t want to trade in a low-rate mortgage for a high-rate mortgage simply to remove a borrower or co-signer.A common scenario might be a young home buyer who needed financial assistance early on, but is now flying solo.They could refinance and alleviate the possible stress/financial burden of the co-signer and finally stand on their own.Alternatives to Using a Co-Borrower/Co-SignerIf you’re unable to find a willing co-borrower or co-signer to go on the loan with you, there might be alternatives.First, determine what the issue is, whether it’s a low credit score, limited income, or a lack of assets.Those with low credit scores may want to consider improving their scores before applying. Aside from making it easier to get approved, you could qualify for a much lower interest rate.Those lacking income/assets can look into options that require little to no down payment.For example, both VA loans and USDA loans don’t require a down payment.There is also Fannie Mae HomeReady and Freddie Mac Home Possible, both of which require just 3% down and allow boarder income (roommate) to qualify.Or inquire about grants and down payment assistance via a local lender or state housing agency.There are many mortgages that require very little down and next to nothing in terms of assets/reserves.You may also consider lowering your maximum purchase price if these issues persist.Another option is using gift funds to lower your LTV ratio and loan amount, thereby making it easier to qualify for a mortgage.

Bailout or business as usual? Home Loan bank advances to crypto banks spark debate

January 19th, 2023|

The use of Federal Home Loan Bank advances to offset crypto deposit losses has raised questions about banks' reliance on the quasi-governmental funding mechanism for liquidity.La Jolla, Calif.-based Silvergate Bank and New York-based Signature Bank, arguably the two traditional banks with the greatest exposure to the digital asset industry, have both tapped Home Loan Bank advances following the collapse of the cryptocurrency exchange FTX. Of the two, Silvergate, which has pivoted the bulk of its operations toward digital assets during the past decade, was more significantly impacted by the volatility in the wake of FTX's demise. The bank received $4.3 billion in advances from the Federal Home Loan Bank of San Francisco in the fourth quarter of 2022 to offset $8.1 billion of drawn down deposits. Advances now account for more than 60 percent of Silvergate's wholesale funding. Silvergate Bank availed itself of billions in advances from the Federal Home Loan Bank of San Francisco in the fourth quarter of 2022, raising questions about whether the Home Loan Bank system should be acting as a critical source of liquidity for the banking system.SOPA Images/Photographer: SOPA Images/LightR The episode puts a spotlight on both the supervision of crypto activity in the banking sector and the use of advances to support institutions that do little to support housing finance."The fact that this bank, which was exposed to steep crypto losses, was entangled with a Federal Home Loan Bank, that's the first suggestion that the real financial system and crypto could be in some ways interconnected," David Zaring, a legal studies professor at the University of Pennsylvania's Wharton School of Business, said. "That it's interconnected with … a pretty hidden avenue for banks to cover their liquidity needs is, in my view, a little worrisome."At the heart of the debate is whether the Federal Home Loan Bank of San Francisco, in providing advances to Silvergate, was merely sticking to its mandate to provide liquidity to a member bank, or if it was providing a de facto bailout to a firm engaged in a risky and unproven line of business. Advances are intended to be a first-order capital source for member banks, said Ryan Donovan, president and CEO of the Council of Federal Home Loan Banks, an organization that serves as a voice for the entire Federal Home Loan Bank System. As long as a firm can provide the proper assets as collateral, the Home Loan Banks are obligated to provide liquidity, Donovan said."Home Loan Banks aren't an emergency source of liquidity. There's this perception that if an institution has a need for liquidity they are in some way troubled, but liquidity issues could arise for a number of reasons in the normal course of business," he said. "We were established by Congress to meet the needs of banks in those situations."Indeed, advances are often the first place many banks will turn for liquidity in a pinch. In the Fed's latest senior financial officer survey, the results of which were published last week, more than three quarters of Home Loan Bank members said they would be "very likely" to tap advances should their reserves fall below their desired level. Home Loan Bank advances were by far the most preferred liquidity source included in the questionnaire. There are several reasons why banks tend to favor advances, Zaring said, including their cost relative to other funding sources as well as the lack of stigma from industry analysts, investors and peers about using them. Meanwhile, turning to other facilities, such as the Fed's discount window, tend to be viewed more negatively, he said.Julie Hill, a law professor at the University of Alabama who specializes in financial regulation, said the regulators are aware of this preference for advances and would have to sign off on their inclusion in banks' liquidity plans. She said this was most likely the case between Silvergate and its primary regulator, the Fed."The Federal Reserve absolutely knew before FTX that crypto presented unique liquidity risks, Silvergate absolutely knew that, too, that's part of why their balance sheet looked so much different than a traditional community bank of a similar size," Hill said. "You know Silvergate had a liquidity plan, you know part of that plan was securities and it would surprise me very much if borrowing money from places like the Federal Home Loan Bank of San Francisco wasn't part of that liquidity plan."Silvergate and the Fed Board of Governors declined to comment for this article. Hill said there is an argument to be made that regulators did the right thing by allowing Silvergate to fall back on Home Loan Bank advances because it enabled the bank to withstand the run and avoid failure. On the other hand, she sees the concerns that the use of advances to hold off a run is needlessly creating more risk for the Federal Deposit Insurance Corp.'s Deposit Insurance Fund.The 11 Federal Home Loan Banks were created as government sponsored enterprises by an act of Congress, but they are privately capitalized by member banks, credit unions, thrifts and other financial institutions. They enjoy certain advantages, such as preferential tax treatment and fundraising costs. They are also given first lien priority, meaning they are repaid first in instances of bank insolvency. That means the FDIC could be on the hook for a potential future bank failure.Zaring said this is concerning because the Home Loan Banks' incentive to support their members could be in conflict with broader financial stability considerations."The Fed sits on [the Financial Security Oversight Council], Home Loan Banks do not, so the Fed has a sort of financial stability mandate that is important when you're thinking about contagion and bank bailouts in provisions of liquidity," he said. "It's just not clear that the Federal Home Loan Bank Board has that kind of systemic view of what's going on in the financial ecosystem."Donovan said in the case of Silvergate, as with all advances, the member bank's regulators — in this case the Fed and FDIC — could have blocked the liquidity provision if it felt the bank presented a threat to financial stability. "In the case of Silvergate and others, the FDIC, the Fed and state bank regulators are in constant contact with the Home Loan Banks," he said. "If they had safety and soundness concerns about a bank, they could ask that the advance not be made."Hill said the episode demonstrates how the regulators themselves have been taking a trial and error approach to managing the counterparty risks presented by crypto firms."It's not like regulators let all banks or thousands and thousands of them do this," Hill said. "Regulators let a handful of banks experiment in this space and now they might be rethinking what sort of experimentation they'll allow."Alison Hashmall, a banking and regulatory lawyer with the law firm Debevoise & Plimpton, said she expects the Fed to take a tougher tack with banks that seek to do business with crypto firms moving forward. She pointed to a joint letter from the Fed, FDIC and Comptroller of the Currency issued earlier this month, in which the regulators pledged to a cautious approach to supervising digital asset exposure."[Regulators are] advising banks that in order to pursue a safe and sound practice, you need to be mindful and consider how much of your deposit base is coming from these types of [crypto] companies," she said. "Examiners are going to be looking at that and wanting banks to make sure they're not over exposed. I don't think they'd like to see that [type of run] happen again."Founded in 1988 as an industrial loan company, Silvergate began as a commercial real estate specialist before transitioning to a single-family mortgage lender and then a multifamily lender. In 2013, it began building its digital asset business. Today, the bulk of the bank's business centers on providing payment, lending and funding services to crypto firms. Much of this is done through its Silvergate Exchange Network platform. Meanwhile, Silvergate's presence in the mortgage industry has dwindled. Late last year, it exited its mortgage warehouse lending product, citing rising interest rates and falling volumes of mortgages. The fact that Home Loan Bank funds are being used to support banks that do little in the home finance space has frustrated some housing advocates. As the Federal Housing Finance Agency, which oversees the Home Loan Banks, conducts a comprehensive review of the system, some are calling for stricter provisions that will force the banks to focus on their core mandate.Caroline Nagy, senior policy counsel for housing, corporate power and climate justice with Americans for Financial Reform, said if the Home Loan Banks are going to provide subsidized funding for banks, the government should ensure that activity is leading to the creation of more housing."If we think that promoting liquidity for the largest banks and insurers in the country is a valid use of public resources, and I'm talking specifically about the privileged lien status and the tax free status of the system, we really need to see a public benefit," Nagy said. "Frankly, we have massive needs for the kind of investment that this banking system could produce. We desperately need affordable housing, we are in an affordable housing crisis."The FHFA declined to comment for this story.Where Silvergate's advances are seen by some as an abuse of the Home Loan Bank system, Signature's use of the funding source is more typical. One of the largest multifamily lenders in New York, Signature frequently taps the Home Loan Bank of New York for advances to support that activity. And while it has launched a similar network for digital payment processing, its falling deposits — which were $88.6 billion on Dec. 31, from $106.1 billion a year earlier — are the result of conscious effort to pull back from the digital asset space."We are truly the quintessential example of what the Federal Home Loan bank was put in place for because any borrowings that we do have from the FHLB are supporting our lending in the multifamily sector," Eric R. Howell, Signature's chief operating officer, told American Banker. "It's really just part of our overall funding equation. We use these advances to fund our businesses."

Housing starts fall to cap first annual decline since 2009

January 19th, 2023|

New U.S. home construction declined for a fourth-straight month in December, wrapping up a disappointing year for an industry that saw annual housing starts fall for the first time since 2009.Residential starts decreased 1.4% last month to a 1.38 million annualized rate, a five-month low, according to government data released Thursday. New construction fell 3% in 2022 after surging the prior year. The December drop was due to a slump in multifamily projects.Single-family homebuilding jumped to a 909,000 annualized rate last month, the most since August. However, for all of last year about 1 million one-family houses were started, down 10.6% from 2021 — the biggest drop since 2009.The median estimates in a Bloomberg survey of economists called for a 1.36 million pace of total residential starts in December.Applications to build, a proxy for future construction, fell 1.6% to an annualized 1.33 million units in December, the fewest since May 2020. Permits for construction of one-family homes dropped 6.5% last month, also the lowest since the early months of the pandemic.The housing market rapidly deteriorated last year in the wake of the Federal Reserve's most aggressive interest-rate hiking campaign since the 1980s. That sent mortgage rates soaring and sidelined many prospective buyers, prompting many builders to offer incentives in hopes of bolstering demand.Builder SentimentWhile homebuilder sentiment unexpectedly rose in January, the improvement followed declines in every month last year. That report on Wednesday also pointed to builders still contending with high construction costs and challenging affordability conditions. Multifamily starts, which are volatile from month to month, slid 19% in December, while permits for new construction rose.Total new construction decreased in three of four US regions. The number of homes completed dropped 8.4% to an annualized 1.41 million.Weakness in the housing industry is spilling over into other areas of the economy as well. The government's retail sales report on Wednesday showed purchases at furniture and home furnishing outlets dropped 2.5% in December, the most since the end of 2021. Sales at electronics and appliances merchants fell 5.6% from a year earlier, by far the weakest category.

What student loan servicing can teach lenders about Gen Z

January 19th, 2023|

While many assume that the best way to reach Gen Zers is through their phones, in reality, they want a personal connection, especially regarding their financial products.Mortgage originators need to keep in mind as the leading edge of this age group — those born between 1997 and 2012 — moves into the home buying market. They have experience from applying for student loans that has shaped their attitudes.One thing they seem to hold dear is the desire for customer service, said Sara Parrish, president of CampusDoor, a unit of mortgage industry vendor Incenter that provides origination services for student lenders. Gen Zers prefer to work with originators across multiple channels, but they would rather do anything than pick up a telephone to call for help."But in our experience, Gen Z does appreciate a full-service concierge approach," Parrish said. "When they do get to the point of needing to pick up the phone, they want to be able to talk to somebody who's going to have all of the answers for them."They do have loads of information at their fingertips, so when they have a question, it is not a basic one, said Parrish."The questions they're asking via phone, via chat, via email, even via text, are super sophisticated," Parrish continued. "Talk me through my APR? What is this fee and what does it mean? Tell me, about the repayment options and what that means for me years down the road?"Furthermore, older generations were more willing to put up with friction in the process. Gen Zers are "a little less reliant on their parents in some ways," said Parrish. "They're doing some of their own research, and when they're submitting their applications, they're comparing us, not with other lenders, but with other technology providers like Uber and like Amazon."Others find that perhaps the younger generation is not so independent. Javelin Research found that most Gen Zers that have moved into homeownership are getting mortgage advice from a personal connection, the first source being their parents and the second being from a real estate broker."It's actually the human beings that they are face-to-face with that are driving where they get a mortgage and whether they get a mortgage," said Javelin lead analyst Babs Ryan. "When Gen Z are getting loans, they actually want, more than other age groups, human help, not digital help."They want someone they can have a conversation with, who can help them through the process."There's still a very high performing proportion of under 30s living at home now, even more than four years ago before COVID," Ryan said. "Their parents are great influencers in helping them in what to do."Regarding loan servicing, 39% said their No. 1 preference is to speak with a person, Ryan said.Supporting a multichannel approach, "we find that in banking, there's a preference often for online over mobile for a lot of different tasks," continued Ryan.In fact, lenders might be better off staying away from going all in on technology integrations looking to take people out of the process, Parrish noted."In our experience, you can create a great user experience for Gen Z borrowers with your communication, with your proactiveness, with your ability to provide great customer service and only adding the bells and whistles where it really adds value to the consumer," Parrish said.However, from CampusDoor's experience, Gen Zers are shifting away from parental advice."Because these are cosigned [student] loans, the parents' opinions still matter and the parents' relationships still matter to an extent," said Parrish. "But we're seeing with every passing year, more of that decision making goes to the student borrower, and a little less to the parent, and the student borrower does most of their research online."Gen Zers are also more rate sensitive when it comes to getting a student loan and that desire to shop is likely to follow them to home buying. Rates, more than brand loyalty, drive their decision making about where they get a loan."They're definitely aware of the impact of rates on the amount that they're repaying over time," said Parrish. "They're asking questions about that. It's just a whole different ball game."Given the rising cost of getting an education, especially if someone pursues a post-graduate degree, these students are borrowing almost as much money as they would be if they bought a house.Past research from Gen Z Planet found that 68% of this group believes homeownership is important for building wealth."They're just exhibiting this incredibly savvy list of behaviors," said Parrish. "That's absolutely going to pull through to their other huge life decisions and big purchases that they're making." 

Rent-to-own options gain traction with younger consumers

January 18th, 2023|

A significant portion of younger potential homebuyers would consider participating in a rent-to-own arrangement, a recent survey from Javelin Strategy & Research shows.More than half (55%) of Gen Zers and 37% of millennials are willing to enter into one of these transactions, Javelin disclosed in a report on the home lending industry, "Mortgage Pandemic or Just the Sniffles: Fast-Track Cures and Long-Haul Boosters."To be sure, rent-to-own agreements currently make up less than 2% of living situations, but Javelin said that points to a broader business opportunity for banks, lenders, investors and incubators.In particular, they suggest lenders should shift from focusing on long-term purchase mortgages to offering a suite of living solutions centered on the flow and changes in people's life cycles.Younger consumers are more interested in a "test drive" of any property they might occupy long-term, said Babs Ryan, lead analyst for Javelin's digital lending practice."What they want is an opportunity to try something before they dive all in," Ryan said. "They don't know if they're going to like the home."While some interested in rent-to-own don't have the funds for a down payment, it is not universal. Catering to renters and those in multigenerational households engages a greater population than homeowners, since 14.3 million renters plan to move in the next 12 months vs. 5.4 million people who already possess a primary residence, U.S. Census data shows."The No. 1 reason why the mortgage market has been so depressed is that lenders have not given people reasons to move," Ryan declared. "They have provided products after they've decided to move, but they haven't given them reasons to move."For Gen Zers and millennials, living in a multigenerational home saves them money while they're not in a committed relationship, and also allows them to avoid a market where home prices and interest rates are rising."The pandemic's created a lot of uncertainty about life, that's what's behind this," added Ryan. "Why would I commit to buying a house or condo if I don't know what I'm going to do three years from now? We heard that over and over."Javelin found that among consumers rent-to-own has low recognition, even though one company in the business, Landis, has investors with celebrity name recognition, Jay Z and Will Smith. Other companies like Pathway Homes and fintech Divvy also are active in this business line.However, several of these arrangements have come under regulatory scrutiny for alleged predatory lending, generating a warning from then-New York State Department of Financial Services Superintendent Maria Vullo in 2018.Also, Vision Property Management settled a lawsuit brought by the NYDFS and Letitia James, the state's attorney general, for $3.75 million in 2020. But the company was later sued that same year by Michigan-based civil rights organizations for its practices.Ryan noted that in many instances to date consumers were only offered rent-to-own opportunities because it was the only way they qualified and that contributed to the legal sensitivities in the Vision lawsuits.A  broader opportunity exists for the mortgage industry in the rent-to-own space because "nobody's gotten the formula right," she said. "If somebody did, it would really work for consumers and it could be a win-win for the investors as well," Ryan addedAn example for U.S. lenders to copy is Lloyd's Bank in the United Kingdom, which not only offers "buy-to-let" mortgages, but has put together a venture, Citra Living, that is reportedly investing in up to 50,000 newly constructed homes on that basis, Ryan said.Rent-to-own options normally add dollars to the list price, whether for a home or a consumer good. But models that put a portion of the rent toward the down payment can help people save for a home. And that's just one of hundreds of ways rent-to-own can do that.Also, having to pay extra to have the option to walk away from the deal is something younger consumers value, she added, reiterating that mortgage lenders are concentrating on fixing the wrong problem."Instead of focusing on faster servicing or quicker onboarding, they should be focusing on 'why I can help somebody move,' creating solutions that help people throughout their lives rather than simply focusing on products for somebody looking to buy something," Ryan said.Among the surprising findings Javelin came across is that many consumers see rent-to-own as an opportunity to test out purchasing a second home or even an investment property that will be sublet.This way they can see if the "snowbird" lifestyle works for them, said Ryan. As for the investment property, using rent-to-own allows the potential purchaser to see if it can be a viable business for them.

Class-action suit against First Guaranty receives green light

January 18th, 2023|

A lawsuit lodged against First Guaranty Mortgage Corp. by former employees was given class-action status by a federal bankruptcy judge in mid-January.The class-action suit, currently made up of 425 employees, alleges that the Plano, Texas-based lender failed to adhere to Worker Adjustment and Retraining Notification (WARN) requirements when it laid employees off "without cause" or notice in June. Soon after, the company declared bankruptcy.Per the WARN Act, employers are required to provide written notice to employees at least 60 calendar days in advance of a mass layoff, though some exceptions do exist. Plaintiffs of the class-action suit – which was given a green light by Judge Craig T. Goldblatt of the U.S. Bankruptcy Court for the District of Delaware on Jan. 11— claim that their employer's violation of the WARN Act entitles them to receive damages from the lender, including "unpaid wages, salary, commissions, bonuses and accrued holiday pay."FGMC declined to comment.In June, FGMC explained that the layoffs were a result of "significant operating losses and cash-flow challenges due to unforeseen historical adverse market conditions for the mortgage lending industry."Soon after, FGMC and its affiliate, Maverick II Holdings LLC, announced that they would be filing for bankruptcy and seeking Chapter 11 protection.The class action lawsuit was originally filed on June 30, 2022. Plaintiffs claimed that the lender "carried out mass layoffs and/or plant closings at its facilities in April 2022 and later on June 24, 2022, terminating hundreds of its employees without cause and without 60 days' notice."Three months later, FGMC denied violating the WARN Act. The lender said it acted in good faith and that FGMC is not liable due to "unforeseeable business circumstances" and "faltering company" exceptions under the WARN Act.Exceptions to the WARN Act's 60-day notice period include a natural disaster, a faltering company scenario, and unforeseen business circumstances.  First Guaranty Mortgage Corp. in a WARN cited an unsuccessful effort to obtain funding before its June bankruptcy. Per the class action suit, FGMC has 10 business days to provide the class counsel with an electronic spreadsheet containing the names and known addresses of former employees. Those contacted have 35 days to opt out of the class action suit.Lori Buckley, Gayle Zech, Roberta Martinez, Jennifer Jackson and James Davies, who filed the original class-action suit, will serve as representative of all employees involved.

CFPB says servicers should offer loss mitigation beyond COVID hardships

January 18th, 2023|

The Consumer Financial Protection Bureau said it expects mortgage servicers to continue offering forbearances, deferrals and loan modifications to consumers experiencing financial hardships unrelated to the COVID-19 pandemic. The CFPB said Wednesday that streamlined loss mitigation options can be made available to any borrower. Though the CFPB's special foreclosure protections for certain delinquent borrowers expired at the end of 2021, the bureau has invoked the "temporary flexibilities" in its servicing rules to make loss mitigation programs available to consumers experiencing a financial hardship, even if the borrower's financial troubles having nothing to do with COVID. "We expect servicers to continue to utilize all the tools at their disposal — including, if available, streamlined deferrals and modifications that meet the conditions of the CFPB's COVID-19-related mortgage servicing rules — in their efforts to keep consumers in their homes," Lorelei Salas, the CFPB's assistant director for supervision policy and acting assistant director for supervision examinations, said in a blog post. "As long as these streamlined loss mitigation options are made available to borrowers experiencing hardship due to the COVID-19 national emergency, those same streamlined options can also be made available under the temporary flexibilities in the rule to borrowers not experiencing COVID-19-related hardships." Consumer Financial Protection Bureau assistant director for supervision policy Lorelei Salas said the agency expects mortgage servicers to offer consumers who are experiencing financial hardships the same relief they extended during the Covid pandemic, even if they are not Covid-related hardships. Bloomberg News CFPB Director Rohit Chopra vowed last year to crack down on mortgage servicers that do not allow borrowers to restructure loan payments or that keep consumers from enrolling in forbearance or loan forgiveness programs.Salas said the CFPB's updated exam procedures provide information on fees that servicers can charge borrowers and misrepresentations related to foreclosure. The 1,812-page supervision and examination manual specifically states that examiners will determine whether a mortgage servicer's "representatives make misrepresentations or use deceptive means to collect debts."The CFPB also has told examiners to seek information on how the servicers communicate with borrowers about homeowner assistance programs. Salas specifically cited the Treasury Department's Homeowner Assistance Fund, a $9.9 billion program that was part of the American Rescue Plan Act, that provides relief to help homeowners avoid foreclosure. Salas noted that the program is available "only if mortgage servicers work with state housing finance agencies and housing counselors" to help borrowers complete the application process.The exam procedures generally describe the types of information that CFPB examiners use to evaluate servicers' policies and procedures and to assess whether servicers are identifying risks to consumers. The manual includes guidance that the bureau has released since the last update in mid-2016.

PNC Financial girds for 'shallow' recession, builds reserves

January 18th, 2023|

PNC Financial Services Group boosted its loan-loss provision during the fourth quarter and cautioned that it is bracing for a mild recession in 2023.The Pittsburgh bank said it expects gross domestic product will fall 1% this year, but employment will hold relatively strong. Chairman, President and CEO William Demchak conceded, though, that the outlook is cloudy, uncertainty looms large and credit quality could deteriorate."As we look ahead, we are operating our company with the expectation for a shallow recession in 2023," Demchak said Wednesday during the company's earnings call. "Accordingly, this outlook drove an increase in our loan-loss provision in the quarter." Pittsburgh-based PNC is projecting average loan growth of 1% to 2% in the first quarter, along with a 1% to 2% decline in net interest income.Stefani Reynolds/Bloomberg The $557 billion-asset bank said its provision for credit losses in the fourth quarter totaled $408 million, up from $241 million in the third quarter. A year earlier, PNC posted a benefit of $327 million from its provision.Net loan charge-offs were $224 million, up 88% from the third quarter.The fourth-quarter provision increase partly reflected loan growth — average loans increased 3% to $322 billion during the quarter, reflecting both consumer and commercial growth — but also the potential for economic weakness ahead.Robert Reilly, chief financial officer, said PNC finished 2022 on solid overall footing and expects continued growth this year. But he said the pace of expansion would ease on multiple fronts, given the economy's vulnerability to inflation that hovers above 7% and rising interest rates that more than doubled in 2022.PNC is assuming that the Federal Reserve's benchmark interest rate will increase by 25 basis points in both February and March, Reilly said. "Following that," he said on the earnings call, "we expect the Fed to pause rate actions until December 2023, when we expect a 25-basis-point cut."PNC is projecting average loan growth of 1% to 2% in the first quarter, Reilly said, with net interest income expected to decline by 1% to 2% after jumping substantially in 2022 as interest rates rose.Higher rates tend to bolster loan margins initially, and to drive up deposit costs later. Fee income, which increased slightly during the fourth quarter, is expected to slide 3% to 5% in the current quarter.PNC said that it expects charge-offs to moderate somewhat to about $200 million, and that the fourth-quarter total reflected a single, soured credit that accounted for much of the quarterly increase."With charge-offs having been so low, it's not surprising to see volatility quarter to quarter, and we saw this in the fourth quarter with an outsized loss on one commercial credit," Demchak said.While deposits decreased slightly in the final quarter of 2022, PNC expects to maintain steady funding levels early this year in order to fund ongoing, albeit lighter, loan growth, Demchak said."We continue to manage our liquidity levels to support growth," he said. "Our deposits remain relatively stable, and we've increased our wholesale borrowings to bolster liquidity."PNC reported fourth-quarter net income attributable to common shareholders of $1.4 billion, up from $1.2 billion a year earlier but down from $1.56 billion in the third quarter.The company posted fourth-quarter earnings per share of $3.47, up from $2.86 a year earlier and down from $3.78 in the previous quarter.Analysts surveyed by FactSet were expecting earnings of $3.95 a share.

$10B mortgage servicing rights deal may be start of new wave of sales

January 18th, 2023|

An agency servicing portfolio that Incenter has up for bid marks the first public deal above $10 billion in 2023, and there may be more where that came from.Moreover, transactions in the $100 billion range were rumored to be potentially brewing with megabank Wells Fargo's recent announcement it'll be reducing its portfolio.Wells at deadline, was said to be mulling the idea of floating two $100 billion-plus packages: one of conventional mortgage servicing rights and another of Ginnie Mae MSRs. Rumors of the potential sales were first reported in HousingWire. While such large sales could be economical from an operational perspective and could minimize long-term impact to the market from Wells' portfolio reduction, analysts at Keefe, Bruyette & Woods said the fact that such big offerings may only be attractive to a limited group of investors could argue against that approach."It is also possible that Wells breaks up the packages into smaller ones, which may make participation from public companies more likely," Bose George, Michael Smyth, Alexander Bond and Thomas McJoynt-Griffith said in a report issued Wednesday.Selling a large deal could be particularly difficult in the thinner Ginnie Mae market, in which the underlying government-backed loans tend to have more delinquencies and compliance sensitivities."From the perspective of the regulators, there would likely be a lot of emphasis on the buyer's operations, capital levels, and track record. Overall, we think that a sale of this size could warrant scrutiny from regulators," the KBW analysts said.Even before Wells announced it would be downsizing its portfolio, stakeholders generally expected that the mortgage servicing rights market would be more heavily weighted toward sellers this year.In addition to the $10.17 billion agency transaction floated by Incenter, other portfolios in the market recently have included a mixed $1.29 billion package of MSRs put up for bid by the Mortgage Industry Advisory Corp. That portfolio's composition is Ginnie Mae (39.84%), Fannie Mae (36.98%) and Freddie Mac (23.18%). it's being sold by an unnamed mortgage company with a California concentration.Weighted averages for that portfolio are: loan age, 2 months; interest rate, 5.96%;FICO score, 732; servicing fee, 0.33% and delinquency rate, 0.99%. Delinquencies are primarily 30-day lates, with a few loans in arrears by 60 days. One loan is in the 120 day/foreclosure bucket. The average loan balance is $330,065. The estimated 12-month escrow balance for the portfolio is $9.77 million.The $10 billion-plus portfolio, which is on offer from an unnamed "well-capitalized" mortgage bank, has the following weighted averages: loan age, 20.2 months; interest rate, 2.90%; loan-to-value ratio, 71.5%; and Fair Isaac & Co. credit score, 763. The average loan size is $301,188. The portfolio's current escrow balance is $48.46 million. Its estimated 12-month escrow balance as a percentage of principal is 0.79%.The bid deadline for the $10 billion-plus portfolio is 2 p.m. Mountain time on Jan. 25. The $1 billion-plus portfolio has a bid deadline on Jan. 23 at 5 p.m.

Fannie picks five groups to receive $5 million in housing contracts

January 18th, 2023|

Fannie Mae has selected five organizations that will receive $5 million in contracts for projects that promote affordable housing and Black homeownership.Fannie Mae announced the selection Wednesday as part of its Innovative Challenge 2022, a nationwide competition for the most innovative proposals that address racial equity issues and the affordable housing crisis. It said it solicited proposals to specifically address consumer credit challenges and upfront and unexpected costs in buying a home. Last year, Fannie awarded $7 million to 13 organizations.Maria Evans, Fannie Mae's vice president of community impact, said the government-sponsored enterprise is committed to knocking down barriers for Black consumers.  Fannie Mae awarded five housing organizations disbursements from a $5 million pool to develop affordable housing and promote Black homeownership. Bloomberg News "A history of discriminatory housing policies and practices has created profound inequities in the housing system that persist to this day," Evans said in a press release. The five groups selected are RebuildMetro, a Baltimore nonprofit that is seeking to restore the properties around Johnston Square in East Baltimore; Southside Community Development & Housing Corp., a Richmond, Virginia, nonprofit that builds affordable housing units; Twin Cities Habitat for Humanity, which plans to down payment assistance for affordable home loans; the Community Builders, a Boston- and New York-based real estate company that will help repair credit for renters; and Module, a Pittsburgh prefab housing firm that plans to expand its energy-efficient homes to Prince George's County, Maryland, and to Richmond.Fannie Mae said the proposals went through multiple rounds of reviews and were evaluated by an expert advisory panel. The competition is part of Fannie's Sustainable Communities Partnership and Innovation Initiative, which focuses on finding solutions to pressing housing issues. 

Mortgage applications surge by almost 28%

January 18th, 2023|

New loan activity stormed out of the holidays with a large surge, aided by mortgage rates dropping to lows not seen in months, according to the Mortgage Bankers Association."Mortgage application activity rebounded strongly in the first full week of January, with both refinance and purchase activity increasing by double-digit percentages, compared to last week, which included the New Year's holiday observance," said Mike Fratantoni, MBA's senior vice president and chief economist, in a press release.The MBA's Market Composite Index, a measure of weekly application activity based on surveys of association members, jumped a seasonally adjusted 27.9% from the prior seven-day period. The index headed upward for a second straight week after rising 1.2% to start the year. But compared to the same time frame in 2022, mortgage volumes still sat almost 60% lower. A week after falling to a nine-year low, the seasonally adjusted Purchase Index reversed course and accelerated 25%, but came in 35% lower year over year. A growing inventory of homes on the market and more favorable purchase environment point to a possible return of sidelined home buyers to the table, according to recent research from Realtor.com. Housing market signals hold some promise for the spring buying season if rate and price trends continue their current trajectories, the MBA said.The Refinance Index also leaped 34% week over week. The surge in refinances led them to take a larger 31.2% share of overall activity, compared to 30.7% a week earlier, but volume remains 81% below its level of a year ago when mortgage rates were at less than half of their current readings.Meanwhile, as rates have receded since peaking in October, the share of adjustable-rate mortgages relative to overall numbers slipped and fell to 6.6% from 7.3% the previous week. Average loan sizes headed upward again as activity picked up, with the mean amount recorded on all applications rising 2.3% to $358,100 from $349,900. The average purchase-loan amount crossed back over the $400,000 mark with a 3.2% uptick to $401,300 from $389,000 seven days earlier. Refinances saw a smaller increase of 0.4%, with their average size coming in at $262,700 compared to $261,600 the prior week.While the seasonally adjusted Government Market Index posted an almost 20% surge, it was outpaced by an even larger rise in conventional applications, bringing down the share of federally sponsored activity. The increase on Jan. 1 of the conforming balance, turning what would have previously been jumbo mortgages into loans eligible for sale to the government-sponsored enterprises, so far coincides with the growing volume of conventional activity in 2023. Federal Housing Administration-backed applications made up 13% of total volume, down from 13.4% one week earlier, while mortgages guaranteed by the Department of Veterans Affairs decreased to 11.8% of activity from 13.2%. U.S. Department of Agriculture-backed loans took the same 0.6% share as it had seven days prior. The return of borrowers so far this year has come in tandem with further decreases in mortgage rates, which dropped across the board for a second straight week among MBA lenders. "Mortgage rates are now at their lowest level since September 2022, and about a percentage point below the peak mortgage rate last fall," Fratantoni said.The average contract interest rate for the 30-year fixed mortgage with conforming balances at or below $726,200 decreased 19 basis points to 6.23% from 6.42% a week earlier. Points decreased to 0.67 from 0.73 for 80% loan-to-value ratio loans. The contract rate for 30-year jumbo loans with balances above the conforming amount averaged 6.08%, inching down from 6.09% week over week, with points decreasing to 0.4 from 0.66.The FHA-backed 30-year mortgage finished the week with a contract rate average of 6.26% compared to 6.39% seven days earlier. Points increased to 1.05 from 1.03 for 80% LTV loans.The contract average of the 15-year fixed-rate mortgage plunged 36 basis points to 5.58% from 5.94%. Points decreased to 0.54 from 0.62.The 5/1 adjustable-rate mortgage contract average also came in lower, dropping to 5.31% from 5.37% the prior week. Points increased to 0.74 from 0.72.

Top Mortgage Lenders in Georgia

January 18th, 2023|

It’s time to check out the top mortgage lenders in Georgia based on their 2021 loan volume.These mortgage companies outranked more than one thousand other lenders to take the top honors.Overall, about $160 billion in home loans was funded in The Peach State last year, making it one of the bigger states volume-wise nationwide.And taking the #1 spot was Rocket Mortgage, also the nation’s largest mortgage lender.Read on to see which other companies ranked in the top 10.Top Mortgage Lenders in Georgia (Overall)RankingCompany Name2021 Loan Volume1.Rocket Mortgage$12.2 billion2.Pennymac$6.6 billion3.Wells Fargo$5.3 billion4.Truist$4.7 billion5.UWM$4.7 billion6.Ameris Bank$4.0 billion7.Newrez$3.9 billion8.Freedom Mortgage$3.8 billion9.AmeriHome Mortgage$3.5 billion10.Fairway Independent$3.1 billionDetroit-based Rocket Mortgage, the nation’s biggest mortgage lender, originated an impressive $12.2 billion in home loans in Georgia last year.That was nearly double their nearest competitor, Pennymac, per HMDA data from advisory company Richey May.SoCal based Pennymac funded about $6.6 billion in the state last year, and only about a third of it comes via the retail channel.They mostly dole out loans via the correspondent lending channel (via smaller banks and credit unions), and through mortgage brokers in the wholesale channel.In other words, your loan may have been originated by a different company, but backed by Pennymac.In third was San Francisco-based Wells Fargo with $5.3 billion funded, another good showing despite their controversies.They were followed closely by Truist Financial and United Wholesale Mortgage (UWM), both with about $4.7 billion funded.In sixth was Atlanta, Georgia’s own Ameris Bank with a healthy $4 billion in home loan volume.Newrez was a close seventh with $3.9 billion, followed by Freedom Mortgage, AmeriHome, and Fairway Independent Mortgage.Top Mortgage Lenders in Georgia (for Home Buyers)RankingCompany Name2021 Loan Volume1.Pennymac$3.5 billion2.Rocket Mortgage$2.6 billion3.Ameris Bank$2.4 billion4.UWM$2.3 billion5.Homestar Financial$2.2 billion6.Truist$2.1 billion7.Fairway Independent$2.1 billion8.Wells Fargo$1.9 billion9.Newrez$1.9 billion10.AmeriHome Mortgage$1.9 billionIf we consider only home purchase lending, the list changes like a bit and new names surface.Pennymac was the #1 home purchase lender in Georgia with $3.5 billion funded, followed by Rocket Mortgage with $2.6 billion.Ameris Bank took third with $2.4 billion, meaning about 60% of their total mortgage business is home purchase loans.In fourth was UWM with $2.3 billion, followed by Gainesville, GA-direct lender Homestar Financial with $2.2 billion in origination volume.Others in the top 10 included Truist Financial, Fairway Independent, Wells Fargo, Newrez, and AmeriHome.Top Refinance Lenders in Georgia (for Existing Homeowners)RankingCompany Name2021 Loan Volume1.Rocket Mortgage$9.5 billion2.Freedom Mortgage$3.3 billion3.Pennymac$3.1 billion4.Wells Fargo$3.1 billion5.UWM$2.4 billion6.Truist$2.2 billion7.loanDepot$2.2 billion8.Mr. Cooper$2.0 billion9.Newrez$2.0 billion10.Better Mortgage$1.8 billionNow let’s talk about the biggest refinance lenders in Georgia. As expected, Rocket Mortgage absolutely dominated with $9.5 billion funded.That was nearly triple second place Freedom Mortgage’s $3.3 billion, a testament to how active they are in the state.In third was Pennymac with $3.1 billion, followed closely by Wells Fargo with roughly the same amount funded.In fifth was UWM with $2.4 billion, a strong showing since they only work with mortgage brokers via the wholesale channel.The rest of the top 10 included Truist Financial, loanDepot, Mr. Cooper, Newrez, and struggling lender Better Mortgage.Top Mortgage Lenders in AtlantaRankingCompany Name2021 Loan Volume1.Rocket Mortgage$8.7 billion2.Pennymac$4.2 billion3.Wells Fargo$4.0 billion4.UWM$3.7 billion5.Truist$3.7 billion6.Ameris Bank$3.1 billion7.Newrez$3.1 billion8.AmeriHome Mortgage$2.6 billion9.Freedom Mortgage$2.4 billion10.loanDepot$2.4 billionWho Are Georgia’s Best Mortgage Lenders?I typically head over to Zillow and check customer reviews to determine which mortgage companies are faring best in a particular state.Here’s what I found for Georgia. Atlanta-based AmeriSave has a 4.68/5 rating from over 2,400 reviews. Not the best rating, but the most reviews by far.Then there’s Atlanta’s Silverton Mortgage, which has a superior 4.94/5 rating from about 1,200 reviews.Even better is Ameris Bank’s 4.95/5 rating from nearly 900 customer reviews, and fellow Atlanta lender First Option Mortgage’s 4.97/5 from about 1,000 reviews.Honorable mention goes to Capital City Home Loans and its 4.96/5 score from 300 reviews.As for the big, national brands, Rocket has a 4.48/5, Pennymac a 4.4/5, and Wells Fargo a 4.95/5.So it appears there are plenty of solid options, whether you use a local, Georgia-based mortgage lender or a national brand.Also be sure to check out some local mortgage brokers to see what they can offer.(photo: sailn1)

How digital rent reporting can build ties with future homebuyers

January 18th, 2023|

To understand the importance of rent reporting and cash-flow, consider the trouble Abbey Wemimo says his family had borrowing money from a bank in the United States after emigrating from Nigeria. Due to a lack of credit history, his mother was turned down. The inability to access the mainstream banking system forced the family to instead take out a high-rate personal loan instead, setting back their wealth-building efforts.That's among the reasons why Wemimo and his colleague, Samir Goel, co-founded Esusu, one of a group of fintechs and "rent techs" active in the sector."Where you come from, the color of your skin and particularly, your financial identity, should never determine where you end up," Wemimo said.Goel, whose family emigrated from India, said he had a similar experience, seeing his parents navigate limited options for banking and shelter because they lacked the credit history needed to get more mainstream loans with lower rates."The thought I was left with was that it just shouldn't be so hard for people that are putting their best foot forward every day to have that opportunity," said Goel.The ability to see that tenants fulfilled their rent obligations can improve the typically more credit-based payment track records that lenders use to determine who qualifies for financing and at what price."We definitely see people going from invisible to visible, and we see people that have decent average scores get better scores, up to 60 points of improvement," said Jonathan Lawless, director of homeownership at Bilt Rewards, another fintech that helps people establish credit.A growing group of startups have increasingly worked to get landlords engaged and to facilitate the transfer of data to the credit bureaus, who confirm it makes a measurable difference for scores."Unscorable is the cohort in which we see the greatest, most dramatic effect," said Maitri Johnson, vice president of tenant and employment screening at TransUnion, noting that in some cases they can go from being credit invisible to a 657 score after several months of rent reporting. People with subprime credit scores also can see incremental gains over time, Johnson said.Research suggests that making a greater number of people credit visible would allow lenders to connect to the future homebuyers they want to reach and help to fulfill the Biden administration's aims to address systemic barriers to racial equity in homeownership."In 2021, millennials with an annual income of more than $50,000 submitted 39% of all rental apartment applications," noted John Paasonen, co-founder and CEO of mortgage technology vendor Maxwell. "That cohort represents a substantial opportunity for lenders, and rent reporting could provide a viable tool to discern which renters are positioned to qualify for mortgage loans."

How the mortgage industry is adapting to climate change

January 18th, 2023|

The impact of climate change on one of the basic necessities of life — the homes we live in — is rippling through the mortgage industry. Government action in the shape of the Inflation Reduction Act is putting a response to climate change firmly on the agenda, while industry professionals say the time for a proactive approach is now.For more on these and other stories on how the mortgage industry is addressing climate change, read our roundup below.

How the FTC's proposed ban on noncompetes could impact lenders

January 18th, 2023|

The Federal Trade Commission's proposed rule banning noncompetes is likely to have a substantial impact on the mortgage industry if it is enacted. The proposed legislation will not only ban noncompetes, but may create greater scrutiny over nonsolicit clauses and set a higher burden for poaching lawsuits, a handful of attorneys said.The proposed rule would make it illegal for employers to attempt to enter into a noncompete with a worker, or to enforce a noncompete agreement. The commentary period for industry stakeholders ends March 10. A version of the legislation is expected to go into effect sometime this year, several attorneys say. Mortgage lenders who use noncompetes will have to rescind them, and will be barred from using them as a mechanism to keep loan originators, executives and marketing personnel from jumping ship to competitors. Some states, including California, North Dakota and Oklahoma, already prohibit the use of noncompetes. Other states, such as Maine, Maryland, New Hampshire, Rhode Island, and Washington, have banned noncompete agreements for low-wage workers.In the mortgage industry, noncompetes have been used as a way to "protect an investment" especially if the originator received a sign-on bonus, said David Stein, partner at Ohio-based law firm Taft Stettinius & Hollister LLP. They have also been used as a "weapon" to keep employees from leaving."There are dozens and dozens of lawsuits that are filed every year in the mortgage industry, seeking to enforce noncompetes, and there are some known employers that use noncompetes as a weapon to retain their talent," Stein said.Noncompetes are also used at banks and credit unions, said Alex Naumovych, loan officer at Draper and Kramer Mortgage Corporation."Noncompetes are more common in banks and credit unions because employees receive a salary and get leads handed to them," said Naumovych. "Nonsolicitation clauses apply more to nonbanks and impact people like branch managers, executives and loan officers that do a lot of business."FTC's proposed rule will likely create an environment in which there will be greater scrutiny over both nonsoliciation clauses and poaching cases, attorneys say."Sometimes nonsolicits are used kind of as a de facto noncompete," said Stein. "I would expect to see scrutiny by some courts to say, well, when does the nonsolicit step over the line and violate the rule?"The "extremely broad" nature of FTC's rule could eventually transfer over into the enforceability of nonsoliciation clauses and "set a higher bourden to get poaching cases to court," said Kim Coleman, former attorney at Primary Residential Mortgage.Noncompetes and nonsolicits are often included in poaching lawsuits, which are quite common in the field. In 2022, lenders including Guild Mortgage, Cross Country Mortgage, Union Home Mortgage and Fairway Independent Mortgage Corp. have either filed or been hit by poaching lawsuits."Plaintiffs will often try to throw in every possible claim that they might have," said Coleman. "And it's up to the defendant to say that the claim is not substantiated, or you don't have standing"FTC's proposed legislation follows the Biden's Administration's announcement in 2021 that encouraged a clamp-down on noncompetes. The FTC estimates stopping noncompetes could increase wages by $300 billion per year and expand career opportunities for 30 million Americans."The freedom to change jobs is core to economic liberty and to a competitive, thriving economy," said Lina M. Khan, chairwoman of the FTC, in a written statement. "Noncompetes block workers from freely switching jobs, depriving them of higher wages and better working conditions, and depriving businesses of a talent pool that they need to build and expand."A ban on noncompetes "would support more competition," said Coleman. It could also lead to more innovation and a "focus more on the people themselves."However, downsides could present themselves. Employers may not want to invest in training their employees. "And also, if you're having to pay more wages, how is that going to impact the bottom line, especially in a mortgage market where it is super difficult?" said Coleman.Brian O'Shaughnessy, CEO of defunct Athas Capital Group, noted that all of his former employees were bound by nonsolicitation clauses, and that regulations banning noncompetes or nonsolicits will have a negative impact on "people willing to risk their capital.""What kind of loyalty will employees expect, if an employer can't get any loyalty?" O'Shaughnessy said. "Watch how that will backfire on the woke. If the salespeople have no loyalty to the brand they're benefiting from and they're not risking their own personal capital… they become the enemy." So far feedback from the general population on FTC's rule has been mostly positive, but James Brody, chairman of the Mortgage Banking Practice Group, expects the final version of the rule to look slightly different from its current iteration."I expect there's going to be some litigation and that could very well impact whatever the final form is," Brody said.

The 3 C’s of mortgage underwriting

January 18th, 2023|

Purchasing a house can be pretty exciting and pretty confusing — all at the same time. And it doesn’t matter if you’re a first time home buyer or if this is your second or third time you’re taking the plunge into homeownership. That’s because the process of applying for a home loan, providing the supporting documentation and waiting for a thumbs up from a mortgage company has typically been one that is lengthy and cumbersome. Continue reading The 3 C’s of mortgage underwriting at Movement Mortgage Blog.

Ginnie Mae ends 2022 with issuance rate far below pre-pandemic levels

January 17th, 2023|

Ginnie Mae's monthly issuance volume fell to $31.14 billion in December, down from $36 billion the previous month, and less than half of the $66.84 billion seen the same month a year earlier.The government bond insurer's issuance hasn't been this low since before the COVID-19 pandemic arrived in the United States in March 2020. When the pandemic started in March 2020, issuance for the month was $55.21 billion.The decrease was in line with numbers from Ginnie's annual report for the fiscal year ending Sept. 30. That report showed issuance for the period had fallen to $649 billion from $934 billion a year earlier and $749 billion in FY 2020, while the volume of outstanding mortgages on Ginnie's books continued to grow. Ginnie's outstanding portfolio ended the fiscal year at $2.28 trillion, compared to $2.13 trillion a year earlier and $2.12 trillion in FY 2020. With rates relatively higher, runoff was scarce in 2022.Also of note in Ginnie's updated report was a reduction in the share of Ginnie issuers that were top 5 banks last year.Banking giant Wells Fargo, which recently confirmed it plans to stage a partial retreat from mortgages this year and has been the biggest depository issuer of Ginnie securitizations, slipped one notch to No. 4 in the 2022 rankings. Wells changed places with Nationstar, a nonbank that does business under the name Mr. Cooper, which had been two notches lower in the rankings in 2021. The only other depository that had been in the ranks of the top 10 Ginnie issuers in 2021, U.S. Bank, dropped entirely out of the rankings in 2022. It had previously been ranked eighth.No issuers defaulted during the fiscal year, which ended prior to Ginnie Mae seizing servicing from the bankrupt Reverse Mortgage Funding. The updated report also made mention of the fact Ginnie plans to accelerate technology development this year. Initiatives it plans to make more progress on include the digital collateral program it opened up to new applicants in 2022. The dollar volume of electronic promissory notes in that program has grown to $15 billion in the past fiscal year.During the fiscal year ended Sept. 30, 2022, 54,000 eMortgages were securitized, with 70% of the digital collateral involved consisting of loans guaranteed by the Department of Veteran Affairs. Loans insured by the Federal Housing Administration dominate Ginnie collateral, but VA-backed mortgages have become more prominent recently.Increased development of automation around changes in the administrative responsibilities for portfolios also is on the technology roadmap for this year."The completion of Ginnie Mae's migration to the cloud in the first quarter of fiscal year 2023 will enable us to accelerate the development of products and programs, such as the loan-level transfer of servicing capabilities," said the bond insurer in the report it jointly issued with the Department of Housing and Urban Development. Ginnie is an arm of HUD.

Home construction set for further slowing as permits fall

January 17th, 2023|

The homebuilding industry appears set for more slowing in the near term, as permit issuances dwindle while shortages of many supplies continue, according to the National Association of Home Builders.Issuances of new single-family permits in 2022 slowed in November, coming in 10.5% lower than the same month in 2021. A total of 921,626 permits, which typically lead to housing starts, were issued between January and November of 2022 compared to 1,029,208 over the same period a year earlier. Declines occurred nationwide, with the largest drops of 13.9% and 13.6% coming in the West and Midwest. The Northeast and South, meanwhile, also posted smaller decreases of 10.2% and 8.4%, respectively. Colorado recorded the sharpest drop of all states, as permits fell to 22,900 year to date from 31,741, a decrease of 27.9%. New Mexico, its neighbor to the south, however, saw the largest gain, rising 37.5% to 6,989 from 5,083 over the first 11 months of 2021. Overall, only five states and the District of Columbia reported increases. The news comes after what many builders would term a downbeat year, with construction industry sentiment falling in every month of 2022, the NAHB said. Values of homebuilder equities have also taken a hit, according to recent analysis from S&P Global Market Intelligence. "U.S. homebuilder stocks remained under pressure with the median one-year total return recording a negative 26.7% as of Jan. 4," S&P's report said. All six of the top-performing publicly traded homebuilders posted drops in new orders as well, from 2.2% to 28% over the past year, the business intelligence provider found. As they feel the pinch of lower business volumes, builders have used various strategies to adjust, including rate buydowns or appliance upgrades. Some are turning to the investor market to offload inventory and offset falling demand among buyers. A more positive indicator for homebuilders came out of the multifamily sector. The number of new multifamily building permits issued year to date grew in November by 14.8% to 624,128 from 543,508 in the same month of 2021. With the exception of the Northeast where numbers fell 1.4%, all other regions of the country saw an increase. The South issued 25.2% more permits and the Midwest 18%, while the West saw a 5.6% gain A majority of homebuilders said they were still dealing with shortages for most materials, but much of that pressure has eased since mid 2021, according to the NAHB. In NAHB's October homebuilder sentiment survey, over 80% of respondents reported a shortage in three major product categories: appliances, transformers and windows and doors. A majority said they had encountered availability issues for 17 out of the 25 categories tracked by the association. A shortage of heating, ventilation and air conditoning systems were also cited by 76%, while a dearth of copper wiring was reported by 65%. Lightweight steel was seen as scarce by 53%, and ready-mix concrete by 49%.  Despite the prevalence of shortages, their severity also diminished for 18 out of the 24 product types compared to May 2021, when such data was last compiled. Transformers were not previously measured.Fewer builders reported problems with wood products. Framing lumber and plywood shortages were cited by only 37% and 36%, improving substantially from levels of 94% and 90% 17 months earlier. Supply of gypsum wallboard came in short for 39% of builders, compared to 70% in spring 2021. 

Home prices slowed in 4Q: Fannie Mae

January 17th, 2023|

Home price growth was largely stagnant to close last year, as high interest rates continued to discourage prospective buyers, Fannie Mae reported.Values for single-family properties rose a seasonally adjusted 0.2% over the fourth quarter of 2022 compared to the prior three months, according to the latest Home Price Index from the government-sponsored enterprise. Home prices rose 9.2% in the fourth quarter compared to the same time in 2021 on a non-seasonally adjusted basis, but that growth was markedly down from the year-over-year growth in the third quarter in 2022, of 13.1%."The rise in mortgage rates over the past year and record inflation have constrained the purchasing power of prospective homebuyers," said Mark Palim, Fannie Mae vice president and deputy chief economist, in a press release. "The resulting affordability pressures are evident in the home price declines of the past two quarters, along with the downturn in home sales."The GSE aggregates county-level data and excludes condos for its index, which was formerly an internal report before Fannie Mae began making it publicly available last April. The HPI hit a peak of 19.7% year-over-year home price growth in the first quarter last year, the highest surge on record according to data dating back to 1976.The miniscule quarterly home price growth gain at the end of 2022 was slightly higher than the 0.1% seasonally adjusted gain in the third quarter, Fannie Mae found. When accounting for a non-seasonally adjusted basis, home values declined 1.0% in the fourth quarter.The housing market is enduring a difficult cycle of diminished demand amid rising mortgage rates and inflation. Mortgage activity hit a 26-year low to end December according to the Mortgage Bankers Association. Wavering mortgage rates over 6% are also keeping homeowners who locked in ultra-low rates in the prior two years on the sidelines, according to Fannie Mae."We believe that a key factor that will impact home prices in 2023 is how the tension between a reduced supply of homes available for sale and lower mortgage demand is resolved," he said. Housing inventory grew in December, according to a Redfin analysis, although the growth was the result of properties lingering on the market for longer periods of time rather than new listings coming to the market. Despite many signs of pessimism, Fannie Mae last week suggested consumer sentiment around home purchases improved last month given recent pricing and interest rate relief.

NYC property values are seen rising 6.1%, boosted by single-family homes

January 17th, 2023|

The value of New York City's 1.1 million properties is projected to rise 6.1% for the next fiscal year, boosted by single-family home prices.The city set a market value of about $1.48 trillion for residential and commercial properties and utilities for the fiscal year beginning in July, according to a tentative assessment roll released by the Department of Finance on Tuesday. Citywide assessed values, which determine the value of property for tax purposes, are projected to rise 4.4% to $286.8 billion. Property values for fiscal year 2024 reflect real estate activity from Jan. 6, 2022 to Jan. 5, 2023."The decline in office occupancy continues to impact retail stores and hotels in the city contributing to the sector's slow recovery," Department of Finance Commissioner Preston Niblack said in a news release. "At the same time, single family homes, which constitute a majority of residential properties, have exhibited a robust recovery and continued growth," he said. Real estate taxes are the biggest contributor to New York City's coffers, providing about one-third of the revenue for its $106.4 billion budget. Property taxes are also the primary source of funds backing the city's approximately $40 billion of general obligation bonds. Sales SlowedThe market value of single-family properties rose 8.3% citywide to $765 billion, with homes in Staten Island having the biggest increase at 12.1%, according to the finance department. Meanwhile values for co-ops, condos and a rental apartment buildings rose about 1% to $351 billion.To be sure, the residential market in the second-half of 2022 slowed as a result of the Federal Reserve's aggressive campaign to raise interest rates and amid declining Wall Street profits.Home sales in the city have slowed for five straight quarters on an annual basis and slumped to 17% below year-ago levels in the third quarter and are projected to fall about 5% in 2022 and 2023, according to the finance department. Still, transactions are projected to remain above the pre-pandemic average of about 51,000 sales per year.Office MarketMeanwhile, New York City's office market continues to struggle as workers have been slow to return and uncertainty remains about the long-term impact of remote work. The total market value of commercial properties rose to by 7.4% to $317.2 billion and assessed values rose by 5.2% to $129.7 billion. Market values of  offices rose 7.1%, while retail buildings and hotels registered a market value of increase of 5.4% and 9.7%, respectively. The market value for commercial property is still below pre-pandemic levels.The combination of weak leasing activity and a surplus of new inventory, particularly in Midtown, pushed the vacancy rate to 22% in November.City officials expect vacancy rates to rise further in 2023 while asking rents are projected to decline to their lowest level in nearly a decade, according to a financial plan released last week as part of Mayor Eric Adams's preliminary budget.

New tech helps servicers with borrowers, third parties and properties

January 17th, 2023|

Zesty.AI, a provider of artificial intelligence-driven property risk analytics used by the insurance industry, has partnered with Black Knight to make its automation available to mortgage servicers for the first time."We are proving that the models that we have built for the property and casualty insurance use case are widely applicable for the $12 trillion U.S. mortgage servicing market as well," said Attila Toth, founder and CEO of ZestyAI, in an interview.The technology aims to help servicers size up risks to the collateral securing loans in their portfolios using various data sources, including information gathered about properties remotely through images. "If they have an aerial image, or if they have a building permit, they cannot use that as an input. It's an unstructured data source. So we are using machine learning to tease out structured data,' said Toth.Eventually, Zesty.AI plans to offer mortgage companies the analytics that allow insurers to size up risks to properties from natural disasters like Hurricane Ian or wildfires.The analytics will, for example, calculate the annualized probability that a property will be in a wildfire perimeter based on location. It can assess the likelihood it might burn if so, based on the characteristics of the structure involved, including the pitch of the roof, the materials it's made of and whether the home has overhanging vegetation."The first step is providing [mortgage companies] with property valuation and property characteristics, and then we will take it to the next step when we are going to also provide climate risk metrics," said Toth.

A 1% Decrease in Mortgage Rates Is Worth an 11% Drop in Home Prices

January 17th, 2023|

A recent podcast from First American economists discussed the current state of the housing market.The subject was the rebalancing of the housing market, which has been out of whack for a while now.Over the past several years, it’s been decidedly slanted toward home sellers, who have enjoyed bidding wars and above-asking offers.As 2023 gets underway, it appears to finally be shifting in the opposite direction, in favor of the home buyer.But there’s still the question of affordability, and what exactly will happen with mortgage rates and home prices.1% Drop in Mortgage Rates = 11% Drop in Home PricesOne interesting thing that stood out was the following line: “Today, a one percentage point decline in mortgage rates has the same impact on affordability as an 11% decline in house prices.”The argument of home prices vs. mortgage rates has been around for years. Most believe it’s a seesaw.If one goes up, the other must go down, often by an equal amount. But data says otherwise.In reality, both can move in tandem. For example, it’s possible for both home prices and interest rates to rise if the economy is doing well.Assuming wages are increasing and the average American is making more, it’s supports home price growth.But the year 2022 was unlike any other year in history with regard to mortgage rates.We didn’t see a typical increase in rates, we saw an unprecedented rise in rates.2022 Was a Very Strange Year for Mortgage RatesWhile higher mortgage rates don’t always portend lower home prices, 2022 was a year like no other.Mortgage rates had never doubled in a calendar year, but they pretty much did in 2022. The popular 30-year fixed began the year at 3.22%, and ended it at 6.42%, per Freddie Mac data.That was surely enough to dampen home buyer demand, or worse, make folks ineligible for home loan financing.At the same time, it seemed to lead to a housing market top, thanks to the sheer rise in interest rates.Typically, you might see mortgage rates rise a percentage point or so in a year, if they’re trending higher.And if you look at mortgage rates in the 1980s, which were comparatively in a different league (e.g. 18%), the rise back then wasn’t as pronounced.We’re talking an increase from around 14% to 18.5% in the span of 12 months at its worst in late 1980 to late 1981.But if you look at that from a percentage increase, it was only about a 36% increase.As noted, 2022 saw basically a 100% increase in the going rate for a 30-year fixed mortgage.This is what finally cratered housing demand and led to a shift from seller’s to buyer’s market.Mortgage Rates Are More Likely to Fall by 1% Than Home Prices by 11%First American Deputy Chief Economist Odeta Kushi also noted that “rates are much more likely to move by a percentage point than prices are to move by 11%,” historically.The general idea is that home prices are downward sticky, meaning they rarely fall, though if inflation is strong, real home prices can decline even if nominal prices barely budge.Either way, it’s much easier for mortgage rates to drop than it is for home prices to take a double-digit dive, even though a lot of folks expect a housing market crash.And this is especially true now as the current housing market isn’t very similar to the one seen in 2008, when the Great Recession led to scores of foreclosures and short sales.I’ll repeat what I always say – it’s not your older sibling’s housing market. Today’s mortgages are mostly pristine with locked-in rates in the 2-3% range.The vast majority of these homeowners aren’t selling, which is why home prices should hold up OK.Additionally, because mortgage rates have already come down, housing affordability can improve that way, without the need for big home price declines.The 30-year fixed already rose above 7%, and is now closer to 6%. Some lenders are even quoting low- to mid-5% rates if you pay a couple discount points.So the balance in the housing market might come from lower mortgage rates, not lower prices.This allows sellers to command a decent enough price to forget about what their home used to be worth.And it gives buyers the ability to afford a property, even if their down payment is slightly elevated based on a still-high asking price.Read more: 2023 Home Buying Tips

8 FHFA developments impacting the housing market

January 17th, 2023|

A review of the Federal Home Loan Bank System for the first time in nearly 100 years, called for by FHFA Director Sandra Thompson, has brought the relevance of the system into question. Meanwhile, new FHFA proposals for GSE multifamily goals based on percentage share rather than number of units could help increase the number of affordable apartment units.For more on these stories and other FHFA developments, read our roundup below.

Signature Bank to tap Home Loan bank advances in crypto pullback

January 17th, 2023|

Not all banks serving the crypto industry can be painted with the same brush. Some banks that courted the business of cryptocurrency firms and exchanges are now distancing themselves from the sector amid the fallout from the FTX bankruptcy and closer scrutiny from regulators, analysts and investors. As experts pour over the financials of banks that are still doing business with cryptocurrency firms, many are looking more closely at those firms' advances from the Federal Home Loan Bank system to determine signs of stress as crypto deposits dry up.Signature Bank, a New York bank with $114.5 billion in assets, is in the process of reducing its exposure to volatile crypto deposits and is expected to show an increase in borrowings from the Federal Home Loan Bank of New York when it reports fourth quarter earnings on Tuesday, executives said. Since the FTX bankruptcy and ensuing crypto meltdown, Signature's executives have sought to explain how their full-service commercial bank differs from other banks that focused almost exclusively on the crypto.  Signature Bank, which has made a name for itself serving cryptocurrency clients, is paring back its exposure to that volatile market and plans to tap the Home Loan Bank system to meet its liquidity needs.Phongphan Supphakank - stock.adobe.com "We don't lend in cryptocurrency," said Eric R. Howell, Signature's chief operating officer, in an interview. "We are an extremely well-diversified financial institution with most of our loans in the multifamily [market] in New York and in office, retail and commercial real estate sectors. We don't lend at all — at all — in the crypto space."Signature was a top 10 borrower of the Federal Home Loan Bank of New York long before it got into the crypto business in 2019. It is one of the largest multifamily lenders in New York with a niche in rent-stabilized properties in New York City. Signature made a name for itself when it became the first Federal Deposit Insurance Corp.-insured institution to launch a blockchain-based digital payments platform, which it called Signet, with customers that include crypto exchanges, stablecoin issuers and bitcoin miners. At the end of the third quarter, Signature had $1.4 billion in outstanding advances from the Federal Home Loan Bank of New York, down from a peak of $2.6 billion in the fourth quarter of 2021. The bank had a drop in deposits in the second and third quarter but Home Loan bank advances remain less than 2% of Signature's total assets."We are truly the quintessential example of what the Federal Home Loan Bank was put in place for because any borrowings that we do have from the FHLB are supporting our lending in the multifamily sector," said Howell, who described Home Loan bank borrowings as "a funding mechanism for us. It's really just part of our overall funding equation. We use these advances to fund our businesses."On Tuesday's earnings call, Signature's executives are expected to distance themselves from other crypto banks, notably Silvergate Capital Corp., which received $4.3 billion in advances from the Federal Home Loan Bank of San Francisco in the fourth quarter. Silvergate, a small, La Jolla, Calif., crypto-friendly bank, has employed a strategy of pledging government securities to the Home Loan bank system in exchange for cash advances that are meant to stave off a further run on deposits. The bulk of its liquidity currently comes from Home Loan bank advances, company filings show. Teresa Bryce Bazemore, the president of the Home Loan bank of San Francisco, posted a response Thursday on LinkedIn to questions about the billions in advances provided to Silvergate. "FHLBanks do not have any oversight responsibility for a member institution's business operations," Bazemore wrote. "FHLBank San Francisco conducts continuous assessments of each member's creditworthiness and financial condition based on information reported to the member's regulator, the results of regulatory examinations, financial reports, and other relevant information." Borrowings from the Home Loan banks have come under increased scrutiny as the system, a little-noticed, public-private partnership that has largely flown under the radar, undergoes its first regulatory review in decades by its regulator, the Federal Housing Finance Agency. The Home Loan banks were created to fund housing finance and some critics suggest the funding to Silvergate, which does not have a mortgage origination business, is an example of the system's mission creep.Banks that are members of the Home Loan bank system are required to post collateral, typically Treasuries or high-quality mortgage-backed securities, in exchange for short-term loans called advances that can be used to fund their operations. Banks also can pledge loans such as multifamily or commercial real estate loans. All loans and securities get reviewed and priced based on interest rates, financial conditions and other factors. The system serves as a ready liquidity backstop and secured lender that has become a central part of the banking system. "You will see an increase in our [Home Loan bank] borrowings," Howell said. "That's why the Federal Home Loan Bank is there — to plug those funding gaps and those shortfalls, and that's what we're utilizing it for in the short term. We'll look to grow deposits after that and then look to pay down those borrowings."In response to questions about Signature's borrowings, the Federal Home Loan Bank of New York said in a statement that its "credit products enhance the financial strength of local lenders, providing them with a reliable source of liquidity to meet the housing finance and credit needs of their communities and support their balance sheet management strategies in all operating environments."Banks often pledge collateral to the Home Loan banks even when they don't immediately need liquidity because they know that if the collateral is under the system's control, it has already been reviewed and priced. As a result, banks can simply call their regional Home Loan bank to get short-term financing when they do need it.Still, less liquid securities that get pledged such as whole loans come with a steep haircut, or discount, typically between 20% and 25%. As an example, at the end of 2021, Signature had pledged $8.1 billion of commercial real estate loans to meet collateral requirements of roughly $3.9 billion on FHLB borrowings, company filings show. Signature said that it has in excess of $30 billion in borrowing capacity from the Home Loan bank of New York due to loans that have already been pledged."We keep that dry powder there at all times," said Kevin Hickey, Signature's chief investment officer and treasurer. "Liquidity is important to us."

4 mortgage-related tech companies that just got an influx of cash

January 17th, 2023|

Splitero, a San Diego-based fintech providing a platform for homeowners in the Western U.S. to access accrued home equity, announced it had secured $11.7 million in Series A capital in January. Fiat Ventures led the round, with additional investment coming from Gemini Ventures, Joint Effects, PBJ Capital, Permit Ventures, Dream Ventures, Goodwater Capital, Spark Growth Ventures and Oyster Fund. The latest funding comes after a $5.8 million seed round last April.The company also increased the number of states it operates in, expanding from California, Colorado and Washington with the additions of Oregon and Utah, and plans for further growth in 2023. The company said it has assisted homeowners with more than $1 billion in financing since its launch in 2021. 

The top 10 hottest housing markets of 2023

January 17th, 2023|

Some of the most popular housing markets during the refinance boom and low-rate era of the past two years are taking a backseat to this year's new hot destinations.The buying landscape has cooled, but this year's most attractive metros will offer strong home value growth forecasts, solid local job growth and a healthy buyer pool, according to a Zillow analysis. Pandemic boomtowns like Austin and Denver now appear overheated compared to affordable Sun Belt and Midwest cities."This year's hottest markets will feel much chillier than they did a year ago," said Anushna Prakash, economic data analyst at Zillow, in a press release. "Home shoppers who can overcome affordability hurdles will find a more comfortable market this year, with more time to consider options and less chance of a bidding war."Metros like Sacramento, San Jose and Minneapolis, commonly identified in recent years as coveted destinations, are now among the coolest markets and will see home value declines and properties spending longer times on the market, Zillow said.On the other hand, this year's hottest cities will experience modest home value growth in the next 12 months, a relief for homebuyers reeling from prices beginning to fall back from record highs and mortgage rates still over 6%. More domiciles in each of these metros also sell under the listing price rather than over it, according to Zillow data. The real estate firm ranked the cities on metrics including forecasted annual home value appreciation by this upcoming November; forecasted acceleration in home value appreciation year-over-year; and the projected change in owner households year-over-year, among other data points.

Nominations open for 2023 Top Producers

January 16th, 2023|

National Mortgage News is pleased to announce the launch of the 2023 Top Producers Survey.IMPORTANT: All entries MUST be completed by the individual loan officer. Any entry found not to be completed by the individual named will be disqualified. Unless noted, a response is required for all questions.Click here to access the online survey. The deadline for all submissions is 6 p.m. EST, Friday, February 24.Information about your 2022 loan production will be used to compile this year's rankings. We strongly encourage you to prepare your origination data before beginning the survey. You can download a list of the required information here.The entire survey should take approximately 20 minutes to complete (not including preparation time to gather loan data). All submissions must be completed via the online survey.The Top Producers Survey is open to individual loan officers who work at depository, nonbank and mortgage brokerage firms in the United States. The survey begins with a series of multiple choice questions about recent industry developments and trends, marketing techniques and business practices. The answers you provide to the multiple choice questions will be used in aggregate and will not be used to personally identify you or your company.Loan officers must also answer three short, open-ended questions intended to discuss the state of the mortgage industry and how it affects their business. Please limit your responses to each question to 150 words or less. Responses will be used in future profiles and other content that feature the loan officers and their companies.The NMN editorial team reserves the right to review or reject any loan officer survey based on incompleteness, inaccurate or unverifiable information, or any other discrepancy that violates the intent or spirit of the Top Producers program.The survey is optimized to work best on a desktop or laptop computer. Completing the survey with a smartphone or tablet is not recommended. If you need to stop at any time, please click the "Save & Continue Later" button located at the right side bottom of the screen. You will then be prompted to enter your email address to receive an emailed link to resume your survey. Please check your spam/junk folders if you do not see the reminder email in your inbox.You will receive an on-screen message after you successfully complete your submission, as well as an email to the address provided in the application.National Mortgage News began its annual loan officer rankings in 1999, with production data covering origination volume from 1998. The 2023 Top Producers will be revealed in April online and in NMN magazine. If you have any questions about the 2023 Top Producers program, please email topproducers@arizent.comThe deadline for all submissions is 6 p.m. EST, Friday, February 24, 2023.Click here to access the online survey.

U.S. household formation late last year seen slowing further

January 16th, 2023|

High inflation, rising interest rates and increased economic uncertainty may be telegraphing a further slowdown in U.S. new household formation during the closing months of 2022.A slowdown in home sales due to high mortgage rates, coupled with the latest figures from RealPage Market Analytics that show a sharp decline in apartment demand — the first since 2009 — point toward fewer households being created. "Demand for new leases all but evaporated due to low consumer confidence and high inflation," said Jay Parsons, economist at RealPage Market Analytics, a rental market intelligence platform. "We've never before seen a period like this — weak demand for all types of housing despite robust job growth and sizable wage gains."Census Bureau data show that more than 1.2 million new households were created on average in the July-September period, the fewest in a year. Fourth-quarter figures are scheduled for release on Jan. 31.Sluggish household formation risks weighing on discretionary consumer spending, particularly for furniture and other household items. At the same time, a slowdown in demand could help to further cool the pace of inflation.A Federal Reserve Bank of New York survey released last week found that the fewest Americans anticipate changing their primary residence over the next 12 months since the survey started in mid-2013.Economic concerns also risk restraining household formation further. While consumer sentiment improved more than expected in early January, as concerns over inflation and an upcoming recession have been lowered, uncertainty remains high.The jobless rate may have matched a five-decade low in December, but when consumers were asked whether unemployment will cause more hardship in the year ahead, about one-in-five agreed, according to the latest University of Michigan consumer sentiment survey. That's up from 9% last June.

HUD proposes remedy to reduce appraisal bias

January 13th, 2023|

The Department of Housing and Urban Development is taking tangible measures to wrangle appraisal bias by giving Federal Housing Administration loan applicants the opportunity to challenge a property valuation.It is proposing to update the FHA's reconsideration of value (ROV) process by including an option for borrowers to request another appraisal if they believe the original's results are skewed by racial bias.ROV's can already be initiated by a prospective borrower, but the process is in need of clarification, HUD said in its draft mortgagee letter. It is looking to include specific guidance to process and document a borrower-initiated review of appraisal results. Borrowers will also have an option to obtain a second valuation "in cases where material deficiencies in the appraisal are documented and the appraiser is unable or unwilling to resolve them," which may include instances of illegal bias,  HUD said.Feedback from the industry will be accepted until Feb. 2. HUD Secretary Marcia Fudge discussed the proposed changes at a Brookings Institute event Thursday, noting that the department is "committed to making the appraisal process fair nationwide.""We must eliminate bias in home valuations so that everyone can equally reap the benefit of wealth — and intergenerational wealth — that come along with homeownership," said Fudge in a written statement. "This announcement is an important step forward in rooting out appraisal bias in this country."Changes to the ROV process were first mentioned in HUD's road map for addressing appraisal bias, also known as the PAVE Action Plan, and highlighted the importance of providing clear guidance for borrowers seeking to challenge an appraisal.The draft mortgagee letter published in early January "supports the Biden-Harris administration's PAVE Action Plan commitments and the continued work of the interagency task force," the department said in a press release.The interagency task force, whose mission is to eliminate bias in residential valuations, is spearheaded by HUD, but includes a bevy of other federal agencies including the Department of Veterans Affairs, Department of Agriculture, Consumer Financial Protection Bureau, Federal Trade Commission and the Federal Deposit Insurance Corporation. Even with the formation of the task force, so far regulatory enforcement and changes to the appraisal process have been fairly sparse. Industry stakeholders continue to believe that more must be done to combat appraisal bias.In October, the Federal Housing Finance Agency moved to make Uniform Appraisal Dataset records by the government-sponsored enterprises public."We view this as a significant first step in sharing the vast amount of valuation data that's retained by the enterprises," Sandra Thompson, president of FHFA, said while speaking at a Mortgage Bankers Annual convention last year. "With the more than 23 million statistics about single family home appraisals, the public will be able to better monitor industry trends, compare appraisal gaps in minority neighborhoods across states and metropolitan areas, evaluate national state, regional and local trends in appraised values and gain a better understanding for how appraised values differ among neighborhoods and housing features."

Wells Fargo hints at how it will downsize its servicing portfolio

January 13th, 2023|

Wells Fargo offered more details about its approach to downsizing its involvement with mortgages during its earnings call, which revealed that its profitability has been halved compared to last year due to a multibillion-dollar settlement and the need to bulk up reserves.Declines in origination and servicing also played a role in the reduction as volumes in the former category and valuations in the latter dropped. (Servicing is often considered a natural hedge for origination declines but its valuations can be volatile, and rates dropped enough in Wells' case enough to hurt valuations modestly in the fourth quarter, while doing little to revive lending.)"We do not need to be one of the biggest originators or servicers in the industry," CEO Charlie Scharf said during the earnings call with analysts, reaffirming the company's downsizing of its mortgage operations and summarizing a big sea change to its leading position in the market."I've been saying for some time that the mortgage business has changed dramatically since the financial crisis and we've been adjusting our strategy accordingly," he said. "We're focused on our customers, profitability returns and serving minority communities, not volume."To that end, the bank will be careful in choosing the buyers to whom they're selling servicing from clients who were brought in by other financial institutions."They can't choose to just indiscriminately sell, they're going to have to sell to people who will continue to take care of the underlying customer," said Nick Smith, founder, CEO and co-chief investment officer of servicing investor Rice Park Capital Management, said in an interview.Regulators have been known to step in when banks haven't. Notably, a New York banking regulator blocked Wells' attempts to sell a $39 billion portfolio to Ocwen in 2014, citing questions about whether the nonbank could adequately service the loans.In this week's earnings call, analysts asked if selling servicing could have some downsides related to the loss of scale or a profit source, but Scharf said the move would be advantageous financially, more so than the correspondent exit."The revenue impact of exiting the correspondent business in the short term is not meaningful. It's a very small number of people….The real benefit comes over time as we reduce the size of the servicing business," said Scharf."Our servicing portfolio can be substantially lower and we'll still have scale to be able to originate the product, and we would say in a more profitable way than we're doing it today," Scharf said. In addition to servicing reductions from the correspondent exit, the company is also looking for "intelligent and economic ways to reduce the complexity and the size" of its portfolio, said Scharf."It's not profitable for us today in a whole bunch of these segments where we continue to have servicing," Scharf said.Wells executives didn't otherwise comment specifically on which segments of the portfolio the company might sell.Smith said it's likely to be related to the loans that government-sponsored enterprises Fannie Mae and Freddie Mac back."I think one could speculate that it's largely going to be GSE. [Wells'] portfolio probably doesn't contain as much Ginnie Mae servicing, and I think the jumbo segment is likely to contain more strategic customers," Smith said. While many banks have distanced themselves from the government-insured loans Ginnie protects the securitizations of, and that servicing has been trading at lower valuations with fewer investors recently, Wells is unlikely to exit it entirely as its a key source of lending for minority households. Executives said the company remained dedicated to home lending in general."We're going to continue to stay in the [mortgage] business, but we're going to view it as part of the importance in the broader relationship. So that means we'll be originating both conforming and nonconforming mortgages and we'll continue to make the decision as to what goes on our balance sheet as we have done in the past," said Scharf.

Fed survey: Home Loan bank advances are popular liquidity fallback for banks

January 13th, 2023|

Federal Home Loan bank advances are a popular option for banks facing falling reserve balances, a recent survey from the Federal Reserve found.Among banks that are members of the Federal Home Loan Bank System, more than three-quarters of respondents would "very likely" turn to advances to increase reserve balances, according to the Fed's most recent senior financial officer survey, released Friday afternoon.Along with the 77% of respondents who rated their likelihood of turning to advances to replenish their reserves as "very likely," another 14% said they would be "likely" to turn to Home Loan bank advances, according to the survey. The next most popular option was borrowing from unsecured markets, such as the federal funds market, followed by raising brokered deposits or certificates of deposit. A survey of senior financial officers conducted by the Federal Reserve found that a wide majority of Federal Home Loan Bank System members would turn to Home Loan bank advances to meet liquidity demands.Bloomberg News The least popular option among the officers surveyed was turning to the Fed's discount window, with 78 percent saying they were not likely to use that option and none saying they would be very likely to do so.The most important reason for maintaining a certain level of reserves is to satisfy liquidity requirements determined by stress testing, with 66% of respondents saying that was a very important consideration and another 16% saying it was important.Typically conducted twice a year by the Federal Reserve Bank of New York, the Fed's senior financial officer survey is a poll of officials at 80 banks, covering a range of asset sizes and business models. The survey, conducted Nov. 4-Nov. 18, focused on balance sheet management expectations for the months ahead, views on reserve preferences and expectations about the effects of the Fed's interest rate changes.The institutions surveyed accounted for nearly three- quarters of the reserves in the banking system. Only 44 of the officers surveyed represented Home Loan Bank System member banks.The Fed's finding comes on the heels of a report that Silvergate Bank took out a $4.3 billion advance from the Federal Home Loan Bank of San Francisco last year. The action by the crypto-focused La Jolla, California, bank took the advance to help stave off a run on its deposits.Home Loan banks are private institutions that were established by the government to provide liquidity to banks that help finance housing purchases and developments. Silvergate's use of a Home Loan bank advance to offset crypto-related losses has rankled some in and around the bank regulatory space. Such advances are given first-lien priority, meaning if an institution becomes insolvent, the advance would be repaid first, an arrangement that skeptics say shifts the burden onto the Federal Deposit Insurance Corp."The Home Loan banks love to say that they've never lost a nickel and that's because they have a prior lien ahead of the FDIC," Federal Financial Analytics managing partner Karen Petrou told American Banker. "The $4.3 billion is clearly at risk and it leaves the FDIC holding the bag."The Fed's survey found that many banks wanted to maintain or augment their reserve holdings in the coming months. Roughly one-third of respondents said they would take steps to keep the same level of reserves or add more in the coming six months, while another third said they would leave their reserve levels alone.

Fannie Mae, Freddie Mac get servicing valuation rules from FHFA

January 13th, 2023|

The Federal Housing Finance Agency issued an advisory bulletin regarding the government-sponsored enterprises' need to establish and implement risk management policies and procedures for valuing and monitoring mortgage servicing rights portfolios."Enterprise-wide risk management policies and procedures should be commensurate with an Enterprise's risk appetite, and based on an assessment of seller/servicer financial strength and MSR risk exposure levels," the bulletin stated. "Although seller/servicers assign values to their MSRs, the Enterprises should have their own processes to evaluate the reasonableness of seller/servicer MSR values."This bulletin applies only to single-family MSR portfolios and is effective on April 1.In August, the FHFA and Ginnie Mae jointly released updated minimum financial-eligibility standards for their counterparties.MSRs are important for Fannie Mae's and Freddie Mac's evaluation of a seller/servicer's financial capacity, said the latest bulletin, issued on Jan. 12.The FHFA warned the GSEs not to accept MSR portfolio evaluations from the seller/servicer because of differing model assumptions that contribute to volatility in values. Instead Fannie Mae and Freddie Mac need to get their own assessment."The Enterprise should document the rationale for the MSR valuation and ensure it is appropriate and prudent for its intended use in managing counterparty credit risk," FHFA said.The valuation requirement is not restricted to Fannie Mae and Freddie Mac MSRs owned by seller/servicers, but other investor types as well. FHFA admitted that the availability of data with these portfolios can be limited."However, seller/servicers regularly provide the Enterprise with information on their MSR portfolios, such as general mortgage loan characteristics and certain MSR valuation assumptions, along with the MSR value," the bulletin said. "Some seller/servicers also commission independent audits and third-party valuations that may contain additional MSR portfolio information."The GSEs can use this information to assess the reasonableness of the valuation for the mortgages they don't own or guarantee and adjust those accordingly, FHFA continued.Fannie Mae and Freddie Mac can use third-party providers for various aspects of the MSR appraisal as long as adequate processes and controls are in place.

Sagent names former Fannie Mae executive as COO

January 13th, 2023|

Sagent has announced that a former government-sponsored enterprise executive who has served on its board has been appointed to the chief operating officer role at the company.Marianne Sullivan, who was senior vice president of single-family business operations at Fannie Mae between 2014 and 2017, is now charged with overseeing the start of the second phase in a multi-year plan Sagent has to modernize servicing. Sullivan also served as Fannie's chief risk officer between 2007 and 2014. Her appointment follows the first phase of Sagent's plan, which was to partner with publicly traded mortgage servicer Mr. Cooper with the aim of jointly developing cloud native technology. In that partnership, Mr. Cooper acquired a 20% equity stake in Sagent. Mr. Cooper also became a staging customer for Sagent, with the technology vendor acquiring components of the servicer's innovations in automation."One of the things that you're going to be hearing from us in 2023 are milestone updates in terms of our progress on that," Sullivan said in an interview Friday. "What we're doing is working to build an end to end platform, but in that, also working to build in simplicity, and user configurability."Sullivan has served on the boards of several other housing finance and technology companies in addition to Sagent, including PennyMac Mortgage Investment Trust, Finicity and Ardley Technologies. She's been working as an industry consultant since 2017.While at Fannie, Sullivan worked with underwriting, origination, quality control, servicing, loss mitigation, default and REO. During her time in operations, she was known for playing a key role in working with companies like Finicity on innovations such as Day1 Certainty and Collateral Underwriter.  As CRO, she was known for having to reset standards in the wake of the massive underperformance of loans that followed the Great Recession."That certainly does accelerate your learning, I'll leave it at that," she said of having to manage through the recession's housing crashSullivan said her overall experience has given her "a lot of interesting seats and vantage points" that she'll be sharing with the team at Sagent.When asked whether the originations and loan purchases innovations she's worked with could have some crossover relevance for servicing, Sullivan said, "There's a lot of applicability of the patterns that were used on the front end that are on the back end in certain areas."Other technologies like artificial intelligence also could come into play in her discussions at Sagent, she said, noting that AI has accelerated progress on issues like document data management the industry had been looking to handle through optical character recognition.However, it's too early to say whether these technologies will be a focus in her new role at Sagent, Sullivan said, noting that she'll need to engage in more discussion with her team before she'll know what her priorities beyond the overarching cloud native project the company will be."I learned really early in my career that by listening to others and encouraging them, solutions become exponentially better," she said.

2023 housing market spurred by mixed bag of economic data

January 13th, 2023|

Another round of positive economic data let investors breathe a sigh of relief that the Federal Reserve may have reason to significantly slow down its quantitative tightening measures. The latest consumer price index (CPI) showed inflation cooled off slightly with a 0.1% month-over-month decrease. On an annual basis, the price of consumer goods rose by 6.5%, down from November’s 7.1% increase. This is still well above the 2% target rate of inflation the Fed generally likes to see. Continue reading 2023 housing market spurred by mixed bag of economic data at Movement Mortgage Blog.