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

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Libor moves to its ‘final chapter’ as U.K. sets end dates

March 5th, 2021|

U.K. regulators kicked off the final countdown for Libor, ordering banks to be ready for the end date of a much maligned benchmark that’s been at the heart of the international financial system for decades. The U.K. Financial Conduct Authority confirmed Friday that the final readings for most rates will take place at end of this year, with just a few key dollar tenors set to linger for a further 18 months. The move comes in the wake of major manipulation scandals and the drying up of trading data used to inform the rates, which are linked to everything from credit cards to leveraged loans. Regulators have made a concerted effort to wind it down in 2021, with the Federal Reserve and others pushing market participants toward alternatives. “Outside the U.S. dollar markets, this marks the end game,” said Claude Brown, a partner at Reed Smith LLP in London. “The rate that linked the world, and then shocked the world, will leave this world in 2021.” Libor is deeply embedded in financial markets. Some $200 trillion of derivatives are tied to the U.S. dollar benchmark alone and most major global banks will spend more than $100 million preparing for the switch. Smaller players — from hedge funds to non-financial corporates — could also be caught in the crossfire, with many only at the beginning of the transition from legacy contracts. Bank of England Governor Andrew Bailey said this was now the “final chapter,” and there’s no excuse for delays. “With limited time remaining, my message to firms is clear — act now and complete your transition,” he said. Progress toward replacement benchmarks, such as the Secured Overnight Financing Rate in the U.S. and the Tokyo Overnight Average Rate in Japan, has been sluggish, and there are hopes Friday’s announcement could accelerate the process. “This was the much anticipated final piece of clarity the market needed to really kick on,” said Kari Hallgrimsson, co-head of EMEA rates at JPMorgan Chase & Co. “We would expect liquidity for trading the new rates to keep increasing from here on out.” The potential delay in the most-used dollar Libor tenors — notably the three-month benchmark — is a concession to market concerns, but regulators remain adamant that dollar Libor shouldn’t be used for new contracts after 2021. Firms should expect further engagement from their supervisors to ensure timelines are met, the FCA warned. Similar regulatory pressure is building in the U.S. The Fed is intensifying its scrutiny of banks’ efforts to shed their reliance on Libor, and has begun compiling more detailed evidence on their progress. Friday’s decision locks in the benchmark’s fallback spread calculations, which for dollar Libor will be added to SOFR, the main U.S. replacement. While speculation about the announcement’s timing jolted the eurodollar market in December, the market reaction on Friday was subdued. The spread between June 2023 and September 2023 Eurodollars widened one basis point, as did the difference between December 2021 versus March 2022 short sterling contract. “The main takeaway is that it will fix the calculation of fallback spread which in turn will provide certainty to market participants in their transition,” said Antoine Bouvet, senior rates strategist at ING Groep NV. The FCA also detailed proposals to deal with the most troublesome loans and securitizations that can’t be switched to replacement rates. The regulator will consult on synthetic Libor -- which doesn’t rely on bank panel data -- for the sterling and yen benchmarks, and will continue to consider the case for using these powers for some dollar Libor settings.

Why Every Mortgage Lender Will Disappoint You

March 4th, 2021|

People constantly ask me if a particular lender is good, bad, or should be avoided at all costs. They also ask who the best mortgage lender is, often citing some customer satisfaction survey or what not. Or whether they should use a mortgage broker or a bank. And my answer is pretty much always the same – it depends on how your particular loan goes. You might end up hating the company or loving them, all based on how things go when it’s your turn. So yes, two individuals can wind up with completely different opinions, even when working with the same company, and perhaps even the same exact employees. The problem with the mortgage industry is that it’s very regulated, dynamic, and complex, and as such, it’s very difficult to please everyone all of the time, even with the best of intentions. In other industries, such as the credit card industry for example, customer service reps can “make things right” if something goes wrong, usually just by pushing a button. You didn’t like our service? Okay, how about a $25 statement credit? The same goes for your cable company, who you have to call each month to ask for a billing adjustment after they attempt to gouge you. With home loans, it’s a little different. Aligning Expectations with Reality Thanks to the widespread “the customer is always right” policy Consumers are almost guaranteed to be dissatisfied with the home loan experience Because it doesn’t work the same way in the mortgage industry Things rarely go according to plan and loans can’t always be approved regardless of how much you complain Unfortunately, it is these very companies mentioned above that create lofty expectations for all other businesses, whether they can live up to them or not. So when a consumer applies for a mortgage, they often go into it thinking they can complain if anything goes wrong and automatically get it fixed. Or simply argue until fees are lowered or waived, and the interest rate reduced. Sadly, it’s not so simple when it comes to mortgage lending. There are so many hands involved in a single loan, and so many guidelines that must be met. Many are black and white, and often not up to your lender. For example, the loan might need to meet the guidelines of Fannie Mae, Freddie Mac, or the FHA, and whining about it won’t change that fact. There are also many technical aspects, and mortgage pricing is very involved. Sure, some junk fees might be waived without too much of a fight, but adjusting your mortgage rate lower will be a lot trickier. If you’re not a great borrower, even the best lender won’t be able to get you the low advertised rate you saw on TV or the Internet. You know the old adage, “the customer is always right.” In mortgage, this doesn’t necessarily hold true, as you and your lender will be at the mercy of external forces. Enter frustration here. Complications May Come Off as Lies While there are certainly unscrupulous players in the mortgage industry like any other line of business Even those who tell the truth might be questioned due to the complexities involved with obtaining a mortgage But if you inform yourself early on you can spot the difference And better understand when you’re being strung along and when you might need to act Let’s take a common scenario, where you are quoted a certain mortgage rate at the beginning of the home loan process. It is at this very moment the lender gets you in the door. After all, without the promise of a low mortgage rate, why would you choose them? They must be somewhat competitive to move forward. You have a great conversation with the loan officer and feel really good about everything. The fees are explained in detail, and the interest rate you’re set to receive is going to shave hundreds off your monthly mortgage payment! Then, out of nowhere, you’re told your mortgage rate will be .50% higher than originally quoted. Turns out something came up on your credit report that wasn’t originally disclosed, pushing your credit score into a lower tier, and thus raising your rate. This is but one example of how rates can change in a flash, and it has nothing to do with the lender originating your loan. It’s not a bait and switch. And that’s completely ignoring the fact that mortgage rates can change daily among all lenders. Another common scenario is an appraised value coming in low. It pushes your loan-to-value ratio higher, and your low mortgage rate isn’t so low anymore. Once again, this has nothing to do with the lender. It has to do with your property value, which the lender doesn’t dictate. Love Them or Hate Them… As noted, your home loan experience may vary considerably from another borrower who uses the same exact lender Simply due to luck (or a lack thereof) when it comes to your particular loan scenario And often it may be completely outside your lender’s control The difference might be how your lender communicates when things do come up Here’s another one. Let’s assume you decide to float your rate, only to see rates rise. You may blame the lender for not locking your rate early on. But the exact opposite could also happen, making you a very happy borrower. Again, your lender is not the culprit here, but rather timing is. So luck is involved as well, which as we all know, can go both ways. You may also find out that your loan is declined after weeks of back and forth with your lender. Again, things come up, and the more documentation you provide to your lender, the more things can change, for better or worse. Your mortgage doesn’t operate in a vacuum. If you send in a document that happens to raise a red flag with the underwriter, everything may change in a heartbeat. Again, it’s not your lender in many cases, it’s just reality in the mortgage world. Lenders can be held accountable for mistakes made during the loan process, and so yes, they may ask for a document more than once. Or a blank page that seems entirely insignificant. And they may ask for a letter of explanation. And they might ask for an explanation to your previous explanation. But it’s all done for a reason. Lenders aren’t in business to play games with you. They want to fund loans just as much as you want yours funded, so cooperation often works better than endless arguing. The only caveat here might be how the lender communicates this all with you. Are they transparent about all that happens? Do they pick up the phone when you call? Are they friendly and happy to explain what’s going on? These characteristics can certainly separate the good lenders from the bad. There Are Always Exceptions If you educate yourself on mortgages you’ll have a better idea of who’s full of it Or attempting to take you for a ride and give you the old bait and switch Comparison shop before you commit and vet each lender carefully before you proceed Also feel out the loan officer you speak with and check out their reviews so you feel good about working with them beforehand While I just did my best to defend mortgage lenders, there are shady and unscrupulous banks, lenders, mortgage brokers, and loan officers out there. Just like any industry, there are bad apples among the good, and you do need to navigate extremely carefully to avoid such individuals. This is especially important when obtaining a mortgage, as a bad deal can cost you a lot more than a bad deal elsewhere. Would you rather overpay for a car or your mortgage? You certainly don’t want to be stuck with an inflated mortgage rate for years, or a loan type that doesn’t make sense for you (hello option arm). Nor do you want to miss out on a home purchase because the lender failed to deliver what they promised. So ask a lot of questions, and make sure your loan rep takes the time to explain anything that might be causing confusion or concern. Or what may arise and how they’ll deal with it. It is their job, and they should be more than willing to help you out, especially if you’re a first-time buyer. Just remember that it is indeed a job, and they need to get paid for assisting you. How much money they make will depend on how well you shop and negotiate. In other words, YOU affect the outcome of your mortgage as well. Prepare, do your homework, address any red flags before you apply, and put in the time to ensure you don’t walk away disappointed. (photo: attercop311)

Summit Funding Review: Highly Rated ‘Home Loan Experts’

March 4th, 2021|

Posted on March 4th, 2021 It’s time for another mortgage review, this time we’ll take hard look at Summit Funding Inc., which bills itself as “The Home Loan Experts.” There might be some truth to that because the direct lender has been around since 1995, almost as long as the duration of a 30-year fixed mortgage. The company started off small with just a few employees, known then as Sacramento Residential Mortgage, but has rapidly expanded into a national mortgage lender. Today, they fund billions in home loans annually and are working to become one of the top lenders in the nation and a household name. Summit Funding Fast Facts Direct-to-consumer retail mortgage lender that offers home purchase and refinance loans Founded in 1995, headquartered in Sacramento, California Licensed to do business in 45 states and the District of Columbia Funded more than $4 billion in home loans last year (a top-100 lender nationally) About two-thirds of their business consisted of home purchase lending More than half of their loan volume came from home state of California Summit Funding, Inc. is a direct mortgage lender and loan servicer that was founded by current CEO Todd Scrima in the mid-1990s. Since then, they have grown to be a top-100 mortgage lender nationally based on loan volume, and may even be close to cracking the top-50 today. Last year, they originated roughly $4 billion in home loans, with about two-thirds of it driven by home purchase loans. That means real estate agents trust working with them to get the job done. The rest was comprised of refinance loans and reverse mortgages, and about half the overall total came from the state of California. The company also appears to be very active in Oregon, Arizona, Michigan, and Nevada. At the moment, Summit Funding is licensed to do business in 45 states and the District of Columbia. They don’t seem to be available in the states of Alaska, Connecticut, Massachusetts, New York, or Rhode Island. How to Apply for a Mortgage with Summit Funding Visit their website and click on Apply Now to get started on your application Browse their loan officer directory if you’re not currently working with someone They offer a digital mortgage process along with a free smartphone app to track your loan progress You can securely upload paperwork, eSign disclosures, and get in touch with your loan officer instantly To get started, simply visit their website and click on apply. They’ll then ask if you’re working with a loan officer, and if not, prompt you to find one nearby using their online directory. Once you locate the individual you wish to work with, you can apply directly online via a digital mortgage application. It will allow you to get pre-qualified, securely upload paperwork, eSign documents, and message your loan officer instantly as you make your way through the process. You’ll also be able to see your progress and get updates once your loan is submitted via the online borrower portal, which is powered by ICE Mortgage Technology (formerly Ellie Mae). Those who wish to download the free smartphone app can also manage their home loan that way. Before you do all that, it is recommended that you obtain mortgage rate pricing and inquire about lender fees. Once you speak to a loan officer to determine if they’re competitive and/or have the loan program you’re looking for, you can proceed with the application. Summit Funding embraces technology but also incorporates human touch to give borrowers the best of both worlds. Loan Programs Offered by Summit Funding Home purchase loans Refinance loans: rate and term, cash out, and streamline Conforming loans backed by Fannie Mae and Freddie Mac Jumbo home loans up to $3 million loan amounts FHA loans VA loans USDA loans Reverse mortgages Fixed-rate and adjustable-rate options available One nice thing about Summit Funding is they offer lots of different loan options. You can get a home purchase loan or a refinance, including a cash out refinance. Additionally, you can get a jumbo loan with a loan amount as high as $3 million, or a reverse mortgage if you’re aged 62 and older. They also offer the full suite of government loan programs, including FHA, USDA, and VA loans. You can get financing on a primary residence, second home, or an investment property, including condos and townhomes. In terms of specific loan programs, you can take out a fixed-rate mortgage such as a 30-year or 15-year fixed, or a hybrid adjustable-rate mortgage like a 5/1 or 7/1 ARM. Summit Funding Mortgage Rates One slight negative to Summit Funding is the fact that they do not publicize their mortgage interest rates online. As a result, it’s unclear how competitive they are relative to other lending options, and the only way you’ll be able to find out is to get in touch with a loan officer for pricing. The same goes for lender fees – we don’t know if they charge a loan application fee, loan origination fee, underwriting/processing fees, and so on. Be sure to inquire about all these important costs when you speak to a loan officer so you can compare their offer(s) to other lenders properly. While customer service is great, so is a low-priced mortgage. You’ll want to make sure you get the best of both worlds. Summit Funding Reviews On SocialSurvey, the company has a very impressive 4.86-star rating out of 5 from about 60,000 reviews. Attaining a score that high from such a large number of reviews says a lot. They’ve also landed in the top-10 for customer satisfaction in past years among a large group of like-sized lenders. Over at Zillow, it’s an even better 4.97-star rating from about 2,000 reviews, with a lot of them indicating that the interest rate and closing costs were lower than expected. The company also has a perfect 5-star rating on Google from about 300 reviews for their corporate headquarters, which is obviously also quite impressive. While Summit Funding isn’t an accredited business with the Better Business Bureau, they do have an ‘A+’ rating based on customer complaint history. In summary, the company could be a good fit for both first-time home buyers and existing homeowners looking to refinance a mortgage thanks to their local offices and plentiful online tools. Summit Funding Pros and Cons The Good Stuff Can apply for a home loan instantly from any device Offer a digital mortgage process powered by ICE Also have brick and mortar locations in many states Excellent customer reviews across all ratings websites Lots of loan programs to choose from including jumbos and reverse mortgages Free smartphone app Free mortgage calculators and glossary on their website The Not Not licensed in all states No mention of rates or fees on their website May not service your loan

18 Reasons to Refinance Your Mortgage

March 3rd, 2021|

There are many reasons to refinance your mortgage, some obvious and some a bit more obscure and/or different. I figured I’d compile a list of the many reasons I can think of to refinance. Some of the situations are complete opposites of one another and will depend on your unique financial goals and/or risk appetite. But most will be appealing at times when interest rates are low, as they are now. 1. To get a lower interest rate This one is the no-brainer that everyone will agree on. If you want a lower interest rate then refinancing your mortgage is the way to go, assuming mortgage rates are lower now than when you took out your original mortgage. The classic rate and term refinance allows homeowners to reduce their interest rate so they can enjoy a lower monthly payment. The potential downside to this is resetting the clock on your mortgage, though you can also go with a shorter term at the same time to avoid that. 2. Because your borrower profile has improved Another reason to refinance has to do with your unique borrower profile. Say you improved your FICO scores over the past year and cleaned up some other negative stuff. Or perhaps your home value increased enough to push your LTV into a lower tier. It’s also possible that your new loan amount could fall below the conforming loan limit, thereby opening up new loan programs and potentially providing even greater savings. In short, if your borrowing profile has improved significantly since you first took out your home loan, you might be entitled to a much lower interest rate than what you previously qualified for. This could be a good time to inquire about a refinance to save some money each month. [How soon can I refinance my mortgage?] It could also be that you started out with a loan product you weren’t too fond of because it was the only way to qualify for a mortgage. But now that you’re a better borrower with more home equity (thanks to all that home price appreciation) you’ve got more loan options to choose from. Instead of paying mortgage insurance for life on an FHA loan, you can refinance your mortgage into a conventional loan instead. This will allow you to remove that pesky and expensive lifetime MI while potentially snagging a lower interest rate at the same time. Talk about a win-win! 4. To reduce the loan term Then we’ve got the folks who want to aggressively pay down their mortgages, or at least not pay them down at a snail’s pace over the next three decades. If this is you, there is a huge benefit to refinancing from a 30-year fixed into a shorter term loan such as the 15-year fixed. You pay a lot less interest and own your home much sooner. These shorter-term mortgages also come with lower interest rates so you can pay your mortgage off a lot faster without potentially breaking the bank, depending on the rate you had and where rates are today. 5. To increase the loan term The exact opposite group might refinance to extend their loan term, which will cost them a lot more in interest but save them in monthly payment. Not everyone wants to pay down their mortgage in three years and for some it’s very difficult to make large monthly payments. Perhaps a change in circumstance means a 30-year term is more sustainable moving forward. Others may simply want to slow mortgage repayment and put their money into alternative investments, whether that’s the stock market or a new investment property. 6. To switch to a fixed-rate mortgage We’ll put this in the common reasons to refinance pile. Just about everyone will suggest that you refinance out of an ARM and into a fixed mortgage if you think interest rates will rise. The same is true if your hybrid ARM that was fixed for X amount of years is about to hit its first rate adjustment. For example, if you originally took out a 5/1 ARM and it’s nearing the 60-month mark. To avoid the costly rate reset you can move to a FRM before that happens. And with rates so low today, you might even get a lower fixed rate than what you had on your ARM. 7. To go adjustable instead Of course, things also move the other way. It’s entirely possible to switch from a boring old 30-year fixed mortgage to an ARM if you want some payment relief, or simply feel you’re overpaying. It’s also possible to refinance out of one ARM and into another ARM to not only obtain a new (hopefully lower) rate but also restart your fixed-rate period on the new ARM. Plenty of wealthy individuals move from ARM to ARM to take advantage of cheap short-term rates while they put their money to work elsewhere. 8. To go fully-amortized Another common scenario might be a borrower with an interest-only mortgage who is facing a recast. The IO period typically only lasts 10 years before the mortgage must be paid back in full. To avoid a steep monthly payment increase, a homeowner might opt to refinance out of the IO product and into something fully-amortizing. Or perhaps even another IO product to extend that benefit. 9. To go interest-only Conversely, a borrower sitting on a lot of home equity might decide it’s time to make interest-only payments to improve monthly cash flow. This can also free up cash for other expenditures or investments the homeowner may be looking at. After all, you don’t always want all your eggs in one basket if you’ve already got a ton of them in your house. 10. To get cash out of your home Speaking of cash flow, you might refinance simply to get cash out of your home. The age-old cash out refinance is a great way to free up your home equity and put it to work elsewhere. Perhaps you want to make some home improvements, or buy a second home or an investment property. Maybe you need some money to pay for college tuition. Or you simply want to diversify and move your cash out of your home and into the stock market instead. 11. To buy someone out In certain situations, you may need/want to add or remove someone from title and/or the mortgage. If this is the case, a refinance can be an appropriate vehicle to do so. Maybe there was a divorce and you’re buying someone out. Or maybe you’re ready to fly solo and remove mom and dad as co-signers. Again, this could be a good time to snag a lower interest rate and/or make a loan product change too assuming it’s favorable. 12. To protect your investment You might also refinance to tap some of the equity you’ve gained over the years. Home values are known to seesaw over time and it could be a good opportunity now to get some of that cash for the future. It doesn’t hurt to put aside some dry powder, especially when interest rates are low. And if you can do so while home values are high and your property is owner-occupied, that cash can be put to work elsewhere. Perhaps to buy another home if property values drop. Diversify. 13. To drop PMI I spoke about switching loan products to drop mortgage insurance, but you can also dump private mortgage insurance by refinancing if you’ve got a low enough LTV. If your home increased in value and/or you paid it down enough to ditch the PMI, a refinance might save you a lot of money from the absence of said PMI. It’s actually a one-two punch because the lower LTV can help you qualify for a lower interest rate as well! 14. To apply a lump sum to lower your LTV Similarly, you might have come across some money recently and as such have the ability to take a big chunk out of your mortgage balance. If you’re one of those people who likes to pay down the mortgage as quickly as possible, applying a lump sum to lower the balance (and the LTV) will lead to a lower monthly payment, assuming you refinance (or recast). But paying extra won’t lower future payments unless you do one of those two aforementioned things. So those looking for actual payment relief could do a cash in refinance. A lower interest rate and/or shorter loan term could apply here as well to really speed up the loan payoff if that’s your goal. 15. To consolidate multiple mortgages Here’s a classic reason to refinance. You’ve got multiple mortgages (hopefully just two) and want to consolidate them into a single loan. A refinance is often a great way to accomplish this, especially if you wind up with a lower interest rate to boot. Many second mortgages have sky-high interest rates or are adjustable (hello HELOC), so this can be both a conservative strategy and a money-saving move. 16. To consolidate other debt Another typical reason to refinance is to consolidate other non-mortgage debt, such as credit cards and other higher-APR debt. Mortgages tend to have the lowest interest rates around, especially right now, and they allow you to pay the debt back very slowly, which makes it easier to manage. Just be careful not to go on a spending spree because you still haven’t paid off the old debt, you’ve merely transferred it. It’s not an excuse to spend more and accrue more debt, it should be a strategy to get out of debt more economically. 17. To access a loan program before it’s gone You may also want to refinance to take advantage of a home loan program before it’s gone. This could be a specialty program such as HARP, which allowed underwater borrowers to refinance, or a guideline change like the FHA’s move to lower the max LTV on cash out refis from 85% to 80%. There may also be a program a specific lender is offering for only a limited time. If you like what you see, it might be wise to bite now to avoid missing out. 18. Simply because you can One final reason I can think of to refinance is simply because you can, assuming things change for the worst financially. There’s never a guarantee you’ll qualify for a mortgage in the future. Heck, it’s possible you might need today’s low interest rates just to stay below the DTI limit. You could also run into some sort of financial hardship like a job loss, or rent out your home that you later wish to refinance. Just take COVID-19 as an example of a completely unforeseen situation that has affected millions of homeowners. Lots of these folks may not be able to refinance their mortgages due to missed payments or forbearance requests. Perhaps it makes sense to refinance now while you know you qualify and the home is owner-occupied. The terms you receive should be better. Read more: Use a refinance calculator to determine if it makes sense for you or check out my list of refinance questions and answers.

Rocket’s Reddit-driven rally halts as shares decline premarket

March 3rd, 2021|

Rocket Cos. fell premarket, halting a three-day rally driven by sentiment that the home-loan provider was the latest retail-trader favorite for its high short interest. The stock fell as much as 9.2% after RBC Capital Markets downgraded its recommendation to sector perform from outperform, with a price target that suggests a 28% drop. It had gained as much as 17% earlier. While mortgage demand is expected to continue to boost growth, that is now more than being captured in its current valuation, analyst Daniel Perlin said in his report. Rocket hit an all-time high Tuesday after CNBC mentioned the company as a possible new target among traders discussing stocks on Reddit. The stock has more than doubled since it went public in August and now has a market capitalization of about $83 billion. “It seems heavy short interest in the stock was exposed, driving a jump at the open and the dam burst once heavy open interest in $30 call options were triggered, fuelling another dealer gamma squeeze like we have seen with GameStop,” Neil Wilson, chief market analyst for Markets.com, said in emailed comments. Rocket carries 46% short interest as a percentage of float, according to S3 analytics. The analytics provider published a report Tuesday identifying exceptionally high trading and option volume for the Detroit-based company’s stock, alongside a large amount of short selling into the rally. Reddit comment volume for Rocket surged to nearly 19% of total comments on the forum WallStreetBets Tuesday, according to SwaggyStocks, a ticker and sentiment tracker. Rocket was the fifth-most-mentioned company on the market social media platform Stocktwits yesterday, at 3% of 271,666 stories carried on Bloomberg. Rocket’s jump may have been a matter of time, according to Bloomberg Intelligence analyst Ben Elliott. “Rocket has been a fringe meme stock for a while, so I figured something like this would happen eventually,” he said. Rocket’s fundamentals, however, don’t support the 16-17x price-to-forward earnings multiple implied by its March 2 close, Elliott said in a note. “Yet surprisingly resilient earnings may support a re-rating of the massive, tech-focused, nonbank lenders like Rocket and UWM if they keep performing amid rising rates.”

Rate spike mutes mortgage application activity with one exception

March 3rd, 2021|

The recent jump in mortgage rates to a high not seen since last summer left application activity overall largely flat last week, with the exception of a slight increase in the purchase market. Total applications inched up a scant 0.5% compared to the previous week, according to the Mortgage Bankers Association. Apps taken out for refinances rose just 0.1% and seasonally-adjusted purchase apps jumped 2% during the week ending Feb. 26. The minor uptick in purchase apps may reflect a recent runup in rate-indicative 10-year Treasury yields. The 10-year started 2021 near 0.9% but has risen, and last week it peaked at around 1.5% before subsiding. At day-end Tuesday, the 10-year was just above 1.4% “There was quite a move in the 10-year,” said Michael Franco, CEO of SitusAMC. “It could run back down, but given the additional stimulus that’s likely to come out, the infrastructure bills and the concerns in the bond market about all that, I think it might be a little more stickier now.” Sometimes refinancing actually gets a lift when rates rise as it spurs some borrowers to act out of fear of further increases, but in the long run a rate increase typically leads to diminished activity. The refi share in the market fell 67.5% from 68.5% the week ending Feb. 19. Homebuyers tend to increase as a share of the market when rates rise, and they also experienced a seasonal lift last week. “Purchase applications increased, with a rise in government applications – likely first-time buyers – pulling down the average loan size for the first time in six weeks, “ said Joel Kan, the MBA’s associate vice president of economic and industry forecasting, in a press release. Overall, the share of loans in the government market increased as follows: Federal Housing Administration loans rose to 12.1% from 11.2%, products guaranteed by the Department of Veterans Affairs increased to 12.3% from 11.9%, and U.S. Department of Agriculture mortgages inched up to 0.4% from 0.3% The average overall loan size was $336,200, down from $344,800 the previous week. The average purchase loan size was $412,300 and the average refinance loan size was $299,600, down from $418,000 and $311,100 the previous week, respectively. The average government loan size was $262,100, almost matching the previous week’s $262,300.

Biden's CFPB nominee puts loan servicers, credit bureaus on notice

March 2nd, 2021|

President Biden’s nominee to lead the Consumer Financial Protection Bureau vowed the bureau would come to the aid of student loan borrowers, consumers trying to correct inaccurate credit reports and homeowners hit hard by the coronavirus pandemic. The comments by Rohit Chopra before the Senate Banking Committee on Tuesday were among the highlights of a wide-ranging confirmation for him and Gary Gensler, a veteran regulator nominated to lead the Securities and Exchange Commission. Democrats raised concerns about the lack of student loan monitoring by the CFPB during the Trump era. And lawmakers raised questions about mortgage lending rules and issues with consumer credit reports. “When victims of fraud and misconduct are not made whole, it not only hurts them but hurts other businesses," says Rohit Chopra, a member of the Federal Trade Commission who has been nominated to run the Consumer Financial Protection Bureau. Bloomberg The hearing also highlighted partisan divisions over the direction of the federal financial regulatory agencies and the scope of their responsibilities. Republican lawmakers questioned whether it is appropriate for the SEC to regulate activities such as environmental impact that are outside of shareholders’ economic interests, while Democrats pushed Gensler to incorporate political-giving and climate-related disclosures in SEC rules. Here are five key areas where Chopra and Gensler were pressed by lawmakers about the actions they would take or the way they would conduct themselves. Enforcement philosophy A few senators raised specific issues about the rule of law and whether Chopra planned to break from a previous Democratic nominee, former CFPB Director Richard Cordray, who was often excoriated by Republican lawmakers and businesses for what they termed “regulation by enforcement.” And Sen. Pat Toomey, R-Pa., wanted to know whether Chopra plans to rescind a rule finalized in January by then CFPB Director Kraninger that clarified the difference between regulations and supervisory guidance. “Are you committing to complying with this law, with this rule or do you intend to revisit and attempt to change this rule that was passed this year?” Toomey asked. Chopra replied: “Supervisory guidance is really supposed to be there to help institutions be able to understand how to best comply." At another point, when questioned about his views on unfair, deceptive or abusive acts or practices, Chopra said: “We have to enforce the law as written.” Mortgages, credit reporting The 2008 financial crisis and regulators’ responses to it loomed large in questions to both Chopra and Gensler. Sen. Jon Tester, D-Mont., asked how the CFPB will help service members that suffered harm and how the bureau plans to decide which companies merit enforcement actions. The CFPB typically looks at consumer complaints, referrals from other agencies and issues raised in supervisory exams to identify and investigate wrongdoing. Chopra several times drew on crisis-era lessons to explain how the bureau should respond to consumers' financial stress in the current economy. “We learned from the last crisis that regulators missed some of the linkages between the mortgage market and our economy,” Chopra said. “We saw not too long ago the illegal foreclosures of active-duty service members. It’s going to be critical for the CFPB to monitor those markets ... so we do not see a deja vu of that crisis again.” Sen. John Kennedy, R-La., asked whether mortgage executives were held accountable for the rash of foreclosures and ensuing economic crisis. Gensler served as chairman of the Commodity Futures Trading Commission from 2009 to 2014. “You were there in ‘08 and ‘09.” Kennedy said. “Why didn’t anybody go to jail? Who made the call? Somebody in Justice had to have said we are not going to put these thieves in jail?” Gensler replied that the CFTC was a civil enforcement agency. In an immediate follow-up question, Sen. Catherina Cortez Masto, D-Nev., noted that during the foreclosure crisis, Gensler was not working at the Department of Justice at the time, and the CFTC did not have criminal enforcement authority. Kennedy also raised questions to Chopra about the difficulty that consumers have making changes to inaccurate credit reports and what the CFPB plans to do about it. “The credit bureaus make their money from the businesses, they don’t make their money from the consumer,” Kennedy said. “If as a consumer, a business reports a debt to the credit bureau that I didn’t pay, the credit bureau is going to be less concerned about the accuracy of that information than they would be if the credit bureau was depending upon me as the consumer to pay their bills. Is that a fair assessment?” Chopra replied by noting that consumers have difficulty getting inaccurate information changed despite requirements of the Fair Credit Reporting Act. "Accuracy is critical for the credit reporting system to work," he said. "I think the idea of making sure consumers can dispute and get answers is part of the FCRA." Yet Chopra said large technology companies must be queried about the accuracy of the information they collect, too. “That’s some of the big issues we are facing not only when it comes to credit bureaus but also the mass databases collected by big tech companies that are increasingly a part of financial services,” he said. Democratic lawmakers were critical of Kraninger for failing to assess stiff penalties against wrongdoers. Chopra, currently a member of the Federal Trade Commission, assured them he would take a tougher approach. “When victims of fraud and misconduct are not made whole, it not only hurts them but hurts other businesses," he said. "I have pushed hard against the FTC’s no-fault, no-settlement approach. When you rip someone off and don't have to pay them back how is that much of a sanction?" Student loans Lawmakers also repeatedly raised concerns about rising student loan debt now at $1.7 trillion, with the majority of losses coming from defaults on loans backed by the federal government. The CFPB under former Republican leadership stopped supervising student lenders and servicers. Sen. Tina Smith, D-Minn., said her constituents are struggling to stay enrolled in income-driven repayment plans and the Public Service Loan Forgiveness Program that allows federal employees to have loans forgiven after 120 qualifying payments. The Biden administration has put federal student loan payments on pause until September. But Smith raised questions about the CFPB’s oversight of student loan servicers. Chopra, who previously served as the CFPB's student loan ombudsman, said he plans to work closely with the Department of Education to hold student loan servicers accountable. ”Some of the same issues that we saw in the mortgage servicing market I think are creeping into the student loan servicing market,” Chopra said. Chopra vowed to crack down on servicers that do not allow borrowers to restructure loan payments or keep them from enrolling in forbearance or forgiveness programs. "If servicers or debt collectors are misrepresenting those options, that is a big problem,” he said. “It’s critical that loan servicers live up to their obligations.” FDIC board Chopra, who as CFPB director also would sit on the board of the Federal Deposit Insurance Corp., was asked how much he would try to exert his influence on the agency's agenda. While Trump-nominated FDIC Chairman Jelena McWilliams will lead the agency through 2023, experts have speculated that Biden-appointed members could wield significant power as members of the FDIC board. The FDIC’s bylaws allow for any two members, including the CFPB director and the comptroller of the currency, to submit written requests to the agency's executive secretary for the FDIC's board to convene. Sen. Cynthia Lummis, R-Wy., urged Chopra not to force votes on new policies that are not approved by McWilliams. “Chairman McWilliams was confirmed by the Senate to set the direction of the FDIC,” Lummis said. “Since you will not be the chairperson of the FDIC board, will you commit not to force votes on matters the FDIC chairwoman has not included on the board’s agenda.” Chopra said he was not aware of the specific FDIC governing rules. “I’m actually not familiar with these rules of procedure, but I’m happy to take questions for the record on it,” Chopra said. Political contributions In light of ongoing discussions about corporate political spending after the Jan. 6 Capitol Hill riots, Democrats on the committee encouraged Gensler to expand disclosure requirements. Sen. Bob Menendez, D-N.J., who has introduced legislation requiring companies to disclose their political contributions and ask for shareholder approval of donations, urged Gensler to require companies to disclose their political contributions. “The fact that so many companies have reevaluated their political contribution plans after the Jan. 6 attack on the Capitol shows just how quickly they have realized the potential contributions have on a material impact on their reputations and the viability of their businesses,” Menendez said. “Do you agree that political contributions by publicly listed corporations represent material information?” Gensler suggested that investors would benefit from knowing corporations’ political contributions without endorsing a specific rule. “Disclosures are critical to investors in promoting capital formation,” Gensler said. “Without prejudging a specific issue, I can assure you that I will be grounded if confirmed in the materiality standard that drives all those decisions on disclosure. … It is something that I think that the commission should consider in light of the strong investor interest.” Republicans on the committee signaled opposition to SEC requirements related to political considerations or social policy. “The securities laws are not the appropriate vehicle to regulate climate change nor to correct racial injustice or intimidate companies regarding political spending,” Toomey said.

Home price growth trounced expectations last year, will slow into 2022

March 2nd, 2021|

Home prices shot up beyond last year’s predictions as coronavirus impacts generated a perfect storm for rapid growth but the pace is expected to slow this year, according to CoreLogic. The data provider’s Home Price Index jumped 10% year-over-year in January and 0.9% from December. It marked the largest annual growth in the index since November 2013. The rate nearly doubled the year-ago forecast of 5.4%, but that was prior to the pandemic’s economic impact and radical disruption of the housing market. As mortgage rates kept falling to new all-time lows, buyer demand skyrocketed. That shrunk already tight inventory even further, creating another factor that pulled housing values higher. CoreLogic’s HPI averaged annual monthly gains of 5.7% over the course of 2020 and 3.8% in 2019. The surging values brought homeowners a combined $3.1 trillion in equity in 2020, according to a separate report from Redfin. The total worth of the U.S. housing market rose by 10% to $32.4 trillion in January 2021 from $29.3 trillion the year prior, the Redfin report found. However, with interest rates growing congruently with rebounding employment and vaccine rollouts, price growth could lessen as the year goes on. CoreLogic predicts a 0.5% rise into February and a 3.3% increase by January 2022. “Heavy competition for the few houses on the market drove home prices to historic highs, and mortgage rates are no longer enough to sway the affordability challenges for consumers,” Frank Martell, president and CEO of CoreLogic, said in the report. “While new construction may help balance home prices towards the end of 2021, we may expect to see demand slow in the medium-term.” At the state level, Idaho home prices led the country by spiking 21% year-over-year in January. Montana followed at 17.4% with Indiana and Maine tied for third at 15.3%. At the opposite end of the spectrum, New York and North Dakota saw the lowest growth at 5.3%. Home prices in Louisiana and Iowa followed at 7.2% and 7.3%, respectively. Among the 10 largest metro areas, Phoenix experienced the biggest jump, surging 14.8% annually. San Diego trailed with 11% and Washington D.C. at 9.1%.

Databits: Fear, malaise, and eroding trust

March 2nd, 2021|

The ongoing digital transformation of the financial services industry has made it faster and more convenient than ever for people to manage their money. However, those same innovations and adoption of fintech tools have increased the risk of fraud and identity theft, and introduced new concerns around how organizations protect customers’ private financial data. Join Arizent's VP of research Janet King as she shares key findings from a recent survey of 500 consumers and over 250 financial services leaders that uncovers troubling mismatches between consumer attitudes toward data privacy and the data policies of many financial institutions.

Application defects grow due to rising mortgage rates

March 2nd, 2021|

Rising interest rates caused an increase in refinance mortgage application defects in January and going forward, their impact will spread to purchase business, First American said. While rates are expected to remain low by historical standards, even a modest increase is expected to cut refi demand as 2021 continues. Typically, refinancings are considered to be less prone to application defects than purchase loans because of the different motivations for seeking a loan. "Modestly rising mortgage rates may cause existing homeowners who are 'in the money' to rush to refinance in order to capture low rates amidst fears rates will increase further," First American Deputy Chief Economist Odeta Kushi said in a statement. "This rush may prompt existing homeowners to misrepresent information on a refinance application, resulting in rising refinance fraud risk." January's First American Loan Application Defect was 64, up from December's 63 but lower than 65 for January 2020. The increase came from the refinance component, which rose to 54 from 53 in December, and is now at its highest level since May 2020. Meanwhile, the purchase component was flat compared with December at 85, remaining at its highest point since May 2019. The ongoing shortage of homes for sale helped to keep purchase risk elevated, as people are more likely to make misstatements on loan applications to help win a bidding war, Kushi noted. An application defect is an indicator for, but not proof of, mortgage fraud. This year "is looking more like a purchase transaction-dominated market, and a competitive one at that," Kushi said. "This is not welcome news for overall fraud risk." The risk associated with conventional loan applications, remained elevated in comparison with government-guaranteed programs. For the fourth straight month, the government defect index was 82. But for Federal Housing Administration, Veterans Affairs and U.S. Department of Agriculture-backed loans, January's index was at 51, down from 52 in December.

Renting vs. Buying a Home: 55 Pros and Cons

March 2nd, 2021|

Last updated on March 2nd, 2021 It’s time for yet another mortgage match-up, so without further ado, here’s a biggie: “Renting vs. buying a home.” Or a townhouse for that matter… This is certainly an intimidating question, and one that’s difficult to sum up in one post, but I’ll do my best to cover as many pros and cons for each as possible (feel free to add more in the comments section!). First and foremost, there is no universal yes or no answer to this question seeing that real estate is constantly in flux and extremely local. These days, home prices are well off their lows, but mortgage rates continue to break new record lows, which has made many renters salivate at the notion of homeownership. After all, if you can buy a home for $100,000 less than your future neighbor while also snagging a mortgage rate several percentage points better than theirs, you’d be in pretty good shape, right? That’s the hope, barring a complete implosion on the economic and housing front. But nothing is ever that easy, is it? With homeownership comes responsibility, while renting may be relatively carefree. Rent vs. Buy Ratio There are several rent vs. buy ratios out there Which you can use to determine if a specific property is a good buy or not But purchasing real estate isn’t always just about the money People buy for many reasons so you don’t necessarily need to adhere to these stringent rules Before we talk about the pros and cons of renting vs. buying, I wanted to touch on the many ways pundits determine if it’s more economical to buy than rent, and vice versa. There are plenty of different rent vs. buy calculators out there, but most compare annual rents to asking prices to find out if it’s a good or bad time to buy. For example, there is the “rent vs. buy rule of 15,” which says to multiply the annual rent of a comparable property by 15. So if rent is $1,000 a month, it’s $12,000 annually. Multiple that number by 15 and you’ve got a suitable purchase price of $180,000. Trulia uses a “price-to-rent ratio” that follow the same formula, whereby you take the list price and divide it by one year’s rent. Using our prior example, $180,000 divided by $12,000 would be 15. Trulia considers ratios of 1-15 as more favorable to buy than rent, whereas numbers of 16+ favor renting. Of course, hot cities like New York City and Los Angeles will typically have much higher ratios. Is That Rental Property a Good Buy? There are also rules for real estate investors Such as the 1% rule and the 2% rule That determine if a property is a good investment Based on projected rents for the underlying properties There are other rules used for purchasing a rental property, including the 1% rule, the 2% rule, and a home’s gross yield, all of which are pretty simple formulas The 1% rule basically says to purchase a rental property only if each month’s rent covers 1% of the purchase price. So if a home is listed at $200,000, you need to bring in at least $2,000 in monthly rent for it to make sense.  This is easier said than done. The 2% rule is a lot less forgiving, doubly less in fact. In our preceding example, you’d need to get $4,000 a month in rent, which is probably next to impossible in most situations today unless you buy a very cheap foreclosure or snag some other fire sale. These types of properties will most likely need a lot of TLC to get into the shape necessary to rent for such a premium. Finally, there’s a home’s gross yield, which is calculated by taking the property’s annual rent and dividing it by the purchase price. So if the annual rent is $24,000 and the purchase price is $300,000, you’d have a gross yield of 8%. A yield of 8% or higher is generally pretty good and anything in the double-digits is pretty spectacular. However, you can’t rely on a blanket rule to make your home buying decision. You need to factor in the true cost by using real-time mortgage rates, expected home price appreciation, maintenance, the desire to own vs. rent, and much more. So bust out a calculator as opposed to going with a rent vs. buy rule of thumb if you want a truly accurate picture. Even if a property doesn’t meet these rules, it could still be a very worthy purchase. Heck, “overpaying” for a property can make sense in certain situations. Pros of Renting a Property The freedom to move when you want The lack of responsibility and maintenance Fewer expenses that might be paid by the landlord (including utilities) The ability to put your money into other investments that yield better returns Let’s start with the beauty of renting an apartment or a home. When you rent, you pay a landlord a certain dollar amount each month. Put simply, this dollar amount is typically less than the going cost of a mortgage, assuming you factor in the insurance and taxes. Oh, and the maintenance. Sure, a mortgage may appear cheaper, but guess what happens when your toilet breaks? You can’t call your helpful resident plumber and get a free fix. You’ll either have to get down with some DIY or open your checkbook. So renting, while seemingly the same price or even more expensive than owning, might still wind up cheaper. There’s also a huge psychological freedom to renting. You aren’t locked in for 30 years. At most, you probably have a 12-month lease agreement. And there’s even a good chance you’ve got a month-to-month deal in place. In short, you won’t feel trapped, and you can freely move on if you want/need to for any reason, such as job relocation, downsizing, upsizing, etc. This should make it a lot easier to sleep at night. Cons of Renting a Property You walk away with nothing after paying tons in rent You’re often still stuck in a lease for 12 months or longer Could be forced to move on fairly short notice if owner sells Might be lots of restrictions like no pets, no remodeling, and so on On the other side of the coin, renting seems to be synonymous with temporary. If you want to establish a household, renting an apartment or a home might not be the best way of going about it. You might also be limited to what you can do to the unit. Pets aren’t allowed? You can’t paint the place? You can’t do X, Y, or Z? Oh, and those rent payments never stop – sure, 30 years is a long, long time, but your lifetime will probably be longer. There won’t be any relief in retirement when you rent – you’ll keep paying your landlord for “as long as it takes.” And at the end, you won’t have anything to say for it, no home equity or ownership, despite all those payments. Nothing to hand off to your kids or to sell for cash proceeds. Additionally, your rent can and will most likely rise, even if some level of rent control is in place. So you might be paying less than your neighbor with the mortgage today, but if your neighbor’s mortgage is fixed, they’ll still be paying the same amount in the future while your rent shoots higher. Pros of Buying a Home A place of your own with few if any rules to follow You are in charge and can do what you want (remodel, move, rent out, stay forever, etc.) You can build a ton of wealth in the process without lifting a finger Might actually be cheaper than renting Okay, so we’ve discussed some pros and cons of renting, but what about buying? Well, the obvious advantage is that you actually gain home equity, or ownership in your home. In other words, over time the home or condo actually becomes your property, as opposed to renting, where you never own anything aside from the measly contents. Additionally, owning might be a cheaper alternative than renting these days in many markets across the United States thanks to the low interest rates on hand. Do a simple online search and you’ll find plenty of places where it’s “better to buy than rent.” In many cases, your mortgage payment, even when factoring in taxes and insurance, may be less than what a landlord charges for rent. Why pay $2,500 in rent if you can make a $2,200 mortgage payment, especially if you can write off the interest and the taxes? That’s right, with homeownership comes tax benefits. Of course, the future of the mortgage interest deduction hangs in the balance, but real estate taxes are still fully deductible. Factor in the tax savings and your mortgage payment gets even cheaper compared to a rental payment. An owner of property also has fewer restrictions, and can add or modify to their heart’s content, less any government bureaucracy. This means you can make your property worth even more over the years, or simply make it more useful/attractive for you and your family. Cons of Buying a Home Lots of hidden costs you never realize until you become a homeowner Greater responsibility and potential liability Might be more expensive than renting Harder to pick up and go if you want to move for whatever reason There are plenty of disadvantages to owning property as well. First off, you must come up with a sizable amount of money, either for down payment or to buy outright. With rent, typically you just need the first and last month’s payment. When buying, you’ll need at least 3.5% of the purchase price in most cases (FHA loans), which can be a hefty amount in higher-priced areas of the nation. There’s also a good chance your mortgage payment will exceed the rents in your area. This can certainly vary, but don’t be surprised if it comes at a premium. You also have to pay real estate taxes and insurance, which don’t stop once the mortgage is paid off. You may even need to pay costly HOA dues. Factor that all in and you could still be paying thousands each month to live “rent-free.” That doesn’t sound very free, does it? You also become the landlord when you own. Remember that helpful handyman at your old apartment complex that fixed your leaky faucet with a smile? That’s your responsibility now Bob Vila. Oh, and you better believe that every little thing that’s wrong with YOUR property will give you stress, each and every day. You can’t just pack up and move along with ease. It takes time (and money) to unload a property, and you might not make out as much as you think once you factor in real estate commissions and less-than-anticipated home price gains. Heck, your house might even lose value and you could be foreclosed on if you don’t hold up your end of the bargain. In Summary There are countless good/bad reasons to both buy or rent And no single answer to satisfy everyone all of the time Some individuals despise real estate investment While others think you’re throwing away money when your rent As you can see, there are plenty of pros and cons to buying vs. renting, and vice versa. When you rent, you pretty much know what you’re getting into. You’re not going to make any money, but you’re not going to explicitly lose any either. And it’s mostly a hands-off type of deal. With a home, you’re making a bit of a gamble on your future, and the future of the economy. After all, you need to put a certain amount down, and you need to ensure you keep making money so you can keep up with your mortgage payments. You’ve also got to set aside an emergency fund so you’re able to pay for repairs if and when necessary. But ideally, the tradeoff is that you’ll be rewarded for making that homeownership leap of faith. Below, I’ve added a fairly exhaustive list of pros and cons for those pondering the rent vs. buy question: Rent Advantages May be cheaper than a mortgage payment Fewer (if any) maintenance costs No down payment required (less deposit) No real estate taxes (renters insurance optional) Less stress (who cares, it’s not yours!) Freedom to move or downsize when necessary No risk of home price depreciation Some utility bills may be included “Free” amenities such as pool, gym, security Money can be used for other, more profitable investments Can’t be foreclosed on Rent Disadvantages Rental payment may exceed monthly cost of mortgage No ownership or wealth creation Payments never stop when renting Rent will rise over time Must deal with a landlord or management company No tax benefits Rules, regulations, and limitations More temporary, less stability Always at the mercy of the property owner Ownership Advantages You can build home equity and wealth Sizable tax deductions possible Your space, your rules (pets welcome) Ability to remodel, expand, tear down Pride of ownership (social status, accomplishment) Potentially better for children, family structure Mortgage can improve your credit history/score Ability to borrow against your home (HELOC or cash-out) No more monthly payments once mortgage paid off Fixed payments (if you choose a fixed mortgage) Mortgages are the cheapest loans available No landlord Can exclude capital gains when you sell (partially) Inflation hedge (houses become worth more as dollar loses value) Forced savings Leveraged investment Can rent out to others Can sell and use proceeds for bigger/better home Retirement nest egg It’s the American Dream! Ownership Disadvantages Home prices may lose value Could overpay for your property Obtaining a mortgage (and finding a home) is a hassle Not everyone qualifies for a mortgage You must pay taxes and homeowners insurance Total housing payment can be more expensive Mortgage payment can rise (if an ARM) Sizable down payment necessary Maintenance costs can be excessive Pricey HOA dues (if applicable) You’re “stuck” in a home (long-term commitment) Increased liability and responsibility Transactional costs of buying and selling Ownership is stressful! Taxes and insurance generally rise Your home can be damaged or destroyed (and not fully insured) Can be foreclosed on and lose your home Read more: When to start looking for a house to buy.

Own Up Review: The Mortgage You Deserve?

March 2nd, 2021|

Today we’ll check out “Own Up,” a new technology company that wants to be your mortgage co-pilot. By that, they mean help you comparison shop for a home loan without having to jump through hoops or get badgered by salespeople. And stick with you every step of the way. Aside from making the process faster and easier, they can apparently save you some serious dough too – to the tune of $27,102 in interest over the life of the loan (on average). How Own Up Works Complete an online profile on the Own Up website in about five minutes Schedule a call with a dedicated home advisor to discuss your mortgage goals Compare rates and fees from partner lenders on their platform and select the one you like best Fill out the lender’s application and they’ll process, underwrite, and fund your loan Instead of going to a bank or calling a lender to get a mortgage, you begin by creating a profile on the Own Up website. While they refer to themselves as a tech company, they’re technically a mortgage broker, just on a larger scale, as opposed to a mom and pop shop. They seem to be similar to Credible, the Fox-owned brokerage that operates a comparable mortgage marketplace for homeowners. What this means for you is that Own Up acts as an intermediary between borrowers and mortgage lenders. After you complete your anonymous online profile, you’ll be assigned a dedicated home advisor who will discuss your needs/goals, along with what to expect during the loan process. You’ll then be able to compare lenders on the Own Up network and see loan offers (mortgage rates) from partner lenders in real-time. They’re able to deliver personalized offers without requiring your social, and they only perform a soft credit check so your scores aren’t affected. If you like what you see, simply fill out the corresponding lender’s digital mortgage application to formally apply. The lender you select will then process, underwrite, and close the loan in typical fashion, with your Own Up home advisor standing by if and when you need them. Why Use Own Up to Get a Mortgage? As to why you would employ two companies instead of one to obtain your home loan, the answer appears to be savings. Whether you’re buying a home or refinancing an existing mortgage, their customers save an average of $27,000 over the life of their loan. They say they’re able to save customers money by charging much less than what the typical salesperson earns per loan. Own Up charges participating lenders a flat 0.40% (40 basis points) of the loan amount, which is only due after the loan closes. They do not charge customers anything directly. This compares to the industry average of 1.15% that the company says is typically charged by banks and lenders. And because Own Up is able to streamline the origination process and effectively lower costs for its partners, they claim many of their lenders reduce their rates for their customers. In other words, it might be possible to get your mortgage from the same exact company but obtain a lower mortgage rate via Own Up. They negotiate terms with their lender network so you don’t have to, and because all lenders pay the same exact fee every time, they show you every offer exactly as they see it. What Types of Loans Does Own Up Offer? Because they act like a mortgage broker, they’re able to offer just about any type of home loan that their partner lenders originate. This means you can get a home purchase loan or a refinance loan, along with a fixed-rate mortgage or an ARM. You can get financing on a single-family home, condo, townhouse, or multi-unit investment property. Similarly, you can choose from a variety of down payment options, including no- and low-down payment loan programs like FHA loans, VA loans, and so on. They also claim to offer the industry’s first automated pre-approval letter, which allows you to generate updates on-demand from any device like your smartphone. So if you’re shopping for a home, you can update any necessary information on the fly in minutes and present the listing agent with a tailored approval to strengthen your offer. Which Lenders Does Own Up Work With? As to who Own Up partners with, they say they handpick mortgage companies that are “reputable and financially secure.” To ensure that, lenders must undergo what they refer to as a “rigorous screening process,” while agreeing to Own Up’s service level standards. Additionally, they share all customer feedback and reviews with their lenders to improve performance going forward. Since they offer a turnkey digital solution for lenders, their partners might include companies that aren’t as technically savvy, yet still want an online presence to target Millennial and Gen Z home buyers and homeowners. This means you might get additional lender options that you may otherwise wouldn’t have considered. That’s a good thing because more lender choice means the potential for a lower interest rate and/or reduced closing costs. At the moment, Own Up is only available in a select number of states, including Colorado, Connecticut, Florida, Georgia, Maine, Massachusetts, Michigan, New Hampshire, Pennsylvania, Rhode Island, Tennessee, and Texas. Should You Use Own Up? The company’s goal is to save you time and money, and make it easier to get a home loan. Those are admirable goals and if they can accomplish them, they could be worth using. But it should be noted that Own Up does not actually take formal mortgage applications, make credit decisions, or originate loans. Rather, the information you submit to them acts as an inquiry to be matched with a lender that does the aforementioned things. This isn’t necessarily a good or bad thing, but you should know what you’re getting. Assuming you do find a lender using their service, you’ll need to complete a formal application and go through the typical home loan process. That’s pretty much unavoidable. The good news is that their service, at a minimum, seems to allow you to comparison shop without much heavy lifting, similar to how a mortgage broker works. The difference is that you can shop anonymously with Own Up and simply decide not to use any of their partners if you don’t like what you see. Aside from the built-in comparison shopping, you also get a loan guide who can provide unbiased guidance and feedback without the usual sales pitch. Additionally, even if you already have a loan offer or two, they say they’re able to negotiate better terms with your lender. I’m not sure how they do that, but it sounds pretty good. In summary, Own Up might be a good choice for someone looking for multiple mortgage quotes who doesn’t want to put in all the work or get bombarded with emails and phone calls.

Cascade's manufactured-home MBS deal puts focus on new originations

March 1st, 2021|

Cascade Financial Services is sponsoring its first rated transaction of manufactured-home (MH) loan contracts, a rare and historically riskier asset class in residential mortgage-backed securities. According to a presale report issued by Fitch Ratings, Cascade will market $162.7 million in bonds backed by 1,889 MH loans, of which most are secured by chattel properties (or structure-only loans that do not include land as collateral). The deal is the third post-crisis manufactured-housing securitization rated by Fitch, following deals in 2019 and 2020 that were sponsored by FirstKey Mortgage. But it is the first deal to primarily focus on new-origination contracts, with average seasoning of just 12 months, Fitch noted. The capital stack of the bond offering features seven tranches of notes, includes a $103.2 million Class A-1 notes tranche with preliminary AAA ratings from Fitch. Paul - stock.adobe.com The notes are backed by 36.6% credit enhancement. About 49% of the loans (with average balances of $86,135) were originated in Texas, and chattel loans make up about 72% of the collateral pool. Nearly all of the manufactured homes (98%) were built within the past four years. The borrower profile of the deal is non-prime with a weighted average FICO of 637, with 3.1% having experienced a delinquency within the past two years. All of the loans are current, however. Fitch cautions that manufactured-housing loans have experienced higher default rates and lower recoveries for lenders and investors. But with an average coupon of 8.8% for the loans, Fitch expects a “notable amount of excess spread” over an expected low offering rate.

Looming risk for borrowers, renters when relief ends, CFPB says

March 1st, 2021|

More than 11 million families — nearly 10% of U.S. households — are at risk of eviction or foreclosure because of the economic impact of the coronavirus pandemic, the Consumer Financial Protection Bureau said Monday. In a report analyzing effects of the pandemic on the housing market, the bureau said roughly 2.1 million families are at least three months behind on mortgage payments, while 8.8 million tenants are behind on their rent. In all, roughly 28% of residents in manufactured homes, 18% of those in multi-family buildings and 12% of those in single-family homes are behind on their housing payments as of December 2020, the CFPB in the 21-page report. In a press release accompanying the report, acting CFPB Director Dave Uejio cited an urgency for policymakers to act. He suggested there will noticeable consequences when federal and state measures to help households weather the economic fallout from COVID-19, including forbearance plans, begin to expire. In all, roughly 28% of residents in manufactured homes, 18% of those in multi-family buildings and 12% of those in single-family homes are behind on their housing payments as of December 2020, the CFPB in the 21-page report. Bloomberg News “We are working hard to help homeowners and renters as the U.S. begins to turn a painful crisis, caused by the pandemic, into a robust recovery,” Uejio said. “We know small landlords are struggling, too, with many dipping into savings or using credit cards to make it through the pandemic. We want everyone — homeowners and renters, landlords, and mortgage servicers — to have the tools they need now to avoid unnecessary evictions and foreclosures.” Black and Hispanic homeowners were more than twice as likely to have fallen behind on housing payments than white homeowners, the report found. “Many households will face difficulties navigating significant payment arrearages or permanent income losses,” the report said. The Biden administration has extended the length of forbearance plans that borrowers can seek, providing extra mortgage payment relief, though the aid is primarily for government-backed loans. Homeowners also have considerable equity, and home prices have risen dramatically in the past year. The CFPB said that 263,000 borrowers are “of particular risk” because they are more than 90 days behind on their mortgages but have not yet signed up to delay mortgage payments through forbearance plans. Many will have limited options to avoid foreclosure if they do not contact their mortgage servicers, the bureau said. The report also noted that “long forbearance can erode equity,” and cites “the impact of forbearance and foreclosure on home values and neighborhoods.” However, homeowners have fared far better than renters since there are no formal policies allowing renters to defer payments, the agency said. Though some renters are protected by eviction suspensions, thousands are still evicted every week. The average delinquent renter is more than three months behind and owes more than $5,000 of missed rent and utilities, according to Moody's Analytics. Collectively, delinquent renters owe an estimated $44.1 billion in total back rent, the CFPB said, citing Moody’s. Black and Hispanic households are more than twice as likely to be renters than white households, so an eviction crisis would fall hardest on communities of color, the CFPB said. The report does not make any specific recommendations, but it cites recommendations by consumer advocates that the government dedicate $100 billion to cover the payments of low-income renters. In December, the federal government set aside $25 billion for the Emergency Rental Assistance program to assist renters.

CoStar adds cash to its hostile bid for CoreLogic

March 1st, 2021|

On the heels of CoreLogic's earnings report, which shows record full year and fourth quarter revenues, CoStar Group added a cash component to its hostile counterbid for the company, in an effort to wrest it away from Stone Point Capital and Insight Partners. CoStar is now willing to pay $6 per share in addition to its previous offer of 0.1019 shares of common stock for each share of CoreLogic. "The merger agreement remains in full force and effect, and the board of directors of CoreLogic has not withdrawn or modified its recommendation that the stockholders of CoreLogic vote in favor of the approval of the merger, the merger agreement and the transactions contemplated thereby," the Irvine, Calif.-based data provider and appraisal management company said in a statement. "CoreLogic's board of directors, consistent with its fiduciary duties and the terms of the merger agreement, will carefully review the proposal in consultation with its outside legal counsel and financial advisors," the statement said. nThe new bid is valued at approximately $90 per share based on its Feb. 26, closing price and approximately $97 per share based on the latest 30-day volume-weighted average share price, CoStar claimed in a letter to CoreLogic's board. CoreLogic chose an all-cash bid of $80 per share from Stone Point Capital and Insight Partners over what was then an all-stock bid from CoStar. However, the aggregate value of the CoStar bid was approximately $700 million higher than the winning bid of $6 billion. These companies were the finalists after an unsolicited bid from Cannae Holdings and Senator Investments put the company into play for a takeover. A request for comment from Stone Point and Insight was not returned by press time. The cash component boosted the aggregate value of CoStar's bid by $425 million to $70.25 billion. "We expect the CoreLogic board to deem this proposal to be a 'Superior Proposal' within 48 hours," the March 1 letter signed by CoStar CEO Andrew Florance said. Furthermore, to alleviate any antitrust and regulatory concerns on CoreLogic's part, CoStar is now proposing a six-month deadline for the deal, equal to that in the agreement with Stone Point/Insight. It also agreed to advance CoreLogic the $165 million termination fee. "We are confident that after consultation with your outside legal counsel and financial advisors and considering all legal, regulatory and financing aspects that you deem appropriate, that our revised proposal described herein is more favorable, from a financial point of view, to CoreLogic's stockholders than the transactions contemplated by the [Stone Point/Insight] Agreement," Florance said. Between the news of the higher bid and the earnings release, CoreLogic's stock opened on Monday morning at $85.44 per share, up from its previous close of $84.66. By 11:45 a.m. on Monday it was up to $86.54 per share. CoreLogic had a fourth quarter 2020 net income of $95.4 million, compared with $113.1 million in the third quarter and $30.1 million in the fourth quarter of 2019. For all of 2020, the company reported net income of $301.4 million, up from $49.4 million for 2019. But its operating revenue grew to $467.6 million from $436.7 million in the third quarter and $352.8 million in the fourth quarter of 2019. Full-year revenue in 2020 of $1.6 billion topped 2019's $1.4 billion. The growth in fourth quarter revenue was attributed to organic year-over-year growth of 7% in the property intelligence and risk management segment, specifically from double-digit gains in property insights along with new international business. Revenues grew 51% in underwriting and workflow solutions due to strong market volumes. It outperformed the market in three lines of business: tax and flood zone solutions, credit solutions and valuations, the company said.

Why submitting payroll, bank data for mortgages is about to get easier

March 1st, 2021|

Technology that makes it easier to submit bank and payroll data used to qualify borrowers for mortgages is on the verge of key approvals needed for its broad use. The verification of data regarding income, assets and employment has typically been a piecemeal process, since that’s what key secondary market investors have allowed. But with testing of consolidated forms of verifications from vendors like Fincity nearly complete, that’s about to change. The two government-sponsored enterprises that buy many of the mortgages in the United States are preparing for a broader rollout, pending a green light from their oversight agency. That could help lenders reverse the trend of ever-lengthening mortgage closing timelines, which has occurred despite the fact that the industry’s processes are increasingly automated. Record volumes in 2020 extended processing times by two to four days, according to a recent Freddie Mac report. "With this, we can quickly validate income and assets with one link sent to a borrower,” said Gary Clark, chief operating officer at Sierra Pacific Mortgage, a lender that helped test Finicity’s new one-touch Mortgage Verification Service technology. The technology allows applicants with mainstream payroll providers to use a single sign-on session and roughly a dozen click-throughs to submit their information. Heavy adopters of the automation at Sierra Pacific had loan processing times that were several days shorter than those of its staff overall, the company found. MVS is in its final stages of review to participate in Fannie Mae’s Desktop Underwriter system as a provider of automated income and employment verification reports, and both Fannie and Freddie Mac are already allowing its use in limited circumstances because it’s done well in tests. “There's a vastly improved consumer experience and certainly operational efficiency to be gained," said Rick Lang, Freddie’s single-family vice president of strategy and integration. “But most importantly, we're able to check real-time data aimed at ensuring we're not putting borrowers in loans they can't afford.” To be sure, while consolidated digital verifications from multiple types of information may be about to take off, it’s unclear how much potential there is to just use a single source of data. The GSEs have experimented with this in the past. “I’ve heard the success rate needed for single-source validation has not, to date, materialized; but conceptually, that’s exactly what we’re getting at,” said Lisa Kimball, senior vice president of product and strategic programs at Finicity. Mortgage applicants whose finances can’t easily be verified through large payroll providers may still have to submit traditional documents like pay stubs or tax records, but many borrowers will be able to use the service, she said. The range of borrowers who can get access to digital validations of data will likely broaden even more in the future, said Brent Chandler, founder and CEO of FormFree. FormFree offers technology called 3n1 that consolidates verifications of income, assets and employment. “When we reach the point where we can assemble assets, income, employment, identity, public records, and credit in one place, we will be able to evaluate ability-to-pay dynamically any time,” he said. “At that point, we’ll be able to virtually underwrite borrowers on the spot.”

10 Things You Should Do Before Applying for a Mortgage

March 1st, 2021|

I recently wrote that you should look for a mortgage before searching for a property to buy because unless you have lots of cash, you’re going to need a loan. Now let’s talk about what you should do before you apply for a mortgage to avoid common setbacks that could, well, set you back. 1. Rent a Place First While it might sound like a no-brainer, renting before you buy a home or condo is a smart move for several different reasons. For one, it’ll show you firsthand what goes into homeownership. If things break or go wrong while renting, you can typically call the property management company or landlord for help. Once it’s your own place, you’ll be fixing it yourself or paying out of your own pocket for a professional to assist you. Additionally, if you rent first you’ll have a lower chance of payment shock, which is when monthly housing payments jump exponentially. Mortgage lenders like applicants who have shown in the past that they can handle large housing payments to ensure they don’t default for that very reason. So renting will make you both a more knowledgeable homeowner and a better candidate for a mortgage. That being said, it’s perfectly acceptable to live at your parents’ house before you apply for a mortgage too, at least in terms of qualifying. 2. Check Your Credit Scores and Reports Most cliché advice ever. Yes, but there’s a reason. It’s very, very important, if not the most important aspect of home loan approval. It also happens to take a lot of time to fix credit-related issues, so it’s not a last-minute activity if you want to be successful. These days it’s also super easy to check your credit scores and reports for free, thanks to services like Credit Karma or Credit Sesame. Simply taking the time to sign up and monitor your credit could make or break you when it comes time to apply for a mortgage. It may also save you a ton of money as higher credit scores are typically rewarded with lower mortgage rates, which equates to lower monthly payments and lots of interest saved. If your scores aren’t all good, tackle the issue(s) immediately so you’re in excellent standing (760+ FICO) when it comes time to apply. 3. Pay Down Your Debts Similarly, knowing much how outstanding debt you’ve got, along with the associated minimum payments, can play a huge role in a mortgage approval. Simply put, the less debt you’ve got, the more you’ll be able to afford on your given salary, all else being equal. It can actually be a win-win to pay down debt prior to a mortgage application because it’ll boost your purchasing power and probably increase your credit scores at the same time. The result may be even more purchasing power thanks to a lower mortgage rate, which drives payments down and increases affordability. To determine how much debt you’ve got, grab a copy of your credit report and add up all the minimum monthly payments. These all eat into your affordability, so eliminating them or reducing the balances can help. 4. Put the Spending on Hold Staying in the credit realm, avoiding unnecessary swiping (or now dipping/tapping) weeks and months before applying for a home loan can have a big impact. First off, your credit scores may drop as a result of more outstanding credit card debt. It’d be silly to make a small or medium-sized purchase that jeopardized your very large home purchase. Secondly, the new debt may eat into your DTI ratio, thereby limiting what you can afford, even if you pay off your credit cards in full each month. In other words, it may be best to just wait and make your purchases a month later, once your mortgage funds. This is also true during the home loan process – don’t go buying the furniture until the mortgage crosses the finish line. 5. Organize Your Assets Now let’s address assets, which are a close second to credit in terms of importance. After all, you’ll need them for your down payment, closing costs, and for reserves, the latter of which shows the lender you’ve got money to spare, or a cushion if circumstances change. But it’s one thing to have these funds, and another to document them. You’re typically asked to provide your last two months of bank statements to show the lender a pattern of saving money. To make life easier, it could be prudent to deposit all the necessary funds in one specific account more than two months before application. That way the money will be seasoned and there won’t be the need for explanation letters if money is constantly going in and out of the account. The ideal scenario might be a saving account with all the necessary funds and little or no activity for the past 90 days. 6. Think of Any Red Flags Asset issues are often red flags for loan underwriters. They hate to see money that was just deposited into your account, as they’ll need to source it and then determine if it’s seasoned. Same goes for recent large deposits. They need to know that it’s your money and not a gift or a loan from someone else since it wouldn’t technically be your money. Try to think like an underwriter here. Make sure assets are in your own account (not your spouse’s or parents) well in advance and that it makes sense based on what you do for a living/earn. Also take a hard look at your employment history. Have you been in the same job or line of work for at least two years, is it stable, any recent changes? Any weird stuff happening with any of your financials? If so, address it personally before the bank does. Work out all the kinks prior to giving the underwriter the keys to your file. And don’t be afraid to get a pre-qual or pre-approval just to see where you stand. You can have a professional take a look for free with no obligation to use them when you really apply. 7. Decide on a Loan Type Yourself I see it all the time – a loan officer or broker will basically put a borrower in a certain type of loan without so much as asking what they’d like. Not everyone wants or needs a 30-year fixed mortgage, even though it’s far and away the most popular loan program out there. An adjustable-rate mortgage may suit you, or perhaps a 15-year fixed is the better play. Whatever it is, do the research yourself before the interested parties get involved. This ensures it’s a more objective choice, and not just a blind, generic, or biased one. 8. Think How Long You’ll Be in the Home Along those same lines, try to determine your expected tenure ahead of time. If you know or have a good idea how long you’ll keep the property, it can be instrumental in loan choice. For example, if you know you’re just buying a starter home, and have pretty strong plans to move in five years or less, a 5/1 adjustable-rate mortgage might be a better choice than a 30-year fixed. It could save you a ton of money, some of which could be put toward the down payment on your move-up property. Conversely, if you’re thinking forever home, it could make sense to get forever financing via a fixed-rate product. And also pay mortgage points to get an even lower rate you’ll enjoy for decades to come. 9. Understand Mortgage Rates This one drives me crazy. Everyone just advertises interest rates without explaining them. Where do they come up with them? Why are they different? Why do they move up and down? These are all important questions you should have the answers to. Sure, you don’t need to be an expert because it can get pretty complicated, but a basic understanding is a must. This can affect the type of loan you choose, when you decide to lock your mortgage rate, and if you’ll pay discount points. If you’re simply comparing rates from different lenders, maybe you should take the time to better understand the fundamentals while you’re at it. This can help with negotiating rates too, as an informed borrower who knows the mortgage lingo will have an easier time making a case if they feel they’re being charged too much. 10. Check Reviews, Get Referrals, and Shop Around Lastly, do your diligence on lenders upfront, not after applying. It’s a lot harder to shop once you’ve applied because you won’t want to “lose your place in line.” You could also lose your deposit if a lender charges you upfront and you go elsewhere. It’s a lot more difficult to even be bothered once you’ve given someone all your financial information and signed a bunch of disclosures. Whenever you buy a TV or a car, or even a toaster, you probably put a decent amount of time into research and price comparisons. You don’t just show up at Best Buy or the car lot and purchase something that day. With a mortgage, it’s even more important to put in the time since it’s such a massive cost, and one that sticks with you a lot longer. Try 360 months longer. If you make missteps or fail to shop for a better price, it’ll sting month after month, not just once. Remember, real estate agents influence lender choice for nearly half of home buyers. Wouldn’t you rather make that choice yourself? (photo: Javi Sánchez de la viña)

Fannie, Freddie double their funding for affordable housing projects

March 1st, 2021|

WASHINGTON — After loans backed by Fannie Mae and Freddie Mac skyrocketed last year due to heightened refinancing activity, the two mortgage giants will more than double their contributions to two trust funds that support affordable housing. The Federal Housing Finance Agency has authorized Fannie and Freddie to contribute a total of $1.09 billion to the National Housing Trust Fund and the Capital Magnet Fund in 2021, more than twice the amount they gave in 2020 and the highest contribution to date. Since 2015, Fannie and Freddie have transferred funds for the two housing initiatives typically at the beginning of every March. The government-sponsored enterprises set aside 4.2 basis points of their unpaid principal balance from the previous year. According to the FHFA, the leap in trust fund contributions reflects much higher refi activity over the past year, boosting the volume of loans on the GSEs' balance sheets. The combined unpaid principal balance for loans backed by the GSEs was $1.43 trillion in 2020, compared with just over $652 million in 2019. In 2020, Fannie and Freddie contributed a total of $502.2 million to the two funds, up from $376 million the year before. The GSEs this year will contribute a total of $711 million to the National Housing Trust Fund and $383 million to the Capital Magnet Fund. “The more than $1 billion disbursed today will help produce and preserve affordable housing throughout the country,” FHFA Director Mark Calabria said in a statement. “The record increase in house prices last year exacerbated the affordable housing shortage. To help increase the supply of affordable housing in our communities, FHFA remains steadfast in support of the Housing Trust Fund and Capital Magnet Fund.” The National Housing Trust Fund, managed by the Department of Housing and Urban Development, provides states with resources to build, preserve and operate affordable housing for extremely low-income households. The Capital Magnet Fund is managed by the Treasury Department and provides grants to community development financial institutions and nonprofit affordable housing organizations.

How these ‘Best Companies’ kept communications alive during a pandemic

March 1st, 2021|

There was no clinking of champagne glasses this year, to toast Guild Mortgage's 60th anniversary. Rather, like so many events planned during the pandemic, the company celebrated over a zoom call. "We had an all-hands call with every employee in the company, and we taped it so people would be able to share it later," said CEO Mary Ann McGarry. The company also sent memorabilia to its staffers, who got to choose from Guild-branded shoes, hoodies or sweatpants. "We did many events like that where we would reach out and not only did we present things, they were able ask questions and get feedback for anything they were worried about or wanted us to implement," McGarry added. The Guild Giving Foundation presents a donation to San Diego non-profit Home Start Maintaining employee engagement has been a big focus for some of the lenders who landed on the Best Mortgage Companies to Work For list this year. Employing some creativity was key to reaching newly remote workers who had been accustomed to in-person mingling at company meetings and celebrations. As pandemic-related changes were roiling the business in April, the management team at InterLinc Mortgage Services realized that just sending out emails would not necessarily keep everyone at the company informed. "And so we were doing a livestream every day for about six to eight weeks, updating our employees as to what our COVID protocols were because they were changing rapidly,” said Gene Thompson, who was recently promoted to CEO from the chief operating officer role. The company’s leadership would use the meetings to discuss “what was going on the market, what was going on with our investors, how the company was shifting and pivoting at the time because we're a firm believer in if you don't give people the truth, they make it up on their own," he added. But with refinancings booming and the correspondent aggregators reentering the market after the early spring disruption, InterLinc reduced the frequency down to once a week, and then to once a month. "It is something that we continue to do once a month, where we have the ability to in a live setting address every single one of our employees," Thompson said. "And it's just a great way for us to stay connected, better than email." Normally, InterLinc has its annual employee meeting in January or February. Without the ability to do a live event, it prerecorded the meeting, and its branches held watch parties. Goody bags were sent to the employees, and the awards forwarded to the branch managers for presentation. "So we're doing everything we can to continue what our traditional stances are with the environment that we have," Thompson said. "Our marketing department is constantly putting little promotional things together, just to keep people engaged, whether it be a contest giveaway or a photo contest of your office from home, just little things to spur engagement," he continued. "Little things go a long way, especially when you're in the environment that we are in and everybody is working tireless overtime on a daily basis to keep up with the volume." At Guild, 2020 was a landmark year, not just because of the 60th anniversary, but also due to its initial public offering on Oct. 22, for which the celebrations were curtailed as well. For its management, the first priority is the health and safety of the employees, but Guild still wants to celebrate their success, McGarry said. "It's a fine line and a balancing act. They've worked really hard and they've been incredible during a very challenging time," she said. "And I just wish I could be with everyone when they are celebrating." So Guild will keep recognizing its employees in various ways in 2021. "It might be something like a thank you note or recognition in our company newsletter or on social media," McGarry said. "We also give out company t-shirts, mugs, or cookies, small things like that. It's all about building and maintaining connections with our people."

As lenders mull ownership shifts, ESOPs provide beneficial alternative

March 1st, 2021|

Since origination booms are considered the best time to get a good price for a company, its assets or its shares, initial public offerings and special purpose acquisition companies have drawn a lot of attention lately. But given that employee retention is key to the long-term profitability of mortgage companies, there’s another underutilized strategy that the latest Best Companies to Work For data suggests owners may want to consider: employee stock ownership plans. In a market where voluntary turnover even at the Best Companies in some cases topped 70% last year, lenders with employee stock ownership plans kept that rate at 25% or lower. The three ESOPs in the list each also ranked within the top 10 among companies their size. “Particularly last year, when you had so many operational staff and loan officers working so many hours, and I would encourage anybody that’s running a mortgage bank and considering options to give it a strong look,” said Gellert Dornay, founder of Axia Home Loans. ESOPs are the most common form of employee ownership in the United States and have been standardized in the tax code since 1974. Across all industries, there are 6,460 ESOP plans covering 14.2 million people, according to the National Center for Employee Ownership. A handful of lenders have them, and they are most typically favored by private owners who are retiring and see their employees as successors. An ESOP is set up as a trust fund that serves as a vehicle for the company’s shares has limited tax-deductibility. That deductibility is currently based on a percentage of earnings before interest, taxes, depreciation, and amortization. In 2022, it becomes a percentage of EBIT instead. The shares are generally distributed to employees on an equitable basis and the company must buy departing workers out when they leave.

2021 Best Large Mortgage Companies to Work For

March 1st, 2021|

How mortgage companies with 500 or more employees stacked up against each other. SEE ALSO: > 2021 Best Mortgage Companies to Work For > 2021 Best Small Mortgage Companies to Work For (15 - 99 employees) > 2021 Best Mid-Sized Mortgage Companies to Work For (100 - 499 employees) > 2020 Best Mortgage Companies to Work For > 2019 Best Mortgage Companies to Work For

2021 Best Mid-Sized Mortgage Companies to Work For

March 1st, 2021|

How mortgage companies with between 100 and 499 employees stacked up against each other. SEE ALSO: > 2021 Best Mortgage Companies to Work For > 2021 Best Small Mortgage Companies to Work For (15 - 99 employees) > 2021 Best Large Mortgage Companies to Work For (500 or more employees) > 2020 Best Mortgage Companies to Work For > 2019 Best Mortgage Companies to Work For

2021 Best Mortgage Companies to Work For

March 1st, 2021|

National Mortgage News presents its third annual Best Mortgage Companies to Work For — an awards program dedicated to recognizing the industry’s premier employers and providing them with employee feedback highlighting their strengths and weaknesses. The program is a collaboration between National Mortgage News and the Best Companies Group, which conducts extensive employee surveys and reviews employer reports on benefits and policies. The employee survey covers eight topics: Leadership and Planning; Corporate Culture and Communications; Role Satisfaction; Work Environment; Relationship with Supervisor; Training, Development and Resources; Pay and Benefits; and Overall Engagement. Following a thorough assessment of the organizations, the survey data was analyzed and the companies received an overall score that determines their rankings. The overall score comprises the employee survey (worth 75%) and the employer questionnaire (worth 25%). To qualify for consideration, organizations with 25 or more employees need a minimum response rate of 40% while organizations with 25 or fewer employees need 80%. Companies must opt-in to the rankings and participation is open to a standalone mortgage lender, mortgage broker, mortgage servicer, or mortgage unit of a diversified financial services firm with at least 15 permanent employees working in the United States. Not all companies that participate in the survey make the list. The survey also includes open-ended and demographic questions. In addition to anecdotes about corporate culture, special events, HR policies and benefits, executives and employees gave us a peek at how the 50 lenders, brokers and servicers on the list make things fun — both at the office and in this year’s shift to remote work. See how companies in the small, mid-sized and large categories measured up against each other: > 2021 Best Small Mortgage Companies to Work For (15 - 99 employees) > 2021 Best Mid-Sized Mortgage Companies to Work For (100 - 499 employees) > 2021 Best Large Mortgage Companies to Work for (500 or more employees) > 2020 Best Mortgage Companies to Work For > 2019 Best Mortgage Companies to Work For

CFPB pick’s past statements set stage for testy confirmation hearing

February 26th, 2021|

Rohit Chopra, President Biden’s nominee to lead the Consumer Financial Protection Bureau, doesn’t mince words about corporate wrongdoing. As a Democratic member of the Federal Trade Commission appointed in the Trump administration, he lambasted Amazon for “cheating its workers” over its policy for tipping drivers, and said wireless data plans offered by AT&T "victimized millions of Americans,” among a long paper trail of nearly 120 public statements. Such comments could influence Republican lawmakers weighing how to vote on his nomination, and could make for a heated confirmation hearing Tuesday when the Senate Banking Committee questions him as well as the administration's nominee to run the Securities and Exchange Commission, Gary Gensler. “His opinions as FTC commissioner are pretty revealing,” Alan Kaplinsky, senior counsel at Ballard Spahr, said of Chopra. Unlike former CFPB Director Kathy Kraninger, a Trump appointee who had no previous experience in consumer finance, Chopra's consumer protection background includes not only his time at the FTC but also a prior stint at the CFPB as the bureau's student loan ombudsman. In contrast to Kraninger's more middle-of-the-road approach seen as kinder to the industry, Chopra's writings show he isn’t afraid to publicly call out bad behavior. “If he thinks something is wrong and executives have acted in an egregious fashion, he will go after them,” Kaplinsky said. "He is not going to suffer fools kindly.” When the FTC ordered Amazon to pay $62 million to settle charges that it withheld tips from delivery drivers, CFPB nominee Rohit Chopra issued a statement saying “Amazon stole nearly one-third of drivers’ tips to pad its own bottom line.” Bloomberg News As a Democrat, Chopra has served on the FTC under a legal construct requiring a minority of appointees on regulatory boards and commissions to come from the party other than the president's. Nominated by then-President Donald Trump in 2018, he sailed through Senate confirmation, which was approved unanimously by voice vote. But his aggressive past statements coupled with the power and high profile that comes with the CFPB job could lead to some pointed questions from GOP lawmakers at his hearing, and potential opposition from some members on the Senate floor. Democrats hold a razor thin majority, with Vice President Kamala Harris casting a tiebreaking vote. Some critics may bristle at Chopra’s use of more inflammatory language about business malfeasance than the tone set by Kraninger. To some observers, Chopra is reminiscent of former CFPB Director Richard Cordray, who issued press releases creating headline risk for large public companies. Chopra’s chief of staff at the FTC, Jen Howard, had been the CFPB’s assistant communications director under Cordray. If Chopra is confirmed, she is expected to become the CFPB’s chief of staff, sources said. “He will be at least as aggressive as former Director Cordray, if not more so,” said Lucy Morris, a partner at Hudson Cook and a former CFPB deputy enforcement director who worked with Chopra in the CFPB’s early years. “His statements are very hard-hitting and the language is quite charged.” His public comments and tweets provide a road map for how he would govern as the nation’s top cop for enforcing consumer financial laws. “He has a very lengthy consumer protection record,” said Linda Jun, senior policy counsel at the Americans for Financial Reform Education Fund. “He believes in meaningful accountability. When people are harmed and companies break the law, he thinks there needs to be consequences.” Chopra, 38, has taken particularly aggressive stands on FTC enforcement when it comes to large technology companies. Earlier this month, when the FTC ordered Amazon to pay $62 million to settle charges that it withheld tips from delivery drivers, Chopra issued a statement saying “Amazon stole nearly one-third of drivers’ tips to pad its own bottom line.” In 2019, when AT&T Mobility agreed to pay $60 million to resolve FTC allegations that it misled consumers about its wireless data plans, Chopra wrote that the carrier “trapped subscribers” in “a bait-and-switch scam.” “AT&T baited subscribers with promises of unlimited data, trapped them in multi-year contracts with punishing termination fees, and then scammed them by choking off their access unless they moved to a more expensive plan,” he wrote. In 2019, Chopra dissented from the FTC's $5 billion settlement with Facebook over charges that the company deceived users about their ability to control the security of their personal information. Chopra said he believed Facebook's exposure likely was far greater, that the FTC's offer of immunity to Facebook's officers and directors was "a giveaway." "Because behavioral advertising allows advertisers to use mass surveillance as a means to their undisclosed and potentially nefarious ends, Facebook users are exposed to propaganda, manipulation, discrimination, and other harms," he wrote. Yet at the same time, Chopra has also taken stances that support free markets, reflecting an interest in finding common ground with his detractors. "Government has long sought to create laws and regulations to structure and facilitate marketplaces that function well," he said in a 2018 speech. "Laws that safeguard an individual’s ability to contract and possess property are foundational to functioning markets." Those who have worked with him says his aggressive approach his policy-focused, not personal. “He’s very thoughtful, he thinks about things in a systematic way and he’s really thinking broadly about how to use the bureau’s authority,” Morris said. At the FTC, he has criticized the agency for not using all of the tools in its arsenal to enforce the law. “Breaking the law has to be riskier than following it,” he wrote in one dissent. In another, he said: “I continue to be concerned that the FTC does not use its authority to the fullest extent possible to combat marketplace abuses. This is another missed opportunity for the Commission.” Chopra served five years as the CFPB’s first student loan ombudsman and often testified on Capitol Hill. Before joining the CFPB, he spent two years as an associate at McKinsey & Co. A graduate of Harvard University, he received a master's degree in business administration from the University of Pennsylvania’s Wharton School. Two issues certain to rankle banks, lenders, industry trade groups and Republicans are his positions on fair-lending violations and enforcing the federal prohibition on "unfair, deceptive or abusive acts or practices." Chopra would likely revive the CFPB's use of "disparate impact," a legal standard used to punish lenders that unintentionally discriminate against minorities. Meanwhile, many expect he will apply the UDAAP ban more broadly than Kraninger did. “I think we will see a reversal very quickly of former Director Kraninger’s policy concerning abusive acts and practices,” said Robert Goldenberg, counsel at Reed Smith. “There is going to be a more aggressive approach and greater scrutiny paid under the new administration, and I think this approach will often dovetail with the administration’s focus on addressing systemic racism issues.” Last year, Kraninger issued new guidance defining what constitutes an “abusive” act. “I’m sure we’ll see a reversal of that [abusive standard] quickly,” Goldenberg said. Discrimination and racial equity issues are another area where the CFPB, in alignment with the Biden administration, plans to crack down hard on financial firms. Chopra has written extensively about how agencies should handle unintentional discrimination. He will also likely be skeptical of lenders' use of artificial intelligence and alternative credit data to underwrite borrowers. In a case last year in which the FTC alleged a Honda auto dealer in the Bronx, N.Y., illegally discriminated against Black and Hispanic families by charging them higher interest rates than white customers, Chopra wrote that “disparate impact analysis is a critical tool to uncover hidden forms of discrimination.” “With the proliferation of machine learning and predictive analytics, the FTC should make use of its unfairness authority to tackle discriminatory algorithms and practices in the economy,” he wrote. Acting CFPB Director Dave Uejio already has laid out an aggressive agenda. Judging by Chopra's FTC comments, auto lenders are likely to be targeted by the CFPB, along with student lenders, mortgage servicers and debt collectors. The agency will likely also take a stricter posture toward consumer lenders, including banks, that are seen scamming immigrants, the elderly and military service members. Large banks and financial companies engaged in wrongdoing should also be on alert, lawyers said. Higher-profile businesses "are going to get a lot more attention and publicity than going after some fly-by-night scam artist company, which Kraninger did go after," Kaplinsky said. “We’re going to see a lot more targeting of larger institutions and the bigger banks in the way Cordray did when he came in and went after every large bank for credit card add-on products,” he said. “I expect [Chopra] is going to be looking for something big to send a message to everyone that the Kraninger era is over."

Redfin CEO likens housing inventory crunch to ‘Soviet-era supermarket’

February 26th, 2021|

The gap between housing supply and demand grew to canyon-sized proportions in February as properties sold nearly immediately after being listed, according to Redfin. Even as buyer activity slowed during the severe winter weather, a record 42.7% of homes sold in under seven days for the four-week period ending Feb. 21 compared to 30.7% the year before. Pending sales jumped 18% to 45,432 from the year-ago total of 38,430. The dearth of inventory fueled the frenzied level of transactions. Active listings tumbled 40% year-over-year and reached a new all-time low of 497,909 from 835,149. Meanwhile, new listings also dropped 17% annually to 63,155 from 76,492. This combination of factors drove median home sale prices up 15% annually to $321,250 from $278,400 and median asking prices up 11% to a new high of $343,961 from $309,937 the year prior. "The housing market is now like a Soviet-era supermarket, with most of the shelves empty," Redfin CEO Glenn Kelman said in the report. “Migrations are warping the space-time continuum of small-town economies. The affordability crisis that flowed like some huge, unspent electrical charge from San Francisco to Seattle to Portland to Denver and to Boise is now reaching virtually every town in North America, bringing dazzling prosperity but also new anxieties." The recent upward trajectory of mortgage rates may add pressure on borrowers to get in now before further rate growth occurs. Redfin’s homebuyer demand index — a market indicator based on requests for home tours and other services — spiked 35% year-over-year to 148 from 109. The index has a baseline score of 100.

Remax-affiliated Motto Mortgage doubles originations in 2020

February 26th, 2021|

Motto Mortgage, Remax's mortgage brokerage franchising business, reported explosive growth in the past year, with its operators doubling their combined origination volume on a year-over-year basis. The 141 operating offices produced $2.47 billion in 2020; in 2019, the 111 locations the company had at the time did $1.1 billion. "Closing nearly $2.5 billion in loan volume as a network is a remarkable feat in any year, but especially in a challenging one like 2020 – only our fourth full year of operations,” Ward Morrison, the president of Motto Franchising LLP, said in a press release. "2020 was a record-breaking year for Motto franchise sales, and the fourth quarter was our best quarter yet in company history." Remax rolled out Motto as a turnkey mortgage brokerage business in October 2016. Motto only collects franchise fees on a per-office basis from its operators. Each franchisee is responsible for brokering its own loans to the wholesaler. During 2020, Motto sold 71 of its franchises. That's both an annual record and an increase of more than 35% from 2019. Even though Remax owns the franchisor, Motto branches also have been sold to real estate brokers affiliated with other companies as well as independent operators. Motto is working on a new concept called the "Branchise," the Remax 10-K filing said. These offices, which are being offered to existing Motto franchisees, are similar to having a satellite office at a traditional mortgage lender. It allows them to expand their physical and/or virtual presence for a reduced contractual fee. "The aim of these new models is to give franchisees the flexibility to expand their business to places where it would not have been feasible to support a full additional franchise while keeping offices compliant with state branch regulations," the Remax 10-K said. As of Jan. 31, there were two open Branchises, the company added. Last August, Remax purchased Wemlo, which provides processing services to mortgage brokers. The company paid $6.1 million in cash and $3.3 million in common stock, plus an additional $6.7 million of equity-based compensation, the 10-K filing said.

Movement Mortgage Expands Sales Leadership to Drive Growth Nationwide

February 26th, 2021|

INDIAN LAND, S.C. — Movement Mortgage, one of the nation’s largest retail mortgage lenders, is excited to announce changes to its senior sales leadership team with the promotion of company veterans Matt Schoolfield, Chris Shelton, and Kisha Weir to Divisional Leaders. They will be responsible for unified, strategic, long-term growth and development across the entire sales organization.  The promotions, announced during a company-wide meeting today, are designed to further align Movement’s sales organization and accelerate the company’s growth. Continue reading Movement Mortgage Expands Sales Leadership to Drive Growth Nationwide at Movement Mortgage Blog.

Optimism as mortgage rates rise

February 26th, 2021|

The average mortgage rate hasn’t risen this high since the end of July 2020. Higher rates signal an economy that’s slowly regaining its footing, noted Sam Khater, Freddie Mac’s chief economist, reported by HousingWire. Rising rates certainly didn’t slow new home sales in January. The U.S. census bureau reported sales of new single-family houses in January were at a seasonally adjusted annual rate of 923,000 — 4.3% above December’s rate. “However, recent increases in mortgage interest rates threaten to exacerbate existing affordability conditions. Continue reading Optimism as mortgage rates rise at Movement Mortgage Blog.

People on the move: Feb. 26

February 26th, 2021|

Lender and servicer Homepoint, based in Ann Arbor, Mich. announced the creation of a new executive leadership role. As the company’s first chief officer of diversity and inclusion, DeAndre Lipscomb will be tasked with developing initiatives that support the company’s corporate social responsibility goals.Lipscomb most recently served as executive director of the Lake Trust Foundation and as community impact manager for Lake Trust Credit Union. Previous to that, he held executive leadership roles within the healthcare industry, fostering employee engagement, community outreach and enhanced diversity and inclusion strategies in the sector.“I am impressed by the leadership team’s demonstrated commitment to embedding diversity and inclusion into the company culture,” Lipscomb said in the announcement. “I look forward to working with the team to strengthen communities through financial well-being brought by homeownership and education.”

3 questions for homeowner education expert Danielle Samalin

February 26th, 2021|

In a new episode of the Financial Planning podcast, the CEO of a homeownership education nonprofit explained the many challenges facing first-time homebuyers. Danielle Samalin is the CEO of Boston-based Framework Homeownership. Danielle Samalin is CEO of Framework Homeownership, a Boston-based organization that offers online training for prospective homebuyers and a network of nonprofit counseling partners. She answered the following three questions posed by FP Senior Editor Tobias Salinger: 1. What's the size of the homeownership gap and what is being done to change it? 2. What are the most important questions for first-time homebuyers? 3. How does the organization work? Listen and subscribe to the FP Podcast on Apple, Spotify or wherever you get podcasts.

Rocket Mortgage rides housing boom to 277% profit increase

February 26th, 2021|

Rocket Companies Inc., one of the nation’s largest mortgage lenders, reported a 277% increase in quarterly profit, punctuating a record-setting year as the home-loan specialist rode the U.S. housing rally. The company posted adjusted revenue that beat estimates. And with a ten-fold increase in net income last year to $9.4 billion, Rocket declared a special dividend of $1.11 per share, according to a statement on Thursday. Shares surged as much as 7.8% to $21.46 in late trading. “We successfully drove growth in every segment of our business,” Rocket Chief Executive Officer Jay Farner said in the statement. The pandemic real estate boom gave a major boost to the mortgage industry, which posted record loan volume and profits in 2020 as rates dipped to historic lows. Much of that was thanks to the Federal Reserve, which kept a lid on borrowing costs and bought mortgage bonds as part of its bid to stimulate the economy. But profitability may have peaked. Rocket reported a 4.41% profit margin on newly originated loans last quarter, well above the company’s November estimate of 3.8% to 4.1%. It told investors on Thursday to expect margins on new loans this quarter to be around 3.6% to 3.9%. Mortgage lenders have been warning investors in recent weeks that profitability won’t expand this year. UWM Holdings Corp., the parent company of United Wholesale Mortgage, said profits on new loans this quarter could fall by as much as one-third from last year’s fourth quarter. Mr. Cooper Group Inc., meanwhile, said this week that its gains on mortgage sales -- lenders generally sell the loans they originate -- will be roughly flat this quarter. RELATED: Mortgage lenders going public in 2020: a timeline Mortgage rates in the U.S. rose this week to the highest level in six months, threatening to snuff out the mortgage rally. And with Treasury yields ticking higher, borrowing costs could continue to climb. That could deter more Americans from seeking to refinance debt, while surging home prices are pushing ownership out of reach for many. Mortgage applications fell to a nine-month low last week, while pending home sales last month dropped to a six-month low.

Why getting e-closing technology is just half the battle

February 25th, 2021|

The share of lenders outfitted with the automation needed to close loans electronically surged last year, but mortgage companies didn't necessarily use it, according to a new report by the Stratmor Group. Although the percentage of housing finance firms with the technology needed to e-close jumped to 43% in 2020 from 18% in 2019, only 12% of them had an adoption rate of 75% or more, the report released Thursday shows. “One could assume that digital closings are building up like a giant ocean wave. But according to our 2020 data, closing lags most of the technologies we are tracking,” said Garth Graham, senior partner at the Stratmor Group, and author of the report. There’s a 54% adoption rate among individual users of e-closing technologies but only 30% at the company level. That results in a net adoption rate of just 16%, according to Stratmor. Mortgage lenders found a shortage to IT expertise to be one key hurdle. “Lenders are getting used to working harder to attract loan officers and processors because everyone else in the industry is also looking for them. Finding qualified IT staff is even more of a challenge because everyone in every industry is also looking for them,” Graham noted in the report. IT development was the No. 1 roadblock to broad digital mortgage implementation by lenders in 2020, up from No. 7 in 2019. And difficulty coordinating the technology installation with the training needed to use it was another barrier cited by 82% of lenders. Also, while internal willingness to use the technology has improved, some wariness persists. “When new tools can perform in seconds jobs that loan officers previously spent hours or days working out, some begin to question their role in the process or they mistrust the outcome,” said Graham. Lenders need to be competitive in recruiting, take time to better coordinate workflows and reassure their employees of their value to address these concerns. To address the last point, lenders can point to customer service metrics that show individual guidance remains valued, the Stratmor report suggests. “We have plenty of data to show that borrowers want to have a person guide them through the loan origination process,” said Graham. "They just don’t want to wait around for them.”

Zombie foreclosures dwindle in 1Q but could be on ‘thin ice’

February 25th, 2021|

While the overall foreclosure rate fell in the first quarter of 2021, the majority of states saw rising shares of zombie properties, according to Attom Data Solutions. A total of 175,414 homes went into the foreclosure process in the opening quarter of 2021 and 6,677 of them, a 3.8% share, sit vacant, according to Attom Data Solutions’ Vacant Property and Zombie Foreclosure Report. That fell from 200,065 and 7,612 units quarter-over-quarter and 282,800 and 8,678 units year-over-year. Overall, zombie foreclosures — empty homes that are in the foreclosure process — represent one in every 14,825 U.S. residential properties, a widening ratio from 13,074 quarterly and 11,405 annually. However, the rates of zombie foreclosures jumped from the fourth quarter in 29 states. Kansas had the most growth, increasing 4.4 percentage points to 20.7% from 16.3%. Arkansas came next, going to 6.6% from 3.1%, then Minnesota rising to 7.1% from 4.7%. The dwindling zombie foreclosure numbers stand in contrast with the Great Recession when abandoned properties dotted many communities, according to Todd Teta, chief product officer with Attom Data Solutions. While zombie foreclosures dwindle and don’t currently pose an issue, it could turn into one depending on the economy when CARES Act protections end. “The trend does remain on thin ice because foreclosures are temporarily on hold, and the market is still at risk of another wave of zombie properties when the moratorium is lifted,” Teta said in the report. Oklahoma, Tennessee, Mississippi and Kansas all tied with the highest first quarter vacancy rate at 2.5%. At the metro level with populations of at least 100,000, Peoria, Ill., had the highest rate at 15.5%, followed by South Bend, Ind., at 15.2% and Cleveland at 12.3%. New York retained its lead in zombie properties, totaling 2,064 in 1Q. Florida trailed with 926, then 759 in Illinois. Indiana leads by zombie share of investor-owned homes at 7.5%, followed by 6.5% in Kansas and 5.9% in Mississippi. Turning over the vacated housing stock could be one way to help ease the nation’s squeezed inventory. “If there’s an abandoned property, we need to get it back in the marketplace both for the good of the neighborhood and the supply shortages,” Ed DeMarco, president of the Housing Policy Council, said in an interview. “We shouldn't be artificially keeping supply off the market, if going through with the foreclosure doesn't create a conflict with any COVID issues.” Of the nearly 99 million homes in the U.S., 1.45 million sit vacant, totaling a 1.5%, share of single-family homes and condos.

Gauge of U.S. pending home sales declines to a six-month low

February 25th, 2021|

A gauge of U.S. pending home sales fell to a six-month low in January as buyers competed for a limited number of properties. The National Association of Realtors’ index of pending home sales decreased 2.8% from the prior month to 122.8, according to data released Thursday. December data was revised to a 0.5% gain after a previously reported decline. The median estimate in a Bloomberg survey of economists called for no change in January. The decline is the latest sign that the housing boom may be starting to cool amid soaring prices, a lack of inventory and rising mortgage rates. The residential real estate market has been a bright spot in the economy as it recovers from the pandemic. Contract signings are still up 8.2% from a year ago on an unadjusted basis. “There are simply not enough homes to match the demand on the market” Lawrence Yun, chief economist at the NAR, said in a statement. Still, Yun said he expects inventory to rise in the coming months. The lack of inventory thus far has driven prices upwards, putting homeownership out of reach for some, said Joel Kan, the Mortgage Bankers Association's associate vice president of economic and industry forecasting. “Various other data sources have pointed to higher median sales prices and record-high purchase mortgage loan sizes, all of which have started to create affordability challenges in many parts of the country," he said. "While home building has picked up to attempt to meet the high demand, increased listings of existing homes will be needed in the coming months to alleviate this shortage of housing inventory.” By region, contract signings fell in the West, Northeast and Midwest. In the South, the index for pending home sales rose to the highest since August.

Appraisal fintech reports spike in use amid Texas storm damage

February 25th, 2021|

Appraisers now face a swell of assessment requests for property damage following February’s extreme winter storms and some will employ new tech to handle the influx. With the severe weather wreaking havoc in housing markets not accustomed to below-freezing temperatures, about 23 million homes or 15% of the overall stock fall in areas of risk, with burst pipes — an average loss of $10,000 — being the most common insurance claim, according to CoreLogic. As insurance and natural disaster mortgage forbearance claims roll in from borrowers, a backlog of demand for appraisal verification will pile up before servicers can take action. Texas will likely head that demand. On Feb. 20, President Biden designated 77 of the state’s 254 counties as major disaster areas. Even the latest mortgage activity hit a standstill in the state with applications nosediving 40% week-over-week. “We’ve seen a spike in requests for inspections in Texas as a result of the extreme weather they recently experienced,” said Tony Pistilli, chief appraiser at Computershare Loan Services. “Remote inspections are particularly useful in such circumstances, enabling appraisers quickly and effectively to meet the sudden increase in demand, and modern mobile inspection technology helps provide homeowners, insurers, lenders with confidence in the reliability of desktop valuations and the work that appraisers undertake.” In turn, appraisers will need to churn through the claims as quickly and accurately as possible. Of course, the ongoing pandemic adds another layer of difficulty and deepens the need for remote appraisal software. They’ll also need to accomplish this while filtering out fraudulent claims and the use of deepfake technology. Technology that verifies images could potentially counter consumer fraud as it relates to servicing. Image veracity could also help address the Federal Housing Finance Agency’s December request for input on modernizing appraisals in a streamlined, accurate way to ensure higher loan quality and safety for Fannie Mae and Freddie Mac. One product that promises to verify images, developed by companies in the Content Authenticity Initiative led by Adobe, is being utilized in home valuations by Truepic, a photo and video verification platform. Users submit photos and videos through the control-capture of the fintech’s interface, eliminating any possibility of alteration. The media is then run through 22 fraud detection and prevention tests within seconds — including timestamps, GPS location and even checking the direction the phone faced while taking the picture — and gets written into blockchain for version control. “There are currently thousands of apps where you can seamlessly manipulate a photo or the metadata of a photo,” Craig Stack, Truepic founder and co-CEO, said in an interview. “It’s not a big deal if it's a kid playing on Instagram, but a really big deal if an enterprise spends dollars or makes decisions because of that photograph.” Truepic saw a record surge in mortgage-related volume, with a 500% leap on Feb. 23 compared to its daily average, overwhelmingly driven from the Texas disaster, according to a company representative. The storms caused servicers a week of interruption and lost productivity, specifically in Texas, making it tough to get in touch with borrowers due to dead phones and closed call centers, said Matthew Tully, chief compliance officer at servicing technology provider Sagent. “Dallas-Fort Worth is a big servicing hub and many of our clients were impacted.”

FHFA announces further extension of COVID-related mortgage relief

February 25th, 2021|

The Federal Housing Finance Agency is providing an additional three months of forbearance to borrowers with loans backed by Fannie Mae and Freddie Mac, totaling 18 months of relief due to the coronavirus pandemic. The FHFA said Thursday that it was aligning its policies with the Biden administration to address economic burdens for homeowners due to COVID-19. The change comes nearly three weeks after the agency had extended the total forbearance period to 15 months. When Congress passed the Coronavirus Aid, Relief and Economic Security Act last year, it allowed borrowers with federally backed mortgages to request up to 12 months of forbearance — divided into two 180-day increments — if they experienced financial hardship. In forbearance, a borrower is allowed to suspend payments by extending the loan's terms. There is no set cutoff date for the 18-month forbearance period because borrowers have entered and exited forbearance at different times. “Today’s extensions of the COVID-19 forbearance period to 18 months and foreclosure and eviction moratoriums through the end of June will help align mortgage policies across the federal government,” FHFA Director Mark Calabria said. Bloomberg News The FHFA also said Thursday that it was extending a moratorium on foreclosures and real estate-owned evictions until June 30 for loans backed by Fannie and Freddie. Because housing prices have jumped dramatically, borrowers are more likely to be able to sell their homes than go into foreclosure compared with the financial crisis in 2008, when many were underwater on their mortgages. The foreclosure moratorium had been set to expire on March 31 but FHFA is offering another three-month extension only for single-family mortgages backed by the government-sponsored enterprises. The REO eviction moratorium applies to properties acquired by the GSEs through foreclosures or deed-in-lieu transactions. Earlier this month, the Biden administration announced similar extensions of relief for loans backed by the Federal Housing Administration, Department of Veterans Affairs and Department of Agriculture. “Today’s extensions of the COVID-19 forbearance period to 18 months and foreclosure and eviction moratoriums through the end of June will help align mortgage policies across the federal government,” FHFA Director Mark Calabria said in a press release. “Borrowers and the housing finance market alike can benefit during the pandemic from the consistent treatment of mortgages regardless of who owns or backs them.” Roughly 2.6 million homeowners were in forbearance plans as of Feb. 14, representing 5.29% of loans serviced, the Mortgage Bankers Association said Monday. The share of Fannie- and Freddie-backed loans in forbearance fell slightly to 2.97% last week, from 3.01% on Feb. 8, the MBA said. By comparison, 5.22% of all loans serviced are currently in forbearance plans, the MBA said.

Mortgage rates jump again, as economic worries subside

February 25th, 2021|

The mortgage rate surge went on for a second week with the 30-year fixed rate reaching its highest point since last summer as generally positive economic news outweighed concerns about inflation. Average rates for the 30-year FRM rose to 2.97%, a 16 basis point increase compared with the previous week's 2.81%, according to Freddie Mac's Primary Mortgage Market Survey. But the rate was still significantly lower than the 3.45% posted for the same week one year ago. This is the highest the 30-year FRM has been since the week of Aug. 20, 2020, when it was 2.99%. "Optimism continues as the economy slowly regains its footing, thus affecting mortgage rates," Sam Khater, Freddie Mac chief economist, said in a press release. "When combined with demand-fueled rising home prices and low inventory, these rising rates limit how competitive a potential homebuyer can be and how much house they are able to purchase." Mortgage rates are finally keeping pace with the recent increases in the yield on the benchmark 10-year Treasury, which on the morning of Feb. 24 reached its highest point in exactly one year. The jump in Treasury yields comes from investors feeling both positive and negative about the U.S. economy at the same time, according Matthew Speakman, an economist at Zillow who issued comments on Wednesday night. The markets are "bullish on falling COVID-19 case counts and encouraging improvements in vaccine distribution, yet fearful that ambitious fiscal relief and accommodative monetary policy will result in higher inflation — something that would theoretically cause the Federal Reserve to scale back on their policies that have helped keep interest rates low," Speakman said. "Rates are still very low by historical standards, but the ultra-low rate environment that became the norm in the second half of 2020 appears to have come to an end." The average for the 15-year FRM also had a double digit increase, up 13 bps to 2.34% from 2.22% the week prior; one year ago it was 2.95%. The five-year Treasury-indexed hybrid adjustable-rate mortgage rose by 22 bps to an average 2.99% with a 0.1 point average, up from 2.77% week-over-week but lower than 3.2% for the same week in 2020.

Zillow Will Now Buy Your Home for Its Zestimate Price

February 25th, 2021|

Posted on February 25th, 2021 Zillow appears to be putting its money where its mouth is by offering to buy properties at their Zestimate price. No longer is the Zestimate just a number you can fantasize about, assuming your home qualifies for the company’s iBuying program known as Zillow Offers. The Zestimate Turns 15 Years Old Zillow introduced the Zestimate all the way back in 2006 They claim it was the first time homeowners had instant access to free estimated home values Zestimates are published for nearly 100 million homes nationwide with a median error rate for on-market homes of just 1.9% Today’s algorithm uses public records, feeds from MLSs, artificial intelligence, computer vision, and a deep-learning neural network that even factors in photographs Zillow’s new initiative coincides with the 15th anniversary of their popular home valuation tool known as the Zestimate. The free quasi-appraisal tool was launched in 2006 and essentially put Zillow on the map by providing homeowners and prospective home buyers with a quick tool to see what a home was worth. Today, their complex algorithm goes beyond public data and MLS feeds and uses things like artificial intelligence and computer vision that allows it to incorporate data from photographs. In other words, if images are uploaded that show a new kitchen or bathroom, or even just new paint or more expensive fixtures, your Zestimate might get a boost. They claim all these improvements to the always-evolving Zestimate give it a median error rate of just 1.9% for on-market homes. While that sounds pretty impressive, it doesn’t mean you should just sell your home to Zillow and call it a day. Where Zillow Is Buying Homes for Their Zestimates If your home is eligible you’ll see an initial cash offer prominently displayed at the top of your property listing page The initial offer is before taxes/fees are factored in and also subject to the accuracy of property information Currently available in a large number of markets including Phoenix, Charlotte, Orlando, San Diego, and Los Angeles The company plans to expand the pool of eligible homes over time as the Zillow Offers platform grows At the moment, the company’s “buy at the Zestimate price” deal is available on a limited number of homes in markets where Zillow Offers currently operates. This includes a pretty large number of cities, including: Phoenix and Tucson, Arizona San Diego, Los Angeles, Riverside, and Sacramento, California Denver, Colorado Springs, and Fort Collins, Colorado Miami, Jacksonville, Orlando, and Tampa, Florida Atlanta, Georgia Minneapolis, Minnesota Las Vegas, Nevada Charlotte and Raleigh, North Carolina Portland, Oregon Nashville, Tennessee Dallas, Houston, and San Antonio, Texas To see if your home is included, simply head over to your property’s listing page on Zillow and look for a prominent “Sell to Zillow for your Zestimate” box. If it’s there, this means you can begin negotiations at that price, before the company factors in things like taxes, fees, and repair requests. Their offer is also subject to eligibility and accuracy of property information. In other words, they’ll need a human being to back up the findings of their Zestimate technology before they proceed with an offer. My assumption is the more cookie-cutter the property, the more likely it is to have one of these instant offers. That means a property in a housing tract that is moderately priced and similar to other properties nearby. Conversely, they probably aren’t doing this for high-priced properties or homes that have unique features. Is Selling at the Zestimate Price a Good Deal? Zillow has referred to the Zestimate as a starting point in the past And that could still be the case if you take them up on this offer once they negotiate the price They’ll also factor in repair costs, listing costs, their service fee, and more When all is said and done you could be looking at sales proceeds that are 10%+ below the Zestimate While Zillow boasts about its high accuracy rate for the Zestimate, it doesn’t mean it’s a no-brainer to just sell your home to Zillow. While they claim their median error rate is just 1.9% for listed properties, what about properties that aren’t listed, i.e. YOUR HOME. Personally, I always feel that the Zestimate is lower than the comparable Redfin Estimate, and often lags home price data. In other words, the Zestimate typically displays a price that feels a little bit in the past, whereas the Redfin Estimate appears to show a more forward-looking price. Put another way, the Zestimate seems to mirror what someone paid for a home, while the Redfin Estimate often feels more like what a buyer would pay. That’s just my personal opinion, but I’ve been tracking these numbers for years, and I’ve rarely seen a Zestimate that’s higher than a Redfin Estimate. This is especially important given the fact that it’s a seller’s market at the moment. Lastly, you need to consider the fees charged for selling to Zillow Offers, including prep and repair costs (they’ll be reselling your home quickly), along with the Zillow service charge. They say that service charge is 2.5% on average, which is on top of the ~6% in selling costs that mirrors what a pair of traditional real estate agents would earn, along with 1-2% for closing costs like transfer taxes, escrow, etc. All said, you could be looking at 10% off the Zestimate, not including repair requests, so your actual walkaway cash could be much lower. Of course, the same can be said of a traditional sale (minus that service charge), and you get to sell immediately without the usual inconvenience, aggravation, and uncertainty. But that’s where the service fee comes in. It’s more like a convenience fee. In any event, this is an interesting development and a sign that Zillow wants its Zestimate to serve a larger role than just a free home price estimate. About the Author: Colin Robertson Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for nearly 15 years.

Texas loss drafts surge as servicers face widespread property damage

February 25th, 2021|

Following the unusual cold-weather power outage in the Texas region, mortgage companies are rushing to deal with a surge in homeowner claims before any further delays add to mounting costs. Nearly 15% of U.S. housing stock in 20 states — over 23 million units — were exposed to severe, low temperatures, according to CoreLogic’s initial numbers. While only a small fraction of these are expected to incur damage from burst pipes and flooding, for those that do, the cost could be $10,000 per home on average. That will contribute to broader estimated losses of $18 billion, according to Karen Clark & Co., a catastrophe risk modeling firm. Insurers need mortgage companies looped in to cut claim checks, so that’s now risen in the waterfall of workflow priorities for an industry already processing a flood of inquiries about forbearance and originations. “I think we will get through this, but our customer loss drafts are our concern on the servicing side at the moment,” said Jeff Bode, owner, president and CEO of Mid America Mortgage, a Texas lender and servicer with roughly 40% of its customer base based in the state. “We know that we’re going to spend this next month trying to help our customers get their homes repaired because there were water pipe breaks and damage.” The mortgage and insurance industries have go-to strategies for these circumstances, but because winter storms aren’t typically a concern in the Lone Star State, the costs and delays associated with the event could be extraordinary, said Laura MacIntyre, CEO of Dimont, a vendor that offers outsourcing and white-label technology that helps the industry handle claims. Current estimates for total damage from the storm are on the level of those for Hurricane Harvey, which had a $20 billion price tag, she said. “The Texas area doesn’t typically deal with this type of damage, so there will be a lot of learning, local limits and delays when it comes finding the right resources to fix whatever’s been broken,” she said. “No one in this area has experienced something like this recently or with such severity.” Because the power outages were concentrated in more metropolitan areas, large numbers of customers were affected by varying degrees, said Mid America Mortgage’s Bode, noting that while he was in an area of Texas that went without power for a stretch, he was able to go to another area just 12 miles away that had electricity for the duration. Mid America is headquartered in Addison, Texas. The ability to work out of different locations and cloud-based technology did keep some mortgage companies going when power went out, but servicers also contended with a reduction in workforce capacity. "There has been no real impact on the corporate side, but we did have several employees who were unable to work given power outages,” said Allen Price, senior vice president, at BSI Financial, which has operations in Dallas, Irvine, Calif., and Titusville, Penn. Outsourcers can help if servicers are willing to add an extra party in an equation that already may involve an insurer, borrower, public entities and contractors. Even if they do, the servicers should be proactive about customer outreach. “It would behoove the servicers to post something on their website, if they haven’t already, to ask if they’ve been impacted,” MacIntyre said. “Servicers should reach out to their customers so the borrowers know what to do and where to go.” On a positive note, repairs to Texas homes can begin more quickly than they would in consistently colder areas, MacIntyre pointed out. Mortgage companies should act quickly to get borrowers the money needed to hire contractors and limit any further damage. “It’s going to take several months to recover, but here’s one good thing about Texas, it’s not Minnesota. Repairs can happen, rather than having to wait until the spring or summer, because you’re probably not going to have another major storm there,” MacIntyre said. — Brad Finkelstein contributed to this report

A Trump tax break kicked off a race to redraw U.S. census maps

February 25th, 2021|

In hockey, it’s the equivalent of moving the red line. Two years ago, the Pittsburgh Penguins, along with Pennsylvania officials and a union leader, lobbied Donald Trump’s administration to expand an area earmarked for tax incentives so it would include the site where the hockey team is embarking on a $1 billion development project. The effort paid off. When the U.S. Census Bureau released updated maps this year, the site had been merged into a tract designated an “opportunity zone” under the 2017 tax law. That sets up investors to score generous federal economic development incentives. Similar maneuvers played out across the country as census tract boundaries were changed to accommodate wealthy investors whose projects fell outside the lines of roughly 8,700 opportunity zones. About 140 tracts grew in size by at least 5%, according to census data analyzed by Bloomberg News. Thirty-six expanded by 20% or more. Interviews and documents show that some of these changes followed appeals by developers and their allies to the White House, senior Treasury Department officials and former Commerce Secretary Wilbur Ross, who oversaw the Census Bureau. Although there’s no indication that such talks broke any laws, the lobbying put pressure on the bureau to approve changes that some people involved in the once-a-decade revisions found inappropriate. On the tropical island of St. Croix, a U.S. territory, an opportunity zone more than tripled in size after an investor encouraged the local government to lobby for a change. Included in the enlarged area: an airport, an oil refinery and an industrial park with a rum distillery. Near Baltimore, the operator of a 3,300-acre logistics park pushed for a merger with an opportunity zone across a river, potentially allowing tenants such as Amazon.com Inc. and Under Armour Inc. to benefit from the tax breaks. The requests extended to rural Raton, New Mexico, where a city manager asked to move a census tract boundary about 1,000 feet to include a downtown district. A spokesman for the Census Bureau didn’t comment on a detailed list of questions about the tract changes. Opportunity zones were among the most innovative and bipartisan features of Trump’s tax overhaul. Investors can claim the incentives by selling an asset that has appreciated in value and plowing the proceeds into projects or businesses in a zone. That lets them defer taxes on capital gains through 2026. If the new asset is held at least a decade, it’s not subject to any capital gains tax when sold. The benefits were meant to pump money into overlooked communities, but criticisms have piled up. In some cases, politically connected individuals influenced the selection of tracts governors picked for the incentives. Some zones were already attracting investment, so the breaks may just juice returns on projects developers were likely to do anyway. And, because there’s no requirement to help low-income communities, the incentives have been used to finance everything from luxury apartments in Houston to a Ritz-Carlton hotel in Portland, Oregon. The new census boundaries will likely inflame those frustrations. Tracts are supposed to stay consistent, giving researchers and policymakers a way to make comparisons over the decades. The geography is also used to allocate hundreds of billions of dollars in government spending and is linked to other incentives for economic development that could be affected by the changes. “This is the building block of how we’re delivering social policy,” said Brett Theodos, a senior fellow at the Urban Institute. “Our nation’s map is being redrawn so developers can make more money.” All this comes at a time when political momentum is building to raise taxes on the wealthy to help support families and small businesses during the pandemic. The question is whether President Joe Biden’s administration will take steps to bar investors from claiming the tax breaks if census tracts were altered to include their properties. The Internal Revenue Service has yet to issue guidance on the matter. Spokespeople for Treasury and the IRS declined to comment. Complicating the issue are the coalitions of local and state leaders, unions and other community groups — some pulled together by developers — eager to see the projects succeed in a time of economic fragility. They argue that the changes will help make the policy work as intended, delivering jobs and development to areas that need it. Few places illustrate this better than Pittsburgh, where the Penguins, co-owned by billionaire Ron Burkle and former hockey star Mario Lemieux, are pitching their development as a way to right past wrongs. In the 1950s, part of a historically Black neighborhood was razed to make way for the Civic Arena, a silver-domed structure known to Penguins fans as “The Igloo.” The stadium was torn down a decade ago and replaced by a sea of parking lots. Since then, the city has struggled to get development going. In recent years, momentum has coalesced around a 28-acre project that is expected to revitalize the surrounding communities. It includes an office tower, housing and a music venue. Pennsylvania officials have poured millions of dollars into infrastructure improvements. They were also working with the hockey team, which controls the development rights, to annex the site to an adjacent opportunity zone, according to Penguins Chief Operating Officer Kevin Acklin. In March 2019, Pittsburgh Mayor Bill Peduto wrote to Governor Tom Wolf, asking him to petition the Trump administration to do just that. A month later, the head of the state’s development agency wrote Treasury Secretary Steven Mnuchin requesting the change. Acklin then met with Mnuchin’s counselor, Dan Kowalski, both men confirmed. Kowalski, who has left the department, said he explained the Census Bureau’s process for updating its maps. The United Steelworkers union also got involved. Its international president at the time, Leo Gerard, wrote to Commerce Secretary Ross in July 2019. The letter, reviewed by Bloomberg News, said Kowalski and White House officials had advised that a case could be made for tax breaks if the census tract boundaries were changed. Gerard’s letter was shared with the Census Bureau, which studied the matter and approved expanding the nearby opportunity zone tract by almost 40%. Spokespeople for local and union officials said they supported the boundary change because it would bring jobs and money to the neighborhood. “It provided a chance to spur development at a site that has long been challenging but has great promise for the community,” said Timothy McNulty, a spokesman for Mayor Peduto. “It gets the property back on the tax roll and will provide transformative work for hundreds of Black workers in a largely underserved area,” said Jess Kamm Broomell, a spokeswoman for the steelworkers’ union. Ross didn’t respond to email requests for comment. Acklin, the Penguins’ operations chief, said the project would have moved forward even without the boundary change, which happened after plans for the site were far along. But the incentives mean the development, expected to break ground this year, could get more money flowing to the community. “This is all about utilizing a federal tax break that doesn’t come out of the hide of anyone locally,” said Acklin, who previously served as the mayor’s chief of staff. “It will drive additional capital investment, not just in the site, but in the whole zone.” The team’s owners don’t plan to use the incentives, Acklin added. But the Buccini/Pollin Group Inc. and Clay Cove Capital, which are working with the Penguins on the first phase of the development, do. “It’s the kindling that gets the fire going,” said Chris Buccini, co-president of the development company. Still, no one told Marimba Milliones. As chief executive officer of the Hill Community Development Corp., she has been deeply involved with planning for the Civic Arena site, pushing the city, the Penguins and its partners to provide benefits to the neighborhood. She also was active in discussions around opportunity zones, suggesting the governor nominate the tract that ultimately absorbed the site and enact protections to ensure the investment helped community residents. So it was a surprise to her to learn about the effort to lobby the Trump administration without any study of whether the tax benefits might speed gentrification and push out local residents. “To proceed without that engagement and that analysis is a huge loss,” Milliones said, and it could be a “threat to our long-term ability to preserve this as one of the most historically important Black communities in the nation.” The reason the Census Bureau even considered the change owes to a process it undertakes every decade to get input on its maps called the Participant Statistical Areas Program. Representatives from regional planning groups, local governments and elsewhere are invited to propose changes that the bureau reviews. The goal is to preserve the shape of census tracts as much as possible so researchers can study demographic trends over time. But sometimes tracts are split if they become too populous or merged if an area loses residents. In some cases, changes are made to better reflect reality on the ground, such as a new highway. Officials have done a good job maintaining standards over the years, said Tim Trainor, a former chief geospatial scientist at the bureau and now president of the International Cartographic Association. But “sometimes there are shenanigans that go on” at the local level as Congress pegs tax breaks and spending to the tracts, he said. The result is that complex policy debates sometimes land on the desks of Census Bureau geographers. While they strive to be apolitical and make determinations independent of these considerations, their judgments have knock-on effects for a host of programs and incentives. Expanding a tract to include land under an opportunity zone development could change its demographics, influencing the availability of other government funding and incentives. Bloomberg’s analysis looked at tracts from a decade ago that still existed in 2020 — about 85% of all opportunity zones. Changes to boundaries were rare. Only 19 of every 1,000 such tracts had an increase in land area of more than 5%, a threshold bureau geographers considered significant when describing the changes to Trump administration officials last year, according to a person familiar with the matter. That compares with roughly 12 out of every 1,000 eligible tracts that weren’t picked. Opportunity zones were twice as likely as that group to see their land area expand by 20% or more. Among the biggest increases: tract 9714 in St. Croix, which grew by 254%. Two people informed of the request at the time said they found it inappropriate. Not only was it large, but the reason for doing it was to deliver tax breaks to developers, said the people, who asked not to be identified discussing the lobbying effort. Jack Thomas, an opportunity zone fund manager, encouraged the territorial government to see if it could bring the tax benefits to an industrial portion of the island where people were more likely to use them to create jobs and drive economic development. One potential beneficiary is St. Croix Renaissance Park, a former Alcoa facility that Thomas spent years redeveloping on behalf of Boston-based Mugar Enterprises Inc. Thomas, who said he’s no longer involved with the industrial park, is interested in using the tax incentives to set up businesses in the expanded zone and defended the move as a way to help the island recover from two hurricanes in 2017. “This isn’t enhancing Trump’s rich friends — it’s a poor, poor area,” said Thomas, who recently started a hemp farm on another part of the island that’s partly funded by opportunity zone investors. “People have ideas of pirates and all this sort of thing” when they think of the Virgin Islands, he added. “It’s hard to get investment dollars in. But we’re doing it.” Richard Motta, a spokesman for the territorial government, said the expansion of the opportunity zone “has great potential for enhancing the economy and employment opportunities on St. Croix.” A spokesman for Mugar didn’t respond to requests for comment. As the Biden administration weighs whether investors will be allowed to claim the tax breaks in expanded tracts, officials will have to wrestle with other issues. Almost 120 opportunity zones shrank by more than 5%, according to Bloomberg’s analysis, and the census tracts tied to more than 1,000 zones no longer exist, likely because of mergers or splits, raising questions about whether projects underway in those areas are still entitled to the benefits. Tradepoint Atlantic, a sprawling logistics facility near Baltimore, is counting on one of the changes to extend tax breaks to its Sparrows Point location, which couldn’t qualify for the incentives because nobody lived in the tract. After unsuccessfully lobbying the Trump administration to change the rules, the developer settled on a different approach: Merge the property with an opportunity zone across a tributary to the Patapsco River. In 2019, Aaron Tomarchio, a Tradepoint senior vice president, met with Baltimore County officials to see if they could get the Census Bureau to make the change, according to emails reviewed by Bloomberg. He said in an interview that excluding zero-population tracts with industrial sites was a technical flaw, an idea some lawmakers have echoed, and that Tradepoint’s project is “within the spirit and intent of the program.” That’s not how Joseph Fraker saw it. The former Baltimore County official, who was involved with the process, said he resigned after expressing opposition. “I didn’t really think it was appropriate,” Fraker said. The county “wouldn’t have done this in any other place, and it was purely at the request of the corporation.” The Census Bureau went ahead with the proposal, creating a new tract that’s 622% bigger than the one designated as an opportunity zone. Sean Naron, a spokesman for Baltimore County, said the tract change had buy-in from the community and would provide “significant economic benefits to the entire area.” He declined to comment on Fraker’s departure. Now, the area’s congressman, Dutch Ruppersberger, wants to ensure the maneuver works. A spokeswoman said he plans to send a letter on Tradepoint’s behalf to Treasury Secretary Janet Yellen asking that the merged tracts become an enlarged opportunity zone. Ruppersberger is also reaching out to other members of the state’s congressional delegation, the spokeswoman said. Tradepoint has attracted tenants including Amazon, Under Armour and FedEx Corp. since Hilco Global and an investment partner bought the former Bethlehem Steel mill in 2012 and began converting it into a global logistics facility. The tax breaks could benefit future development on the site and attract more companies to set up there, creating jobs, said Tomarchio. “A project of this size and magnitude, it’s incredibly capital-intensive,” he said. “There’s always a need for additional investments.” A spokeswoman for FedEx said the company would consider using the tax break if it becomes available. Spokespeople for Amazon and Under Armour declined to comment. Across the country, in Raton, New Mexico, Scott Berry is also hunting for investments. The town of 6,000, about 115 miles northeast of Santa Fe, once a coal-mining center, has fallen on hard times. So Berry, the city manager, was excited when a developer came to town with a proposal to spend more than $8 million refurbishing the Golden Rule general store if he could tap the area’s tax incentives. There was just one hitch: The property fell 300 feet outside the tract where the benefits were available. Starting in March 2019, Berry set about changing that. He wrote to New Mexico’s congressional delegation and eventually found his way to the Census Bureau. The approved change is almost microscopic, representing an addition of 0.02% to the land area of a tract that sprawls over 840 square miles of northern New Mexico. But it was enough to cover the site of the store and a part of town where others were considering projects, Berry said. Now, he’s hopeful the Biden administration will extend the benefits to the additional area. “It would be a real momentum shift for us,” said Berry. “This could be a big win for Raton.” —With assistance by Jason Grotto and Dave Merrill

Amerifirst Financial Review: They Take Home Purchase Lending Seriously

February 24th, 2021|

Posted on February 24th, 2021 It’s not every day you come across a large-scale independent mortgage lender that has been around since the 1980s, but Amerifirst Financial Inc. fits that description. The Arizona-based company understands that there’s more to the mortgage business than just refinances, which is why their goal is to be the lender of choice for real estate professionals in all the markets they serve. This could be a pretty smart strategy if and when interest rates rise and the pool of eligible refinance candidates begins to run dry. If you’re thinking about buying a home, Amerifirst could be good choice for your financing needs since they’re heavily focused on purchase loans. Let’s discover more about them. Amerifirst Financial Fast Facts Direct-to-consumer retail mortgage lender Founded in 1989, headquartered Mesa, Arizona Offers home purchase financing and mortgage refinances Funded more than $2 billion in home loans last year Most active in Arizona, Colorado, and California Licensed to do business in 43 states and the District of Columbia Also operate several DBAs including AFI Mortgage, Spire Financial, and Truly Mortgage Amerifirst Financial Inc. is a direct-to-consumer retail mortgage lender, meaning they operate a call center along with branches throughout the country. The company was founded all the way back in 1989 and is headquartered in Mesa, Arizona, which is just east of Phoenix. They also have branches in nine states, including Arizona, California, Colorado, Florida, Mississippi, Nevada, Oregon, Texas, and Utah. Amerifirst appears to specialize in home purchase financing, with roughly two-thirds of total volume dedicated to home buyers. The rest can be attributed to mortgage refinances, including rate and term refinances and cash out refinances. Last year, the company funded more than $2 billion in home loans, with nearly a billion in their home state of Arizona. They’re also very active in Colorado and California, and have a decent presence in Nevada and Texas as well. While they’re licensed in most states nationally, they don’t seem to be available in Delaware, Hawaii, Maine, New York, Rhode Island, Vermont, or West Virginia. How to Apply with Amerifirst Financial You can get started instantly by visiting their website and clicking “Apply Now” They offer a digital mortgage application powered by ICE that lets you complete most tasks on your own It’s also possible to browse their online loan officer (or branch) directory first to find someone to work with nearby Once your loan is submitted you can manage it 24/7 via the online borrower portal Amerifirst Financial makes it super easy to get started on your home loan application. Simply head to their website and click on the big “Apply Now” button and you’ll be off to the races. That will take you to their digital mortgage application powered by ICE that lets you input all your personal and financial details electronically. Then you can link financial accounts using your credentials to avoid having to scan/upload or track down your documents. Additionally, you can order your own credit report and eSign disclosures to speed through the more painstaking part of the process in a matter of minutes. Once your loan is submitted and approved, you’ll receive a to-do list with any conditions that must be met to get to the finish line. You’ll also be able to track and manage your loan via the online borrower portal, and get in touch with your lending team if and when you have questions. Those who prefer a more human touch can also visit a local branch and/or browse the online loan officer directory to learn more about the individuals who work there. It may also be advisable to speak with a loan officer first to discuss loan pricing and available loan programs, then proceed to the online mortgage application. In any case, they make it really simple to apply for a mortgage and manage your loan from start to finish thanks to the latest technology. Protect Your Transaction Pre-Approval for Home Buyers One perk to using Amerifirst Financial, especially if you’re buying a home in a competitive market, is their “Protect Your Transaction” loan commitment. It goes beyond both a pre-qualification and pre-approval in that it’s underwritten upfront by a real human loan underwriter. In fact, the PYT even comes with monetary assurance (up to $15,000, with an additional $5,000 for first responders and teachers), which represents their belief in the strength of your application. So if the loan falls through and it turns out to be the lender’s fault, you could be entitled to that cash, which can also be shared with the seller. This may strengthen your offer. Next to a cash offer, they believe it provides the greatest assurance that they can provide financing for your home purchase. And that could just be enough to give you edge versus other home buyers on a hot home. It may also give you peace of mind in the process, knowing you can actually get financing when all is said and done. Loan Programs Offered by Amerifirst Financial Home purchase loans Refinance loans: rate and term, cash out, streamline Conforming home loans High-balance and jumbo home loans FHA/USDA/VA loans Down payment assistance Green Value Mortgage Fixed-rate and adjustable-rate options available Amerifirst Financial offers both home purchase loans and refinance loans, including rate and term, cash out, and streamline refinances. You can get financing on a primary residence, including townhomes/condos, along with a vacation home or 1-4 unit investment property. They offer all the popular loan types, including conforming loans backed by Fannie Mae and Freddie Mac, high-balance and jumbo loans, and government-backed options like FHA, USDA, and VA loans. They also offer an exclusive loan program known as the “Green Value Mortgage” that offers a reduced interest rate, fees, and discounted mortgage insurance if your property has a green score of 75 or lower. You may also be eligible to receive up to 3.5% of the purchase price as a non-repayable gift. All the more reason to go green! In terms of loan programs, you can get either a fixed-rate mortgage such as a 30-year or 15-year fixed, or an adjustable-rate mortgage like a 7/1 or 5/1 ARM. Amerifirst Financial Mortgage Rates One slight negative to Amerifirst Financial is the fact that they don’t mention their mortgage rates anywhere on their website. As such, we don’t have any clues about their loan pricing relative to other banks and lenders out there. The same goes for lender fees, which aren’t clearly listed on their website to my knowledge. This means you’ll need to get in touch with a loan officer to discuss rates and fees to ensure they are competitively priced. Be sure to compare their rates/fees with other lenders before you proceed to the application if you want peace of mind on pricing front. Customer service and competence is always important, especially when it comes to a home loan, but so is cost. Amerifirst Financial Reviews On Zillow, Amerifirst has a very impressive 4.98-star rating out of 5 from roughly 900 customer reviews, which is quite impressive given the volume of feedback. On LendingTree, they have a perfect 5-star rating, though it’s based on just about 30 reviews. They also have a 100% recommended score there. If you’re looking for more reviews, you can also check out local ones on Google for their brick-and-mortar branches nearest you. Lastly, the company is Better Business Bureau accredited, and has been since 2014. They currently enjoy an ‘A+’ rating based on complaint history. To sum it up, Amerifirst Financial could be a solid choice for someone purchasing a home (especially a first-time buyer) thanks to their robust Protect Your Transaction loan approval and variety of down payment assistance programs. Amerifirst Financial Pros and Cons The Good You can apply for a home loan from any device in minutes Offer a digital mortgage application powered by ICE Lots of loan programs to choose from Discounts for those who purchase a green home Protect Your Transaction loan approval for home buyers Excellent customer reviews from former customers A+ BBB rating, accredited business since 2014 Free mortgage calculators and mortgage dictionary on site The Not Not available in all states currently Do not list mortgage rates or lender fees on their website (photo: nathanmac87)

What is an FHA Streamline Refinance and do I qualify?

February 24th, 2021|

With home loan interest rates hovering near historic lows, many homeowners are wondering, “What about me? I took out a mortgage some time ago when rates weren’t as attractive as they are now. Is there something I can do?” The answer is, “Absolutely!” For those of you who aren’t clear, refinancing is simply the act of paying off one loan by getting another. Any homeowner should consider refinancing if they are offered better loan terms or a lower interest rate.  Continue reading What is an FHA Streamline Refinance and do I qualify? at Movement Mortgage Blog.

Serious mortgage delinquencies remain high as overall rate declines

February 24th, 2021|

Mortgage delinquencies are at a 10-month low, but the number of borrowers that have not made a payment in 90 days or longer remains five times higher than before the pandemic began, Black Knight said. For January, 5.85% of outstanding mortgages were at least 30-days or more late on their payment, down from 6.08% in December. It was the first month that the delinquency rate was under 6% since March 2020, when it was at 3.39%. The delinquency rate does not include loans in foreclosure. But the upcoming trouble for mortgage servicers can be seen in the still relatively high share of seriously delinquent borrowers. At the end of January, payments were 30 to 89 days late on just over 1 million properties, but there were 2.1 million properties for which a payment was 90 days or more past due. "Recent forbearance and foreclosure moratorium extensions have reduced near-term risk, but at the same time may have the effect of extending the length of the recovery period," Black Knight said in its press release. "At the current rate of improvement, 1.8 million mortgages will still be seriously delinquent at the end of June when foreclosure moratoriums on government-backed loans are currently slated to lift." For comparative purposes, back in March 2020, of the 1.8 million properties that were at least 30 days late on a payment, just 406,000 were 90 days or more delinquent, a record low. In December, there were 3.25 million properties for which the mortgage hadn't been paid in at least 30 days, with 2.15 million past the 90-day mark. But those moratoriums have resulted in continued declines in foreclosure starts. There were 5,900 foreclosure starts in January, down 16.9% from December and 86.2% from January 2020. The number of properties in the foreclosure pre-sale inventory slipped to 171,000 in January, down by 7,000 from December and 75,000 fewer units compared with January 2020. As mortgage interest rates started rising in January, prepayment rates declined to 2.63%, down from 3.15% from December. But that was still more than 109% higher than January 2020's prepayment rate of 1.26%.

Paying More Today Won’t Lower Future Monthly Mortgage Payments

February 24th, 2021|

Posted on February 24th, 2021 Just about everyone with a home loan ponders the idea of paying a little extra, whether it’s via biweekly mortgage payments, or just once a year after receiving a sizable bonus or tax refund. Whatever the method, you should first consider why you’re thinking about paying your mortgage off early as opposed to putting the money elsewhere. This is a particularly important question to ask in the super-low mortgage rate environment we’ve been enjoying for some time. Simply put, mortgage borrowing is really cheap, and probably the least expensive debt you’ve got, so prioritizing it over other debt may not make sense. For example, if you have student loan or credit card debt, it might be more beneficial to pay that off first. Anyway, assuming you do decide to make extra mortgage payments, whether significantly larger or just a little more than required, your next monthly payment won’t be affected by the previous payment. You will still owe what you owed the month before, regardless of your principal balance being smaller. While this might sound unfair, it all has to do with math and the fact that a mortgage is an amortizing loan. A Mortgage Is an Amortizing Loan with Equal Monthly Payments Most mortgages have a set loan term in which they are paid off in full Fully-amortizing payments consist of a principal and interest portion The monthly payment amount typically doesn’t change unless it’s an ARM But the portion that goes to principal/interest will adjust over time as your loan is paid off Traditional mortgages are paid off over a certain set time period with regular monthly payments that consist of a principal and interest portion. This total payment amount does not change (barring an ARM adjustment or negative amortization) regardless of whether you pay more than is due each month. The only thing that changes over time is the composition of your mortgage payment, with the portion going toward principal increasing over time as the loan balance falls. As more goes toward principal, less go toward interest – picture an old-fashioned balance scale where one side drops while the other rises. Let’s take a look at an example to illustrate: Mortgage amount: $100,000Mortgage interest rate: 5%Loan type: 30-year fixedMonthly payment: $536.82 In this example, your monthly mortgage payment would be $536.82 per month for 360 months. The very first payment would allocate $416.67 toward interest and the remaining $120.15 would go toward principal. This right here illustrates how interest on mortgages is front-loaded, with about 78% of the payment going toward interest and doing nothing to pay down the loan balance. To calculate the interest portion, simply multiply 5% by $100,000, and divide it by 12 (months). The principal portion is the remainder, as noted above. For the second payment, you need to use an outstanding balance of $99,879.85 to account for the principal amount paid off via payment one. So to calculate interest for the second payment, you multiply $99,879.85 by 5% and come up with $416.17. This is the interest due and the remainder of the $536.82 payment goes toward principal. Over time, the interest portion decreases as the outstanding balance decreases, and the amount that goes toward principal increases. Pay More Each Month and the Payment Composition Will Change While paying more than necessary won’t lower the minimum amount due on your next mortgage payment It will change the composition of all future payments thanks to a lower outstanding balance This means you’ll save on interest and reduce your loan term despite owing the same each month In other words paying extra is well-suited for those looking to save money long-term, not to obtain payment relief If you make some additional payments, the outstanding loan balance will drop prematurely based on the original amortization schedule. But instead of your monthly mortgage payments decreasing, the composition of your next payment (and the payment after that) becomes more principal-heavy. In other words, the payment due would still be $536.82 the next month, but more of it would go toward principal (paying down your balance). And for that reason, less interest would be paid throughout the life of the loan, and the mortgage would be paid off ahead of schedule. These are the two benefits of making larger payments. The obvious downside is you wouldn’t enjoy lower payments in the future, which could be an issue if money becomes unexpectedly tight, especially seeing that you used it to pay your mortgage down quicker. Instead, more money is essentially locked up in your home until you either sell the property or refinance and pull equity (cash out refinance). Recast or Refinance If You Want to Lower Future Payments As noted extra payments alone won’t lower future ones The only way future mortgage payments will drop is if you recast your loan or refinance it Make sure you have money in the bank after making any extra payments The money could be trapped in your home and unavailable for other more pressing needs If you made additional payments and want subsequent monthly payments to be lower, you have two options to get payment relief. You can refinance the loan, which would also re-amortize the loan based on a brand new loan term. Of course, if you’re well into a 30-year loan, you’ll reset the clock if you go with another 30-year term. That’s why it’s recommended to go with a shorter term loan when refinancing such as a 15-year fixed mortgage, which kind of defeats the purpose of lowering monthly payments. The other option you might have is to request a “loan recast,” where the lender re-amortizes the loan based on the reduced principal balance. This generally only makes sense if you make a sizable extra payment, something that would really change the payment structure of the loan. In fact, some banks may only offer a recast it if you make a certain lump sum payment that cuts a certain percentage off the loan. They’ll also charge you a fee to do it in most cases. So while both a refinance and a recast can lower monthly payments, you have to be careful not to tack on more costs as you attempt to pay your mortgage down faster. At the end of the day, it can be very worthwhile to make larger payments even if your subsequent payments don’t change, just make sure you have money set aside for a rainy day.

U.S. new-home sales increased in January by more than forecast

February 24th, 2021|

Sales of new U.S. homes rose in January by more than forecast to a three-month high as buyers took advantage of attractive mortgage rates that are now starting to increase. Purchases of new single-family homes increased 4.3% to a 923,000 annualized pace in January from an upwardly revised 885,000 rate in the prior month, government data showed Wednesday. The median forecast called for an 856,000 pace. The median sales price rose 5.3% to $346,400 from a year earlier, the highest for any January on record. Historically-low mortgage rates helped fuel a housing boom last year when many Americans sought more space, with homes serving as offices and classrooms during the pandemic. The demand surge has left inventories lean and driven up prices, threatening to cool momentum just as borrowing costs begin to ratchet higher. At the same time, builder backlogs remain elevated and indicate residential construction will stay firm in coming months and contribute to economic growth. A report earlier Wednesday from the Mortgage Bankers Association showed loan applications to purchase homes declined last week to a nine-month low against a backdrop of rising mortgage rates and soaring prices. On Tuesday, a gauge of December home prices in 20 cities posted the largest year-over-year gain since 2014. Other data suggest the current strength can continue in the months ahead. While housing starts last month were softer than expected, applications to build single-family homes rose to the highest since 2006. Meanwhile, the number of one-family residential projects authorized but not yet started climbed to the highest in more than 13 years. At the current sales pace, it would take four months to exhaust the supply of new homes, according to the today’s data. The report is published jointly by the U.S. Census Bureau and the Department of Housing and Urban Development. A few more stats: Three of four regions showed seasonally adjusted gains in home sales, including a 12.6% jump in the Midwest. Purchases climbed 6.8% in the West and 3% in the South. The number of homes sold in January for which construction had not yet started increased to a three-month high. The average sales price climbed to $408,800 last month, the highest on record, reflecting an increase in purchases of properties in the $500,000 to $749,000 range. 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. The figures tend to be volatile.

Berkeley considers ending single-family zoning by December 2022

February 24th, 2021|

Berkeley is considering ending single-family zoning by December 2022 in an effort to right the wrongs of the past and address the region's housing crisis, city leaders say. The City Council will vote on a symbolic resolution that calls for an end to single-family zoning in the city. But the controversial proposal has already upset some residents who've expressed concern that the change could ruin their neighborhoods. Berkeley is the latest city looking at opening up these exclusive neighborhoods to more housing as the region struggles with exorbitant rents and home prices and increasing homelessness. Sacramento recently took a big step in allowing fourplexes in these neighborhoods and one San Francisco politician is pushing a similar plan. Berkeley may also allow fourplexes in city neighborhoods. Next month, the council will consider that proposal, which will likely spark pushback from tenants groups fearful it could fuel displacement if more protections aren't included. For Berkeley, which has historically been anti-development, the moves are the latest shift as the city slowly embraces more density, including plans to add housing around the North Berkeley and Ashby stations. Councilwoman Lori Droste, who is introducing the resolution, said she's trying to undo the legacy of racism that created single-family neighborhoods, which cover 50% of the city. In 1916, single-family zoning was born in Berkeley's Elmwood neighborhood, forbidding the construction of anything other than one home on each lot. At the time, an ordinance stated that its intent was to protect "the home against the intrusion of the less desirable and floating renter class." "I live in the Elmwood area where it is sort of the birthplace of single-family zoning," Droste said. "I thought it was incumbent upon me as representing this neighborhood to say that I want to change something that I think is detrimental to the community." Dean Metzger, the founder of the Berkeley Neighborhoods Council, a collective of nearly 40 neighborhoods, said he wants the opportunity to give more input before the city changes any zoning laws. He said he worries that if a developer builds a multistory building next to a single-family home, it could obstruct views, block solar panels and clog available parking. Metzger said it's hard to specify what kind of design would be most appropriate for Berkeley's single-family neighborhoods. He said he wants developers to be required to seek input from neighbors before building. "They've labeled us anti-growth; it's really not true," he said. "We are trying to find ways to accommodate the development and make our neighborhoods livable. (The council) just wants to build whatever they want to build." After a year of racial reckoning, the same criticism of law enforcement practices should be applied to housing policies, said Councilman Terry Taplin, one of the authors of the resolution. "This is really a historical moment for us in Berkeley because now the racial justice reckoning really has come home," Taplin said. As the state grapples with a housing crisis, many housing advocates say city leaders have to undo decades' worth of anti-density housing policies. They say Berkeley's efforts are a necessary step in addressing the region's crisis even if it takes time. If the resolution passes, it will take years before the city sees a change in its housing stock. "It will take time," said Grover Wehman-Brown, a spokesperson for East Bay Housing Organizations, which represents nonprofit builders. "It's many, many decades and centuries in the making. Building housing takes time, especially in areas like ours where there are not just wide open lots that you can drive large equipment up to and start digging to build one house." David Garcia, the policy director at UC Berkeley's Terner Center for Housing Innovation, said the proposal was a "big deal." "It wasn't that long ago when Berkeley wasn't considered the most forward-thinking on housing," he said. But he added that it's crucial these policies don't jeopardize existing housing. Outreach to residents is key, he said. "It's important to be thoughtful about these decisions because they cannot be easily reversed," Garcia said. "Creating such a significant change of land use in such a large part of the city is going to involve a lot of planning and critical thinking on how to ensure the best policy outcome. You're going to want to make sure the policy itself does result in the kind of housing city leadership wants to see." Eliminating single-family zoning is changing a status quo that has long favored wealthy, white property owners, and opposition can often stall change, said Jassmin Poyaoan, the director of the Community Economic Justice Clinic at East Bay Community Law Center. She said local, state and federal officials have to focus on shifting a culture and mind-set around housing policies that focuses on "housing is a human right." She emphasized that policy changes must focus on creating housing for very low-income residents, protecting rent-controlled units and fortifying tenant protections. This includes Berkeley's future efforts to allow fourplexes. But change is coming. Recently, the Berkeley council approved rezoning the Adeline Street corridor and even added an extra floor of height to what builders could do there. The plan allows 1,450 new housing units, about half for low-income families in an area that was once a thriving Black, working-class community, but has become increasingly white as the high cost of housing has driven out many families. Officials are now trying to undo that. "I think it's really easy to look at racism and injustice in other cities and other places, but it takes a lot more courage, introspection and vulnerability to look at the mistakes that we've made in these areas," Taplin said. "We have to really take an honest look at our shortcomings and be open to changes that might make us uncomfortable." Sarah Ravani is a San Francisco Chronicle staff writer. Email: [email protected] Twitter: SarRavani

Texas freeze, rate jump drive a week of stalled mortgage app activity

February 24th, 2021|

As interest rates hit the highest levels since September, mortgage application activity dropped for the third week in a row, according to the Mortgage Bankers Association. Overall loan application volume fell 11.4% for the week ending Feb. 19 on a seasonally-adjusted basis and 10% unadjusted from the week prior. The refinance share of loan activity continues to tumble in contrast with growing mortgage rates, falling to 68.5% from 69.3% week-over-week. The refi index dropped 11.3% weekly but sat 50% higher than the same time a year ago. The purchase share increased to 31.5% from 30.7% and the index declined 7.8% from last week while rising 7% annually. The average purchase loan size climbed to yet another new record high of $418,000 from $412,200 the previous week. Brutal weather also contributed to a regional drop in activity. “The severe winter weather in Texas affected many households and lenders, causing more than a 40% drop in both purchase and refinance applications in the state last week,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a press release. The total application share of loans guaranteed by the Federal Housing Administration jumped to 11.2% from 9% from the week before, the Department of Veterans Affairs loans dipped to 11.9% from 13.2% and U.S. Department of Agriculture loans edged down to 0.3% from 0.4%. The share of adjustable-rate mortgages rose to 2.56% from 2.47%.

CFPB will delay QM rule's compliance date

February 23rd, 2021|

The Consumer Financial Protection Bureau plans to delay the compliance date of the Qualified Mortgage rule and may revoke or amend a separate rule that created a new category of “seasoned” QM loans. Acting CFPB Director Dave Uejio said on Tuesday that the CFPB will issue a proposed rule soon to delay the July 1 mandatory compliance date for the general QM rule. The bureau said it also will weigh at a later date whether to initiate another rulemaking “to reconsider other aspects of the QM rule.” The changes are not a surprise since Uejio said earlier this month that the CFPB would reconsider any rules implemented under the Trump administration that had not yet gone into effect. The underwriting rule was created after the 2008 financial crisis to set parameters, such as a 43% debt-to-income ratio, that defined loans as safe, and protected lenders using such criteria from legal liability. “An extension of the compliance deadline would allow lenders more time in which they could make QM loans based on a debt-to-income ratio or whether the loans are eligible for sale to Fannie Mae or Freddie Mac, and not just a pricing cut off,” Uejio said in a blog post. Still, mortgage lenders may be feeling some whiplash given that former CFPB Director Kathy Kraninger, a Trump appointee, just proposed an overhaul in June to replace the 43% DTI ratio with a pricing threshold for loans to be considered safe, qualified mortgages. In August, Kraninger also proposed a rule that would allow QM loans held on a lender’s balance sheet for 36 months — or "seasoned loans — to become eligible for so-called QM status, based on a borrower’s past three years of payment history. The QM rule has been the subject of intense debate since 2014 when loans backed by Fannie Mae and Freddie Mac were given an exemption from the QM rule’s 43% DTI requirement. The exemption for the government-sponsored enterprises — known as the GSE "patch" — was supposed to expire in January. The bureau had previously set a March 1 effective date for both the QM rule and seasoned QM rule with a mandatory compliance date of July 1.

Freddie Mac’s single-family CRT soared to record-high despite pandemic

February 23rd, 2021|

The issuance of credit risk transfers on traditional home loans rose to new heights in 2020 despite complications that emerged amid the pandemic, Freddie Mac reported Monday. The $16.9 billion in issuance that transferred risk on more than $475.8 billion in mortgages was the highest annual amount seen since the government-sponsored enterprise reconstituted its risk sharing in 2013. In comparison, there was $12.2 billion in issuance that transferred risk on $252.9 billion in loans in 2019. Record issuance in 2020 suggests that CRTs, which were tested by market dislocation and increased borrower payment challenges, have proved resilient and could rebound under current U.S. leadership. “Despite a challenging environment, Freddie Mac’s single-family CRT program closed out its biggest year ever in 2020,” said Mike Reynolds, a vice president at the government-sponsored enterprise, in a press release. “Our effectiveness in managing risk and tailoring transactions to investor needs and market conditions, together with our ongoing commitment to leadership in this asset class, helped drive demand for our CRT products.” Helping to boost Freddie Mac’s volumes in 2020 was the fact that its competitor, Fannie Mae, put the structured portion of its single-family CRT programs on hold due to the pandemic-related pressures that emerged last year. Fannie did not respond to a question about the current status of those programs by deadline. Among the reasons for Fannie’s pullback from the market last year was the development of a capital plan for the GSEs, which assigns a higher risk weighting to structured CRTs under Federal Housing Finance Agency Director Mark Calabria, a Trump administration appointee. The final version of the plan did slightly lower the weighting. The Biden administration is expected to take a more favorable view of structured CRTs, which the GSEs were originally directed to engage by previous FHFA Director Mel Watt during the Obama administration. But Biden’s power to remove Calabria may be limited until his term ends in 2024, pending the outcome of litigation related to the removal of independent directors playing out in the Supreme Court. How CRT performance fares for investors going forward depends in part on the amount of borrowers who get back on track after putting their payments on hold to address coronavirus-related hardships. The Biden administration recently extended this forbearance through June. At year-end, payments on 2.7% of Freddie’s single-family loans were on hold. That forbearance broke down as follows: 1.29% had been in forbearance for more than six months; 0.63%, three to six months; 0.37%, current; 0.23% one month; and 0.18%, two months.

Mr. Cooper bets on future servicing earnings as 4Q profits run high

February 23rd, 2021|

Mr. Cooper is betting on the future earnings of its servicing portfolio while it rides the wave of high origination volumes seen throughout the industry. The mortgage company produced a net income of $191 million and $2.00 per diluted share in the fourth quarter, down from $214 million and $2.18 per share in the third quarter and $461 million and $4.95 year-over-year. It’s the company’s third consecutive profitable quarter and the fifth of the last six. Despite the fourth quarter income reaching less than half of the year-ago level, the overall profitability continues “well above our target range” and the “balance sheet has never been in better shape,” vice chairman and CFO Chris Marshall said on the earnings call. Mr. Cooper’s pretax origination income of $435 million — down slightly from its record $438 million from 3Q — drove the latest gain, offsetting the $29 million pretax servicing loss. The low interest rate environment, while benefiting originations, combined with fast conditional prepayment rates to hinder servicing profits. The company financed 85,452 mortgage originations worth $24.5 billion in the fourth quarter, a 57% spike from the third quarter’s $15.6 billion and $12.6 billion during the same period a year ago. Based on the January and February loan volumes that rolled in, Marshall expects 2020’s origination strength to carry over into the new year. Mr. Cooper also expanded its servicing portfolio to $626 billion in unpaid principal balance from $588 billion quarterly while falling slightly from $643 billion one year prior. It expects 2021 to stay consistent with 2020 as the latest forbearance extensions — with a possibility of more to follow — will help set up a smooth recovery for borrowers. However, with interest rates predicted to grow into 2022, Mr. Cooper’s looking at the upside of its servicing portfolio to get back in the black down the road. “We have an enormous backlog of orders in the REO exchange,” Marshall said. “Even if some of them dwindle because of higher home prices, the sheer number says that once the foreclosure moratorium is lifted, the REO exchange platform is going to be extremely profitable right out of the gate. That will probably continue at very, very elevated levels for 18 months or two years.”

FHLB-San Francisco to be led by former Radian exec Teresa Bazemore

February 23rd, 2021|

While not inactive in the housing community since retiring in 2017, Teresa Bryce Bazemore said the opportunity to advance the Federal Home Loan Bank of San Francisco's objectives brought her back on a full-time basis. Bazemore will become president and CEO of the FHLB-San Francisco on March 15, replacing Stephen Traynor who held both titles on an interim basis since Greg Seibly resigned one year ago. "When you think about what I've been focused on and what I've been very passionate about over my career, a lot of it has been in alignment with what the Bank's mission is: affordable housing, community development and economic development," Bazemore said. "It just seemed like the perfect combination for me to work with the Bank and it was something that was exciting enough to entice me out of retirement." From July 2008 through April 2017, Bazemore was the president of private mortgage insurer Radian Guaranty. Her career in the mortgage business started in September 1990 as the vice president and associate general counsel of Prudential Home Loans. Bazemore also was at NationsBank, where she helped integrate the mortgage business with Bank of America after those organizations merged, and then was on the executive team at Nexstar Financial prior to its acquisition by MBNA. After leaving Radian, Bazemore was elected to the board of the Federal Home Loan Bank of Pittsburgh, where she served between August 2017 and February 2019. While the FHLB-SF's role in housing finance is different than Radian's, both are aligned in helping low-to-moderate income borrowers have access to affordable credit, and creating affordable housing opportunities and sustainable homeownership, Bazemore said. "The mission of the Bank is broader in that we also are helping with other types of housing opportunities that may not always be homeownership, but other ways to provide for affordable housing in the community," she said. At Prudential Home Loans, she was involved with the task force that created products that expanded its lending to include more opportunities for low and moderate income consumers, and an initiative to increase outreach to minority borrowers. During Bazemore's time at NationsBank, she worked on fair lending as well as its community development bank. That experience is in line with the FHLB's focus on helping small businesses. Bazemore has already had preliminary discussions with the leadership team at the FHLB-SF, getting up to speed on its activities. During the pandemic, Bazemore noted, "the system as a whole has really stepped up and functioned in a way it was intended to function in a situation like this. We'll continue to see if there's opportunities to do more to help our members help their customers in the communities in our footprint" of California, Nevada and Arizona. She is looking to keep stakeholders, especially those in Washington, educated on the role of the FHLB-SF in the U.S. financial system and how it has benefited the members and the community during the pandemic. "The Federal Home Loan Bank system is the other GSE if you will and it provides a lot of low cost liquidity into the system," Bazemore said. "But for most people, that role is not front and center and I think we need to make sure that in the future, policy makers in particular but more broadly everyone, understands how important how important the Federal Home Loan Banks are to the overall economy and the housing economy."

N.Y. appeals court sides with lenders in foreclosure case

February 23rd, 2021|

The New York Court of Appeals issued a groundbreaking decision last week that established clear rules around the statute of limitations in foreclosure actions. In four cases, the court sided with banks and mortgage lenders against claims by defaulted borrowers. Chief Judge Janet DiFiore on Feb. 18 reversed four appellate division rulings related to when the clock starts ticking on the six-year statute of limitations in New York. The 34-page decision will allow mortgage note holders to foreclose more quickly on defaulted borrowers and may help reduce a backlog of litigation still pending from the 2008 financial crisis. Bank lawyers involved in foreclosure actions said the decision provides clarity and consistency on how the statute of limitations will be calculated going forward. “There are many cases that are still on the court’s docket from the financial crisis,” said Schuyler Kraus, co-partner in charge of the New York office at Hinshaw & Culbertson. “The decision will factor into the willingness [of both parties] to work out a resolution and could allow noteholders to move more quickly on foreclosures where settlement is not feasible.” Banks and other noteholders should review their inventory of loans to see if enforcement of a mortgage that was thought to be time-barred under a prior analysis can now be the subject of a timely foreclosure action, Kraus said. The four cases were consolidated because they raised common questions about how and when to calculate the beginning date for the six-year statute of limitations in New York, which typically starts when a note holder files a foreclosure action. A mortgage noteholder is the entity of standing to foreclose when a borrower stops paying their mortgage. Noteholders are typically banks, lenders and investors that may hold loans on balance sheet or in a securitized pool of loans. The decision also resolved a long-standing case in which a defaulted borrower claimed a small defect in a foreclosure filing should allow them to keep their home outright due to the expiration of the statute of limitations. In a case involving a foreclosure on a $900,000 condo in Manhattan, the court found that Wells Fargo's failure to attach a modified loan agreement to the first of five foreclosure filings — dating back to 2009 — did not preclude the bank from foreclosing. The court reversed an appellate decision in Wells Fargo Bank v. Donna Ferrato, in which the borrower had argued that the six-year statute of limitations had expired. The decision also sought to resolve some contradictory lower court rulings as to whether prior foreclosure actions impacted the future calculation of the statute of limitations. The court found in two cases that the withdrawal of a foreclosure action by a lender constitutes an “affirmative act,” that resets the statute of limitations. The court reversed lower court decisions in Freedom Mortgage Corp. v Herschel Engel and in Ditech Financial v Santhana Kumar Nataraja Naidu, ruling in favor of both lenders that claimed prior foreclosure filings had essentially been withdrawn. The court also addressed disagreements in lower courts about the specific language used in default notices sent to borrowers. Letters to borrowers that state a lender “may accelerate,” or “will accelerate,” the requirement to repay mortgage debt cannot be used to calculate the statute of limitations, the court found. Specifically, a default letter sent by Deutsche Bank to a borrower did not constitute a foreclosure action but rather allowed for “breathing room” for the bank and borrower to work out a loan modification or other plan to bring the note current, the court said. The court reversed an appellate division ruling in Juan Vargas v. Deutsche Bank National Trust Company, granting Deutsche Bank’s motion to dismiss. “Noteholders should be free to accurately inform borrowers of their default, the steps required for a cure and the practical consequences if the borrower fails to act, without running the risk of being deemed to have taken the drastic step of accelerating the loan,” Judge DiFiore wrote.

Look for a Mortgage Before You Search for a Home

February 23rd, 2021|

While it might look and sound counterintuitive at first glance, it could actually make perfect sense. Instead of assuming that home loan financing is just a cumbersome, yet mostly guaranteed step toward the American Dream, understand that it will dictate the home shopping process itself. After all, without a mortgage, there’s a good chance you won’t be getting a home unless you’re one of the few individuals out there able to finance the transaction with cash. Don’t Assume You’re Good to Go on the Mortgage Front Close the real estate apps and dig into your financials Take the time to ensure you actually qualify for a mortgage Only then should you start searching for a suitable property to buy And try to do this before you speak to a real estate agent or lender to keep things as objective as possible There’s a reason I’ve written so many articles in the past about what to do and not to do before applying for a mortgage. I’ve recommended renting before applying for a mortgage, avoiding credit card use, knowing which type of mortgage you want before speaking to a lender, paying down debts, and more. I brought up all these important points because they are often overlooked, and aren’t something one can resolve in a matter of days or weeks during crunch time. And so focusing on these potential pitfalls early is key to actually getting the house you want, especially when it’s a seller’s market (as it is now!). Unfortunately, in practice, would-be buyers seem to be too quick to launch the Redfin or Zillow app on their smartphone instead of heeding such advice. Aside from complicating matters when it comes to mortgage loan financing, it could completely jeopardize the deal, especially in a competitive housing market such as the one we’re experiencing now. To give you one such example, a friend recently called me because he found out he’ll need to put down 35% in order to get a jumbo loan at the moment. This may not be the case with all lenders, but now he has to scramble to find one willing to work with him. Had he gotten pre-approved for a mortgage early on, there wouldn’t be a mad dash to find financing, at a time when other qualified buyers are competing with him. Are You Too Focused on the Home Search? Don’t put the cart before the horse Without a mortgage you probably won’t get a house While it’s equally important to focus on both aspects of the process Make sure adequate time is allotted to your home loan too! I get it, home shopping is fun, albeit frustrating. You can envision yourself in a brand new house, celebrating life’s milestones and perhaps growing a family. You get to go to open houses and peruse listings, wondering if this next property is potentially “the one.” It evokes excitement and curiosity, often the complete opposite of what a boring old mortgage might do. And even once you find a house and go under contract, there’s a good chance you’ll focus more on the house itself than the mortgage. For example, you might put countless hours into what needs to be done once you move in, such as choosing a new paint color, but find it difficult to set aside even an hour or two toward home loan research. I fully get that, mortgages just aren’t exciting, and never will be. But you have to look at the mortgage as an opportunity (to save time and money), not as a hassle or a roadblock. Mortgages Seen as a Hurdle, Evoke Negative Emotions Home loans are often viewed as a barrier to homeownership As opposed to a necessary financing vehicle most of us need But looking at it in that way essentially sets you up for frustration and potentially failure Why not come into it prepared with the right expectations so you can secure a low rate without all the stress A study from Fannie Mae a while back revealed that there is a “lack of mortgage focus” out there that is more prevalent among low- and moderate-income borrowers. In particular, these prospective home buyers weren’t aware of minimum down payment and credit score requirements, let alone their own credit scores. And instead of trying to better understand their eventual mortgage and the process of obtaining one, simply looked at it as a “hurdle to overcome.” In viewing it this way, they also did themselves a disservice by not allowing adequate time to comparison shop. They simply found a mortgage lender that could close by the deadline, and likely out of fear, didn’t bother checking in with other banks regarding mortgage rates, closing costs, and so forth. For others, they weren’t so lucky. In about half of the cases in the Fannie Mae study, the lack of research and planning meant they didn’t qualify for a mortgage at all. And were forced to go back to the drawing board, either to rebuild their credit or to add to their savings in order to qualify. Do You Want to Spend Two Years Buying a Home? Make sure you put in the time and research upfront Otherwise the home purchase journey could last years (literally) And cost you unmeasurable amounts of money and stress Or worse, cause you to miss out completely on your dream home For those in the survey, lack of preparation meant a “home purchase journey” that lasted more than two years when all was said and done. The wasted time aside, we’re also talking a potentially higher purchase price, a higher mortgage rate, and possibly missing out on your dream home while being forced to settle for something less than desirable. The takeaway is clear; put in the time beforehand when it comes to obtaining a mortgage. Otherwise it can cost you big and become a major headache. The time you put in upfront could actually reduce the overall amount of legwork throughout the process too, and increase your chances of getting the right mortgage (and house!) the first time around. Getting a mortgage pre-qualification is not enough. Knowing you’ll be pre-approved, or having a very good idea that you’ll qualify for a mortgage long before you begin shopping for a home, is vital. Otherwise you might want to shut those real estate apps on your phone and cancel all those real estate listing emails you receive on a daily basis. Read more: 11 tips for those buying a home in 2021!

7/1 ARM vs. 30-Year Fixed Mortgage: Pros and Cons

February 23rd, 2021|

Posted on February 23rd, 2021 When shopping for a mortgage, it’s very important to pick a suitable loan product for your unique situation. Today, we’ll compare two popular loan programs, the “30-year fixed mortgage vs. the 7-year ARM.” We all know about the traditional 30-year fixed – it’s a home loan with a 30-year duration and an interest rate that never adjusts the entire loan term. Pretty simple, right? But what about the 7-year ARM, or more specifically, the 7/1 ARM? It’s an adjustable-rate mortgage and a fixed-rate mortgage, all rolled into one. Sounds a little bit more complicated… How the 7/1 ARM Works You get a fixed interest rate for the first seven years of the loan After that the rate becomes annually adjustable for the remaining 23 years of the 30-year loan term Many borrowers don’t keep their mortgage/home that long so you may never actually face a rate adjustment It’s an option to consider alongside the more popular 30-year fixed A 7/1 ARM is an adjustable-rate mortgage with a 30-year term that features a fixed interest rate for the first seven years and a variable rate for the remaining 23 years. Let’s break it down. During the first seven years of the loan term, the mortgage rate is fixed, meaning it won’t change from month-to-month, or even year-to-year. So if the starting interest rate is 3%, that’s where it will remain until it’s first adjustment in month 85. For all intents and purposes, the loan program offers borrowers fixed rates for a very lengthy 84 months. During the remaining 23 years, the rate is adjustable, and can change just once per year.  That’s where the number “1”  in 7/1 ARM comes in. This makes the 7-year ARM a so-called “hybrid” adjustable-rate mortgage, which is actually good news. You essentially get the best of both worlds. A lower interest rate thanks to it being an ARM, and a long period where that rate won’t change. It affords you two additional years of fixed payments when compared to the 5/1 ARM. And those 24 extra months might come in handy… Why Choose the 7/1 ARM? You can obtain a lower interest rate (and monthly payment) Relative to other fixed-rate mortgage options that might be available This loan type features a fixed interest rate for a full seven years Meaning you may effectively hold a fixed-rate mortgage for as long as you own your home or until you refinance You probably don’t want your mortgage rate (and mortgage payment) to change all the time, especially if your rate increases, which is probably the likelier outcome. With the 7/1 ARM, you get mortgage rate stability for a full seven years before even having to worry about the first rate adjustment. And because most homeowners either sell or refinance before that time, it could prove to be a good choice for those looking for a discount. That’s right, 7/1 ARM mortgage rates are cheaper than the 30-year fixed, or at least they should be. By cheaper, I mean it comes with a lower interest rate than the 30-year fixed, which equates to a lower monthly mortgage payment for the first 84 months! As noted, most homeowners don’t keep their home loans that long anyway, so there’s a decent chance the borrower will never see that first adjustment, yet still enjoy that low rate month after month for years. At the time of this writing, mortgage rates on the 7-year ARM averaged 2.910%, while the average rate on a 30-year fixed was a slightly higher 3.090%, according to figures from Bankrate. [What mortgage rate can I expect?] That’s a paltry difference in rate, and a reflection of the current disruption on the secondary market. In short, fixed interest rates are super low at the moment because the Fed has pledged to buy up long-term fixed-rate mortgage securities, driving rates down. As such, ARMs aren’t offering much of a discount and aren’t very attractive or even worth looking into in most cases. But in normal times, you might find a much wider spread between the two products. For example, a few years back the 7-year ARM averaged 3.64%, while the average rate on a 30-year fixed was 4.69%. That resulted in a monthly payment difference of $122.28 a month, $1,467 per year, and over $10,000 over the first seven years on a $200,000 loan amount. Not bad, eh? Let’s look at the math: Loan amount: $200,00030-year fixed monthly payment: $1,036.077-year ARM monthly payment: $913.79 Not only would you save long-term, but you’d also save monthly, meaning you could put that extra money to good use somewhere else, such as in a more liquid investment. Or simply set it aside to pay other bills (like high-interest credit cards) or build up an emergency fund. The lower rate would also pay down your principal balance faster, meaning you’d accrue home equity faster. Are the Lower 7/1 ARM Rates Worth the Risk? You have to weigh the risk and reward of the 7/1 ARM While you get a discounted interest rate for a lengthy seven years Perhaps .50% to .625% lower than the 30-year fixed during normal times Consider the risk of the rate adjusting higher in year 8 and beyond unless you sell/refinance before that time Now let’s talk about 7/1 ARM rates, which are typically cheaper than the 30-year fixed, but how much depends on the current rate environment. If you actually plan on staying in your home and paying off your mortgage, you face the possibility of an interest rate reset (higher, or lower) in the future. And you don’t want to get caught out if mortgage rates surge over the next seven years, especially if you can’t sell your home or don’t want to. However, if you’re like many Americans, who sell or refinance within seven years, the loan program could make a lot of sense, assuming it’s a good time to sell or refinance rates are attractive at some point over those 84 months. Just be sure to do the math on both scenarios before committing to either of these loan programs. Sometimes the rate spread between seven-year ARM rates and the 30-year fixed isn’t that wide. At the moment, the spread is almost nonexistent, making fixed-rate mortgages the obvious choice for just about everyone. However, you do need to put in more to shop around because ARM rates can vary a lot more from bank to bank than fixed rates. If you put in the legwork, you may find a bank or lender willing to offer a more substantial discount. For example, First Republic Bank does most of its volume in ARMs, and could offer a wider spread versus the competition. Regardless, this spread can and will fluctuate over time, so always take the time to consider that when making a decision between the two loan programs. Obviously the upside is diminished and it gets riskier if the two loan programs are pricing similarly. Make Sure You Can Afford the 7/1 ARM It might be wise to look at the worst-case scenario Which is the maximum interest rate your loan can adjust to This ensures you can handle the larger monthly mortgage payments Assuming you don’t sell or refinance or are unable to and your rate adjusts significantly higher Lastly, note that you should be able to afford the fully-indexed rate on a mortgage ARM, should it adjust higher. After those seven years are up, the interest rate will be calculated using the margin and the index rate (such as SOFR) tied to the loan. This rate could be considerably higher than what you were paying. In other words, expect and plan for rate increases in the future and make sure you can absorb them if for some reason you don’t sell your home or refinance your mortgage first. If a rate adjustment isn’t within your budget, or won’t be in the future when it adjusts, you may want to pay it safe with a fixed-rate mortgage instead of the 7/1 ARM. Believe it or not, seven years can go by pretty fast. The good news is even if mortgage rate are higher seven years after you take out your loan, you’ll still be pretty far ahead from all the savings realized during that time. You’ll have a smaller outstanding loan amount thanks to more of your monthly payment going toward the principal balance and you’ll have saved a ton on interest. So even if refinance rates are higher in the future, or you simply let it ride with a rate adjustment, you may still come out ahead, at least for a little while. If nothing else, the savings during the first seven years may give you breathing room to pay more in the future, or refinance at more attractive terms. In summary, the 7-year ARM might not be for the faint of heart, whereas a 30-year fixed is pretty straightforward and stress-free. And that’s why you pay more for it. If you’re certain you won’t be staying in a property for more than five or so years, it could be a solid alternative and a big money saver if spreads are wide. To know for sure, use a mortgage calculator to compare the costs of each loan program over your expected tenure in the property. 7/1 ARM Pros and Cons The Good You get a fixed interest rate for an entire seven years (84 months!) The rate is typically much lower than a 30-year fixed More of each monthly payment will go toward the principal balance instead of interest Most homeowners move or refinance in less time than that So you can enjoy a lower mortgage rate without worrying about a rate adjustment The Bad It’s an ARM that can adjust higher after seven years Monthly payments may become much more expensive if you hold onto it The interest rate discount may not be worth the risk of the rate adjustment More stress if you hold the mortgage anywhere near seven years Could be stuck with the loan if unable to sell/refinance once it becomes adjustable Read more: 30-year fixed vs. 15-year fixed.

Home prices in U.S. cities jump at fastest pace since 2014

February 23rd, 2021|

Home prices in 20 U.S. cities surged in December, with low mortgage rates fueling the housing market. The S&P CoreLogic Case-Shiller index of property values climbed 10.1% from a year earlier, beating the median estimate of 9.9% in a Bloomberg survey of economists. It followed a 9.2% gain in November and was the biggest jump since 2014. Phoenix, San Diego and Seattle posted the biggest gains in prices, according to a press release on Tuesday. Nationally, the Case-Shiller index jumped 10.4% in December, also the biggest surge since 2014. Historically low mortgage rates have fueled a pandemic housing rally, with a scant inventory of homes to buy helping to boost prices. The Space Needle stands past a "For Sale" sign displayed in front of a house in Seattle, Washington. Mike Kane/Photographer: Mike Kane/Bloomber December was the fourth straight month that prices gained the most since 2014. The rally started in July and picked up steam in the final months of 2020, with Americans looking to take advantage of low borrowing costs to buy suburban homes. “These data are consistent with the view that Covid has encouraged potential buyers to move from urban apartments to suburban homes,” said Craig Lazzara, global head of index investment strategy at S&P Dow Jones Indices. Prices gained 14.4% in Phoenix, leading all cities for the 19th straight. In the West, the overall gain was 10.8%. But the price growth is likely to slow this year, according to CoreLogic Deputy Chief Economist Selma Hepp. "Acceleration in price growth is largely driven by record-low mortgage rates and the severe undersupply of for-sale home — two factors that may take a turn this year and relieve some of the price pressure," she said. "But, demand from millennials and existing owners, who may have been on the sidelines throughout the pandemic, is likely to persist.”

AimLoan Review: You Can Check Their Rates and Fees 24/7

February 23rd, 2021|

Posted on February 22nd, 2021 Today we’ll take a look at American Internet Mortgage, more commonly known as “AimLoan,” which is a streamlined discount mortgage lender that focuses mostly on conforming loans. Doing so allows them to do what they do best, and ideally offer lower mortgage rates to their customers by running more efficiently and keeping costs low. At the time of this writing, they were offering the lowest APR for both a 30-year fixed and a 15-year fixed mortgage for a sample loan scenario on the Zillow Mortgage Marketplace. So they appear to offer competitive interest rates and reasonable lender fees. Let’s find out more about them. AimLoan Fast Facts Direct-to-consumer mortgage lender that offers home purchase and refinance loans Founded in 1998, headquartered in San Diego, California Funded roughly $1.3 billion in home loans last year Most active in the states of California, Arizona, and Texas Licensed to do business in all 50 states and D.C. AimLoan is a proper veteran in the mortgage industry, having been around since 1998. Not many companies last that long without being acquired or going out of business. The San Diego, CA-based direct mortgage lender was founded by Vince Kasperick, who continues to serve as the company’s president. Since that time, they’ve funded more than $23 billion in home loans, with nearly $1.3 billion originated last year. Their bread and butter product is the mortgage refinance, whether it’s a rate and term refinance or a cash out refinance. But they also offer home purchase loans too. They tend to stick to plain vanilla loans, meaning straightforward stuff that can easily be sold to Fannie Mae and Freddie Mac shortly after funding. AimLoan operates as a direct-to-consumer mortgage lender, meaning it’s a call center you can’t visit in person. So you’ll be working with a loan officer and processor remotely. The company appears to be most active in their home state of California, which accounts for more than a quarter of total loan volume. They also do a lot of business in nearby Arizona and Texas, along with Florida and Georgia. At the moment, AimLoan is licensed to lend in all 50 states nationwide, along with the District of Columbia. How to Apply for a Mortgage with AimLoan They offer the so-called AimLoan 6-Step Process It starts with a digital mortgage application powered by Ellie Mae Then your loan is run through their automated underwriting system Once approved you can manage your loan via the online borrower portal and upload any required conditions It’s easy to apply for a home loan with AimLoan. Simply visit their website and click on “Apply Now.” From there you’ll need to provide personal and financial information, then your application will be run through their automated underwriting system. Assuming you receive a conditional loan approval, you’ll be given the opportunity to lock or float your rate at your desired fee/credit combination. A human loan officer and loan processor will also assist you along the way and provide you with a list of any conditions that need to be met. During that time, a home appraisal will be scheduled if necessary and third-party items like title and escrow will be set up. Speaking of, you will be asked to submit an appraisal fee at the time you lock your rate, which kind of acts like the application fee, though it covers the appraisal if and when you fund. All in all, they appear to make it pretty simple to apply, lock, and close your loan. If you don’t want to use their self-service option, you can also call them up directly and connect with a loan officer before beginning the application. Loan Programs Offered by AimLoan Home purchase loans Rate and term refinances Cash out refinances Conforming loans backed by Fannie Mae and Freddie Mac VA loans Fixed-rate mortgages: 30-, 25-, 20-, 15-, and 10-year terms available They lend on primary residences, second homes, and investment properties (1-4 units) As alluded to, AimLoan is a streamlined mortgage lender that likes to keep its product menu short and sweet. Doing so allows them to offer lower rates and superior customer service. But it also means you may not be able to get what you’re looking for. While they offer all the usual stuff, like home purchase loans and mortgage refinances, along with conforming loans and VA loans, several items appear to be missing. Those include jumbo loans, which exceed the conforming loan limit, along with FHA loans and USDA loans. If you’re in need of one of these loan types, you may need to go elsewhere. Additionally, while you can get a fixed-rate mortgage in a variety of loan terms, they aren’t offering adjustable-rate mortgages at the moment. Or at least not displaying them on their website because they say they’re currently pricing higher than fixed rates, which tends to be true. AimLoan Mortgage Rates One advantage to using AimLoan is the fact that you can see their mortgage rates online. And you don’t need to sign up or speak to someone first. Additionally, you can compare a variety of rates all at once tailored to your own unique loan scenario, instead of simply looking at promotional rates that make a bunch of assumptions. To get started, simply head to the AimLoan website and start filling out the instant rate quote form on the homepage. It’s easy to complete and you should see a variety of rates in about a minute. In terms of fees, they appear to charge a flat $995 origination fee, which can often be offset by a lender credit. They say their pricing model differs from other lenders because their profit is mostly from that flat fee. As such, they can pass on the savings to consumers by not marking up the pricing they receive on the secondary market. Anyway, once you click on a given mortgage rate, it will show you a full fee breakdown including their fees and third-party costs like appraisal and title insurance. You can also get an idea of cash to close by inputting your estimated property taxes and current loan balance if it’s a refinance. If you like what you see, simply click on “Apply Now” or “Talk to a Loan Officer” to get started on your application. AimLoan Reviews On Zillow, they have a 4.15-star rating out of 5 from nearly 400 customer reviews, which is good but not excellent. There are some mixed reviews that seem to be dragging down their overall score. On Google, they have a 4.3-star rating from nearly 300 reviews, and on Bankrate a 4.4-rating from almost 200 reviews with an 84% recommend score. AimLoan has a more inferior 3.5-star rating on Yelp from about 300 reviews. They also list a bunch of customer reviews on their own website, though it’s unclear if they provide much value. Lastly, they have a 4.61/5-star rating with the Better Business Bureau and an ‘A+’ rating based on complaint history. They’ve been an accredited business since 2015 and were awarded the BBB Torch Award for Ethics, which goes to businesses with “the highest standards of leadership character and organizational ethics.” To sum it up, AimLoan is probably best suited for an existing homeowner looking to refinance their mortgage to a lower rate, who doesn’t have a complicated scenario. I’m talking someone with good credit, a steady W-2 job, and nothing out of the ordinary to ensure the loan process moves along smoothly. Those who have more complex loan scenarios or need more hand-holding may want to consider other lenders. AimLoan Pros and Cons The Good Stuff Can apply for a mortgage directly from their website Offer a digital application powered by Ellie Mae (ICE) View mortgage rates online without providing contact info Offer 60-day rate locks standard Licensed to do business in all 50 states and D.C. Mostly good customer reviews A+ BBB rating, accredited since 2015 Free mortgage calculators and mortgage glossary on site The Perhaps Not Do not appear to offer FHA, jumbo, or USDA loans Typically do not allow FICO scores below 620 Do not finance co-ops or manufactured/mobile homes No physical locations (photo: Ann Oro)

HUD issues relief on foreclosures for Texans after storm

February 22nd, 2021|

Texas residents and businesses have two extra months to file and pay their federal taxes, and Texans will also get some housing-related assistance after severe winter storms this month left millions without power and running water. The U.S. Department of Housing and Urban Development announced a 90-day moratorium on foreclosures of Federal Housing Administration (FHA)-insured home mortgages. The HUD said that it will extend mortgage insurance to homeowners whose properties have been destroyed. The mortgage insurance expansion can be used to purchase a new home or renovate a damaged one. The Internal Revenue Service also said on Monday that Texans have until June 15 to file federal returns and pay any taxes owed, tapping its authority to delay deadlines for disaster victims. Any tax forms due in the lead up to the June 15 deadline will be delayed until the new deadline. Winter storms and record-breaking freezing temperatures hit nearly the entirety of Texas earlier this month. Millions lost power, and then water, as pipes froze and water pressure dropped. Power began resuming late last week and over the weekend, though millions are still without safe drinking water.

Flueid, a fintech streamlining title insurability, plans growth

February 22nd, 2021|

Flueid, a mortgage and real estate technology company founded by executives with title-related expertise announced Monday that it’s planning an expansion funded by two investors, Aquiline Technology Growth and Commerce Ventures. The undisclosed amount of Series A funding will help the company build out its technology, which is currently focused on helping lenders keep timelines under control through measures that include automating portions of the title insurance approval process. “This funding validates a year of record growth and revenue,” said Peter Bowman, CEO of Flueid, in a press release. “We’re delivering key real estate industry differentiators without disrupting workflow for a variety of customers, including new fintech solution providers who are digitizing the mortgage process.” Many lenders are seeking improvements in the speed of title insurance approvals and other steps as purchase-loan timelines have gotten longer due to booming business. The average closing time for a purchase loan lengthened in January to 57 days from 56 days the previous month. It was nine days longer than the same month last year, according to ICE Mortgage Technology. That’s a concern for the mortgage and real estate industry because homebuyer mortgages are governed by time-sensitive contracts. “Flueid has innovative technology that addresses many pressing challenges found in the traditional loan lifecycle," said Jeff Greenberg, Chairman and CEO of Aquiline Capital Partners ATG, in the press release. The mortgage industry historically has been slow to innovate, and while it’s made some advances in recent years, the investment in Flueid suggests there’s room for improvement. “We're always looking for experienced management teams that are building technology solutions in large, but under-innovated verticals of financial services — and we found a natural fit with Flueid,” said Vivek Krishnamurthy, principal at Commerce Ventures, in the press release.

Senate panel to question CFPB, SEC nominees next month

February 22nd, 2021|

WASHINGTON — President Biden’s nominees to lead the Consumer Financial Protection Bureau and the Securities and Exchange Commission will appear before the Senate Banking Committee on March 2. The confirmation hearing for Rohit Chopra and Gary Gensler, the administration's picks to lead the CFPB and SEC, respectively, is scheduled for 10 a.m. It will be the first nomination hearing under Chairman Sherrod Brown, D-Ohio. Chopra is currently serving as a Democratic member of the Federal Trade Commission. He was previously an assistant director and student loan ombudsman at the CFPB under former Director Richard Cordray. If confirmed, Chopra will take over for Dave Ueijo, who was named acting director of the CFPB after the Trump-appointed Director Kathy Kraninger resigned in January. Gensler has been leading the Biden transition team’s banking and securities regulator review team. He was chairman of the Commodity Futures Trading Commission from 2009 until 2014.

Forbearances drop as extensions provide a ‘smooth transition’

February 22nd, 2021|

Independent mortgage banker recovery drove the weekly decrease in forbearance share, according to the Mortgage Bankers Association. The number of mortgages in coronavirus-related forbearance followed two weeks of declines by dropping another 7 basis points between Feb. 8 and Feb. 14. Home loans in forbearance plans represent 5.22% — about 2.6 million homeowners — of all outstanding mortgages, down from 5.29% the week before. It marks the lowest forbearance rate since hitting 3.74% on the week ending April 5. The share of forborne loans at independent mortgage bank servicers dropped to 5.54% from 5.69%, while depositories rose to 5.28% from 5.26%. “Policymakers and the mortgage industry have helped enable this [strong housing market] during the pandemic by providing millions of homeowners support in the form of forbearance,” MBA’s SVP and chief economist Mike Fratantoni, said in a press release. “The decision to extend the allowable duration of forbearance plans should provide for a smoother transition this year as the job market continues to recover.” In the last two weeks,both President Biden and the Federal Housing Finance Agency pushed out the forbearance request deadlines by three months to June 30. While the extended forbearance protections are intended to assist troubled borrowers, the latest Black Knight report asserts that they’ll likely stymy the recovery rate. Ginnie Mae loans in forbearance — Federal Housing Administration, Department of Veterans Affairs and U.S. Department of Agriculture Rural Housing Service products — dipped to 7.32% from 7.34%. Conforming mortgages — those purchased by Fannie Mae and Freddie Mac — continue to be the healthiest loan type, going to 2.97% from 3.01%. Meanwhile, private-label securities and portfolio loans — products not addressed by the coronavirus relief act — dropped to 8.76% from 8.89%. An 15.9% share of all forborne mortgages sit in the initial forbearance stage, while 81.6% shifted to extended plans. The remaining 2.5% re-entered forbearance after exiting previously. Forbearance requests as a percentage of servicing portfolio volume dipped to 0.06% from 0.07% the week earlier. Call center volume as a percentage of portfolio volume increased slightly to 9.3% from 9.2%. The MBA's sample for this week's survey includes a total of 48 servicers with 25 independent mortgage bankers and 21 depositories. The sample also included two subservicers. By unit count, the respondents represented about 74%, or 37.1 million, of outstanding first-lien mortgages.

Appraisal Foundation cites COVID, fair housing in USPAP change delay

February 22nd, 2021|

Citing challenges presented by the coronavirus and the broader conversation about race and housing, the Appraisal Foundation has postponed the publication of guideline revisions, extending the current Uniform Standards of Professional Appraisal Practice through the end of 2022. While COVID-19 has had an impact on how appraisers are able to do their day-to-day work, examples of discrimination in property valuations have also bubbled up in the media, amid a national discussion on racial bias and economic equity. "Pressing issues have arisen in our profession over the past year ranging widely from concerns about fair housing matters to how to conduct a socially distanced property inspection," Wayne Miller, chairman of the Appraisal Foundation's Appraisal Standards Board, said in a press release. "USPAP is a maturing document, and it can take longer to study the complex issues facing our profession and how they will impact our standards." USPAP is the governing criteria for performing valuations of a number of forms of assets, including real estate, and compliance is required for all federally-related transactions. The original version was written by a group of appraisal organizations in the mid-1980s, which then established the Appraisal Foundation to implement them. The Financial Institutions Reform, Recovery and Enforcement Act of 1989 mandated states enforce real estate appraisal compliance to this standard. Originally, changes to USPAP were made on a frequent ad hoc basis. Eventually the Appraisal Foundation's Appraisal Standards Board adopted a one-year cycle for revisions, which was subsequently lengthened to two years. Normally, the round of rule revisions would have gone into effect on Jan. 1, 2022. But the ASB needs additional time beyond the normal cycle to examine the impact of the above events on the appraisal profession before it issues new guidance, Miller said. "With that in mind, we have decided to extend the effective date of the current USPAP by one year," Miller said. "This will provide continuity to the profession during this pandemic while also giving the ASB the appropriate time to carefully examine the challenges facing our profession before offering additional guidance." Since the start of the pandemic, the mortgage market has adapted to social distancing protocols, evidenced by the increased use of appraisal waivers and tools that allow borrowers to take photos of the inside of their property rather than have an appraiser physically present.

Why Does Everyone Want Us to Pay Down Our Mortgages?

February 22nd, 2021|

Posted on February 22nd, 2021 You may have come across one of those articles lately that talks about how a couple paid off their mortgage in five years. Or some other absurdly-fast timeline. While it also sounds super enticing and perhaps inspiring, it’s often just a feel-good story that may not actually make a lot of sense financially. At least for your particular situation. And with mortgage rates close to levels never seen before, one should question whether it makes sense to target the mortgage as a bad debt. Mortgage Debt Has Hit Record Highs The New York Federal Reserve Bank recently reported that household debt, largely comprised of home loans, hit a record $14.56 trillion in the fourth quarter of 2020. It was driven “by a steep increase in mortgage originations,” which the NY Fed estimated to be a staggering $1.2 trillion in the fourth quarter of 2020. That was also a record which surpassed the massive volumes seen during the historic refinance boom back in the third quarter of 2003 (at least in nominal terms). At first glance, this makes it appear as if Americans are going down that dark debt path once again. But in reality, it’s more illustrative of surging property values, not so much overflowing debt balances. Many homeowners these days actually owe very little relative to what their homes are worth, which puts them in a much better position than where we were at a decade ago. Back then, scores of homeowners applied for cash out refinances at near-100% loan-to-value ratios (LTVs) on properties with dubious valuations. In other words, looking at outstanding debt alone isn’t sufficient – you need to consider homeowner equity, which I believe has also never been higher. It Sounds Really Good to Own Your Home Sooner… We are obsessed with owning our homes free and clear Yet nothing really changes other than not having a principal and interest payment You’ll still need to pay property taxes and homeowners insurance and possibly HOA dues And all that money you threw at your house is essentially locked away until you sell or refinance If you look at a lot of today’s mortgage refinance ads, you’ll notice that the 15-year fixed (or any shorter term for that matter) is often touted above all else. Heck, even 10-year fixed mortgages are being actively pitched by lenders as a great opportunity to own your home faster! Part of this could have to do with the fact it simply looks better to advertise an interest rate just below 2% (1.99% APR!). And if mortgage shoppers don’t take the time actually differentiate these mortgage types, they may just assume one lender is offering a more competitive rate. Regardless, one has to ask themselves if it makes sense to prepay the mortgage right now, at a time when mortgage rates have never been lower. Instead of “slowly” paying off your mortgage with a traditional 30-year fixed, banks, lenders, and even the government are recommending that we shorten our loan terms and get out of debt quicker. The angle is simple: You can pay off your home loan in half the time without actually increasing your monthly mortgage payment, assuming your old rate is substantially higher than today’s going rate. A shorter loan term with a similar monthly payment sounds great. If you’re currently paying $1,500 a month on a 30-year mortgage, why not switch to a 15-year mortgage if the payment is just about the same thanks to the rock-bottom mortgage rates. After all, you’ll save a ton of money in interest, and you’ll own your home free and clear a lot quicker. If you pay mortgage insurance, you’ll also be able to ditch it sooner rather than later once your loan-to-value drops low enough. And of course, you’ll build precious home equity. [15-year fixed vs. 30-year fixed mortgage] Is Now the Best Time to Pay Down Debt? Some pundits will tell you to always pay down debt like it’s the plague But why get rid of ultra-low cost debt if your money can grow faster elsewhere This idea can be even more compelling with high rates of inflation expected in coming years Your mortgage payment could feel like peanuts as the value of the dollar continues to erode At the same time, with interest rates so low and only poised to rise, it’s really the ideal time to carry ultra-cheap debt. And a mortgage can be a good debt, especially when interest rates are at or near all-time lows. After all, one could reasonably argue that investing their money elsewhere at a better rate of return would serve them better financially. Sure, it may not make a whole lot of sense to park your money in a savings account paying sub-1% APYs if your mortgage rate is set at 3% or higher. But if you can snag an annual return in the stock market of 6% or more, why settle for 3%, or even less if your mortgage rate is lower? You may also have other debts with much higher interest rates that need your attention, such as your credit card set at 19.99% APR, or pretty much any other loan you have. The point I’m getting at here is that paying off the mortgage early (or faster than need be) isn’t necessarily right for everyone, even if the monthly payment isn’t much more expensive due to a favorable refinance. This is especially true when mortgage rates are at unprecedented lows because you’re able to borrow cheap money. While a 15-year fixed can save you a ton in interest over time, it’ll also mean you’re fully invested in your home. But what if you can’t keep up with monthly payments for one reason or another. Those bigger payments won’t do much good, will they? Remember, paying extra won’t lower future mortgage payments. It just reduces your total interest expense and shortens your loan term. There’s also the issue of saving for retirement, your children’s college, and even a basic emergency fund. Going nuts trying to pay off the mortgage just isn’t that logical, and is perhaps more a psychological victory than a financial one. It kind of reminds me of the rush to retire – congratulations, but then what?

CFPB goes on hiring spree as it looks to ramp up enforcement

February 22nd, 2021|

The Consumer Financial Protection Bureau is assembling a new enforcement team and hiring more personnel as it prepares to toughen oversight of banks, mortgage servicers and other financial firms. President Biden’s pick to lead the agency, Federal Trade Commissioner Rohit Chopra, has not yet had a nomination hearing before the Senate Banking Committee. But the agency under acting Director Dave Uejio has already named a new head of enforcement and launched an effort to recruit attorneys. The size of the agency's workforce tapered off during the Trump administration as enforcement activity slowed. But observers see the latest personnel moves as a sign that the bureau aims to bulk up under new leadership, even before Chopra is confirmed. “They are ramping up for an increase in the number of enforcement investigations and activity,” said Tony Alexis, a partner at Goodwin Procter and a former CFPB assistant director and head of enforcement. “Headcount is an incredible part of the resources that need boosting.” Uejio has already installed Cara Petersen as acting head of enforcement, succeeding former Director Kathy Kraninger's enforcement chief, and appointed new senior officials to oversee Trump appointees. He also announced plans on LinkedIn and an agency blog to recruit additional attorneys for multiple areas. "We must hold accountable companies that break the law and harm American consumers and small businesses during this time of incredible financial stress," he said in the Feb. 9 blog. "To do this, we need the fullest talents and passion of the American public. The Bureau has one of the most remarkable workforces I have ever seen, and I invite you to seize the moment and join us." The hiring moves come as Uejio also has moved aggressively to tee up enforcement actions. “It’s clear that they intend to become really aggressive as quickly as they can,” said Scott Pearson, a partner at Manatt, Phelps & Phillips. To be fair, CFPB enforcement actions picked up toward the end of the Trump era. Tom Ward, Kraninger's enforcement director, filed 52 such orders last year, the highest number since 2015. But in a move appearing to clear the way for Chopra to put his own managers in top positions, Ward was moved out of the job recently and into a new role to make way for Petersen, according to internal agency emails. Petersen has been with the bureau since 2011. Ward will serve as executive senior counsel in the division of Supervision, Enforcement and Fair Lending. The change in enforcement chiefs is just the beginning of a return to reviving the approach taken by former CFPB Director Richard Cordray during the Obama administration, experts said. "There may be a lot of reshuffling within the bureau," said Courtney Dankworth, a litigation partner at Debevoise & Plimpton. "Cordray was obviously quite aggressive and set the stage as the first director for what the bureau could do, so [Chopra] doesn’t have to break new ground." The national campaign to recruit attorneys follows a 17% drop in staffing at the agency during the Trump administration. Still, some experts were surprised at the scope of the recruitment drive. In addition to the LinkedIn page, the agency also is actively recruiting from the Hispanic Bar Association, the National Asian Pacific American Bar Association, law schools, government entities and nonprofits, according to a CFPB spokesperson. The bureau has also engaged with current and former members of its advisory committees about the hiring efforts, the spokesperson said. "They are trying to staff up aggressively and trying to get the word out through nontraditional means, which suggests they have big plans for what they want to do," said Lucy Morris, a partner at Hudson Cook and former CFPB deputy enforcement director. In his blog post calling on attorneys to apply for jobs, Uejio highlighted the bureau's mission and the stress of the COVID-19 pandemic on consumers. The "CFPB was created for moments like this,” Uejio wrote. "Born out of the Great Recession, the CFPB was forged in crisis to vigorously protect America’s consumers. Achieving this goal requires vigorous oversight of all applicable Federal laws and the fullest utilization of our legal authorities.” The ramp-up in hiring follows a three-year period of mostly attrition under the Trump administration. When former acting CFPB Director Mick Mulvaney took control of the agency in late 2017, he immediately instituted a two-year hiring freeze. Though Kraninger vowed to increase hiring in 2019, the bureau's headcount dropped 17% under her watch to a low of 1,421 in June 2020, from a peak of 1,712 in June 2017 under Cordray. The CFPB had 1,504 employees at the end of December, according to the bureau’s financial statements. "It makes a lot of sense that they want new attorneys and to beef up the overall numbers because they have had attrition of employees over the last few years that haven’t been replaced," said Dankworth. Meanwhile, though Mulvaney’s plan to embed political appointees in 2017 to shadow career employees was blasted by critics, Uejio has hired two senior political appointees — both consumer advocates and former CFPB officials — essentially to do the same thing. Diane Thompson is founder of the Consumer Rights Regulatory Engagement and Advocacy Project, and Brian Shearer was legal director at Justice Catalyst Law. They will serve as senior advisers and will shadow Trump appointees, sources said. Uejio has already signaled that the bureau will be scrutinizing how consumers have been treated by auto lenders, banks, debt collectors and mortgage servicers under the Coronavirus Aid, Relief, and Economic Security Act. Many expect an increase in the number of enforcement actions and the size of penalties and fines. "I expect to see more big names in their sights where they go after players affecting millions of consumers with very large penalties," said Dankworth.

Treasury yields jump, AmeriHome sells to Western Alliance and more of the week's top news

February 19th, 2021|

The homeownership rate for Black households was 44.1% in the fourth quarter, down from 46.4% in 3Q 2020, and virtually unchanged from both a year ago and when the Fair Housing Act outlawed discrimination in 1968. For years, it’s consistently been more than 20 percentage points lower than the average homeownership rate, and over 30 percentage points lower than the homeownership rates for whites.With historic barriers including discrimination, wealth inequities and predatory lending to overcome, change may take time, but there are steps lenders can take now, industry leaders say.“Since 2015 there have been approximately 1 million new Black homeowners. Unfortunately, the number of black applicants has not reached pre-2008 levels,” said Antoine Thompson, executive director of the National Association of Real Estate Brokers, the oldest minority trade group in the nation. “Marketing and outreach, diversity in loan officers and staff and mortgage underwriting criteria may play key roles in increasing Black homeownership.”Read the full story here.

Redfin courts first time home buyers with $608M deal to buy RentPath

February 19th, 2021|

Redfin signaled Friday that it’s interested in putting its listings in front of a broader potential customer base for entry-level homes with its proposed purchase of RentPath. The online real estate company, which has an in-house mortgage unit, would pay $608 million in cash if the deal is approved by the Federal Trade Commission and a bankruptcy court. The acquisition could accelerate online property sales to transitioning buyers in a growing online real estate market. “When approved, this acquisition will bring together a leading site for buying a home with a leading site for renting a home,” Redfin CEO Glenn Kelman said in an investor call Friday. Glenn Kelman, chief executive officer of Redfin Corp. David Ryder/Bloomberg The acquisition agreement initially gave Redfin’s stock nearly a 9% lift on Friday, when it rose to levels near $94 per share before plateauing. If the deal goes through, RentPath’s listings could be on Redfin’s site by late 2020. Redfin expects the FTC to be more open to its proposal to buy RentPath than it was to CoStar’s earlier offer, Chief Financial Officer Chris Nielsen said during the call. RentPath canceled its previous agreement with CoStar after the FTC filed an antitrust lawsuit to block the deal. “We just think we’re in a different position from CoStar, which operates the No. 1 rental site, Apartments.com. We’re new to the rentals business,” Nielsen said. Recently, there’s been more upward pressure on home prices than rent in the United States, but the pandemic has highlighted advantages owner-occupants have, like the ability to make equity draws or exert more personal control over a living space. Redfin estimates that roughly one-quarter of its more than 40 million visitors may be interested in renting a home. RentPath had 13 million visitors in December 2020 who may be interested in homeownership. Regardless of what consumers choose, Redfin is anticipating a net benefit from the purchase, due to a reduction in customer acquisition expenses for both businesses thanks to economies of scale, which will also likely help listings rank higher in search engines. “It lowers our customer acquisition cost. It also helps us sell properties, and what we found is that adding rentals to our website will actually not only increase the audience of renters on our site but also increase the audience of homebuyers,” Kelman said.

Movement expands Indianapolis market with Michelle Banning

February 19th, 2021|

Movement Mortgage, a national top 10 retail mortgage lender, is excited to announce the addition of Market Leader Michelle Banning to the Indianapolis, Indiana market. Banning will be based out of Fishers, a popular suburb.  Banning brings nearly a decade of experience to the Movement Mortgage team. Starting as a loan closer at Homestead Title in Columbus, Ohio, Banning soon transitioned to Mortgage Loan Originator at Victory Mortgage. In 2016, she transferred to Indiana to revitalize the Indianapolis office. Continue reading Movement expands Indianapolis market with Michelle Banning at Movement Mortgage Blog.

There's no 2-minute warning for rate shocks, even with Fed at the zero bound

February 19th, 2021|

The mortgage industry is notorious for its use of acronyms and even acronyms inside acronyms (TRID, anyone?). However, there is an acronym that is highly relevant to the current rate environment: ZIRP, which stands for “Zero Interest Rate Policy.” As its definition implies, this term describes the Federal Reserve’ s current policy of holding the Fed funds rate at near 0% for the foreseeable future due to the economic challenges presented by the COVID-19 pandemic. It may be easy for some to assume a locked-down Fed Funds rate means mortgage rates will remain at the historically ultra-low levels the industry has seen throughout the pandemic. Not only does history tells us this is not the case, but the recent uptick in interest rates due to the rise in the Treasury yield and increased economic spending provides even more current proof that rate swings are possible, if not inevitable during ZIRP. As such, lenders and their capital markets executives must be prepared for interest rate swings in either direction despite the current ZIRP. The last time the Fed instituted ZIRP was following the Global Financial Crisis, which lasted for a span of seven years, from December 2008 to December 2015. In December 2008, the average note rate for 30-year mortgages was 5.14%, when ZIRP ended in December 2015 the par note rate was 3.31%. However, that lengthy seven-year span was not a gentle expressway ramp; it was riddled with both bull and bear markets for mortgage rates despite the continued Fed pledge of “lower for longer.” Despite a Federal Open Markets Committee (FOMC) target on short-term rates of 0.00% - 0.25%, mortgage rates experienced several violent swings. During what was known as the taper tantrum (remember hearing that talk again earlier this month?), the market was afraid the Fed was going to taper off its purchases of Treasuries and mortgage-backed securities so mortgage rates went up over 100 basis points over 3 short months. During another span of only 9 weeks prices on the lowest-coupon mortgage-backed security declined by a whopping 800 basis points, from 101 all the way down to a 93 handle. All of this activity occurred more than two years before the Fed actually instituted the very tiniest bit of liftoff in their Fed funds rate policy. Looking at the current environment, the Fed has indicated that it will not raise the Fed funds rate until at least 2023. However, as the industry has observed before, this does not mean that mortgage rates are going to languish around the same range they’ve been in for the last 10 months. In fact, it would not be unusual to see changes of even an entire whole percentage point up, or down, for however long this current ZIRP is in place. In fact, Fannie Mae and Freddie Mac have both forecasted moderate increases in interest rates in 2021 in anticipation of this inevitability, though rates could certainly head in the opposite direction given the right market conditions. In these past few months, I’ve heard people say things like “The market’s not going anywhere for a few years. The Fed said so, and it’s already priced in, right?” While that may be the case for the Interest on Excess Reserves and Fed Funds, which the Fed has pegged at near zero, there will not be an alarm that goes off letting lenders know to lock the doors. Just because the Fed is staying put doesn’t mean that mortgage rates, and prices of MBS, are staying put as well. As history has shown us, shocks can — and do — come when markets least expect them.

Fed sounds alarm on commercial real estate, business bankruptcy

February 19th, 2021|

The Federal Reserve warned of significant risks of business bankruptcies and steep drops in commercial real estate prices in a report published on Friday. “Business leverage now stands near historical highs,” the central bank said in its semiannual Monetary Policy Report to Congress. “Insolvency risks at small and medium-sized firms, as well as at some large firms, remain considerable.” In part encouraged by government and Fed programs, businesses have taken on more debt over the past year as they’ve struggled to deal with the economic and financial fallout from COVID-19, including in some cases forced shutdowns. Powell testimony The Fed report, which provides lawmakers with an update on economic and financial developments and monetary policy, was published on the central bank’s website ahead of Chair Jerome Powell’s testimony before the Senate Banking Committee on Tuesday and the House Financial Services panel a day later. In the report, the Fed voiced hopes of an end to the pandemic later this year, though it cautioned that pitfalls remained. In particular, it said that commercial real estate prices “appear susceptible to sharp declines” from historically high levels. That could particularly prove to be the case if the level of distressed sales picks up or if the pandemic leads to longer-term declines in demand, it said. Commercial real estate might be hit by a double-whammy after the pandemic, some economists say. An increase in people working from home could result in less demand for office space, while stepped-up online purchases could force more shutdowns of brick-and-mortar retailers and additional vacancies at shopping centers.

Mortgage rates spike, but there’s no reason to panic

February 19th, 2021|

Now that things are starting to look brighter, rates are rising to places they haven’t been in months. They’re being pushed up by optimism over vaccinations and the relief bill working its way through Congress – and by fears that an improving economy will spark inflation. Zillow economist Matthew Speakman warns that “the days of all-time low rates may be a thing of the past.” But he’s also giving borrowers a reality check, reminding them that “mortgage rates remain very low by historical standards.” That means buyers can still get an excellent deal on loan for a new home, or on a refinance that will shrink monthly payments.  Continue reading Mortgage rates spike, but there’s no reason to panic at Movement Mortgage Blog.

When Should You Start Looking for a House?

February 19th, 2021|

The short answer: Immediately. That is, if you want to buy a home at some point in the next year, or any time thereafter. We’ll get into the specifics in a moment, but there’s really no sense in waiting if you want to own a home or condo because it’s always going to be a lengthy process. Sure, once you find “the one” it might only take a month, or even less, to close escrow, thanks to new technologies that are making the actual transactional piece faster. But the transaction is just one slice of the pie, and usually the fastest part. Personally, whenever I’ve looked for real estate, it’s been a long, long search. We’re talking many months if not a year or longer. Consider All Aspects of the Process Decide you want to buy a home (might be a long or short process) Determine if you’re able to (seek out mortgage pre-approval) Might need additional time to save for down payment and/or improve credit Start looking at listings (set saved searches and alerts) Find a real estate agent to work with (can be early on or late in the process) Attend open houses, tour properties, and find one you like Make an offer the seller accepts Conduct inspections Secure financing and close your loan It’ll Probably Take You Over a Year to Find a Home If we count the time from when you begin house hunting until your home purchase loan ultimately funds, there’s a decent chance 365 days will have elapsed. I’m talking the day you first set your filters on Zillow/Redfin until the time the mortgage lender congratulates you on being a homeowner with an oversized key. Does this mean each and every day is going to be consumed with home shopping? No, not at all. In fact, there might be days or weeks at a time during that span when nothing is brewing. Your desired market could lie dormant if no new listings appear that fit within your specific parameters. Of course, this is technically part of the process too. Waiting. And keeping an eye on things even when nothing is happening. The good news is this will give you more time to prepare as a homeowner, especially if you’re going to be a first-time home buyer. First Make Sure You Qualify for Home Loan Financing The mortgage should come before the house Not the other way around as some may lead you to believe Know you can actually obtain financing and at what price point Then start looking at suitable properties to ensure you don’t waste your time or anyone else’s I’ve written an entire post about this, but I’ll reiterate here again. It’s probably not a good idea to start searching for a home until you know you qualify for a mortgage, assuming you’re not paying cash. You wouldn’t shop for a new car if you didn’t have a steady job and money in the bank, so why shop for an even larger purchase without knowing where you stand? Fortunately, it’s pretty easy to get a mortgage pre-approval, and even easier to get pre-qualified, though the latter isn’t worth a whole lot. Either way, make sure you do one of the two to at least get a ballpark estimate of what you can afford. And to determine if there are any red flags that need to be addressed early on. Credit is usually a biggie, and one that can take months to resolve if there are any glaring issues. Or if you simply need time to up your credit scores for more favorable mortgage rate pricing. Anyway, once you know how much house you can afford, and that you’re more or less eligible for a home loan, you can begin your property search. Set Up Your Property Searches and Get Email Updates Only after you know you can obtain a home loan Should you begin searching for properties in your price range Companies like Zillow and Redfin are handy and offer nearly real-time updates They allow you to set alerts and receive instant or daily emails when new properties hit the market One of the best ways to search for a property these days is via Zillow or Redfin. Assuming they cover your particular metro, pretty much every house, condo, and townhome will be listed. You’ll have a ton of key information at your fingertips, including listing price, days on market, number of bedrooms and bathrooms, square footage, sales history, recent comparable sales, and most importantly, pictures! Most home sellers throw up 20-50 photos or more, so you can do most of your home shopping from the comfort of your own abode before even thinking about a tour. The good thing about these sites is you can set up filters and saved searches, then elect to receive targeted emails daily or instantly. So the minute something new pops up, you’ll receive an alert. Or you can wait and get all new listings for that day in one shot. Assuming you followed step one and got pre-approved for a mortgage, while simultaneously getting all your ducks in a row otherwise, you’ll be ready to pounce at a moment’s notice. And these days, with the real estate market so hot, you might not get a chance to hesitate (see my 2021 home buying tips for more on that). However, for most folks, the search process will take over a year, so there’s not necessarily a big rush. Tip: If it’s a pocket listing or for some reason not on the MLS, the property may not show up on these websites. But this is less likely and even then, it may not be what you’re looking for or readily available. Select an Experienced Real Estate Agent Most home buyers will use a real estate agent to get the job done despite there being other options You can choose to work with one early on in the discovery process Or do the pre-qualifying and home shopping on your own before selecting one Then you can have them come in just for the negotiation and paperwork when you find a house you like Another thing you’ll need to take care of along the way is choosing a real estate agent to work with, that is, if you don’t go it alone. Most home buyers work with agents, so there’s a good chance you will too. Add this selection process onto your home search timeline. It can happen while you’re looking at prospective homes, or once you’ve already found one. You might know an agent and just tell them to be ready for you once you find your ideal home. Or you might want some more hand-holding and seek out an agent without delay, who hopefully will get you organized and prepped immediately to avoid any missteps. I like the idea of doing some stuff on your own first without any input from interested parties so you can explore and figure things out without bias. But everyone is different and may not have the time, patience, or ability to do so. Anyway, an agent can send you updates when new listings hit the market as well and basically be a more hands-on guide if you want/need it. They can take part immediately or enter the conversation at a later date. It’s really up to you on how they fit in. Tip: You can fly solo and once you find a home you like, use the listing agent as your buying agent to perhaps give you a leg up on the competition. Just be sure they have your best interests in mind too. There Are Plenty of Houses in the… It’s easy to fall in love with a house at first sight And experience major FOMO along the way But you’ll probably see 10+ properties in person Before finding the right one (so try to temper your emotions) I think we all have a tendency to fall in love with the homes we see in person, especially as first-timers, but it’s important to physically visit multiple properties to gain perspective. These days you can see 50+ photos of a property before committing to a tour. So if you’ve made it that far there’s a good chance you’re into it. Sure, you can arrive at the property in question and be completely underwhelmed, but if do like what you see, it might be hard to walk away. And even harder not to imagine yourself living there. And decorating it exactly how you wish. The best line I can think of here is that there are plenty more fish in the sea. Don’t get caught up on that first property, or any property in particular. Aside from potentially overpaying, often times, you’ll look back and be grateful that you didn’t buy that one house, or you’ll be glad you got outbid by another buyer, etc. You might get lucky and find that right house in a week, but chances are you won’t. Or it might just feel like the right one until you dig deeper and see more of what’s out there. Tip: Per the National Association of Realtors, buyers see an average of 10 homes before making an offer. So prepare yourself mentally. Okay, So How Long Does It Take to Buy a House? The average time it takes to find a house might be 4-6 months But it depends when we actually start the clock Many buyers dip their toes for a while before getting more serious We also have to factor in the many steps including financial prep, selecting an agent, house hunting, and loan closing While results will vary, maybe tremendously, most industry experts say it’ll take anywhere from four to six months to buy a house, if not longer. Thing is, it depends when the clock starts ticking. Do we start counting when you first open the Redfin or Zillow app, or do we start counting once you’ve met with a real estate agent? These days, prospective buyers do a lot on their own before making contact with anyone. Or making it known that they’re even in the market to buy. They may go through their own little discovery period where they weigh the pros and cons of homeownership, potentially for months. As noted, it’s advisable to get in touch with a bank, lender, or mortgage broker just to know you qualify for a mortgage. Technically, this could count as the start of the home buying process. The real estate agent part can be put off until you get more serious about buying a home because of the technology available these days. We no longer need to be driven around the neighborhood by a friendly real estate agent in their Mercedes-Benz. So really, the agent can come in during the late stages and help you close the deal, maybe only working with you for a month or so with the offer, paperwork, inspections, and loan closing. But chances are they’ll come in earlier and send you listings or be on the lookout for properties that might make sense. Then we have to take into account the home loan process, which can take anywhere from 30-45 days or longer. If we round that up to two months and add a couple months of looking, we’re already around four months. But the odds of finding your dream home in two months might be quite low if you’re a picky buyer, which you should be in most cases. In reality, you could be looking for six months before you find something you like, then once you submit an offer and get your mortgage, it’s seven or eight months. Factor in the time you were thinking about buying a home for a few months before that, the general financial preparation (saving for a down payment, getting credit in order, etc.), and the pre-approval piece, and you’re at a year in many cases. To summarize, it going to take a while, and that’s totally okay. It’s not a process that should be rushed. In fact, the more time that goes by, the more knowledgeable you should become. And you can mentally prepare for homeownership at the same time. That’s a good thing. Read more: When should I buy a house?

Blue Sky Financial Review: Spend Less Time on Your Mortgage and More Time Outside

February 19th, 2021|

Posted on February 19th, 2021 Today we’ll check out “Blue Sky Financial,” whose goal is to save you time and money so you can get outside and enjoy those beautiful blue skies a little bit more. The young company (formed in 2020) refers to itself as a discount mortgage brokerage, meaning they work with third-party lenders to find your loan a home. Apparently they also offer low mortgage rates, which they say are possible thanks to “digital efficiencies” aka the latest technology and less overhead. Let’s find out more about them. Blue Sky Financial Fast Facts An independent discount mortgage brokerage Offers home purchase financing and mortgage refinances Founded in 2020, headquartered in Boise, Idaho Has three physical locations: Boise, Sun Valley, and West Palm Beach Employ about two dozen loan officers nationwide Currently licensed to do business in eight states As mentioned, Blue Sky Financial is a mortgage brokerage, meaning they link up borrowers with a wholesale mortgage lender, which actually provides the financing. While that means they need to turn to another company to get your loan to the finish line, it gives them the advantage of offering more loan programs because they’ve got multiple lending partners. Like other mortgage lenders, they offer home purchase financing, along with mortgage refinances. They have three physical offices, including locations in Boise and Sun Valley, Idaho, along with a branch in West Palm Beach, Florida. At the moment, they’re only licensed in eight states nationwide, including California, Colorado, Florida, Idaho, Illinois, New Jersey, Ohio, and Washington. It’s unclear if they plan to expand to additional states soon, or focus on those specific states for the time being. How to Apply for a Home Loan with Blue Sky Financial They refer to their loan process as the “10 Minute Application” It is a digital mortgage platform powered by Ellie Mae You can apply online, upload income and asset documents, and eSign disclosures Their online borrower portal allows you to keep track of loan progress and receive updates along the way Blue Sky Financial is big on making it easy to apply for a home loan, and they’ve partnered with fintech company Ellie Mae (ICE) to make that possible. They say they offer a better mortgage experience via their “10 Minute Application,” which sounds fast enough, even if Rocket Mortgage claims you can do it in just eight minutes. Anyway, to get started you simply visit their website, then click on “Blue Skies Start Here.” That will take you to the digital application page where you begin filling out personal and financial information online. When prompted, you can link financial accounts and/or upload things like pay stubs and bank statements to verify your information. You can also eSign important disclosures with the click of a button to breeze through what is often a painstaking process. Once submitted, a loan officer and processor will discuss pricing and prep your file to submit to the underwriting department. Those who are looking to get pre-qualified for a mortgage can follow the same instructions listed above. If you want to work with someone specific, you can click on the loan officer bios on their website as well, then get in touch before you apply. It may make more sense to get loan pricing with an actual loan officer first, then proceed to the application if you’re happy with what you hear. All in all, it appears to be pretty easy to get started with Blue Sky Financial, and you can price a loan on your own via their website as well if you don’t want to speak to anyone. Loan Programs Offered by Blue Sky Financial Home purchase loans Refinance loans: rate and term and cash out Conforming loans backed by Fannie Mae and Freddie Mac FHA loans VA loans Jumbo loans Fixed-rate mortgages: 30-year fixed, 15-year fixed, etc. Adjustable-rate mortgages: 5/1 ARM, 7/1 ARM While they don’t list individual loan programs on their website, my guess is they offer the full suite of offerings you’d expect to find with any big lender. Because they’re a mortgage broker, they can send your loan to one of a variety of their partners depending on its attributes. For example, they may have a certain partner that accepts jumbo loans, and another that’s a good fit for FHA loans or VA loans. You can take out a home purchase loan or a refinance loan, including a rate and term refinance or a cash out refinance. They lend on all common property types, including single-family homes, condos/townhomes, 1-4-unit investment properties, and more. It’s unclear if they offer USDA loans or any specialty options like interest-only loans. It would be nice if they provided more information on their website regarding available loan programs so we don’t have to guess. Blue Sky Financial Mortgage Rates One benefit to using Blue Sky Financial is the “Loan Pricer” found on their website. It allows you to plug in your loan details to see today’s mortgage rates, without having to sign up or log in. It will show you both an interest rate and price, which is the associated lender credit or points required for said rate. You can play around to see different rates and prices across different scenarios if you’re simply shopping around, then get in touch with a loan officer to confirm pricing. It’s a nice touch of transparency as not many lenders actually publicize their mortgage rates online. Additionally, you may come across Blue Sky Financial’s mortgage rates on popular home loan comparison websites like Bankrate or Zillow. So they do seem to lead with their pricing, which is a great sign if you’re shopping for the lowest rates out there. That being said, they don’t mention anything about lender fees, so it’s not clear if they charge an application fee, loan origination fee, and so on. Be sure to inquire about those fees as well when comparing different lenders. Blue Sky Financial Reviews On Zillow, Blue Sky Financial has a very respectable 4.83-star rating out of 5 from about 60 customer reviews. Similarly, they’ve got a 4.8-star review at Bankrate from about 30 reviews, with most perfect 5-star reviews. They’ve also got a 5.0-rating on Google from 21 reviews at last glance. While the sample sizes aren’t huge, they appear to be making customers happy thus far across all ratings sites. Blue Sky Financial isn’t an accredited company with the Better Business Bureau, nor does it have a rating, perhaps because they’re pretty new. In summary, while relatively young, they’re a well-liked company and seem to employ the latest technology while offering attractive mortgage rates. That means they could be a good fit for existing homeowners looking to refinance, or even a prospective home buyer looking to make their first purchase. Blue Sky Financial Pros and Cons The Good You can apply for a mortgage quickly and easily from any device Their digital mortgage application is powered by Ellie Mae (ICE) They let you see today’s mortgage rates via their loan pricer Excellent customer reviews from past customers Free mortgage calculators on site The Perhaps Not Not licensed in all states No BBB rating Unclear what lender fees they charge (photo: Blake Matheny)

5 ways to increase the Black homeownership rate right now

February 19th, 2021|

Establishing alternative methods of assessing credit and collateral could improve the rate of Black homeownership particularly at lower income levels, where racial disparities are currently quite pronounced, according to Urban Institute data.For example, there’s about a 10 percentage point gap in homeownership of those with annual incomes of $150,000 or more: 80% for Blacks and 90% for whites. In contrast, for those who make $25,000 or less per year, the gap between Blacks and whites is 25 percentage points, with Blacks having a homeownership rate of 25% and whites at 50%.There are many systemic challenges when it comes to small loans, and one of the most-cited ones is the fact that lenders make less money on them than bigger mortgages while paying the same amount to produce them.Given that many lenders have been exceptionally profitable as a result of the recent origination boom, they might be able to absorb the cost of making some smaller loans more easily right now.But they will have to be careful making sure those loans are made within the spirit of regulations that hold lenders accountable for borrowers’ ability to repay by making sure borrowers understand and can afford the long-term costs of lower-priced homes they buy.One past Department of Housing and Urban Development program that existed before ability-to-repay regulations were established notoriously failed because it did not factor in costs of repairing or maintaining the houses involved.The best way for a low-income homeowner to pay for repairs or maintenance may be to refinance and tap more home equity, but often the reluctance to make small-dollar loans precludes that as well.A borrower may be able to get a small-dollar home loan through say, a special first-time home buyer program. However later, when the time comes to refinance the loan to pay for repairs, lenders may be even more reluctant to deal with the small loan.In fact, when small loans are sold to the secondary market, a premium is often paid for them because investors are counting on the fact that they get refinanced less often. When loans refinance or prepay, it often diminishes the cash-flows from the investment to buyers, so they prefer to purchase loans where the cash-flow remains constant.“This inability to leverage home equity and improve a deteriorating home feeds into a perpetual cycle that leads to long-term maintenance issues and persistent degradation of housing values, impeding how much wealth a homeowner will ultimately have,” the Urban Institute’s Housing Finance Policy Center noted in a recent report on small-dollar financing.The institute has been working with Fahe, a Community Development Financial Institution, and the Homeownership Development Council of America on a “MicroMortgage” pilot project aimed at finding ways to address some of these challenges.Strategies used in the pilot, which has initial funding of $2 million, include an appraisal alternatives to lower costs and underwriting based on rent payments rather than a more traditional credit history.“It’s really about finding out what ancillary costs can be reduced and what different underwriting standards or parameters you could put in place that would enable doing more of this kind of lending,” said Alanna McCargo, a vice president at the institute and one of the report’s authors.As the Louisville-based project enters its later phases, there may be opportunities for other lenders to encourage increased origination of small loans, said Linna Zhu, research associate at the institute, who also helped author the report.“The main focus for phase one is new purchase loans, and for phase two we will look deeper into rehab and refinance,” she said. “In phase two, we also are planning to collaborate with more players to increase our scalability.”

Fed staff suggest more worry over financial risk than Powell

February 18th, 2021|

Federal Reserve staff members gave a potentially more worrisome assessment of the risks to financial stability in the central bank’s policy meeting last month than the one presented publicly by Chair Jerome Powell. Speaking to reporters on Jan. 27 after the Fed’s last policy making meeting, Powell called financial stability vulnerabilities overall “moderate.” Central bank staff gave a less sanguine assessment in their presentation at the January meeting, telling policy makers that vulnerabilities on balance were “notable,” according to the minutes of the gathering released on Wednesday. Powell agrees with the staff’s overall assessment but was just speaking more generally to reporters than the granular approach taken by Fed economists in their presentation to the Federal Open Market Committee, according to a Fed official familiar with the matter. The Fed’s appraisal of financial stability risks is important because it can play a role in determining the central bank’s stance on monetary policy and its approach to financial regulation. If policy makers consider the weaknesses of the financial system to be elevated, they can tighten rules governing banks or even raise borrowing costs to try to rein in any excesses they see. Fed officials showed no sign at last month’s meeting of wanting to pull back anytime soon on their support for the pandemic-stricken economy and financial markets. They expected it would be “some time” before conditions were met to scale back their massive bond buying, according to the meeting’s minutes. The Fed is currently buying $120 billion of assets per month — $80 billion of Treasuries and $40 billion of mortgage-backed securities — and has pledged to maintain that pace until it makes “substantial further progress” toward its goals of maximum employment and 2% inflation. The question about when to begin to taper those purchases could come to the fore later this year as the economy gathers steam with a more widespread distribution of vaccines to fight Covid-19 and even more spending by the federal government, Fed watchers said. That could particularly be the case if stock and asset markets continue their seemingly inexorable advance and already loose financial conditions ease further. In their detailed presentation to the FOMC last month, Fed staff “assessed asset valuation pressures as elevated” — their highest characterization of risk. Supported by the central bank’s easy money stance, the S&P 500 stock market index has surged 75% from the lows it struck in March when the pandemic began. Corporate bond spreads have also declined, with yields on the riskiest debt dropping below 4% for the first time ever earlier this month. As for household and business balance sheets, the Fed economists judged vulnerabilities on that front to be notable, “reflecting increased leverage and decreased incomes and revenues in 2020.” Big banks were seen to be in good shape. In a Feb. 17 note to clients, Goldman Sachs Group Inc. chief economist Jan Hatzius and his colleagues said the minutes suggested that there was increased discussion by policy makers of financial stability after the presentation of the staff report, with a wide variety of views expressed. Powell in the past has flagged the dangers that excessively elevated asset prices and other financial vulnerabilities can pose to the economy. In 2007, it was the bursting of a housing market bubble that took the economy down. In 2001, it was a collapse in technology stock prices that helped lead to a recession. The Fed chairman defended the central bank’s easy monetary policy in his Jan. 27 press conference, saying it was justified as payrolls are some 9 million workers short of what they were before the pandemic. He also argued that the increase in stock prices in recent months had been driven more by fiscal policy and the development and dissemination of vaccines, than by the Fed’s monetary stance. “I would say that financial stability vulnerabilities overall are moderate,” he said.

Why Do Mortgage Companies Want You to Refinance So Badly?

February 18th, 2021|

Last updated on September 10th, 2020 If you already have a mortgage, there’s a good chance you receive junk mail on a regular basis urging you to refinance. You may receive solicitations from both your current bank and from a competing lender or mortgage broker looking to acquire your business. But why do they want you to refinance your mortgage so badly? What’s in it for them, especially if they already originated your mortgage and get paid interest each month? Wouldn’t it be in their best interest (seriously, no pun intended) to hold onto your mortgage and continue to earn a decent rate of return, rather than give you a new low rate. Why Would They Offer You a Lower Rate? Why would a mortgage lender offer you a lower interest rate That would ostensibly earn them less money each month? Because they often sell the loans off to investors to make a profit Or they never owned your mortgage to begin with, so they get a commission and a sale Let’s look at it the other way around. Imagine you have a savings account with an APY of 0.95%. Your same bank wouldn’t come to you and say hey, let’s get you into an account with a rate of 1.25% instead. If they did, there would be a huge catch, such as locking it up for five years at a fixed rate of return (CD). On the other hand, competing banks might offer you that 1.25% with no strings attached (and even give you a bonus) because they don’t currently have your money. That gives us one clue as to why a bank may want you to refinance with them. They don’t actually hold your mortgage. You see, a lot of banks and lenders these days originate mortgages but then quickly sell them off to other investors. So while they may have made your loan, they don’t actually service it any longer or make interest on it. For them, it makes perfect sense to want to refinance your loan again, even if the new interest rate is a lot lower than it is on the existing loan. Who Owns Your Home Loan? There’s a lot of confusion with regard to ownership The bank that gave you a mortgage may have nothing to do with it today It could have been sold off years ago to another company But if they still service it, they may not be keen to offer you a refinance In that case, just look elsewhere for a new lender who stands to benefit Some of the confusion regarding “what’s in it for them” might come from the fact that ownership of the loan is unclear. So even though say Bank of America closed your loan, it could have been sold to Wells Fargo or some other lesser-known loan servicer after the fact. That would explain Bank of America’s willingness to refinance your mortgage. They can make money on closing costs (again) and make money by selling it off again or by servicing the loan. If they actually hold onto the mortgage the second time around, they may not want to refinance it again in the future. But if they sell it again, there’s a good chance you’ll get an offer to refinance down the road.  They may even urge to you cash out to make the loan even bigger and more profitable. If you consider a mortgage broker, who closes loans on behalf of a variety of lenders, they can refinance your mortgage over and over with different banks and always make a profit regardless of where the loan ends up. They’ll still earn their commission even if your interest rate goes up, down, or sideways. Sure, they may have to wait six months between each refinancing to avoid losing their commission, but if it makes sense, they can try to get you to refinance again. Interestingly, Navy Federal Credit Union actually claims it services your mortgage for life, which is a plus because you won’t have to keep track of who to pay if your loan is sold and the level of service might be better because they keep you as a customer. Tip: Don’t be discouraged if your current lender isn’t interesting in refinancing your loan, shop around instead and you might find a better deal. But The Bank Isn’t Charging Me Anything! Don’t be fooled into thinking you aren’t being charged There is never, ever a free lunch, as cliché as it sounds If you aren’t paying lender fees or any closing costs You are receiving a higher interest rate than necessary, even if it’s lower than your current rate Here’s another myth. Just because you aren’t being charged a dime doesn’t mean you aren’t making the bank (or broker) any money. If you haven’t already heard of a no cost refinance, mosey on over to that page and you’ll see how lenders are able to make new mortgages without charging you any money (out of pocket). In short, they take advantage of lender credits to cover your closing costs. And these lender credits are generated by offering you a higher interest rate than what you might otherwise qualify for. So yes, they’re still making money, even if it sounds too good to be true. Never worry about whether the lender is making any money. Worry about whether it actually makes sense for you to refinance. They’ll come up with a million different reasons to convince you to refinance, even if it’s not in your best interest. How Money Is Made on a Home Loan Refinancing the loan (commissions and closing costs) Servicing the loan (collecting interest each month) Selling the loan to an investor (service release premium) In summary, loan officers and mortgage brokers can make commissions on a per loan basis when you refinance with them. When the loan is sold to an investor, the originating lender can earn what’s called a service release premium, which can be represented as a percentage of the loan, say 1-2% of the balance. Finally, the company that services the loan can collect interest and make money as well. This explains why mortgages are so profitable and why everyone wants you to refinance! About the Author: Colin Robertson Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for nearly 15 years.

Do I Qualify for a Mortgage?

February 17th, 2021|

Sometimes I tend to skip past the seemingly basic mortgage questions, assuming everyone already knows the simple stuff. Unfortunately, that’s not the case, and what may appear basic isn’t really so straightforward. So let’s talk about qualifying for a mortgage. Unsurprisingly, it’s actually a pretty complex process. After all, you are asking a bank to loan you a ton of money for a long period of time. They’ll want to know you can actually pay it all back. Jump to mortgage qualification topics: – The Mortgage Qualification Process– The Home Loan Submission Process– Keys to Qualifying for a Mortgage– Use Common Sense and Think Like the Lender– What You Need to Qualify for a Mortgage Mortgage Qualification Varies by Lender and Loan Type There is no one-size-fits-all approach Some mortgage lenders may say no while others says yes It depends on their risk appetite and available loan programs But your goal should be a smooth loan approval no matter where you apply The first thing I’ll say on this topic is that qualification for a mortgage can vary greatly from bank to bank, and also by loan type. For example, one lender may allow FICO credit scores as low as 550 for FHA loans, while another may require a minimum credit score of 620. So right there you could be approved by one company and denied by another, simply because of their unique credit scoring thresholds. Not every lender necessarily offers the same product or abides by the same underwriting guidelines, so some may approve you, while others may say, “No way!” There’s also a little thing called “risk appetite,” and not every bank is as hungry as the next. Some are willing to approve more folks than the next. This illustrates why shopping around is paramount to secure the best deal, because one bank may agree to do business with you, but not at the best terms. So it’s important to find the right lender for YOU. Tip: A mortgage broker can shop your loan application with multiple banks and lenders all at once to find you the lowest rate with the fewest fees. The Mortgage Qualification Process You can use mortgage calculators on your own and get pre-qualified first Or take things a step further and get pre-approved either online or in-person It might be advisable to do this several months out to avoid any surprises if it’s a home purchase That way you can address any serious issues that might take time to resolve such as improving your credit or setting aside necessary assets If you’re interested in purchasing a home with the help of a mortgage (cash buyers need not apply), your starting point would be getting pre-qualified. Essentially, a “pre-qual” allows you to first see if you’re even eligible for a home loan, and secondly to determine how much you can afford based on income, asset, and credit score estimates. So you basically tell a bank or mortgage broker that you do “X” job, make “Y” amount each month, have “Z” credit score, and can put down a certain amount. It’s a starting point that relies on a lot of estimates. Most will ask you to go a step further and run some hard numbers, such as figuring out your debt-to-income ratio, to see what mortgage amount you can actually qualify for. Assuming everything looks good, they may get you a more robust mortgage pre-approval, which is a commitment from a bank to lend you the money you need to make the home purchase in question. Of course, you can run the numbers on your own without anyone’s assistance if you’re just casually wondering where you stand. But the numbers you come up with might be quite a bit different, so if you are serious about home buying, it’s wise to get a lender’s eyes on your financials. Tip: Do this as soon as possible so you have time to correct any issues or roadblocks. It takes time to fix stuff, so giving yourself plenty of time is a smart move. The Home Loan Submission Process You can apply for a home loan either online or in-person Once you complete the application you’ll need to sign disclosures and submit your financials (an appraisal may be ordered at this time) A loan processor will organize your loan file and prep it for underwriting (you may simultaneously receive mortgage rate pricing from your loan officer) The file is then sent to an underwriter who decisions the loan If approved you must satisfy a list of conditions in order to receive your documents and fund the loan While the loan submission process may vary depending on the lender you use and your own preferences, it generally begins with an online or in-person application. Once the initial application is completed, you must sign disclosures in order for the lender to pull your credit and gather other financial documents on your behalf. You’ll be asked to send or upload financial statements like bank account information, pay stubs, and tax returns so your loan can be properly underwritten. A loan processor will typically get involved at this point and organize your loan file before presenting it to the underwriter for a decision. Simply put, they’ll want to make sure all your ducks are in a row before an underwriter gets their eyes on it and proceeds to scrutinize heavily. Assuming you pass muster, your loan will be conditionally approved by the underwriter and you’ll need to send in additional documentation to get to the finish line. At the same time, a home appraisal will be ordered to ensure the collateral is up to snuff and valued properly. Once these steps are completed and you’re clear-to-close, you’ll schedule a meeting with a notary public to sign your loan documents. Then it’s just a matter of the funder crossing the t’s and dotting the i’s before the loan is ultimately recorded with your county registrar. The process can take anywhere from 3-6 weeks depending on the circumstances, so you’ll need to be patient. And cooperative to keep things moving along. Keys to Qualifying for a Mortgage Now let’s talk about what it takes to qualify for a mortgage. First off, you’ll need an adequate credit score, along with sufficient income to make the proposed mortgage payment each month. [What credit score do I need to get a mortgage?] Generally speaking, a credit score below 620 is considered subprime in the mortgage world and will make qualifying for a mortgage that much more difficult. But it’s still possible depending on lender and loan type. If you’ve got previous foreclosures on your credit report, things will get even more problematic and you may not even be eligible for a certain period of time. But if your credit score is above 740 and you’ve got some decent credit history to back it up, you should have access to the lowest mortgage rates and a wide array of loan options. Credit scores in between should still work, though there might be pricing hits associated, which all else being equal, may bump up your interest rate. Tip: Lenders want to see a minimum of 3 active credit tradelines with two-year history on each to assess your creditworthiness. As far as job history goes, it’s important to show the mortgage underwriter you’ve had (and still have!) a steady job, typically for two years or longer. This essentially proves that you will continue to receive regular income to make those costly mortgage payments each month for the next 30 years. If you just graduated and have held a job for a mere two months, don’t expect to qualify for a mortgage unless your new position directly correlates with what you studied in school. For example, if you went to medical school, and now have a job as a doctor, this might be sufficient to qualify for a mortgage. But if you were an art history student who has been working as a flight attendant for two months, mortgage lenders probably won’t feel comfortable lending to you just yet. Make sense? When seeking out your mortgage, you’ll also need to consider the mortgage down payment requirements, which vary depending on the type of loan you’re after. While there are still some zero down mortgages around, namely VA loans and USDA loans, it certainly helps to set aside some assets so you’ve got something to put into your home purchase. Obviously, the amount of money needed will also vary based on the purchase price of the home. If you want a more expensive house, expect to put more down in order to qualify. If we’re talking about a mortgage refinance, you’ll need a certain amount of home equity to qualify for the mortgage, as determined by loan-to-value ratio constraints. Use Common Sense and Think Like the Mortgage Lender Would you approve YOU for a mortgage? If not, address those red flags immediately before loan submission Don’t guess, run the actual numbers with a professional to avoid surprises And ask plenty of questions if you’re unsure about anything early on When it comes down it, it’s all pretty much common sense. Do you think you can/should qualify for a mortgage? Do you have a track record of making on-time payments, carrying large amounts of debt and paying it down, holding a job, and saving money? Are you ready to make a big commitment? If you were the bank, would you lend you a mortgage…hmm. [How much house can I afford?] I would guess that most prospective homeowners could assess the situation beforehand and determine if they should be granted a mortgage. But without running the numbers, you won’t know for certain. So be sure to do plenty of calculations and speak with a loan officer or two to see where you stand. They’ll be able to get you a quick answer so no one’s time is wasted (what do mortgage lender look for?. What You Need to Qualify for a Mortgage Here’s a general list of what you need to qualify for a mortgage. Keep in mind that qualification requirements vary greatly by lender and loan type. In some cases, you won’t need all of these things, but it should certainly make life easier to satisfy everything on this list. Credit History – minimum of 3 active tradelines with 2-year history on each (credit score minimums vary) Job History – at least 2 years on same job or in same line of work (recent graduates with new jobs in certain fields like doctors and lawyers may be exempt) Income – verifiable income (tax returns, pay stubs) for the past two years that satisfies debt-to-income ratio limits Assets – enough to cover down payment, closing costs, and at least two months of mortgage payments (known as reserves) Rental History – proof of clean rental history for the past two years is also important to show the lender you have a propensity to pay on time each month (those currently living with their parents may be excluded from this rule). If you can’t satisfy these basic requirements, you may want to keep renting, saving, and working on your credit until you can. Or consider adding a co-signer who is better qualified to apply for a mortgage. Either way, don’t be discouraged. There are lots of home loan programs and creative options out there to suit all different needs. As noted, one lender may say no while another says YES. Read more: Tips for first-time homebuyers.

The 3 C’s of mortgage underwriting

February 17th, 2021|

  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.

Cash-out refis help drive pandemic-era mortgage boom

February 17th, 2021|

A fuller picture of the factors that drove the great U.S. mortgage boom of 2020 is starting to emerge. The homebuyers who took advantage of rock-bottom mortgage rates during the pandemic included many investors and purchasers of second homes who flocked to the market at levels unseen since before the Great Recession, according to new data from the Federal Reserve Bank of New York. Cash-out refinancings also hit a post-financial-crisis high, as many households tapped into the equity they have accumulated as home prices have climbed over the last decade. Mortgage origination volume last year totaled $3.7 trillion, by far the highest level since 2003. The data is most notable for one major contrast that it reveals between the current boom and the previous one: borrowers’ creditworthiness. Last year, roughly 70% of mortgage borrowers had credit scores of 760 or higher, compared with around 30% in 2003. The 40-percentage-point gap is a reflection of both lenders’ reluctance to extend credit to borrowers with subpar credit and prime borrowers’ confidence in their ability to handle more debt. During the subprime lending boom, many borrowers with little equity took on more debt than they could afford. “Researchers have concluded that the 2003 refi boom had long-running consequences, contributing to over-leveraged balance sheets as home prices fell,” experts at New York Fed noted in a blog post published Wednesday. During the fourth quarter, total U.S. household debt outstanding hit an all-time high of $14.56 trillion, according to the report, which was based on a sample of credit data from Equifax. Many Americans are eschewing public transit for cars during the pandemic, contributing to a boom in auto lending. Car loan originations of $616 billion in 2020 marked a record high. Credit cards are one consumer lending segment where balances have sharply declined in recent quarters, as banks have tightened their lending criteria and many households have used increased savings and government benefits to pay down existing debt. Card debt as a share of disposable income fell from around 5.5% to roughly 4.5% in the early months of the pandemic, according to a recent report by the American Bankers Association. During the fourth quarter, credit card debt outstanding totaled $820 million, down $108 million from the same period a year earlier, the New York Fed found. The spike in mortgage originations in 2020 was driven mostly by refinancing activity, but loans for home purchases also rose significantly, likely contributing to the recent increase in U.S. home prices. A national index of home prices developed by economists Karl Case and Robert Shiller rose by 9.5% between November 2019 and the same month last year. In addition to investors, first-time homebuyers also helped fuel demand for mortgages. This group lagged behind repeat purchasers during much of the last decade but has recently caught up, according to the New York Fed’s data. Still, young adults make up a relatively small portion of the market. In the fourth quarter of last year, adults ages 18 to 29 accounted for 7% of all mortgage originations, down from 11% in the third quarter of 2018, but still up from the low-water mark of 4% in the first quarter of 2013. While U.S. homeowners withdrew $182 billion in equity last year, the comparable figures from 2003 to 2006 were higher, even without adjusting for inflation, according to the New York Fed researchers. The average amount withdrawn by a homeowner was also significantly lower in 2020 than it had been in 2019. “The median cashout withdrawal in 2020 was only $6,700,” the researchers wrote, “suggesting that at least half of the refinancers borrowed only enough additional funds to cover the closing costs on the new mortgage.”

Mortgage industry digital strategies sag under weight of COVID-19

February 17th, 2021|

It’s been a complicated 12-months for the mortgage industry. Mortgage professionals working through the COVID-19 pandemic have been faced with managing a complex duality as they’ve tried to balance the opposing forces of record low interest rates and record high levels of unemployment. On one side: a 14-year high in new home sales and a 200% annual increase in refinancing volume driving new origination into the stratosphere. On the other: a 14.7% unemployment rate pushing legions of mortgage holders to modify terms and defer payments on existing loans. In the middle: mortgage lenders — themselves displaced from their offices — trying to manage a historic surge in customer volume with digital self-service tools that, more-often-than-not, directed customers to the phone. This is not the recipe for a world class customer experience. Quite the opposite, it is a formula for slower loan processing times, overloaded and unprofitable call centers and declines in customer loyalty and advocacy. Missing the mark on digital Mortgage providers have been lucky that the halo effect of ultra-low interest rates and large scale federal relief efforts have kept most customers pacified during the pandemic. But the experience should serve as a wakeup call for an industry that has struggled to keep pace when it comes to digital self-service tools that meet customer expectations and streamline operational efficiency. It’s a trend we see clearly across our studies evaluating customer satisfaction with mortgage originators and servicers during the pandemic. On the new mortgage origination side of the equation, customer satisfaction with the competitiveness of interest was the only attribute in our study to show improvement this year. Every other factor — loan processing time, ease of self-service interaction and helpfulness of customer service — showed marked declines. The average time to close a loan refinancing transaction also rose by three days in 2020. Given the significant demands on the industry this past year, that is not a huge gap, but it does illustrate that the increased reliance on digital did not speed things up, as it should have. Things were worse on the servicing side, where servicers struggled to meet customer demand amid rising confusion and scattered resources. In the months leading up to and during the COVID-19 pandemic, more than three-fifths (62%) of mortgage customers visited their lender’s website for information, but just 28% said they found their servicer’s website to be the most effective channel to resolve an issue. Among those who could not resolve their issue on the lender’s website, 45% said their issues were only solved after picking up the phone to speak with a representative. All told, among all customers who called their mortgage servicer for help, 19% said they struggled to get a live agent on the phone. A new formula for the new normal The COVID-19 experience for the mortgage industry is certainly a case study in managing a very challenging set of external variables, but it is also a sign of things to come. Research from McKinsey Digital has already found that 75% of people using digital channels for the first time during the pandemic say they will continue to use them when things return to normal. That’s a really important stat when you consider how poorly mortgage originator and servicer digital channels are performing right now. Fortunately for the mortgage industry, there is a well-worn path of digital innovators that are proving that digital-first customer engagement can be done effectively. It’s not just Netflix and Amazon who’ve figured it out. Many of the nation’s retail banks, credit unions and direct banks have cracked the code on digital customer experience through their personal loans business lines. In fact, in our most recent analysis of consumer lending providers, we found that 34% of personal loan applications were digital-only, more than any other application channel. What’s more, the digital channel had significantly higher levels of overall customer satisfaction, outperforming face-to-face and phone-based application processes by a margin of ten points or more, on a 1,000-point scale. What’s happening in personal loans that is not happening in traditional mortgages? The consumer lending providers are making it simple. “Two clicks or less” needs to become the mantra for the mortgage industry as it confronts the digital challenges that have kept it mired in the world of costly and cumbersome phone-based customer support. Servicers need to make basic information that is commonly searched by consumers — information on payment schedules, what to do if you can’t make a payment, information on late payments — easily accessible and complete. Originators need to make it simple to click through the application process without jumping through hoops. Then, this all needs to be tied together with frequent, proactive communication in the form of emails, text messages and updates on progress. The industry has managed to survive one of the most difficult periods in history. If it wants to thrive, it needs to get serious about digital. Companies cannot afford to keep throwing stop-gap solutions and expensive work arounds at the problem; they need a sustainable digital formula that meets customers where they are.

Morningstar tweaked MBS ratings of paying clients, SEC claims

February 17th, 2021|

Morningstar Credit Ratings LLC let analysts make undisclosed adjustments that resulted in higher ratings of mortgage-backed securities for issuers that paid for the rating, the U.S. Securities and Exchange Commission said in a lawsuit against the rating agency. The SEC sued Morningstar in federal court in Manhattan Tuesday for allegedly failing to transparently explain how it rated about $30 billion in commercial mortgage-backed securities in 2015 and 2016. According to the regulator, the rating agency permitted its analysts to adjust key stresses in the model that it used in determining CMBS ratings. Analysts frequently reduced the stress applied in the model, lowering the credit enhancement required for many of the ratings it awarded, the SEC said. This, in certain instances, benefited the issuers that paid for the ratings because it enabled them to pay lower interest, according to the suit. “Morningstar failed to disclose that its CMBS rating methodology permitted its analysts to adjust those stresses on a ‘loan-specific’ basis,” the SEC said in the complaint. “This omission was material.” Morningstar Credit Ratings, or MCR, hasn’t used those methods to rate CMBS transactions since 2017 and ended the practice a year later, the company said in an emailed statement. “The SEC alleges technical violations of the rules that formerly applied to MCR when it was a credit rating agency,” the company said. “In fact, MCR complied with the regulatory requirements in question; the SEC’s position in this case is inconsistent with its own rules and the SEC’s stated policies. ” In September, Kroll Bond Rating Agency Inc. agreed to pay more than $2 million to the SEC to settle claims that its internal controls failed to prevent inconsistencies in CMBS and collateralized loan obligation ratings.

Appraisers get 24-hour payment cycle from Incenter

February 17th, 2021|

Ahead of what promises to be a busy spring season, appraisers may've scored a win in a long-running dispute with many appraisal management companies regarding timely payment. Incenter Appraisal Management is rolling out a new program that allows appraisers to be paid within 24 hours of submitting a report. The shrinking ranks of appraisers, an ongoing trend for many years, combined with the record number of loan applications in 2020, created "the perfect storm between supply and demand," said Mark Walser, the president of Incenter Appraisal Management, in an interview. The company developed the payment program in a bid to keep Incenter top of mind for these independent contractors, and thus more willing to accept its work orders. "We looked at that problem, we realized we could do something about it," Walser said. "In our case, we looked to take the billing piece [and provide] peace of mind and make that a reality for our appraiser panel." Typically, most appraisal management companies pay within 30 to 45 days after receiving a report; that is also the case for banks and other lenders that use their own panel of appraisers to do valuation work. But the appraisers themselves are typically small businesses, with quite a few solo practitioners doing everything themselves, including tracking down compensation for unpaid invoices. As is they spend much of their day doing inspections and reports; with the extra volume seen in the last year especially, there is not a lot of time left to spend on managing the business. "We've gotten a lot of feedback from appraisers about how they're chasing down their payments with AMCs," Walser said. Some appraisers have had to turn to factoring — borrowing against their receivables for a cut, usually 5% — in order to get paid quicker, Walser said. And in a business where what constitutes a customary and reasonable fee is still an issue, getting paid quickly is one less worry for the appraiser. Payment to its appraisers will be made within 24 hours of the report's submission in most cases, via automated clearing house transactions. The company already typically paid on a seven-day cycle via check and that option will be maintained as well, said Walser. Incenter has 13,000 appraisers nationally but some of them are used more frequently based on location and workflow. Appraisers often aren't paid for at least 30 days because of timing of when the AMC itself gets its money from the lender. "The vast majority of AMCs can't afford to pay out the appraisers 100% right out the door and wait for payment from the lender, it just doesn't work from a profit and loss standpoint," Walser said. The 30-day model gives the AMC time to collect the funds from the lender. With a team of six appraisers, Daniel Fries & Associates, an appraisal company located outside of Atlanta, exemplifies the exception more often than the rule. Its valuators are supplemented by two full-time and one part-time support staffers, so the company is considered medium-sized relative to those of other appraisers, said Daniel Fries in an interview. "It would be nice to get paid in 24 hours but to me, it's not that big of a deal because we've got the cash flow coming…and we're not running check-to-check," Fries said. His appraisers are able to spend all of their time doing valuations, while his support staff, which includes his wife, is able to do all the work required to keep the business going. Still, while the Incenter program is great (and he is not an Incenter appraiser), "I've been doing this 36 years and it's kind of the nature of the beast," Fries said. The ideal is for his clients to pay in 30 days, "in real life it's probably 30 to 45 days for my corporate accounts." And the AMCs he works with are actually more diligent than that about making their payments. And getting paid at all can be a big deal. When Atlanta-based HomeBanc went bankrupt in 2007, there were $40,000 of unpaid bills due to Daniel Fries & Associates. When Fries did get paid, the bankruptcy court judge clawed back some of that as part of the process of settling the company. Regardless, appraisers need to be taking care of in order for the industry to keep on moving as smoothly and as fast as it wants to move, Walser said. Appraisers "are business people too," he said. "They make decisions, prioritizing lenders and AMCs based on what they're being paid, how fast they're being paid and how much of a pain are you to work with."

Refinancing activity dies down on the heels of rate rise

February 17th, 2021|

The share of mortgage applications taken out to refinance an existing loan slipped as rates climbed to a high not seen since November, according to the Mortgage Bankers Association. The dip in refis during the week ending Feb. 12 brought their share below 70% for the first time since October, the trade group found. The refi share during the latest week tracked by the MBA was 69.3%, down from 70.2% the previous week. Between the dip in refis and the approach of the spring buying season, mortgage lenders are likely to start paying a little more attention to the purchase market, which is less rate-sensitive but constrained by inventory shortages. “The uptick in rates has slightly dampened refinance activity, with MBA’s index falling for the second week in a row,” said Joel Kan, MBA’s associate vice president of economic and Industry forecasting. While both refis and seasonally adjusted purchase apps were lower week-over-week by 5% and 6%, respectively, both parts of the market looked a lot better than they did during the same week last year. Refis were up 51% from a year ago and purchases were up 15%. In total, applications were down a little over 5% on a seasonally adjusted basis. A drop in government applications drove an increase in the average size for a loan to a new survey-high because it meant there were fewer small Federal Housing Administration-insured loans in the mix. The FHA loan share was 9%, down from 9.5% the previous week. The average loan size was $412,200, as compared to $402,200 the previous week.

Western Alliance to buy large mortgage lender

February 16th, 2021|

Western Alliance Bancorp. in Phoenix has agreed to buy Aris Mortgage Holding in Thousand Oaks, Calif. The $35 billion-asset Western Alliance said in a press release Tuesday that it will pay $1 billion in cash for the parent of AmeriHome Mortgage. The deal, which is expected to close in the second quarter, priced Aris at 140% of its tangible book value. AmeriHome, which has been a Western Alliance client for more than four years, bought $65 billion in conventional conforming and government-insured loans last year. It manages a $99 billion mortgage servicing portfolio and has relationships with more than 700 correspondent mortgage originators, including mortgage lenders, credit unions and small and midsize banks. “We look forward to maximizing the strategic and financial opportunities created by partnering with AmeriHome,” Ken Vecchione, Western Alliance’s president and CEO, said in the release. “Acquiring this differentiated, high-performing mortgage platform provides a powerful growth engine and expands mortgage offerings to existing clients that give us flexible levers to drive consistent returns throughout market cycles,” Vecchione added. AmeriHome will become a unit of Western Alliance Bank. Jim Furash, AmeriHome’s president and CEO, will continue to run the company after the deal closes. Western Alliance said it expects the deal to be more than 30% accretive to its earnings per share. Merger-related expenses should total $27 million, though Western Alliance said it expects to achieve $50 million in annual after-tax funding cost synergies. Western Alliance plans to raise about $275 million in the second quarter by selling common stock. Evercore, Guggenheim Securities and Troutman Pepper Hamilton Sanders advised Western Alliance. Houlihan Lokey Capital, Wells Fargo Securities and Sidley Austin advised AmeriHome.

That dreaded foreclosure wave may not be coming, two reports assert

February 16th, 2021|

While analysts have expressed concern foreclosures could overwhelm servicers when forbearance ends, new data suggest that outcomes will be manageable in most areas. That’s in part because the Biden administration’s extension of borrower relief measures this week will give borrowers more time to recover. Also, the number of households with long-term forbearance is stabilizing, and a recent analysis suggests many distressed homeowners ultimately won’t enter foreclosure. There were 841,977 borrowers in the government-sponsored enterprise forbearance plans in November, down from 922,589 the month before, according to the Federal Housing Finance Agency. That decrease, combined with broader declines in unemployment, means the incidence of distress is stable to lower for the average mortgage borrower. Even in the more vulnerable Ginnie Mae market, borrowers have a strong home equity buffer against foreclosure, the Urban Institute found. Thanks to home price appreciation, these borrowers have on average a 22% equity buffer and only 3.6% have negative equity, according to the Urban Institute. This presents a contrast to the Great Recession, when negative equity peaked at 30% and foreclosures surged. Traditionally, borrowers are considered to have strong financial incentive not to abandon efforts to repay when they have at least 20% equity in their home. To be sure, the extent to which foreclosure risk will grow is unknown as forbearance activity is fluctuating. Additionally, servicers will be busy with other forms of loss mitigation like modifications that make loan terms more affordable even if they aren’t processing foreclosures, per se. The number of GSE borrowers entering forbearance plans inched up to 59,203 from 58,016 and completions dropped to 57,133 from 83,404 in the Federal Housing Finance Agency’s latest foreclosure prevention report. Also, while much of the market may bear up due to strong equity levels, distress could be compounded in a limited number of local markets that were left out of the broader housing boom. Some of these are markets feature home prices that may have been artificially inflated by loans made with little regard to borrowers’ ability to repay in the leadup to the Great Recession. Most housing markets' prices recovered from subsequent depreciation but some did not. Housing values are considered more stable now than they were then due to relatively tighter underwriting and ATR regulation. “Home prices in some parts of the country, including Chicago, Illinois; Baltimore, Maryland; and Riverside, California, are still below their pre-crisis peak,” the Urban Institute researchers said in their report. “These areas are where we may see a greater number of actual home foreclosures.”

Biden extends mortgage forbearance and foreclosure protections

February 16th, 2021|

With the end of the first 12-month CARES Act forbearance periods fast approaching, President Biden extended borrower payment protections. The administration pushed back both forbearance enrollment and the foreclosure moratorium by three months to June 30, 2021. Borrowers who entered forbearance prior to June 30, 2020, will be allotted an additional six months of coverage in three-month increments. The announcement comes one week after the Federal Housing Finance Agency allowed borrowers with mortgages backed by Fannie Mae and Freddie Mac to request an additional three months of forbearance. These combined efforts should protect about 70% of U.S. single-family home loans, according to the White House’s press release. Forbearance plan exits noticeably slipped recently, which could lead to a considerable challenge for the industry once the CARES Act forbearance periods end. This week’s action provides the near 2.67 million forborne homeowners with further clarity and time. The Mortgage Bankers Association welcomed the extension, believing it necessary for borrowers and servicers alike. However, the measures could have negative ripple effects on housing inventory, potentially keeping hundreds of thousands and maybe millions of properties off the market that’s starving for inventory, Tim Rood, SitusAMC’s managing director of government and industry relations, said in an interview. “The real fear I have is in an effort to be overly charitable — and we need to be charitable — that we’ll try to extend and pretend a way through this problem,” Rood said. “The risk is you create a zombie housing market with no transparency into who's making their payments and how much shadow inventory is out there. That tends to weigh on investors’ minds.”

CoStar boosts its offer to acquire CoreLogic to $6.9 billion

February 16th, 2021|

CoStar Group Inc. boosted its offer to acquire CoreLogic Inc. to $95.76 a share, topping a bid the property-data company accepted earlier this month. CoreLogic’s recent agreement with funds managed by Stone Point Capital and Insight Partners “was materially less than our last all-stock offer,” CoStar Chief Executive Officer Andrew Florance said in a letter Tuesday to CoreLogic’s board. He added he was “stunned” to read about the deal. CoStar’s newest offer represents an equity value of approximately $6.9 billion, a 20% more than the earlier offer, CoStar said in a statement. “We do not believe the pending transaction maximizes value for CoreLogic stockholders and we continue to believe in the strong strategic rationale for the combination of our two companies,” Florance said in the letter. “The fact that CoreLogic stock continues to trade well above the pending transaction price is a clear indication that the shareholders agree with us.” CoreLogic has become an appealing target as the U.S. housing market booms, fueled by historically low mortgage rates. The buying and refinance frenzy has ignited interest in real estate technology. CoreLogic shares were up 6.1% at $87 as of 9:49 a.m. in New York on Tuesday. RELATED: Inside CoreLogic's dramatic fight against a hostile takeover Funds managed by Stone Point Capital and Insight Partners agreed to buy CoreLogic earlier this month in a deal with an equity value of about $6 billion. That came after CoStar made an offer worth $86 a share, according to Bloomberg calculations. Under the terms of the newest proposal, CoreLogic shareholders would receive 0.1019 shares of CoStar in exchange for each share of CoreLogic stock, representing a value of $95.76 a share based on CoStar’s closing price Friday. Irvine, California-based CoreLogic launched a strategic review in November amid a boardroom battle with investors Cannae Holdings Inc. and Senator Investment Group. The duo subsequently won three seats on CoreLogic’s board. The investors had offered to buy the company in June but pulled out of the sales process after CoreLogic said it had received indications of interest at $80 or above. The duo, which said they weren’t interested in acquiring CoreLogic at that price, had offered $66 a share to buy the company.

Fixing the fiasco called the CARES Act

February 16th, 2021|

Last month U.S. home prices, fueled by the lowest mortgage rates in modern history, rose at the fastest pace on record, surpassing the peak from the last property boom in 2005, Bloomberg News reports. In November 2020, the industry originated and sold over $600 billion in new residential mortgage loans.And as home prices rise at the highest rate in 20 years, it has become ever more apparent that the CARES Act and the attendant progressive angst regarding the impact of COVID on low-income households was unjustified. More, the apparent overreaction by Congress in mandating nonpayment of loans created a mess for the mortgage industry that need not have occurred. “These flatlining forbearance rates have generated considerable concern, with some experts predicting that a large number of homeowners could face foreclosure in 2021,” write Laurie Goodman and Michael Neal of Urban Institute. “Some policymakers worry about what will happen at the end of forbearance to these borrowers and whether borrowers who have not regained their prior financial position will go into foreclosure.” They continue: “But this widespread forbearance won’t necessarily happen, even among government loan borrowers who have a higher risk of default due to higher-initial-loan to value ratios, higher debt-to-income ratios, lower credit scores and lower incomes than borrowers using conventional loans.” Goodman & Neal cite improved loss mitigation policies at mortgage servicers and, as we noted last December (“A Bull Case for Mortgage Assets”), substantial housing equity as factors that can keep foreclosures at bay in most states. “The two strong lines of defense are the loss mitigation waterfall and the amount of home equity that borrowers have accumulated thanks to robust home price appreciation,” they write. From a public policy perspective, the fact that many of the FHA and VA loans currently in forbearance are likely to cure and re-emerge from delinquency suggests that the positive impact of low interest rates on housing prices and housing credit is considerable. But from an industry perspective, the positive outcomes for consumers do not change the fiasco created by Congress via the CARES Act. Every IMB’s ability to access ample liquidity to withstand contractually obligated servicer advance requirements, margin calls (that occur from hedging various assets including the loan pipeline), and unforeseen market dynamics is different. As we have noted in this column, the industry is currently taking from Peter to pay Paul by using the cash float generated by strong refinance volumes to finance the cost of loan forbearance. When Congress legislated the latest consumer mandate to not pay the cost of a home mortgage or an auto loan, none of the bright lights on either side of the aisle on Capitol Hill considered the cost. You see, mortgage servicers are contractually bound to advance principal and interest due on a mortgage when the consumer does not pay. These payments are made to the institutional investors who own Fannie Mae, Freddie Mac or Ginnie Mae mortgage-backed securities (MBS). These agency and government MBS, in turn, are guaranteed by the US government. In their haste to legislate this latest consumer mandate last year, neither party in Congress asked what happens to the government-guaranteed MBS when the consumer fails to pay their monthly installment. “The CARES bill requires servicers to advance up to a year of borrower payments on government-guaranteed/insured and conforming mortgages to every borrower that requests forbearance and attests to financial hardship caused by coronavirus, writes Scott Olson of the Community Home Lenders. “But no liquidity support is explicitly being provided to help IMB servicers meet this new responsibility for servicers to cover missed borrower mortgage payments…” As new loan backlogs start to shrink, however, and refinance volumes inevitably slow, the cash flow shortage caused by the CARES Act will begin to get super critical, particularly in the government loan market served by Ginnie Mae. Smaller servicers of Ginnie Mae MBS will need liquidity support from the Federal Reserve or we could face the prospect of a default caused by the negligence of members of Congress! The liquidity burden in the government market falls squarely in the private issuers of Ginnie Mae securities. In the conventional market, on the other hand, the GSEs own the loans and the servicing, thus they are ultimately responsible for making the payment to investors on conventional MBS. For this reason, Fannie Mae and Freddie Mac face the same cash shortfall as the private issuers of Ginnie Mae MBS. In an effort to protect the GSEs from the mounting cash shortfall in the conventional loan market, the Federal Housing Finance Agency took steps to limit loan purchases and other activities, but this just pushes the liquidity problem created by Congress onto smaller issuers. In June 2020, the FHFA testified to the Senate Banking Committee that FHFA’s analysis of servicer capacity compared to early forbearance projections indicated servicers as a whole have more than ample liquidity, and that liquidity position has improved since March 2020. But since June, even as many consumer mortgages have cured, the tab for financing and administering the CARES Act has grown. Both in terms of interest expense and the sheer cost of dealing with consumers, the industry is out hundreds of millions of dollars in terms of expenses incurred for this unfunded mandate from Congress. The clock is ticking with respect to the unfunded mandates in the CARES Act. A cynic would say that FHFA Director Mark Calabria would like to see mortgage banks fail to endorse his iconoclastic assessment of the risk posed by nonbank mortgage servicers. But in this case, even with the challenges of COVID, the nonbanks would be just fine were it not for the failure by Congress to fully understand and appropriate moneys to cover the cost of the CARES Act.

Treasury yields jump in catch-up to European bond selloff

February 16th, 2021|

U.S. Treasuries are breaching key levels as this week’s global debt selloff sends yields to their highest in about a year. While U.S. markets were closed on Monday for President’s Day, German bunds and U.K. gilts both saw benchmark yields gain five basis points as a significant slow-down in virus cases, progress on vaccine roll-outs and higher oil prices bolstered stock markets and proponents of the reflation trade. After they reopened on Tuesday, Treasury 10-year yields rose four basis points to touch 1.25% — the highest since last March — while the 30-year equivalent pushed above 2%. These are sad tidings for investors who snapped up some $68 billion of 10- and 30-year debt in Treasury auctions last week, at yields almost 10 basis points lower than current levels. Strategists at TD Securities have warned that further increases in yields could prompt offsetting flows in swaps, which have in the past created even more upward pressure. Hedging of mortgage bonds, often known as convexity hedging, could materialize if 10-year Treasury yields continue to rise past 1.30%, they note. The global reflation trade has gotten another bump as oil futures continued to advance, closing in on 13-month highs as extreme weather conditions caused some of the biggest refineries in North America to shut down. In every major market, stocks rallied strongly to start the week. Japan’s Nikkei Index broke above 30,000 for the first time since 1990, while S&P Index futures printed another record high on Tuesday. In the U.K., 30-year bonds were the worst performers on Monday. Yields rose seven basis points as the FTSE 100 stock index climbed more than 2.5% after the country hit a milestone in its vaccination program, supporting calls for easing of social restrictions. The selloff was broad, with even Italian bonds — which would typically outperform safe haven assets such as German bunds when credit spreads tighten and stocks climb -- under pressure. The announcement of a new 10-year benchmark bond sale to take place via syndication saw yields also advance five basis points.

The selling season that never ends

February 16th, 2021|

With the conditions surrounding the upcoming spring home buying season looking much like last year’s — itself a dramatic departure from the past— a new normal might be established: a sales season that lasts throughout the year. Home sales activity in 2020 was far different than any year in recent memory, as the pandemic forced changes to traditional patterns and practices. After the pandemic’s onset and subsequent lockdowns in March, April and May, buyers — many motivated by record low mortgage rates and the ability to work from home — began buying homes throughout the summer and beyond. "The housing market is unseasonably hot — it's behaving like it normally does in the spring, with plenty of demand from homebuyers," Redfin Chief Economist Daryl Fairweather said in a Jan. 15 press release. "Typically, the vast majority of homes for sale in December are homes that have been sitting on the market because they're overpriced or there's a problem with the property. This December, with so many Americans moving, scores of desirable homes hit the market — but not enough to satisfy insatiable demand from homebuyers." That was borne out in data from ShowingTime, a scheduling platform recently purchased by Zillow, which tracks the average number of appointments received on active property listings. In December, in-person home visits surged 63.5% on a year-over-year basis, the company reported. About 17% of Americans who have not purchased a home since March 2020 plan to do so prior to the end of 2022, according to a MyWalletJoy survey of 2,723 adults conducted between Dec. 9 and 11, 2020. Furthermore, 24% of those not planning to do so over that same time frame wish they could.Given the continued spread of COVID-19 and projections that vaccinations won’t be reaching the broad swath of the population until summer at least, 2021 is likely to mirror 2020 in both activity and process. Rather than one, concentrated spring season, the market will be host to a year-round frenzy of activity. The market bellwethers Certain indicators can offer hints as to which way this year’s spring selling season is going to go. The success of vaccine rollouts across the country are one place to look. Last year, "clearly the normal seasonal pattern didn't occur. Now whether it occurs in 2021 depends on the vaccine issue," said Fannie Mae Chief Economist Doug Duncan. But problems with vaccine distribution in a number of areas make it unlikely that sellers would reach a greater comfort level any sooner than April, at best, "and whether people immediately rush out the door to buy a home remains to be seen," Duncan said. The number of in-person visits to listed properties in January should provide an accurate forecast of spring sales activity, said Michael Lane, president of ShowingTime. He’s eager to see how January numbers will compare to the same month last year. "About the same will tell me that we might be shaping up to [it being] a typical year, but my gut tells me that we're not done with making up for lost time," said Lane. "There are lots of people that have not sold their home because they were uncomfortable doing it in 2020." On the other hand, 2021 could be another year where the sales pattern is "odd" compared to the past, he said. "It won't be like the shut down in March and April last year, it will be a slow ramp up, but I bet you that June through December will be higher than two years ago." Last year’s pandemic-related shifts should cause sales to boom both in the spring and beyond, said Andy Sachs, a real estate broker with Keller Williams in Newtown, Conn. "It's really driven by expectations about how America's going to go to work," he said, adding that widespread work-from-home flexibilities and cost-saving efforts to reduce office footprints are long-term trends that will influence the market. "And if that's the case, you're going to continue to push buyers out of the city, out of major metropolitan areas into the suburbs," and even beyond, where they might be able to get more value for their money, Sachs said. In addition, the traditional sales curves have seen some flattening over the past decade, taking out the peaks and valleys of seasonality. "Society in general is a little bit transient," Sachs said. Parents might prefer that their children be set to enter a new school district in the fall "but at the end of the day I don't think it is a driving force. So what we could see this season is a very, very robust summer into fall, into winter selling season when people feel comfortable letting people into the house to look." Entities like fulfilment services provider Promontory MortgagePath are expecting heightened activity ahead. It's preparing for increased demand from lenders for its services by being a bit overstaffed, "so we're carrying a bit of a bench, a bit of a buffer," said its chief operating officer Debora Aydelotte. "We hope for typical, but I don't think that's what's going to happen," said Aydelotte. "What we've been anticipating is a very bumpy reentry in 2021, [but] the spring selling market will arrive early in some places, based on pent-up demand." Lenders adjust As each listing becomes increasingly competitive for buyers, lenders may begin to feel some of the pressure. Getting loans through the underwriting process quickly could be the differentiator in getting the consumer's business. Homebuyers are doing everything possible to make their offer the "best," said Tony Weick, president of Bell Bank Mortgage. “Best” not just on price, but also "the strength of the approval, the lender the client is using, as well as how fast a buyer can close in some situations as well," Weick said. "Every scenario will have different triggers, but lenders will need to be able to accommodate all aspects the clients and the markets are demanding during these times," he added. For lenders who had to modify their practices during the pandemic, gearing up for this buying season will require further changes. "We have had to think differently and learn from what's worked well, what we need to do more of, where we may need to adapt further," said Cameron Beane, head of pricing and secondary markets at TD Bank, which covers the East Coast markets from Maine to Florida. "We're going to have to continue to adapt to an economy that is so early in what ultimately needs to happen for us to be able to say we're out of the pandemic and we're back to normal, whatever normal may be. "Certainly no one at TD knows what that is. We're all learning through the lens of supporting our clients."

Watermark Home Loans Review: Loan Amounts Up to $10 Million

February 15th, 2021|

Posted on February 15th, 2021 If you’ve been comparing mortgage rates and shopping your home loan lately, you may have encountered “Watermark Home Loans” along the way. They advertise quite a bit on some of the mortgage comparison websites, but aren’t necessarily a household name like some of the bigger guys. Of course, bigger isn’t always better, nor does it tend to be cheaper in my experience. So let’s learn more about them to see if they should be included in your home loan search. Watermark Home Loans Fast Facts Direct-to-consumer retail mortgage lender Offers home purchase financing and refinance loans Founded in 2006, headquartered in Irvine, CA Licensed in 36 states and the District of Columbia Funded more than $1.2 billion in home loans last year Appears to specialize in refinancing for existing homeowners Watermark Home Loans is a direct-to-consumer mortgage lender based out of Irvine, California, which is essentially the mortgage capital of the United States. There are tons of mortgage companies situated nearby in Orange County, including big names like New American Funding and techy newcomer LoanSnap. Anyway, they essentially operate a call center whereby you can phone in to get started on a mortgage application. This differs from lenders who offer brick-and-mortar locations as well. While they offer both home purchase loans and refinance loans, they appear to specialize in the latter, with such loans accounting for about 70% of total volume, per the latest HMDA data. Last year, they originated roughly $1.2 billion in home loans, with nearly half of total loan volume coming from their home state of California. At the moment, they’re licensed in 36 states and the District of Columbia. They don’t seem to do business in Alaska, Arkansas, Iowa, Kansas, Maine, Missouri, Montana, Nebraska, New Hampshire, New York, Rhode Island, Vermont, or the Dakotas at the moment. How to Apply with Watermark Home Loans You can either call them up directly or fill out a short online contact form Once you speak to a loan officer to get pricing you can apply online Their digital loan application is powered by fintech company Blend It allows you to link financial accounts, electronically sign documents, and check loan status 24/7 When it comes to applying for a mortgage, Watermark Home Loans makes it pretty easy. That’s because they’ve chosen to partner with fintech company Blend, which is a leader in the digital mortgage space. Their software allows borrowers to link financial accounts using bank or payroll credentials, sign documents and disclosures electronically, and collaborate with their loan officer or loan processor in real time. Additionally, customers can track the status of their loan application 24/7 by simply logging on to the borrower portal via the Watermark website. But before you get to the application, you’ll need to either call the company directly to link up with a loan officer, or fill out a short form on their website. Once you do that, you’ll be able to discuss mortgage rates, fees, and loan options – assuming you like what you hear, you can move along to the application. All in all, Watermark makes it easy to apply and track your home loan from start to finish. Loan Programs Offered by Watermark Home Loans Home purchase loans Refinance loans: rate and term, cash out, streamline Conforming loans backed by Fannie Mae and Freddie Mac Jumbo home loans up to $10 million loan amounts Government-backed loans: FHA, USDA, and VA Reverse mortgages for seniors Interest-only mortgages Fixed-rate and adjustable-rate options available in various loan terms (including 40-year terms) Watermark Home Loans appears to be big on mortgage refinancing, with rate and term refinances accounting for about 50% of volume. Another 20% or so is devoted to cash out refinances, in which existing homeowners pull equity from their properties to pay for other expenses. The remainder is devoted to home purchase loans, with many of them conforming loans backed by Fannie Mae or Freddie Mac. They also do quite a bit of jumbo home loan lending, which makes sense given their headquarters being in pricey Southern California. In fact, they offer loan amounts as high as $10 million! Borrowers can also take out a government-backed mortgage, such as an FHA loan, USDA loan, or VA loans. Speaking of VA loans, Watermark Home Loans says it donates a portion of loan proceeds to the Warrior Foundation – Freedom Station, which assists wounded veterans. With regard to specific loan programs, you can get a fixed-rate mortgage such as a 30-year or 15-year fixed, or an adjustable-rate mortgage like a 5/1 ARM. They actually say they offer loan terms as long as 40 years, along with interest-only home loans, both of which are somewhat outside-the-box and harder to come by these days. So you shouldn’t be limited when it comes to loan choice, which is another plus. Watermark Home Loans Mortgage Rates While they don’t list their mortgage rates on their website, they do say you can call in for a free, no obligation quote. You may also come across their mortgage rates when comparing lenders on websites like Bankrate. If so, you might be able to get an idea of their loan pricing, along with closing costs if also listed. My assumption is they’re pretty competitive in the pricing department because they’re essentially a direct-to-consumer online mortgage lender. That should mean less overhead and a streamlined approach, which hopefully translates to lower costs and cheaper mortgages for their customers! But you’ll need to call them or fill out a form on their website to obtain pricing for your particular loan scenario to find out. Once you’ve got that in hand, be sure to compare their rates and fees to a few other lenders to ensure they offer the best price. Based on their many positive customer reviews, homeowners seem satisfied with their pricing. Watermark Home Loans Reviews The company comes highly rated, with a 4.81-star rating out of a possible 5 on Zillow from nearly 1,300 customer reviews. Many of the reviews on Zillow indicated that the interest rate and/or closing costs were lower than expected, which gives us another hint about pricing. Over at Bankrate, they’ve got an even better 4.9-star rating out of 5 from more than 700 reviews, with nearly all of them 5-star reviews. Similarly, they’ve got a 4.6-star rating out of 5 on Google from more than 600 reviews. But wait, there’s more – at LendingTree they have a 4.9-star rating from over 30 reviews and a 97% recommended rate. Lastly, they are an accredited business with the Better Business Bureau and currently hold an ‘A+’ rating based on their interactions with customers. They’ve got a 3.9/5-star rating based on about 30 customer reviews as well. In summary, Watermark could be a good choice for an existing homeowner looking to refinance thanks to their perceived low rates and plentiful loan options, coupled with their easy digital loan process. Watermark Home Loans Pros and Cons The Pros Can apply for a home loan via their website in minutes Offer a digital mortgage application powered by Blend Lots of loan programs to choose from including jumbos and interest-only options No closing cost and $0 application fee options Excellent customer reviews across all ratings sites A+ BBB rating, accredited company Free mortgage calculators on site The Cons Not licensed in all states No physical locations Do not publicize mortgage rates or fees

Should You Buy a New Home or an Old Home?

February 15th, 2021|

It’s time for another match-up, this time we’ll compare buying a new home versus purchasing an old one. For the record, some home builders refer to existing homes as “used,” which sounds kind of silly considering we’re talking about a house and not a car. Ultimately, it’s a marketing gimmick to sway you toward buying new as opposed to old, but let’s continue on to determine the pros and cons. Millennials and Gen X Are Big on New Homes A recent report from the National Association of Home Builders found that interest in newly-built homes has surged. They noted that during the fourth quarter of 2020, 41% of prospective buyers were searching for a newly-built home, double the 19% share a year earlier. At the same time, the share interested in an existing home fell from 40% to 30%. It’s even more pronounced when we break it down by generation, with 50% of Millennial and 48% of Gen X buyers looking to buy a new home. Meanwhile, just 13% of Boomers indicated that they were looking for a new home vs. existing. Interestingly, Gen Z is a little more into existing homes than Boomers with a 38% share, but still below that of Millennials and Gen X. New Homes Are Untouched and Clean The number one reason to buy a new home is probably the fact that it’s never been lived in Some people may not like the idea of living somewhere that was previously occupied It also might feature the newest amenities such as improved insulation and solar panels And in theory you shouldn’t have to repair or renovate anything right away The most obvious benefit to buying a new home as opposed to an old, existing, or used one is the fact that it’s brand spanking new. It’s untouched, it’s clean, everything is in good working order and nothing needs to be repaired. At least that’s the hope. That’s a pretty huge incentive to buy new. You won’t have to worry about the typical costs of homeownership for the first several years, right? Another benefit to buying new is that the home (or townhouse or condo) should have all the latest amenities. Remember when it was all the rage to have stainless steel appliances and granite countertops? Well, today’s new homes come with solar panels, energy-saving windows, smart appliances, USB outlets, electric vehicle charging stations, thermostats and door locks you can control with your phone, and other features that might make your used home look really old, especially a few years down the line. Aesthetics aside, these upgrades could actually save you a lot of money each year on utility costs because they’re designed to be cost-efficient, not just handy.  You might even get a tax break! Not only that, but many of these new homes use low-VOC paints and flooring, which are supposedly better for your health. Who knows what lurks in some of the older homes? Additionally, new home buyers often get the opportunity to fine-tune the home they buy by selecting certain features, colors, styles, etc., and even financing any add-ons into the mortgage loan amount. It Can Be Easier to Buy a New Home It might be easier to finance a new home with a mortgage Home builders often have their own home loan divisions So they’ll be motivated to work with you to get the deal done But still take the time to shop around and negotiate since you don’t need to use their preferred company And speaking of mortgages, most home builders have their own financing departments that make it easy to get a mortgage. Whether it’s the best deal is another question, but if you simply want in, your odds are probably better with a new home.  After all, the builder has a vested interest to get you financing. There’s probably also a lot less competition for a new home, seeing that you’re probably checking out a brand new neighborhood full of vacant homes to choose from. This can be a huge advantage in a seller’s market, which we’re experiencing at the moment. Instead of a bidding war, you might be able to pick and choose from a selection of available properties. You can even pick among different sizes and floor plans to get just the right amount of space, as opposed to having to conform to what’s available in the existing market. You might be thinking, hey, this sounds great, sign me up now! Why on earth would I want a used home with dodgy popcorn ceilings and laminate countertops? But wait, there’s more to homes than their shiny exteriors and what’s inside. Don’t Forget About Location… Location is and will always be the biggest property value driver And new construction homes are often in less desirable areas Or in the outskirts of urban areas because that’s where new land is available Be sure to take that into consideration as a major tradeoff to buying a new home Let’s face it; the old adage that location is everything in real estate is true. It’s always been true, and always will be true. That is, if you want to see your property actually go up in value. And guess what. Brand new homes often ren’t being built in the best locations. When it comes down to it, there’s no space for a new development in an established or central location. Sure, you might see a new condo development, but new homes most likely won’t be that central. They’ll be on the outskirts of town, or in a “trendy” or “up-and-coming” area. In other words, there’s going to be a commute if you buy new, and the location might be questionable at best in terms of value. There might even be multiple new developments surrounding yours, with tractors and hammering construction workers doing what they do all day long. That being said, it is possible to buy a new home in an area that flourishes. One hint it’s the right area might be the stores that are built nearby, such as a Whole Food’s or Trader Joe’s. Of course, with an existing or used home, you can buy in the heart of the city, or in an area you know well that is insulated by a lack of available space and construction. That buffer means the property should hold up well in terms of value, even during a downturn, assuming the area isn’t subject to obsolescence. A used home might also give you the ability to walk to work, or to popular restaurants, bars, shops, and so on. At the same time, a used home doesn’t necessarily have to be old inside. If you shop around, you might be able to find an old home that has already been remodeled to your liking. And even if it hasn’t, that shouldn’t stop you from buying it and making renovations if it’s got good bones. New Homes Are 20% More Expensive Ultimately you pay a premium for a new home (just like a brand new car) Apparently the cost is 20% more on average per a study from Trulia So while a new home might be cheaper with regard to maintenance and renovation You still need to consider the upfront cost to get an apples-to-apples comparison A while back, Trulia determined that new homes (built in 2013-2014) cost roughly 20% more than similar existing homes. They also found that two in five Americans would prefer to buy a new home, compared to just 21% opting for an existing home and 38% declaring no preference. But when it came to that 20% markup, only 17% would actually pay the premium to get the new house. So to get this straight, you might have to pay 20% for a new home AND you won’t be in a central location. You’ll be in an untested location that might wind up being a ghost neighborhood in a decade if things don’t work out as planned. During the most recent housing crisis, a lot of new home communities were hit the hardest, whereas existing homes saw their values decline but prop back up over time. Of course, if you opt for new you’ll probably have all the latest technology and no major issues. And if you go with an older home, you might have major bills on your hands when the roof gives out, or you discover serious plumbing issues. So you’ll need to do your due diligence when buying an old home to ensure the property is in adequate shape. This means paying for a quality inspection (or two). Then again, I’ve heard really negative stuff about new homes too, with many claiming workmanship has gone to you know what these days. In other words, you’re not out of woods if you buy new either, though there might be some kind of warranty in place for a while. At the end of the day, it’s probably okay to consider both new and used homes when looking for a property, and including both types should increase your odds of finding a winner. As long as you take the time to inspect the property and the neighborhood, negotiate the right place, and make sure you can afford the place, you should be okay. Lastly, you should make sure you actually want to own as opposed to rent because owning comes with many more responsibilities, whether you buy new or used. Advantages to Buying a New Home Brand new, clean, no major issues Move-in ready (no wait or work to be done) Cool new technology Green features could reduce utility costs and/or provide tax incentives Trendy design Ability to customize Can finance additions into mortgage Possibly easier to get financing with home builder Less competition, more choices on floor plans Disadvantages to Buying a New Home More expensive than buying used Location probably isn’t ideal Despite being new, workmanship might be questionable Could be subject to costly HOAs, even if it’s a house Neighborhood dynamic is unknown Property values might be more volatile Construction nearby (eyesore and noisy) More cookie-cutter, less unique Advantages to Buying an Existing Home Possibly cheaper Better, more central location Can buy in an established school district Can own in a more reputable and recognized neighborhood Old house might have new upgrades You can always renovate if need be Older houses tend to have more character, custom design Could actually be built better than a new home Disadvantages to Buying an Existing Home Harder to find an existing home (less inventory) Might have major problems you don’t initially notice Financing could be tricky (if unpermitted work, etc.) Could still be more expensive than buying new Fewer amenities, especially as homes get more tech-integrated The neighborhood might be in decline More competition to get your offer accepted Might have to settle for a smaller, less ideal home to get right location

FHFA extends forbearance, the hottest U.S. housing markets revealed and more of the week's top news

February 12th, 2021|

The seal of the Federal Housing Finance Agency (FHFA) is displayed outside the organization's headquarters in Washington, D.C., U.S., on Wednesday, March 20, 2019. President Donald Trump's pick to lead Fannie Mae and Freddie Macs regulator pledged to work with Congress on overhauling the companies, while downplaying controversial positions he's previously laid out on everything from the 30-year-mortgage to affordable housing initiatives. Photographer: Andrew Harrer/Bloomberg Andrew Harrer/Bloomberg

Forbearances at lowest level since April, but further drops in doubt

February 12th, 2021|

The number of borrowers in forbearance is at its lowest level in 10 months but with conforming borrowers now able to extend their plans, it’s uncertain whether that amount will drop further in the near future, Black Knight said. There were 2.67 million borrowers, or 5% of the 53 million outstanding mortgages, in a forbearance plan on Feb. 9, the fewest since the middle of last April. These loans have an unpaid principal balance of $532 billion. One week prior, there were 2.71 million borrowers, or 5.1% of the outstanding mortgages, with a UPB of $541 billion in a forbearance plan. The declines over the past two weeks were driven by plans expiring on Jan. 31, Black Knight said.The Federal Housing Finance Agency’s Feb. 9 announcement, which allows borrowers to request an additional three months of relief for Fannie Mae and Freddie Mac loans at the end of this month, stands to upend trends in forbearance exits. "Significant unknowns remain, one of which is the impact such extensions will have on the overall recovery," Andy Walden, Black Knight's director of market research, wrote in a blog post. "We've already seen evidence of forbearance starting to erode borrowers' equity positions." Since early December, the month-to-month declines have been averaging less than 2%, he noted. Now, with the FHFA extension, that could be slowed even further as roughly 30% of the existing forbearances for Fannie and Freddie borrowers were set to expire at the end of March. If Ginnie Mae should follow suit and extend the timeline on the Federal Housing Administration and Veterans Affairs mortgages in its securities to 15 months, at the current rate of improvement there would still be some 2.5 million homeowners in forbearance at the end of June when the first round hit their new 15-month expirations, Walden said. There are now 907,000 government-sponsored enterprise loans in a forbearance plan, with a UPB of $189 billion. This was down from 913,000 mortgages with a UPB of $190 billion one week ago. The largest number of mortgages in forbearance are the government-guaranteed products, with 1.11 million loans in a plan. But because loan amounts are typically lower than conforming loans, the UPB is only slightly higher, at $190 billion. The previous week, there were 1.26 million FHA and VA loans in a plan with a $192 billion UPB. As for portfolio and private-label mortgages in forbearance — the granting of which is up to the servicer and investor — there are now 650,000 loans in a plan, with a UPB of $153 million. This category had the largest week-to-week decline, as for the period ended Feb. 2, there were 680,000 of these mortgages in a plan with a UPB of $159 billion.

Fannie Mae’s 2020 earnings fall due to COVID-related credit expenses

February 12th, 2021|

Although its net income dropped annually, Fannie Mae’s earnings improved in every quarter of 2020 as it provided record volumes of mortgage liquidity. The government-sponsored enterprise reported a fourth quarter net income of $4.6 billion, up from $4.2 billion in the third quarter and $4.4 billion one year earlier. The government-sponsored enterprise logged $11.8 billion in net income in 2020, a drop from $14.2 billion in 2019 and $16 billion in 2018. The annual decline was primarily due to nearly $900 million of credit-related expenses incurred as a result of the pandemic, which compared with $3.5 billion of credit-related income in 2019, Fannie’s chief financial officer Celeste Mellet Brown said on the earnings call. Fannie’s fourth quarter and yearly earnings outpaced Freddie Mac’s respective net incomes of $2.9 billion and $7.3 billion. “Today’s Fannie Mae is far more resilient than Fannie Mae of yesterday,” said Fannie chief executive officer Hugh Frater on its earnings call. “In 2020, with the greatest labor market disruption since the Great Depression, we provided historic amounts of liquidity to the mortgage market, and we provided forbearance to more than 1.3 million homeowners to help keep them in their homes.” With mortgage rates reaching new all-time lows in September and again in December, Fannie financed 1.5 million home purchases in 2020, a 20% jump from 2019. The GSE also refinanced 3.4 million loans, a 200% surge from the year before. Fannie provided a record $1.4 trillion in single-family mortgage liquidity in 2020, with refinancing activity accounting for $948 billion — its highest amount since 2003. The overall volume represented a 135% spike from 2019. The single-family business made a quarterly net income of $3.9 billion — up from nearly $3.8 billion in the third quarter. It pulled in $9.9 billion for the year, down from $11.8 billion in 2019. The multifamily segment produced a record $76 billion in annual volume. It brought in a net income of $626 million — up from $460 million in the third quarter — and over $1.9 billion in 2020 — down from $2.3 billion the year prior. The GSEs started 2021 with the Treasury and Federal Housing Finance Agency amending their preferred stock purchase agreements to allow them to hold more capital, another step toward a responsible exit from conservatorship. The agreement largely garnered support from around the mortgage industry. The amendment allows Fannie to build funds until it achieves “adequate capitalization under the new enterprise framework,” Brown said. “This is essential as it remains a key unfinished aspect of our transformation under conservatorship.” Fannie also notably re-adopted hedge accounting in an effort to reduce earnings volatility. The first impact of this adoption will be seen in the first quarter of 2021.

The 12 Hottest Housing Markets in 2021

February 12th, 2021|

Bidding wars. Soaring profits for sellers. A shift in working remotely. A push for amenities. After 2020, some markets will stand out above the rest. According to National Mortgage News, With the combination of extremely low inventory and interest rates holding near historic lows, forecasts show 2021 shaping up to be a strong year of originations with increased emphasis on buying. From the Lone Star State to all across the Sun Belt,  the top 12 cities most likely to outperform the national average are:  12) Houston, Texas 11) Miami, Florida 10) Las Vegas, Nevada 9) Riverside, California 8) Washington, D.C. Continue reading The 12 Hottest Housing Markets in 2021 at Movement Mortgage Blog.

People on the move: Feb. 12

February 12th, 2021|

Interfirst Mortgage Co., which relaunched last June after a three-year hiatus, promoted Dhaval Patel to senior vice president of consumer direct production. Patel joined the company as vice president of that segment in January 2020. Previous to joining Interfirst, Patel was the area lending manager with Carrington Holding Co. and held leadership roles at Azure Knowledge Corp. and Citizen Financial Mortgage Corp. “Over my 30-year career, this is the first time where I trust a company enough to recommend its products to my family, friends and neighbors,” Patel said in an announcement about the promotion. “This speaks to the strong belief I have in Interfirst’s culture and corporate vision.”Licensed in 19 states, the company is headquartered in Chicago, where Patel expects to grow his team of originators from 120 loan officers to 250. Interfirst, founded in 2001, had exited the origination market in 2017 citing oversaturation and overvaluation in the market.

Former SoFi CEO starting blank-check company to raise $250 million

February 12th, 2021|

Mike Cagney’s blockchain lending startup Figure Technologies plans to raise $250 million through a new blank-check company, according to an SEC filing. The special-purpose acquisition company, or SPAC, is called Figure Acquisition Corp. I and sponsored by Fintech Acquisition LLC, a Figure affiliate. Ellington Management “owns a significant economic interest” in the fintech entity and “has the right to designate a director for election to our board of directors,” according to the filing. Figure, a mortgage firm, has not yet selected any business combination target nor initiated any “substantive discussions” with any company, the filing said. A representative for Figure declined to comment beyond what was in the filing. Mike Cagney. David Paul Morris/Bloomberg Established in 2018 in San Francisco, Figure has raised over $220 million in funding from early-stage and corporate venture investors including Ribbit Management, the partners at DST Global, RPM Ventures, Nimble Ventures and Morgan Creek, among others, the filing said. SPACs look to merge with private companies, letting them become publicly traded while avoiding some of the uncertainty of an initial public offering. The vehicles have become a popular way for venture-backed startups to list on the public markets. After a record 2020, the grab for capital by SPACs has continued into the new year. In the first six weeks of 2021, some 155 U.S. vehicles filed for initial public offerings, seeking to raise a collective $46 billion, Bloomberg data show. Read more: Former SoFi CEO Cagney Sells Biggest Heloc-Backed Bond in Decade Figure set up a platform to underwrite, originate, service and finance mortgage loans and other consumer debt through its affiliated blockchain, Provenance. In September, Cagney told Bloomberg that digitally underwriting and originating the loans on blockchain makes the process less cumbersome for the borrower versus traditional origination, and more transparent for capital-markets investors. Cagney helped build SoFi into one of the largest refinancers of student loans. He resigned after several workplace controversies at the firm, including allegations of sexual misconduct and a toxic work environment at the company.

Mortgage investors bracing for Fed’s taper may be disappointed

February 12th, 2021|

The best mortgage bonds to buy now may be the ones the Federal Reserve is purchasing, because the securities might benefit the most if macro optimism fades. So far this year, some investors have been growing more hopeful about an economic recovery as a new U.S. stimulus package is rolled out. This has markets looking for any positive macro signs that may translate to the Fed tapering its direct purchases of mortgage bonds, according to a recent Bank of America report. A slowdown in central bank buying would hurt demand for the 30-year uniform mortgage-backed securities with 2% and 2.5% coupons that it tends to buy. Concerns about tapering are part of why those securities have generated excess returns over Treasuries of just 0.05% and 0.06% this year, performing far worse than mortgage bonds with 3% and 3.5% coupons. Those higher-coupon bonds have generated excess returns of 0.75% and 0.65%, respectively. But investor optimism about recovery may not last. Looking at bond yield forecasts, consensus is for the 10-year Treasury yield to fall about 0.1 percentage point by the end of the quarter, and for the difference between 10-year and 2-year U.S. Treasury yields to narrow by 0.16% over the same time frame. Both of those moves would imply that mortgage investors are likely to grow more concerned about the pace of economic recovery in the coming weeks. That would help lower-coupon mortgage bonds and hurt higher-coupon securities. “For higher coupons, the yield curve steepening is running into some headwinds, call risk is high and there’s no Fed backstop,” said Randy Ahlgren, a director at Wells Fargo. “It’s tough to see the higher coupons continue to outperform.” Both 3% and 3.5% uniform MBS in the latest prepayment report paid at 40.2 CPR, meaning that at the current pace just over 40% of the remaining principal balance on the bonds will be prepaid annually at par, potentially hurting performance. Investors that have bought these bonds may have been hoping for prepayments to slow, but they may be disappointed. The mortgage lending industry added application processing capacity at a rapid pace in 2020, meaning that even if rates rise or stay steady, they may still look to keep mortgage rates low to keep their pipelines full. The weighted average coupon of the mortgages bundled into 3% bonds is 3.73%, and for 3.5% securities it’s 4.12%. The borrowers here still have ample incentive to refinance with 30-year mortgage lending rates at 2.73%.

LoanDepot shares soar after the IPO’s price and size were slashed

February 11th, 2021|

LoanDepot became the fourth out of four mortgage company initial public offerings launched in recent months to downsize, but that did not deter investors from driving the price straight up. The offering ultimately consisted of 3.85 million shares at $14 per share; with an underwriters' option to purchase an additional 577,500 shares. The IPO included 2.394 million shares sold by loanDepot for proceeds of $25 million. The remaining 1.456 million shares were sold by Parthenon Capital Partners In its registration statement, loanDepot had been looking to sell 10.82 million shares including the underwriters' option, while Parthenon was selling 6.43 million with a price range of $19 to $21 per share. Still, the stock quickly shot up with a high of $17.77 per share when it started trading on Thursday morning; by 1:30 p.m. it backed down to $17.05. But in the last half hour of trading the price leaped to a high for the day of $23.49 before closing at $22.09.The loanDepot transaction came two weeks after Home Point Capital launched its IPO, which was significantly reduced in the midst of the Game Stop turmoil. Both Rocket Cos. and Guild Holdings had also downsized their offerings before launching their IPOs. Because UWM Holdings went public in a merger with a special purpose acquisition company, it simply took over the existing stock and price of its partner, Gores Holdings IV. A request for comment from loanDepot regarding the decision to pare the offering down was not returned. However, in November 2015, loanDepot halted its planned offering at the brink of pricing, with some speculating at the time that the deal was going to fall below the $16 to $18 per share it was seeking. This week’s reduction in the offering size affected loanDepot's plans for the use of its proceeds. It will now purchase 2.394 million shares of LDI Holdings together with an equal number of shares of Class B and Class C common stock, from CEO Anthony Hsieh among other company officers.

Freddie Mac's 2020 earnings rose as it delivered 'record liquidity'

February 11th, 2021|

Freddie Mac touted its performance supporting the markets during the pandemic and a year of record originations in its earnings call, announcing also that it nearly doubled its net worth thanks to the new capital requirements from the FHFA. The government-sponsored enterprise reported fourth quarter net income of $2.9 billion, compared with $2.5 billion in the third quarter and $2.6 billion for the fourth quarter of 2019. For the full year of 2020, Freddie Mac earned $7.3 billion, slightly higher than the $7.2 billion net income for 2019. "We delivered record liquidity of $1.2 trillion at a critical time, helping 4.6 million families purchase, refinance or rent a home, a significant increase compared to the 2.6 million in 2016," Chief Financial Officer Chris Lown said in his introductory remarks during the call. "First-time home buyers represented 46% of the 1.1 million homebuyers we supported and of the over 800,000 multiple family units we helped finance, 96% were affordable to families making at or below 120% of the area median income." This was the company's first results call following former CEO David Brickman's resignation in January. Brickman subsequently became the executive chairman of Meridian Capital and CEO of a multifamily agency lender backed by Meridian and Barings. It was also the first call since the Jan. 14 agreement between Freddie Mac's regulator, the Federal Housing Finance Agency, and the Treasury, which allows it and Fannie Mae to retain more capital.Because Freddie Mac's requirement to pay dividends on the senior preferred stock held by the Treasury has been put on hold so it can build capital, the company's net worth grew to $16.4 billion as of Dec. 31, 2020, from $9.1 billion on the same day in 2019. But the retained earnings also increased the liquidation preference for those shares from $84.1 billion on Sept. 30, 2020 to $86.5 billion on Dec. 31, 2020 based on the $2.4 billion increase in Freddie Mac's net worth during the third quarter. It will increase to $89.1 billion on March 31, 2021 based on the $2.5 billion increase for the fourth quarter. Freddie Mac's single-family business did $1.1 trillion of activity during 2020, up 141% from the prior year, a result of the higher refinance and purchase activity resulting from the low mortgage interest rate environment. This segment earned $4.5 billion in 2020, up from $4.3 billion in 2019. For the fourth quarter, the single-family business earned $1.9 billion, compared with $1.3 billion in the third quarter and $1.4 billion in the fourth quarter of 2019. More than 700,000 single family Freddie Mac borrowers had entered into forbearance agreements with its servicers during the pandemic and nearly 61% or 437,000 had exited as of Dec. 31, Lown said. Meanwhile, the multifamily segment had 2020 earnings of $3.1 billion, up from $1.8 billion in 2019, because of higher guarantee fee income driven by portfolio growth and lower fair value losses on guarantee assets due to lower interest rates. In the fourth quarter, this segment earned $1.15 billion, compared with $1.18 billion in the third quarter and $502 million in the fourth quarter of 2019. Freddie Mac did $83 billion of new multifamily business in 2020, up from $78 billion the previous year. But the negative effects of the pandemic were seen in Freddie Mac's capital markets segment results. This business lost $137 million in the fourth quarter and $324 million for all of 2020 on a net basis. On a comprehensive basis, which includes changes related to available-for-sale securities and changes related to cash flow hedge relationships, Freddie Mac had a net loss in the capital markets segment of $502 million for the fourth quarter. That loss wiped out gains earlier in the year, so the segment lost $204 million in 2020. The year-over-year loss was attributed to lower net interest income, driven by an increase in amortization expense due to higher loan prepayments. That was coupled with additional expenses as a result of payments that needed to be made to security holders at the full monthly coupon rate when mortgages pay off in the middle of a month. While Freddie Mac's custodial trust account balance increased due to the higher prepayments, it earned a minimal yield due to the low interest rate environment. However, as a result of the FHFA requiring Freddie Mac to keep loans with COVID-19-related forbearance in mortgage-backed security pools for at least the duration of the plan, "the company's less liquid assets are likely to increase in future periods as it will likely purchase a higher amount of delinquent and modified loans from securities after borrowers exit forbearance plans," the earnings release said.

Assurance Financial Review: So Fast You Can Apply During Halftime

February 11th, 2021|

Posted on February 11th, 2021 Today we’ll check out a mortgage lender based in the south by the name “Assurance Financial,” which is headquartered in Baton Rouge, Louisiana. Aside from being fans of LSU, they also say you can apply for a mortgage during halftime, which is handy if you’re a sports fan. They’re able to get things done quickly because they’ve employed the latest cutting-edge technology, and they do everything in-house. Let’s learn more. Assurance Financial Fast Facts Direct mortgage lender that operates online Offers home purchase financing, refinances, and construction loans Founded in 2001, headquartered in Baton Rouge, LA Licensed in 43 states and the District of Columbia Funded more than $1 billion in home loans last year Does most of their business in home state of Louisiana Assurance Financial is an independent, direct-to-consumer full-service residential mortgage banker that offers home purchase financing, mortgage refinances, and construction loans. This means you can apply for a home loan directly from their website so you don’t need to leave your couch. But while the company mostly operates online, they do have physical branches in eight states nationwide to serve customers locally. They’ve been around since the turn of the century, which is a lifetime in the mortgage biz, and funded more than $1 billion in home loans last year. At present, they’re licensed in 43 states and the District of Columbia, but not currently available in Arizona, Hawaii, Missouri, Nevada, New Jersey, New York, or Utah. Much of their business came from their home state of Louisiana, along with Alabama, Georgia, Texas, and Virginia. About 70% of total volume comes from home purchase loans, with the remainder mostly refinances and some HELOCs. How to Apply for a Mortgage with Assurance Financial You can call them, have them call you, get in touch with a loan officer, or use their digital assistant Abby Their digital mortgage offering is powered by leading fintech company Blend It allows you to complete most of the process electronically from any device They handle the entire loan process from start to finish in-house to ensure turn times are quick One great thing about Assurance Financial is the ability to apply for a home loan from any device using the latest technology. They’ve turned to Blend to get that done, and go a step further in simplifying things by bringing in their digital assistant Abby. The character is actually based on their “very real” Post Closing Manager Abby Widmer. You can apply with “Abby” in as little as 15 minutes and get helpful tips and guidance along the way so you know what you’re getting into and what to expect. But if you want a real human to help you right off the bat, you’re also able to peruse the online loan officer directory on their website. There you can enter your location to see which loan officers are licensed in your state, then get access to their contact information if you want to discuss pricing and loan options first. Regardless of how you apply, a licensed loan officer will step in at some point to get you approved and help you fund your loan. Either way, it’ll be super simple because you can complete the app online and link your financial accounts and tax returns using your credentials instead of having to scan or fax paperwork. Additionally, you can eSign all those pesky disclosures and manage your loan from their online portal 24/7. You’ll also get status updates and a to-do list to stay on track. As mentioned, they also have branches in eight states if you prefer to do business in-person, including Alabama, Colorado, Georgia, Louisiana, North Carolina, South Carolina, Texas, and Virginia. Loan Programs Offered by Assurance Financial Home purchase loans Refinance loans: rate and term and cash out Construction loans (one and two-time close options) Conforming loans backed by Fannie Mae and Freddie Mac FHA loans VA loans USDA loans Jumbo loans Non-QM loans Down payment assistance programs Manufactured home loans HELOCs Fixed-rate and adjustable-rate options available Assurance Financial has a very wide range of loan programs available, and lends on all property types, including single-family homes, condos/townhomes, and even manufactured homes. You can get financing for a primary residence, vacation home, 1-4 investment property, or even a new build if you’re constructing your dream home. If you’re an existing homeowner, you can take advantage of a rate and term refinance or a cash out refinance if you want to take advantage of a lower rate and/or your accrued equity. With regard to loan types, you can get a conforming loan backed by Fannie/Freddie, a government-backed loan such as an FHA or VA loan, or even a jumbo loan. They say they also offer non-QM options and down payment assistance programs for first-time home buyers, along with home equity lines of credit (HELOCs). Both fixed-rate and adjustable-rate mortgage options are available in a variety of loan terms. Assurance Financial Mortgage Rates One drawback to Assurance Financial is the fact that they don’t list their mortgage rates online or elsewhere. As such, it’s unclear where they stand in the loan pricing department. It is recommended that you speak to a loan officer to get pricing first before diving into an application. That way you can be assured that they’re competitively priced relative to other lenders out there so you don’t waste your time. Also be sure to inquire about any lender fees they may charge, such as an application fee or loan origination fee. Once you know these things, which together make up the mortgage APR, you can accurately shop your home loan with other lenders to ensure they’re good on price. Assurance Financial Reviews They seem to really excel when it comes to customer service, so much so that someone living far away from their corporate headquarters might be tempted to use them. On SocialSurvey, they have a 4.94-star rating out of 5 from nearly 15,000 customer reviews, which is impressive for both the rating and sheer volume. Similarly, they’ve got a 5-star rating out of 5 from more than 7,000 reviews on LendingTree, with a 100% recommended score. They are rated excellent in every category, including interest rates, closing costs, responsiveness, and customer service. On Zillow, it’s the same deal, a 4.99-star rating out of a possible 5 from almost 100 reviews, which while a smaller sample size is on point with their other ratings. Lastly, they are a Better Business Bureau accredited company (since 2003) and currently hold an ‘A+’ rating based on customer complaint history. In summary, Assurance Financial has incredible customer satisfaction ratings, the latest technology, an excellent website, and tons of loan programs to choose from. Assuming they also offer great pricing, they could be an excellent choice for your home loan needs, whether you’re a first-time buyer or an existing homeowner. Assurance Financial Pros and Cons The Pros Can apply for a home loan directly from their website Offer a digital mortgage application powered by Blend Also have a digital assistant to help you along the way Their website is very modern and easy to navigate Lots of programs to choose from including jumbos and non-QMs Excellent customer reviews from past customers A+ BBB rating, accredited company Physical branches in some states Free mortgage calculators and mortgage guides online The Cons Not licensed in all states Do not list mortgage rates or lender fees on their website (photo: Stuart Seeger)

January’s foreclosure activity 'doesn’t reflect market reality’

February 11th, 2021|

Foreclosures hit an all-time low in January as President Biden’s extension of the foreclosure moratorium spared millions of delinquent borrowers from entering the process, according to Attom Data Solutions. After rising 8% in December from November, mortgage foreclosures dropped 11% month-over-month in January and dropped 80% from a year earlier, according to Attom Data Solutions. Foreclosure filings — inclusive of default notices, bank repossessions and scheduled auctions — totaled 9,702, falling from 10,876 in December and 49,106 in January 2020. “January foreclosure activity declined at least in part due to the Biden Administration’s decision to continue the foreclosure moratorium on government-backed loans through the end of March,” Rick Sharga, executive vice president of Attom's consumer-facing business, RealtyTrac, said in the report. “But it’s important to remember that the number of foreclosures we’re seeing right now doesn’t reflect market reality — and that’s something we’ll need to deal with once these government programs expire.” One in every 14,164 U.S. mortgaged properties sat in a stage of the foreclosure process in January. Delaware had the highest foreclosure rate at one in every 4,923 units. Louisiana came next at one in 6,581 units, followed by Florida at one in 7,920. Broken down to housing markets with populations above 1 million, Jacksonville, Fla., had the country’s worst foreclosure rate at one in every 5,657 properties. It barely edged out Cleveland’s one in every 5,660. Miami trailed with one in every 6,867. Almost identical to the filings, foreclosure starts fell 12% month-over-month and 80% annually. Overall, 5,235 properties started the foreclosure process. Despite the decrease, five states saw foreclosure start growth from December. Starts jumped 63% in Washington, 54% in Virginia, 32% in North Carolina, 21% in Massachusetts and 10% in Ohio.Counter to the short-term growth, some major metro areas exhibited large annual declines. Of those with over 200,000 people, foreclosure starts fell year-over-year by 87% in Chicago, 85% in New York, 80% in Los Angeles, 77% in Dallas and 69% in Houston. Lender repossessions plummeted 28% monthly and 86% yearly — the 13th straight month of annual decreases. A total of 1,428 properties completed the foreclosure process in January. Illinois saw the biggest annual drop in REOs at 86%, followed by 83% in Florida and Maryland. Among major housing markets above 200,000 people, the most bank repossessions came in Birmingham, Ala., with 124, Chicago with 65 and Baltimore with 41. While the foreclosure moratorium will have ripple effects for the administration to work through, industry experts expect further actions taken to lessen the negative fallout on the housing market and borrowers alike. “At some point, there's going to have to be a reality check recognition about what the longer-term economic circumstances of those families are,” Ed DeMarco, president of the Housing Policy Council, said in an interview. “Even for a family that's had a permanent change and can't afford their mortgage anymore, if we can't do a loan modification we've learned a lot of tools to help create graceful exits and help to create a more stable transition. Nobody wants to foreclose on families.”

Prolonged plateau in mortgage rates adds to signs of market shift

February 11th, 2021|

The lack of change in the average fixed rate for a mortgage this week added to evidence that refinancing opportunities are contracting slightly as economic signals point to a tepid recovery. At 2.73% the 30-year Freddie Mac rate reprised its number from the previous week and was down from 3.47% a year ago following the release of a Consumer Price Index number that inched upward 0.3% on a seasonally-adjusted basis on Wednesday. Because the CPI number only inched up slightly, it improved the odds that government officials will keep putting downward pressure on rates rather than tapering it. Stimulus has included federal purchases of bonds tied to long-term rates. “Modest inflation should help keep mortgage rates low by limiting the likelihood that the central bank will tighten its monetary policy anytime soon,” Zillow Economist Matthew Speakman said in a separate press release.The benchmark 10-year Treasury yield, which can be indicative of rate direction, was slightly higher early Thursday morning following the release of unemployment claims, which inched down a little but remained elevated compared to pre-pandemic levels at 793,000. However, even if the bond market puts pressure on what have generally been strong profit margins, lenders may choose to offer lower rates to borrowers so they can compete. “New COVID-19 cases are receding, which is encouraging and that has led to a rise in Treasury rates. But, the run-up in Treasury rates has not impacted mortgage rates yet, which have held firm,” Freddie Mac Chief Economist Sam Khater said in a press release. An estimated 18 million-plus borrowers are prime candidates for refinancing with rates at current levels, according to Black Knight. That’s a significant population but it’s down slightly from one that exceeded 19 million last year. Borrowers are considered prime candidates for refinances if they can save at least 0.75%, have a 720 credit score and a home with a maximum 80% loan-to-value ratio. Eventually mortgage activity will taper off if rates are stabilizing, because the group of people who can benefit from refinancing will shrink. But in the short term, if rates show no sign of dropping any further, it may spur additional refinancing on the part of fence-sitters who have been trying to time the market. While overall signs point to stability in rates, they are notoriously difficult to predict and at least one indicator this week suggested there’s still enough weakness in the economy that another downward move isn’t out of the question. The U.S. is “a long way” from where it should be on employment, Federal Reserve Chairman Jerome Powell said in a speech on Wednesday, and that initially drove 10-year yields lower Thursday morning prior to the release of unemployment claims. “It’s a tale of two economies. The services economy remains in the doldrums, but the production side of the economy remains strong,” Khater said.

Zillow follows Saturday Night Live spoof with record profit

February 11th, 2021|

Zillow Group Inc. has cemented its role in the pandemic-era zeitgeist, with “Saturday Night Live”poking fun at homebound millennials who lust after online home listings. The growing popularity of the company’s websites and apps has also earned the company record profits during the fourth quarter, with adjusted earnings before interest, taxes, depreciation and amortization of $170 million, according to a statement on Wednesday. That beat the average analyst estimate of $125 million and represented a wide swing from a $3.2 million loss a year earlier period. The results sent shares surging as much as 13% to $193.39. The company’s stock had already jumped more than 600% since bottoming out in March. The rally comes amid a housing boom in the U.S. that has been fueled by low mortgage rates. With Americans confined to their homes, Zillow scrolling has become a national pastime. “Because of all the people who are stuck at home, dreaming about a new home, and because of all the millennials having babies and shopping for homes, the Zillow brand has broken through to a new level of awareness and cultural significance,” Zillow Chief Executive Officer Rich Barton said in an interview. “There’s lots more shopping, lots more dreaming, and lots more fantasizing.” Zillow’s websites and apps received 2.2 billion visits during the fourth quarter. That drove revenue growth in the company’s core marketing business, which brought in $314 million, up 35% from the prior year. Zillow’s booming marketing operation has shifted the spotlight away from its nascent home-flipping initiative. The company acquired 1,789 homes in the quarter, compared to 1,787 a year earlier, as it returned to pre-Covid purchasing levels after slowing acquisitions earlier in the year. Zillow also announced it has agreed to pay $500 million to acquire ShowingTime.com Inc., which makes tools for house-hunters to arrange home tours with agents. The purchase fits a key theme in the U.S. housing market in recent months, as socially-distancing efforts and the coming-of-age of millennial homebuyers drives more house-hunting functions online. That theme has also been good for other companies at the intersection of technology and the U.S. housing market. Shares in brokerage Redfin Corp. have soared, and next-generation home-flipper Opendoor Technologies Inc. went public through a merger with a blank-check company. Barton said that Zillow, along with consumers, will benefit from the increasing digitization of the homebuying process. “The seller and the buyer are going to win from more innovation, happening faster,” he said. “It’s long overdue.”

HUD should put entry-level homebuyers first, not special interest groups

February 11th, 2021|

During the confirmation hearing for the nomination of Representative Marcia Fudge, D-Ohio, to serve as Secretary of the U.S. Department of Housing and Urban Development, she was asked repeatedly about assistance to borrowers, including a Federal Housing Administration mortgage insurance premium cut. While Fudge was noncommittal on the move, cutting the MIP on 30-year loans would do little to help borrowers. Evidence from the last MIP cut in 2015 shows that any benefit from it would accrue to current homeowners or special interest groups that work for real estate commissions. Pressure for a MIP cut is building from such groups. The National Association of Realtors states that “a reduction in FHA insurance premiums has the potential to decrease monthly mortgage payments for thousands of new low- and moderate-income borrowers,” according to Inside Mortgage Finance. Lenders such as the Community Home Lenders Association are also jumping on the bandwagon. However, HUD needs to consider that since mid-2020, the housing market has been on a tear. Thanks to ultra-low mortgage rates, 2020 purchase originations will likely be 15% higher than in 2019, despite the pandemic-induced drop in activity during April and May. In addition, work from home has unshackled homeowners and renters alike to purchase a home in more affordable cities and states. At the same time, supply has been depleted and at the end of 2020 stands at just around just 2 months — a historic low. Home prices are rising at over 10% due to the increased demand and limited supply.Given this backdrop, stimulating yet more demand through a premium cut — which works the same way as a mortgage rate cut — would lead to even faster home price appreciation, especially in areas with moderate FHA presence. It would hurt non-FHA borrowers as they would have to pay higher prices and take on greater debt. For FHA borrowers, the financial impact would be a wash as the lower MIP would be absorbed into higher prices. Crucially, it would not open the doors for new homebuyers as supply is still limited. In the end, higher prices would benefit existing homeowners, realtors, and lenders. This outcome is entirely foreseeable, as AEI Housing Center research shows with respect to the 2015 FHA MIP cut. That 50 bps MIP cut was predicted to lead to 250,000 new first-time buyers over the next three years and save each FHA buyer $900 annually. Instead, we found that home prices rose about 2.5 ppts. faster in FHA neighborhoods and only about 17,000 new first-time buyers were brought into the market — far short of FHA’s prediction. Beneficiaries were existing homeowners, who gained from higher asset prices, and realtors, who received an estimated windfall, which since 2015 totals around $2.4 billion, due to increased commissions from higher prices. In 2021, months’ supply is about half the level that it was in 2015 and home prices are already rising at twice their rate in 2015. If a MIP cut then did not help low- or moderate-income borrowers buy a home, it certainly won’t help them today. Of course it is to be expected that special interest groups would again lobby for this cut during the early stages of the Biden presidency, after having struck out with the Trump administration on a similar proposal in 2017. Even though it is true that FHA’s Mortgage Insurance Fund’s capital ratio now stands at 6.1%, which is three times the statutory minimum mandated by Congress, prudent long-term fiscal planning actually requires caution since FHA delinquencies in December stand at 17.4% and serious delinquencies at 11.8%. Once the forbearance program, which is allowing borrowers to temporarily pause mortgage payments, ends, FHA will likely need much of this money to pay claims. Instead of a straight up premium cut, a far superior solution would be for HUD focus on helping disadvantaged borrowers. This could be done by tying any premium reduction to shorter loan terms, which would reduce defaults and thus require FHA to hold less capital. This approach would not increase buying power during a tight market, thereby mitigating the inflationary price pressure while ensuring more rapid equity buildup. HUD should withstand the lobbying by realtors and lenders for an MIP cut on 30-year loans, as such a cut would be harmful to entry-level buyers. U.S. housing policy should look out for the interests of low- and moderate-income families, rather than special interest groups.

How long should small-business, mortgage aid last?

February 10th, 2021|

WASHINGTON — Despite calls from the Biden administration for bipartisan action on coronavirus relief, lawmakers remain sharply divided over the scope of stimulus funds for mortgage borrowers, renters and small businesses. At the center of the partisan disagreement is whether funding for programs like the State Small Business Credit Initiative and Homeowner Assistance Fund would be cut off when the public health emergency is declared over, or would remain in place to mitigate lingering economic effects. “The fact is the economic crisis will last many, many months perhaps after the health crisis is over,” Rep. Brad Sherman, D-Calif., said Wednesday at a House Financial Services Committee markup of the $1.9 trillion stimulus plan championed by the White House. Several Republicans on the panel questioned allowing funding for programs that predated the pandemic and proposed amendments to set a deadline on certain appropriations, warning that Democrats shouldn't take advantage of the crisis to boost government programs. Yet all of their amendments were rejected. “Bottom line, we need to deliver temporary, targeted, and COVID-related relief to the people who need it most,” McHenry said. “Despite my colleagues’ claims, it is possible to do too much. In fact, there is bipartisan agreement that this additional $1.9 trillion package could overheat the economy.” “Millions of individuals and families are on the brink of eviction or foreclosure as back rent or mortgage payments pile up through no fault of their own,” said Chairwoman Maxine Waters, D-Calif. Bloomberg News The debate indicated that House Democrats are on track to pass the legislation with little to no GOP support. (Congress has yet to act on the stimulus plan despite a Senate vote enabling lawmakers to advance the relief package through the budget reconciliation process.) The stimulus legislation would provide roughly $25 billion for emergency rental assistance, $5 billion to support people experiencing homelessness, $10 billion for struggling homeowners to make their mortgage payments, and $10 billion to support small businesses, including minority-owned businesses. The $10 billion in mortgage aid would deliver relief to states and local tribes in the form of direct assistance with mortgage payments, property taxes, property insurance and other housing costs. Democrats on the committee called for a sweeping approach to ensure that Congress is supporting the economic aftermath of the pandemic. “Millions of individuals and families are on the brink of eviction or foreclosure as back rent or mortgage payments pile up through no fault of their own,” said Chairwoman Maxine Waters, D-Calif. “Across the nation people are struggling to make ends meet, and hunger is growing. Communities of color continue to be the hardest hit." But Republicans on the committee warned that the legislation would authorize funds to be used well after the pandemic is over. “If we are going to provide emergency relief, it should be provided through the national pandemic emergency, not out through 2025 and 2030,” said Rep. Ann Wagner, R-Mo. Another sticking point is whether Congress should allocate funds for programs that were established outside of the pandemic. Democrats’ proposal includes a reauthorization of an Obama-era program to help states support small businesses, known as the State Small Business Credit Initiative. “This would codify numerous partisan priorities, including duplicative rental assistance to funnel money toward non-COVID purposes and restarts the ineffective Obama-era State Small Business Credit Initiative,” McHenry said. But Rep. Al Green, D-Texas, touted the program as a way to leverage government funds to spur small business growth. “This would help our small businesses, it would help us to leverage money,” Green said. “We can have $1 billion in and it leverages $10 billion. As a matter of fact, when we had the downturn in 2008 we put in $1.5 billion into this program and it leveraged $15 billion.” Rep. Blaine Luetkemeyer, R-Mo., attempted to amend the State Small Business Credit Initiative reauthorization, requiring all funding to be used within six months after the end of the national health emergency. But the amendment was rejected by Democrats. “The SSBCI provision of the bill is clearly written to give states money well into the future with little immediate benefit to workers and job creators,” Leutkemeyer said. “This program is being touted as helping small businesses make it through the pandemic yet does not require all the funding to go out for five years and allows states to sit on that funding for up to 10 years,” Luetkemeyer said.

New debt investment pact with Oaktree gives Ocwen’s stock a lift

February 10th, 2021|

A new note agreement that will generate more than $250 million for Ocwen Financial Corp. initially boosted its shares early Wednesday as investors welcomed plans to use the money to refinance existing funding and make investments. At roughly $29.50, Ocwen’s stock price was up by about $2 mid-day Wednesday on the East Coast, compared to where it was before the new debt investment pact with Oaktree Capital Management was announced late Tuesday. Business opportunities and expenses are both broadly rising for servicers as regulation intensifies and federal forbearance is extended. That’s driving large players like Ocwen to handle funding in ways that achieve a balance between the two. “We just relentlessly focus on costs and execution,” President and CEO Glen Messina said in an investor call about the debt agreement and the company’s preliminary earnings on Wednesday.While servicing expenses have generally mounted amid the pandemic, Ocwen has recorded a 2 basis-point drop in its operating expenses to 13 basis points of average unpaid principal balance for 2020. That cost is on track to drop another 2 basis points. Ocwen’s preliminary estimate for its fourth quarter 2020 earnings is a $7 million loss. That represents an improvement over a more than $9 million loss in 3Q20 but compares less favorably to the nearly $35 million in net income generated in 4Q19, prior to the pandemic. The company specifically plans to use $100 million of the proceeds from the new subordinated, high-yield notes to pay down and support the refinancing of its existing corporate debt, while investing the remainder in its servicing and originations businesses. The investment in originations will be aimed at diversifying the business and may include acquisitions. The OFC HoldCo notes in the debt agreement have a six-year term, and a 12% cash coupon adjusted for an original issue discount that helps the company reduce its interest expense. The notes also have a 13.25% payment-in-kind coupon. In PIK coupons, payments are made in additional bonds rather than cash, which helps reduce expenses related to investor payments. The debt agreement also includes warrants for 12% of shares at closing, subject to adjustments. The warrants entitle investors to buy shares at a fixed price under certain conditions until the notes expire. There also is a second lien on parent company’s (OFC’s) assets but not the operating subsidiary’s assets. Ocwen’s most recent agreement with Oaktree-related entities follows a December deal between the two companies involving a purchase vehicle for Fannie Mae and Freddie Mac mortgage servicing rights. Ocwen will need funds to both invest in its business and absorb regulatory costs related to servicing in part because its contending with a multistate enforcement action related to PHH Corp., a company it acquired in 2018. Ocwen also recently broke off mediation it had entered into with the Consumer Financial Protection Bureau in an attempt to resolve past servicing allegations, saying it considered the CFPB’s demands excessive.

Acting CFPB head calls out industry for slow complaint response times

February 10th, 2021|

The new interim leader of the Consumer Financial Protection Bureau pledged to take action against firms that are slow to respond to customer complaints during the pandemic. Consumers submitted 42,774 complaints to the CFPB portal in April 2020 as COVID-19 was spreading, the highest monthly tally ever. The CFPB received 187,547 complaints from Jan. 1, 2020 to May 31. But in a blog post, acting CFPB Director Dave Uejio expressed concern that financial institutions have dragged their feet in addressing complaints, and said the agency was working on an upcoming report highlighting response issues. The bureau typically requires a financial company to respond to the consumer within 15 days of a complaint. The bureau will specifically analyze disparities in how companies address complaints from minorities, he said Wednesday. “Some companies have been lax in meeting their obligation to respond to complaints," Uejio wrote. "Consumer advocates have found disparities in some companies’ responses to Black, Brown, and Indigenous communities. This is unacceptable.” In a blog post, acting CFPB Director Dave Uejio expressed concern that financial institutions have dragged their feet in addressing complaints, and said the agency was working on an upcoming report highlighting response issues. Uejio warned that companies doing a poor job of responding to consumers will be identified in its annual consumer response report that typically gets released in the first quarter. Uejio has wasted no time focusing on two areas in the early days of the Biden administration: consumers' financial hardships resulting from the coronavirus and racial equity issues. The CFPB is also updating its web site and expanding its social media presence to reach more consumers, Uejio said. "Elevating the voices of those consumers who are suffering due to the pandemic and from racial inequity is the most important way to ensure that the CFPB is doing the best we can for those who need our help the most at this moment in history," he said. "The Bureau must transition from treating consumer input as mere anecdotes or stories to a world in which the experience of our neighbors, our families, and our communities serve as crucial data that drives our policymaking." The CFPB also is moving aggressively to rebuild and repair relationships with consumer, civil rights, racial justice, and tribal and Indigenous rights groups that have found gaps in how the bureau treats consumers. “I have asked Consumer Response to prepare a report highlighting the companies with a poor track record on these issues," Uejio wrote. "We will be publishing this analysis and the senior leadership of these companies can expect to be hearing from me.” Complaints about financial products and services — and any documents a consumer provides — are sent directly to financial firms that generally must respond within 15 days. The CFPB also refers some complaints to other federal agencies. The CFPB has traditionally used its complaint database to identify companies for enforcement actions. During the pandemic, the bureau has issued bulletins analyzing thousands of complaints it has received mentioning coronavirus and related terms. Complaints about mortgages, credit cards and credit reports have topped the list during the pandemic. In 2019, the bureau received 352,400 consumer complaints and 81% were sent to companies for review and response. In its report last year, the bureau said that more than 3,200 companies responded to complaints sent to them in 2019. “It is the Bureau’s expectation that companies provide substantive responses that address the issues consumers describe in their complaints,” Uejio wrote.

Commercial mortgage lending expected to see slight recovery in 2021

February 10th, 2021|

Commercial and multifamily mortgage origination volume should recover somewhat in 2021, the Mortgage Bankers Association said. The trade group forecasts $486 billion in loans secured by income producing properties will be originated this year, compared with an estimated $440 billion in 2020, a year in which commercial real estate was heavily impacted by COVID-19, especially lodging and retail. "The economic rebound MBA anticipates in the second half of the year should bring greater stability to the markets, but with continued differentiation by property type," Jamie Woodwell, vice president for commercial real estate research, said in a press release. "Much of the path forward will depend on the virus and our confidence and ability to move past it." That will carry through to 2022, with the MBA forecasting $539 billion in commercial and multifamily lending that year. Even so, that preliminary estimate of last year's activity was well below the MBA's January 2020 prediction of $683 billion. For the multifamily segment only, the MBA predicts $323 billion in originations in 2021, up from an estimated $302 billion last year. Heavy refinance activity for government-backed mortgages boosted the 2020 total, Woodwell said.For 2022, the MBA is projecting $358 billion in multifamily mortgage originations. Commercial originations are likely to be helped by the expected 36% year-over-year increase in maturities for mortgages held by nonbank lenders this year. A total of $222.5 billion of the $2.3 trillion of outstanding commercial and multifamily mortgages held by this group will mature in 2021, the most since 2009, Woodwell said in a separate press release. About $163.2 billion in nonbank commercial and multifamily mortgages matured in 2020. "Many life company, government-sponsored enterprise and Federal Housing Administration loans that would have been coming due this year were instead refinanced or prepaid early," Woodwell explained. "Those declines have been more than made up for by shorter-term loans with 2021 maturity dates made by commercial mortgage-backed security and investor-driven lenders." In 2020, there was an increase in commercial and multifamily mortgages that reached maturity but remained outstanding: 1.5% as of Dec. 31, versus 0.8% on the same date in 2019. It’s likely that these loans were not refinanced due to challenges raised by the pandemic. But this amount was still much lower than the share of such mortgages during the financial crisis years between 2009 and 2012, when the rate of matured loans still outstanding ranged between 2.25% and 2.75%. CMBS lenders have the largest total outstanding balance of commercial and multifamily mortgages maturing this year at $100 billion; that represents 16% of their holdings. Then there are $72.6 billion or 30% of the commercial mortgages held by credit companies and other investors that are coming due. Life insurance companies have $39.8 billion (6 %) of their outstanding mortgages maturing. For the government-guaranteed investors, $10.1 billion (1%) of the outstanding balance of multifamily and health care mortgages held or guaranteed by Fannie Mae, Freddie Mac, FHA and Ginnie Mae will mature in 2021.

You Can Now Request COVID-Related Mortgage Forbearance for Up to 15 Months

February 10th, 2021|

Posted on February 10th, 2021 Some good news this morning for homeowners continuing to struggle to make ends meet thanks to COVID-19, which as the name implies has been going on for a while now. The Federal Housing Finance Agency (FHFA), which oversees Fannie Mae and Freddie Mac, has just announced an extension to the COVID forbearance period, which was previously capped at 360 days. Now borrowers who requested mortgage forbearance back in March or April of 2020 will be able to get another few months to keep monthly payments on hold. COVID-Related Mortgage Forbearance Extended Another 3 Months Homeowners with a Fannie/Freddie-backed mortgage can now request an additional three months of forbearance Originally allowed for an initial 180 days of payment relief (and an additional 180 days if the borrower needed more time) Now borrowers can get a full 15 months of mortgage payment relief if in a COVID-19 forbearance plan Applies to those who are in a COVID-19 forbearance plan as of February 28th, 2021 The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) originally allowed homeowners with a federally-backed residential home loan to request forbearance for up to 180 days, or roughly six months. It also included a 180-day extension if they were still struggling to make mortgage payments at the end of the original 180-day term. Now the FHFA has gone step further by allowing an additional three months of relief, for a grand total of 15 months of suspended mortgage payments. In other words, a homeowner who is unable to pay their mortgage due to COVID-19 can now set aside payments for a whopping 540 days. While it might sound excessive, it’s a sign of the lasting economic effects of COVID, which is now into its third year with no clear sign of slowing. All 15 Months of Missed Mortgage Payments Can Be Deferred Homeowners who request all 15 months can also set aside the full amount to repay later The COVID-19 Payment Deferral option has been adjusted to cover up to 15 months of missed payments The missed payments are not due until the home is sold, the mortgage refinanced, or when the loan matures This should make it easier for those struggling with a COVID-19 income disruption to remain in their homes In line with the three-month extension, the FHFA noted that it will also allow borrowers to defer the full 15 months of mortgage payments via the COVID-19 Payment Deferral option. This means they won’t need to repay any of that sum until the underlying property is sold, the mortgage is refinanced, or when the home loan matures. Do keep in mind that there is a three-month waiting period to get a mortgage after forbearance ends. So if you request another extension, you’ll have to wait that little bit longer to get a subsequent mortgage backed by Fannie Mae or Freddie Mac. The FHFA also extended the moratoriums on single-family foreclosures and real estate owned (REO) evictions until March 31st, 2021. Previously, they were set to expire on February 28th, 2021. The foreclosure moratorium applies to Fannie- or Freddie-backed, single-family mortgages only. And the REO eviction moratorium applies to properties acquired by Fannie or Freddie via foreclosure or deed-in-lieu of foreclosure transactions. The only lingering question now is the deadline to apply for mortgage forbearance. While you can apply until March 31st, 2021 if you have an FHA loan, USDA loan, or VA loan, those with Fannie and Freddie loans currently only have until the end of this month. Whether that date gets extended remains to be seen, but my guess is they’ll push that date out as well. Still, if you need help, you probably don’t want to waste time in case they don’t. About the Author: Colin Robertson Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for nearly 15 years.

Kelly Purcell, digital mortgage pioneer, dies at 58

February 10th, 2021|

Kelly Purcell, an advocate for the digital mortgage movement, died on Feb. 6 at the age of 58. Purcell was a pioneer of electronic signature technology, co-founding SignOnline in 1999, a year before the federal legalization of e-signatures. Since October 2018, Purcell served as NotaryCam’s EVP of marketing and business development. SignOnline — later renamed eSignSystems — still lives on. It was acquired by Wave Systems in 2001 and again by DocMagic in 2014. The company’s survival is a testament to Purcell’s vision and tenacity, friends and industry veterans said. She committed herself to bettering an industry ripe for innovation and refused to quit, they added.“Kelly was my go-to whenever I was weary,” Nancy Alley, SignOnline co-founder and vice president of strategic planning at Simplifile, said in an interview. “I remember Jonathan [Kearns] and I were starting to see hope expire a little bit. She just looked at us and it was non-negotiable. She literally became Annette Bening in American Beauty saying, ‘I will sell this house today.” Purcell made her first foray into lending at GE Mortgage Insurance Group in 1989. Over the years, she heavily involved herself in several industry groups, including the Mortgage Bankers Association, Electronic Signature and Records Association and Progress in Lending Association. She canvassed for new ideas and prioritized thought leadership over bureaucracy. In 2009, eSignSystems won Mortgage Technology Magazine’s Lasting Impact Award. “To call Kelly Purcell a pioneer is an understatement. eSignatures are a part of our daily lives today but back in the early 2000’s it was such an unknown and considered a risk factor, especially in the mortgage industry,” said Jonathan Kearns, SignOnline co-founder and associate vice president at the Mortgage Bankers Association. “For years we evangelized and moved the needle forward on eMortgages, no one did it better than Kelly. Having an eVault was even more unheard of but from the beginning we knew maintaining the integrity of digital assets would be as important as eSignatures.” Tim Anderson, SVP and director of digital strategy at MortgageConnect, posted the news of Purcell’s passing on LinkedIn to an outpouring of sympathies from around the mortgage world. Anderson and Purcell met in 1999 and stayed friends ever since. Purcell’s loyalty and ability to form true connections will be a huge part of her legacy, Alley added. “She would take anybody in the industry interested in mortgages or E-signatures under her wing, share what she knew, introduce them to the right people and help them find jobs,” Alley said. “She was the best salesperson I've ever met. She just had that great connection with people. She was very loyal to her peers in the industry, but loyal to her family above all else.” Purcell is survived by her daughter, Rachel, her mother, two sisters, three nieces and two nephews.

The Challenges Facing Black Homeowners Today

February 10th, 2021|

In recognition of Black History Month, we wanted to take a moment to discuss black homeownership in the USA.  While black Americans are central to America’s story, African-Americans are less likely than other racial groups to own homes. Few things lift communities more than homeownership. Owning homes creates wealth, brings stability and evokes pride. But the gap in homeownership rates between black Americans and white Americans is huge and we thought it was worth exploring while making a commitment to try and reverse the trend. Continue reading The Challenges Facing Black Homeowners Today at Movement Mortgage Blog.

Mortgage applications down as rising rates suppress activity

February 10th, 2021|

Mortgage application volume declined on a week-to-week basis as interest rates rising to their highest level since November inhibited consumer activity, the Mortgage Bankers Association said. The MBA's Market Composite Index was down 4.1% on a seasonally adjusted basis and 3% unadjusted for the week ended Feb. 5 compared with the prior week. "Treasury rates have been driven higher by expectations of faster economic growth as the COVID-19 vaccine rollout continues," Joel Kan, the MBA's associate vice president of economic and industry forecasting. On Feb. 5, the 10-year Treasury yield at one point neared 1.19%, which was its highest since March 18. Refinance applications, in particular, fell to their lowest level in three months, with its index, which is not seasonally adjusted, falling 4% compared with the previous week. The share of refi applications decreased to 70.2% of the total from 71.4% the previous week. "Government refinance applications did buck the trend and increase, and overall activity was still 46% higher than a year ago," Kan said. "Demand for refinances is still very strong this winter."The seasonally adjusted purchase index was down 5%, but was 2% higher on an unadjusted basis from the previous week. Compared with the same week in 2020, purchase application activity was up 17% on an unadjusted basis. "Purchase applications cooled the first week of February, but homebuyers are still very active," Kan said. "The average purchase loan size continued to increase, reaching another survey high of $402,200, as the higher-priced segment of the market continues to perform well." Adjustable-rate mortgage applications had a 2.3% market share last week, up from 2.2% one week ago. By loan type, applications for Federal Housing Administration-insured mortgages saw their share increase to 9.5% from 9.1% the week prior. Veterans Affairs-guaranteed applications increased to 13.3% from 12.1% the week prior. The U.S. Department of Agriculture/Rural Housing Service share was unchanged from 0.4% the week prior. The average rate for 30-year fixed conforming mortgages, those with a loan balance of $528,250 or less, rose 4 basis points over the previous week to 2.96%. For the FHA 30-year mortgage, the average rose 3 bps from the previous week to 2.97%. But jumbo 30-year mortgages bucked the trend, dropping 1 bp from the previous week to 3.11%. When it comes to the 15-year FRM, the average rate increased 6 bps to 2.5%. Finally for the 5/1 ARM product that the MBA tracks, the average rate rose 4 bps to 2.92, with points decreasing to 0.36 from 0.46.

Nonbank stock performance has New Residential squeamish about its NewRez IPO

February 9th, 2021|

The uneven stock performance from nonbank lenders that have recently gone public has given pause to New Residential Investment, which was considering its own IPO for the New Rez division. "We think that it will create more value for shareholders by separating the company and bringing it into the public markets," said Michael Nierenberg, its chairman, CEO and president, on its fourth quarter conference call. "But as you've seen from some of the recent attempts…some of them have gone OK; others have not gone as well." A confidential registration statement was filed in November. If there was to be a public offering, the two companies would still be intertwined as New Residential would likely maintain a substantial stake in a publicly-traded NewRez, he said. When asked when a decision would be made, Nierenberg said it is something the company evaluates every day. "It's not just to take a company public…we have a public REIT (referring to New Residential) that can raise capital and help grow the mortgage company," he explained. Any decision on taking NewRez public will be tied to whether it benefits New Residential's shareholders, he said.The level of mortgage production this year will be a key factor in that decision, said Randy Binner, an analyst with B. Riley Securities. "Our view is that mortgage originations have the potential to be better than market and Mortgage Bankers Association expectations as gain on sale margins remain wide enough still that mortgage bankers should have flexibility to keep volumes at elevated levels," Binner said in a report that, in part discusses the benefits of the New Rez IPO. "This could create a more constructive environment for this potential positive catalyst later in 2021." New Residential reported fourth quarter net income of $68.4 million, its second consecutive profitable quarter. This compares with net income of $77.9 million in third quarter and $300,000 in the fourth quarter of 2019. However the company took a massive $1.6 billion loss in the first quarter, when the value of its mortgage-backed securities investments was devastated by the Federal Reserve's intervention at the start of the pandemic. As a result, the company posted a $1.47 billion net loss for the full year. NewRez, which became the company's primary operating business as a result of the pandemic-driven changes, had fourth quarter net income of $169.8 million in its originations unit and $36.2 million from servicing. But the mortgage servicing rights and servicer advances portion of this business lost $179 million in the quarter. Total mortgage volume funded in the fourth quarter was a record $23.9 billion. That was led by its correspondent business' volume of $16 billion. The segment continues to recover from the secondary market disruptions caused by the Fed's actions, which cut its second quarter volume to just $3 billion. In the third quarter it did $11.5 billion and one year ago, $6.9 billion. The direct-to-consumer channel, which Nierenberg said would be an emphasis for the company back in July, did $4.3 billion in funded volume, up 25% from the third quarter's $3.4 billion and 169% over the fourth quarter 2019 production of $1.6 billion. NewRez' gain on sale margin fell to 157 basis points from 204 bps in the third quarter. In the first quarter, NewRez expects to originate between $23 billion to $25 billion. Its servicing portfolio as of Dec. 31 was $298 billion, up from $219 billion at Dec. 31, 2019. It expects to end the first quarter at $300 billion. Meanwhile, in its investment portfolio, New Residential earned $80.1 million on residential securities and securitization call rights. But it lost $7.4 million on residential loan investments. The company also recorded a $31.2 million loss for the corporate and other segment. "From a macro view, we believe interest rates should rise, which should be great for our company," Nierenberg said. Slower prepayment speeds will mean more cash flow from its MSRs and a higher recapture rate. The combination should overcome the likely decline in mortgage originations, he said. That ties into New Residential's expectations for the direct-to-consumer channel, which is mostly dedicated to recapturing existing servicing customers who are looking for a new mortgage from another lender. The company is "very excited about our growth prospects…which should lead to increased market share, higher earnings in that channel and better recapture rates for our MSR portfolio," Nierenberg said.

FHFA will allow borrowers to prolong forbearance plans

February 9th, 2021|

WASHINGTON — The Federal Housing Finance Agency is allowing borrowers with loans backed by Fannie Mae and Freddie Mac to request an additional three months of forbearance, the agency said Tuesday. The Coronavirus Aid, Relief and Economic Security Act passed by Congress last year allowed borrowers with a federally backed mortgage to request up to 12 months of forbearance — divided into two 180-day increments — if they experienced financial hardship because of COVID-19. But as of Feb. 28, borrowers who are in forbearance plans will be permitted to request an additional three-month extension, covering up to 15 months of mortgage payments overall for borrowers with Fannie and Freddie-supported loans, the FHFA said. The agency also announced Tuesday that it is extending its moratorium on single-family home foreclosures and real estate owned evictions until March 31 in an effort “to keep families in their home during the pandemic,” FHFA Director Mark Calabria said in a news release. Meanwhile, President Biden is pushing Congress to allow borrowers to request forbearance on federally backed loans through Sept. 30 in his administration’s sweeping stimulus package. That proposal also calls for the national foreclosure and eviction moratorium on federally backed properties to be extended until the end of September.

Mortgage delinquencies fall to a pandemic low

February 9th, 2021|

While the number of distressed mortgages declined to a pandemic low in November, sustainable improvement won’t be made until the job market grows, CoreLogic chief economist Frank Nothaft said. “Forbearance and loan modification helped struggling families rebuild their financial house in hard-hit places,” he wrote in the company’s Loan Performance Insights report. “While vaccination will mitigate the pandemic, the best cure for delinquency is income restoration through job creation.” The CoreLogic report showed November’s overall delinquency rate dipped to 5.9% from 6.1% the month prior while climbing from 3.9% the year before. The downward trajectory since August’s high indicates more financial stability for consumers and a probable decrease for distressed sales, CoreLogic president and CEO Frank Martell said in the report. With moratoria in place, the foreclosure rate remained at 0.3% dating back to April. The number edged down annually from 0.4%. “People may sell their homes, but you're not going to see the same level of short sales and foreclosure during the global financial crisis just given the amount of equity that people have,” Jeremy Sicklick, CEO and co-founder of HouseCanary, said in an interview. Serious delinquencies — loans 90 days or more past due, including foreclosures — decreased to 3.9% from 4.1% one month earlier, while tripling November 2019’s rate of 1.3%. Mortgages past 120 days due but not yet in foreclosure also dropped monthly to 3.1% from 3.3% but jumped year-over-year from 1%.The share of 30- to 59-day early-stage delinquencies held at 1.4% month-over-month while dropping from 2% year-over-year. The rate for 60- to 89-day delinquencies stayed static at 0.6% from both the month and year before, though not every housing market saw the same recovery in distressed loans. The three states with the highest foreclosure rates remain unchanged from a month ago, with rates of 1.1% in New York and 0.8% in both Hawaii and Maine. A total of 16 states — up from 14 the month before — tied for the lowest rate at 0.1%. The three highest delinquency rates also held from October with Louisiana at 9.7%, Mississippi at 8.9% and New York at 8.5%. Idaho again had the lowest delinquency rate at 3.1%, while Montana, Wisconsin and South Dakota tied for second at 3.4%. In addition to reducing delinquency rates, a strong influx of jobs is a common denominator for metro areas predicted to outperform the rest of the country in home sales this year.

ARM financing inches up as credit loosens ahead of spring buying

February 9th, 2021|

Lenders in January reversed a slight year-end contraction in underwriting with an expanded product set that included more adjustable-rate mortgages taken out by borrowers with lower credit scores. The Mortgage Bankers Association’s credit availability index last month ticked up 2.5 points to 124.6 from 122.1, but that number was down markedly from 181.9 a year ago. The index’s movement suggests that lenders want to accommodate consumers buying homes amid forecasts of diminished refinancing, but they aren’t yet ready to lend as freely as they did before the pandemic. “Even with overall credit availability picking up in three of the past four months, credit supply is still at its tightest level since 2014,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting, in a press release.While the ARM market share remains very small, an uptick for this loan type may indicate that some borrowers are looking for slightly lower initial rates prior to an adjustment period. The fact that there’s been a slight dip in the credit score allowable suggests lenders are looking to do more to address affordability considerations as well. The jumbo component of the index rose by 2.2% week-over-week but there was an even larger increase — 7.7% — among loans within Fannie Mae and Freddie Mac’s conforming limits, which vary by location but generally require loans to be no larger than $548,250. Underwriting of government-insured loans that generally serve the needs of lower-income borrowers tightened 0.1%, suggesting lenders are somewhat cautious about this sector. The rate at which borrowers have been putting payments on hold for coronavirus-related contingencies has been higher in the government market than the conforming market. Government loans had a 7.46% forbearance rate, compared to a 3.07% for conforming mortgages, in the MBA’s latest weekly survey. The MCAI is based on data from the widely-used Ellie Mae mortgage origination system owned by Intercontinental Exchange. The index’s baseline of 100 represents underwriting conditions in March 2012, which credit was relatively tight.

How lenders plan to shrink loan timelines for spring buyers

February 9th, 2021|

Since Quicken Loans launched its Rocket Mortgage platform five years ago at Super Bowl 50, the industry has generally sought to emphasize a speedy, high-tech experience when funding homebuyers’ time-sensitive loans. Flash forward to the present day, when the need to work remotely during a pandemic is testing the industry’s digital operations. Even with plenty of technology at hand, lenders on average saw closing timelines lengthen far beyond the traditional but increasingly scarce 30-day contract in 2020, as rate stimulus pushed volumes to record highs. The industry average for the application-to-funding process was 56 days in December, up from 51 a year ago and 49 the previous month, according to ICE Mortgage Technology.“That’s crazy. If you are a lender and you are not closing loans in 30 days, you are losing business,” said Mat Ishbia, CEO at United Wholesale Mortgage in an interview. “Time kills deals, so you have to look at how you can control that.” Purchase loans that take longer than 90 days do measurably hurt customer referrals, according to Garth Graham, senior partner at the Stratmor Group. When these rose to 7% in the fourth quarter of 2020 from 5% 2Q20, net promoter scores dropped from 73 to 67, Stratmor found. That’s why lenders are investigating where an otherwise speedy pre-closing loan process is getting jammed up. This is what they found. A need to automate and communicate with referral partners Upon flagging a small uptick in purchase timelines in its metrics, UWM looked for causes beyond the sheer volumes flowing in. They found that a lot of the delays had more to do with the home purchase than the mortgage funding, Ishbia said. “We’ve assumed a lot of the purchase timelines being slower was tied to things like sellers that didn’t want to move out, we understand that happens. When we did a little research that was 70% of it,” said Ishbia. UWM since 2015 has had a proprietary technology platform called UClose, which it uses to work with real estate agents and loan brokers. Using the platform and reaching consensus on shorter contract times with real estate agents has helped to rein in timelines, he said. Use of such platforms, either proprietary or from a vendor, has risen in the past three years from 21% to 42%, Graham said. However, only 20% of the companies using them have a high adoption rate, defined as being used for more than 75% of eligible transactions, which suggests that it’s a technology lenders should urgently adopt before the spring. “Generally, we see that increased volume is the biggest contributor to longer close times, but we have also seen lenders really adopting technology that improves … communication,” said Joe Tyrrell, president, ICE Mortgage Technology, in an email. While it’s difficult to calculate the cost-savings found in automating communications with real estate agents, loans tend to encounter fewer obstacles when all parties use a system that reinforces coordination, Planet Home Lending’s senior vice president of operations, Michele Kryczkowski said. “For us, it’s not necessarily solving a specific loan-level issue, it’s solving a larger issue,” she said. “It allows you to see if you can deliver earlier, regardless of whether you’re working with a Realtor or builder.” Shrinking the appraisal process Another opportunity for shrinking loan timelines may lie in the appraisal process, especially since there’s new flexibility this year. Appraisals are the second largest cause of delays at UWM, Ishbia said last week. “The biggest risk to turn time is the receipt of appraisal,” Graham said. “The turn times for appraisals are significantly worse than in previous years, although there is a wide range based on local market conditions. Any technology that makes it faster saves you time. So a portal, or online platform to share that data is key.” UWM’s approach to the appraisal timeline concern was to offer a guarantee this year that consumers will get their money back if a deadline in this area isn’t met. Its appraisal providers are on board with it as their interests in serving customers are aligned, Ishbia said. A number of appraisal alternatives are another option. While traditional appraisals have been taking 14 to 28 days, depending on the region and appraiser availability, use of a hybrid appraisal method that doesn’t rely on a live visit by the appraiser has taken five days on average, said Katie Brewer, a senior vice president in Radian's valuation services division. “I know there’s been some hesitancy to use them, but they do allow for a significant compression of the timeline at less than half the cost of a traditional appraisal, where appropriate,” she said. Use of waivers, exterior-only appraisals and other remote assessment methods were increasing even before investors like Fannie Mae and Freddie Mac allowed more latitude for pandemic contingencies. Even so, they aren’t being used to their full potential in the purchase market. Fannie and Freddie do allow appraisal waivers on purchase loans, for example, but as of November only 11% had them as compared to nearly half of refinances, according to the American Enterprise Institute’s latest analysis of data. That’s because it’s difficult to establish valuations based on historical data for a new purchase. However, bank regulations generally allow use of alternatives on purchases of more standard properties that are up to $400,000 in value. However, when an appraiser is needed, one method isn’t necessarily guaranteed to be quicker than another, and given the talent shortage in the market. So a lender might be better off being willing to be open to various forms of valuations when possible. “We have appraisers who won’t embrace the exterior-only appraisal, you could run up against that, so having all options on the table is going to expand the opportunity to meet any deadline,” said Jan Buchele, senior vice president of residential services at The William Fall Group. But while delays can be minimized, lenders likely can’t remove them altogether, and they want to be particularly careful about putting a rush on appraisals. Following the Great Recession, there was some backlash against fast closings, as they were associated with the loose underwriting that preceded it. Underwriting has been much tighter since then. “We don’t want to do anything that slows down the process for the lender, it’s really important for them to be able to manage their pipeline,” said Dart Appraisal President Michael Dresden. “At the same time there’s a responsibility to make sure there’s enough collateral there to support that loan."

How long can credit unions keep the mortgage momentum going?

February 9th, 2021|

Credit union executives are hoping to keep the mortgage momentum going in 2021. Many lending lines are expected to be tepid for much of the year, including commercial loans and credit cards. Home loans have been a bright spot for the industry, however, thanks to high demand driven by low rates. The question is how long lenders can keep that up. House for sale Monkey Business Images/Monkey Business - stock.adobe.com "The Fed is on record that interest rates will remain at historic lows for the foreseeable future, which in our view means at the very least through 2022," said Jim Adkins, managing partner of the consulting firm Artisan Advisors. "It is a good time to be a mortgage lender." Loans secured by 1-to-4 family residential properties increased $42.1 billion, or 9.0%, to $508.8 billion, according to third-quarter data from the National Credit Union Administration, the most recent figures available. In the 12 months ending Sept. 30, 2019, those figures were up by 6.1%. Kinecta Federal Credit Union in Manhattan Beach, Calif., expects production this year to be on par with 2020 – at least early on. The $5.3 billion-asset credit union had more than $1.4 billion in mortgage loans on the books as of Sept. 30, 2020, according to NCUA call report data, an increase from the $1.3 billion seen 12 months earlier. While COVID-19 has not impacted demand or the credit union’s ability to lend, President and CEO Keith Sultemeier said the expectation is that demand will taper off sometime this year. He said the refi business is the lion’s share of Kinecta's volume at present, and the purchase money business is hampered primarily by a lack of inventory in the credit union's Southern California markets. "The upside of short inventory has been a pretty sizable uptick in construction lending. We have seen strong growth there and have a good pipeline heading into 2021," he said. While the housing market’s hot streak looks set to continue at least for the early months of 2021, demand will also continue to be high, which could put a strain on availability, said Geoff Bacino, a credit union consultant and former NCUA board member. Government is likely to do what it can to keep the momentum going, he said. "The Biden administration will push for the homebuyer tax credit that candidate Biden proposed on the election trail, and the Fed nominees put forward by the administration will most likely continue to keep interest rates stable," said Bacino. Rates are likely to stay low until at least the second half of the year, said Adkins, after which they could get a boost as economic activity rebounds on the backs of expanded COVID-19 vaccinations. Artisan estimates the average mortgage rate for the year will top out around 3.3%, slightly higher than they currently are but still low enough to keep housing affordable. "With that said, the refi market should cool off with the purchase market taking center stage, the result being a very strong residential real estate market in 2021," Adkins said. The average contract interest rate for 30-year fixed-rate mortgages with loan balances of $510,400 or less decreased to 2.92% from 2.95%, according to recent weekly data from the Mortgage Bankers Association. However, results may vary from state to stay. While some regions could be cool down faster than others, Texas has seen some of the fastest mortgage growth in the nation and could be poised for more in 2021. JSC Federal Credit Union in Houston had more than $321 million in mortgages on its books at the close of the third quarter, a 37% year-over-year increase. Much of that was thanks to low interest rates, population growth and stronger-than-anticipated economic numbers, said Brandon Michaels, president and CEO of the $2.6 billion-asset institution. But Michaels added that a K-shaped recovery means that while some consumers have largely bounced back from the worst of the pandemic and its economic fallout, many with incomes below $60,000 per year are still struggling. Credit unions in the Lone Star State are keeping their fingers crossed that their good fortune continues. "Job opportunities and a relatively affordable cost of living positions credit unions in our region — particularly Texas — for an uptick in residential mortgage lending," said Ryan Dold, chief revenue officer at Cornerstone Resources, a division of the Cornerstone Credit Union League, which stretches across Arkansas, Oklahoma and Texas.

More than 1 million homeowners feared imminent foreclosure in December

February 8th, 2021|

Many borrowers feared they’d be forced to move in the fourth quarter, according to a recent survey that reveals a lack of awareness or access to the pandemic-related government protections in place. As the end of 2020 approached, approximately 1.2 million borrowers were afraid they would be foreclosed on within 30 days, according to new data in a Research Institute for Housing America report backed by the Mortgage Bankers Association. While loan performance is improving due to government aid and optimism surrounding vaccinations, the finding shows that borrowers who remain unaware of the relief available could put protracted liquidity strains on servicers.“It’s reduced, but the pain persists,” said RIHA Executive Director Edward Seiler, who also serves as the MBA’s associate vice president of housing economics. RIHA is a nonprofit arm of the MBA that provides grants and sponsored research opportunities to academics and other experts. The share of borrowers registering concern about being immediately displaced varied by numbers of payments missed, ranging from 2% for those whose payments were up to date, to 10% for those who had not made eight or nine payments, Seiler said. The aggregate dollar volume of missed mortgage payments dropped to $14.2 billion from $19.4 billion during the fourth quarter, and to $7.2 billion from more than $9.1 billion for renters. Approximately 2.38 million homeowners and 2.62 million renters missed housing payments in December, down from 6 million combined in September. The percentage of mortgagors who failed to pay dropped to 5% from 7% and the share of renters in that category fell to 7.9% from 8.4%. While the share of homeowners and renters who missed payments fell in December, the percentage of student debt borrowers who missed a monthly payment climbed to approximately 43% of borrowers from a steady share of around 40% since May. Some of those hardest hit by the pandemic have income-based student loans that make it more difficult to qualify for first-time homebuyer mortgages from the Federal Housing Administration. The Biden administration has expressed interest in helping both borrowers with student debt and first-time homebuyers. Under the Trump administration, the FHA considered calls to relax the requirements for income-based student loans but said it wanted to be sure such a move would be in keeping with sustainable homeownership.

Mortgage insurers log fewer delinquencies but pace slows at legacies

February 8th, 2021|

While all four standalone private mortgage insurers reported month-to-month reductions in their delinquent loan inventory, the pace of improvement at the two legacy companies is lagging. That is likely reflective of the pattern of government-sponsored enterprise mortgages in forbearance, which continued to drop, but also at a slower rate, according to Black Knight. Between the weeks of Jan. 5 and Feb. 2 the number declined by 19,000 units, bringing the total to 913,000 loans. But between Dec. 8 and Jan. 5, GSE mortgages in forbearance fell by 33,000. Still, the shrinking inventory is a good sign for the mortgage insurers. "While the pace of improvement was slower than December, January metrics still support our view that Radian's loss ratio will compress throughout 2021 which should push return on equity, and the multiple, higher," said Ryan Gilbert, an analyst with BTIG in a report on Radian. But Gilbert noted that Radian's January cure rate was 10%, down from 11% in December and 12% in November. Radian's inventory ended January at 54,488 delinquent mortgages, compared with 55,537 on Dec. 31, a change of 1,049 loans. But the inventory shrank by 1,639 loans between Nov. 30 and Dec. 31. At MGIC, the inventory of delinquent mortgages declined by 1,395 to 56,315 on Jan. 31; in December, the inventory was reduced by 1,526 mortgages. In January, the company had a higher share of new notices of default from servicers regarding loans in forbearance versus December — 47% of 4,810 in January; 46% of 4,941 in December. However, a slightly smaller percentage of the overall inventory was in forbearance at the end of January 60%, compared with 62% one month prior. Still, MGIC's January's rate of new loans entering default is effectively in-line with pre-COVID19 levels, Gilbert said in his report on that company. At National MI, the delinquent inventory was down by 304 loans in January to 11,905. That’s only slightly smaller than December's drop of 323 loans. Its delinquency rate continues to improve, ending January at 2.9%, compared with 3.06% in December and 3.6% at the end of the third quarter 2020. That is ahead of the pace Gilbert forecast for the current quarter at National MI. He predicted a 3.2% delinquency rate in a joint report on that company and Essent. Essent’s January default rate of 1.0% is in-line with Gilbert's estimates, but the cures are running behind. "There appears to be some seasonality in Essent's cure rates from the fourth quarter to the first quarter, and we expect a pick-up in February and March," he said. That seasonality is true at the other mortgage insurance companies. Unlike its competition, Essent actually had an increase in the number of loans exiting its inventory in January over December. Its delinquent inventory fell to 30,895 mortgages at the end of January, down 574 units from December's 31,469. Between November and December, Essent's inventory declined by 481 loans.

Home selling sentiment surges in January

February 8th, 2021|

The anticipation of a strong spring selling season just around the corner drove consumer confidence in the housing market for January, according to Fannie Mae. After two months of declines, the Home Purchase Sentiment Index jumped to 77.7 in January from 74 in December while trailing the year-ago score of 93. Selling sentiment shot up by a net 16 percentage points month-over-month in January with seller optimism increasing to 57% from 50% while the pessimistic share dropped to 33% from 42%. Consumer attitudes for buying also improved, gaining a net of two percentage points from December. The share of “good time to buy” held at 52% as the “bad time to buy” crowd diminished to 37% from 39%. Mortgage rates continue to be favorable so far this year and about 46% of borrowers expect them to hold over the next 12 months while shares of 45% expect growth and 9% expect them to fall.Further, a 24% net share predicts home prices will continue an upward trajectory in the next year, down from a net 25% in December. Within the report, optimism ran higher among renters and lower-income respondents. If that sentiment continues, it could indicate an improved economic recovery and the latest stimulus impacted those most negatively effected by the pandemic, according to Doug Duncan, senior vice president and chief economist at Fannie Mae. “Among owners and higher-income groups, however, the other five components of the index remained relatively flat or slightly negative, suggesting to us that some consumers are waiting to gauge the effectiveness of any new fiscal policies and vaccination distribution programs on both housing and the larger economy,” Duncan said in a press release. Concerns over employment improved slightly month-over-month in January. Consumers not worried about losing their job held at 75% while those actively concerned dipped to 24% from 25%. The net share of households reporting a significantly higher income from the past 12 months inched up one percentage point to 21% and the share reporting a significantly lower income dropped four percentage points to 14%.

The 12 hottest housing markets in 2021

February 8th, 2021|

With the combination of extremely low inventory and interest rates holding near historic lows, forecasts show 2021 shaping up to be a strong year of originations with increased emphasis on buying. These conditions created rampant bidding wars and soaring profits for sellers in the past year, while the shift to working remotely caused buyers to flood markets where they could get more space for their money. With home price growth expected to taper after surging in 2020, some markets will stand out above the rest. Metro areas offering a mix of amenities, relative affordability and a slew of new jobs should expect booms in 2021, according to Zillow’s Hottest Housing Market report. "While sustained tailwinds are forecasted this year across most of the shifting U.S. housing landscape, certain densely populated markets with high-priced real estate face prevailing headwinds," Terry Loebs, founder of Pulsenomics, said in the report. "Accordingly, home value appreciation rates within coastal cities such as New York, San Francisco, and Los Angeles are projected to see a downshift from last year's remarkable levels." Zillow based its list of the hottest 2021 markets on a survey of 113 economists, investment strategists and real estate experts, conducted by Pulsenomics. Those surveyed gave their home price growth expectations for 20 of the largest metro areas compared to the rest of the country. From the Lone Star State to all across the Sun Belt, local lenders in the top 12 cities most likely to outperform the national average discuss what makes their respective markets unique.

Mortgage hiring growth slows as broader job market shows weak gains

February 5th, 2021|

Record-breaking employment in the home lending business was even stronger than early indicators suggested last year, but it is starting to level off as hints of tightening in mortgage credit begin to emerge. Payroll size for nonbank mortgage bankers and brokers climbed to 369,400 in December from 365,700 in November and from 310,300 in December 2019, according to the Bureau of Labor Statistics. The bureau’s numbers in these categories were all slightly higher than previously estimated for the past year when reconciled with the BLS’s annual business census. October payrolls totaled 353,500 after revisions. While some lenders may’ve engaged in “excessive staffing” when rates first dropped precipitously last year, mortgage companies should have more predictable hiring needs now, Mat Ishbia, CEO of United Wholesale Mortgage, said in an earnings call this week. “If that [excessive hiring] happens in the first month or maybe the second month after that, I understand it; but it shouldn’t be the case nine months later,” he said. UWM reported that it set a new record for volume in the fourth quarter, but its consecutive-quarter gain was smaller than the previous one because it tightened underwriting in response to credit concerns heighted by the pandemic. Industrywide, credit availability tightened slightly in December, according to the Mortgage Bankers Association’s latest index report. The index was down by 0.1% that month. Credit availability generally contracts when the employment is weaker. There was a slight improvement in unemployment in January, which inched down to 6.3% in January from 6.9% the previous month. However, unemployment remains well above the record low of 3.5% seen in January 2020, according to the BLS. The BLS reports broader numbers more quickly than some industry data. As in the previous month, unemployment may have been as much as 0.6% higher due to an ongoing categorization error that affects the bureau’s data. While the percentage of those unemployed improved a little in January, there were signs that previous job losses are becoming entrenched. “Although the headline unemployment rate declined, there are still 4 million people who have been actively looking for work for 27 weeks or longer,” Mortgage Bankers Association Chief Economist Mike Fratantoni noted in an emailed press statement. Just 49,000 jobs were added to the economy in January. While that marked an improvement from the downwardly revised loss of 227,000 jobs in December, it was down from pre-pandemic numbers seen last January. That month, U.S. employers added a revised 214,000 jobs.While a relatively weak jobs report could add to upward pressure on benchmark 10-year Treasury yields and mortgage rates, the weak overall employment gains left it largely unchanged. At 1.15%, the 10-year was only 0.6% higher shortly after noon on the East Coast. Mortgage lenders have been so profitable they may be able hold their rates low for a while even if there is upward pressure on their margins from the bond market. That’s likely to occur because the recent wave of initial public offerings from nonbank mortgage lenders will likely put more pressure on large and influential players to generate continual growth for their shareholders, said Walt Schmidt, a senior vice president and mortgage researcher at FHN Financial. “I don’t see them allowing the rates to get higher. They want to keep the volume going,” he said. These players will be hoping to stay in a sweet spot where the economy is weak enough that rates remain low and they can generate volume, but not so weak it hurts the stock market, Schimdt added. Because the relative weak gains in the jobs report were seen as potentially making the case for additional government stimulus, stocks were broadly higher at deadline Friday. At midday, the Dow was up nearly 200 points or 0.3%. Digital mortgage giant Rocket Co.s,, which spurred the current wave of nonbank IPOs by going public, was trading just slightly lower at $21.47, down 0.5%.

The number of equity-rich properties jumps by 2 million in 2 years

February 5th, 2021|

A greater portion of borrowers built their equity levels in the fourth quarter, while the share of underwater properties shrunk, according to Attom Data Solutions. Of the country’s 59 million mortgaged properties, 17.8 million — or 30.2% — qualified as equity-rich, with combined loan-to-value ratios of 50% or less. The steady improvement continued from 16.7 million and 28.3% in the third quarter, with the number of equity-rich homes growing by over two million in two years. “For now, homeowners are sitting pretty on a growing reserve of personal wealth,” Todd Teta, Attom's chief product officer, said in the report. “As with many other housing-market metrics, the prospects for equity building even further in 2021 are wholly uncertain because of many questions surrounding the pandemic and the U.S. economy.” Vermont held its place leading all states in proportion of equity-rich homes at 47.8%. Shares of 46.1% in California, 42.7% in Idaho, 41% in Washington and 40.4% in Hawaii rounded out the top five. Of the 107 metro areas with populations above 500,000, California accounted for the highest shares of equity-rich properties. San Jose maintained first place with a 65.7% share. Followed by San Francisco at 57.5%, Los Angeles at 51.7%, Santa Rosa at 45.1% and San Diego at 44.5%. At the opposite pole, 3.2 million U.S. properties — or 5.4% — were considered seriously underwater with LTV ratios above 125%. The numbers also sat on an improved trajectory, declining from 3.5 million and 6% the previous quarter and a 1.8 million drop in two years. Louisiana had the highest share of seriously underwater properties in the country at 14.9%. Mississippi and West Virginia tied at 11.4%, while Iowa’s 11.3% and Arkansas’s 10.7% trailed closely. At the metro area level, Baton Rouge, La., posted the highest share of seriously underwater homes at 14.2%. Syracuse, N.Y. (14%), Youngstown, Ohio (12.5%), Toledo, Ohio (11.3%) and Scranton, Pa. (11.2%) filled out the bottom five. “The good news is that fewer and fewer homeowners across the country are underwater on their loans,” said Rick Sharga, executive vice president of RealtyTrac, an ATTOM Data Solutions company. “But for those homeowners who are, the uncertainty of the economy during the pandemic looms large. The dual-trigger effect of losing a job and being underwater on a mortgage often, unfortunately, leads to a foreclosure.”

Lower taxes, more M&A: Behind a California bank’s move to Texas

February 5th, 2021|

First Foundation in Irvine, Calif., is ready for its next act — in North Texas. Lured by opportunities to beef up lending, add wealth management clients and pursue acquisitions of community banks — and the promise of lower taxes over time — the parent of First Foundation Bank is relocating its corporate headquarters from California to Dallas this spring. Executives are scouting locations near Plano for a potential branch that could open within the next six months and are gearing up to hire as many as 35 new employees by the end of this year. The relocation — announced in late January during the company’s quarterly earnings call — is part of a plan to boost assets from $7 billion to $10 billion by 2023. When First Foundation "started figuring out how to get to the growth numbers" it sought, "we decided that we need other markets to help us get there,” CEO Scott Kavanaugh said this week. “And the Dallas metroplex is such a strong marketplace that we felt very compelled to try to build out there.” First Foundation is the latest in a string of companies fleeing California for Texas, joining Charles Schwab, Toyota Motor North America and Jamba Juice and others that have moved to the Dallas-Fort Worth market. Seven hundred sixty-five companies left California in 2018 and 2019, on top of an estimated 13,000 companies that left the state between 2009 and 2016, according to a California economics newsletter published by the Hoover Institution, a think tank at Stanford University. Kavanaugh said companies view Texas as being more business-friendly than California, where taxes are high, regulations can be tough and growth opportunities are limited. First Foundation’s taxes will decrease over several years as the company ramps up loan production and starts earning more profits outside of California, Kavanaugh said. A more immediate benefit of the relocation, however, is a healthy multifamily lending space in Dallas, where the percentage of vacancies is low and monthly rental fees are rising thanks to the region’s robust population growth. At the end of December, the number of residents in the Dallas-Fort Worth area topped 7.8 million, a new high, according to a Cushman & Wakefield report. As it settles into Texas, First Foundation will focus on multifamily lending, at least in the near term, Kavanaugh said. Right now, multifamily lending is the largest segment of the company’s loan portfolio, accounting for 42% of the mix as of late December, though the company is doing more commercial and industrial lending, which accounts for 26% of the portfolio. In the multifamily sector, JPMorgan Chase is First Foundation’s largest competitor in California, but in Dallas the market is “a little bit more fragmented,” Kavanaugh said. “Real estate lending is usually easier to build” in a new market, First Foundation Bank President David DePillo told investors last month. But as time passes, the company will “start layering in C&I and consumer” loans, along with wealth management products, he said. The company will seek Texas trust powers after it opens its first branch, Kavanaugh said. It is also planning to host its annual shareholders meeting in Dallas this year, he added. There are no plans to change the headquarters of the bank or the wealth management business, which will remain in Irvine for now, Kavanaugh said. The shift to Texas won’t have “an overnight effect” on the company, but focusing on multifamily is a solid starting point, said Gary Tenner, an analyst at D.A. Davidson. “Multifamily, if you bring on the right people, is clearly a space where you could grow pretty quickly if you source the right people, so I have no doubt they can do that,” Tenner said. “In terms of more traditional C&I, that’s a longer sales process … and more commodified. It’s the same with wealth management. You have to source the right people to bring over the assets and I think all of that takes time.” The company considered Denver, Florida and other markets, but ultimately decided that Dallas would provide the best chance for expansion, including by way of M&A, Kavanaugh said. There were more than 400 community banks in Texas as of Sept. 30, according to Federal Deposit Insurance Corp. data. “In the Dallas metroplex area, there are more than you can shake a stick at in terms of community banks,” Kavanaugh said. “Now, whether they’re willing to consider M&A, that’s a different topic, but I do believe there’s great opportunity for consolidation in the Texas marketplace.” There have been discussions with potential sellers, but nothing has been worked out yet, he said. HoldCo Asset Management disclosed last month that First Foundation tried to initiate merger talks with the $9.7 billion-asset Boston Private Financial Holdings. HoldCo, a Boston Private investor, is upset that the company agreed to be sold to SVB Financial in Santa Clara, Calif. HoldCo, in a letter to Boston Private CEO Anthony DeChellis, shared the contents of an email from Kavanaugh stating that he had "persistently" called DeChellis “to pursue a dialogue about a merger.” First Foundation was told in late November that Boston Private’s board had instructed DeChellis to focus internally and that the company was “not interested in pursuing a sale.” First Foundation is not the first out-of-state bank to relocate to Texas seeking more growth and acquisition opportunities. In 2007, Comerica moved its headquarters from Detroit to Dallas and about three years later struck a deal to acquire Sterling Bancshares in Houston. For Kavanaugh, a University of North Texas graduate, the move is a homecoming of sorts. He moved to California from Dallas in 1986 and helped launch First Foundation Bank in 2007. Kavanaugh is building a home in the area, which he expects will be finished in April. The relocation will mark First Foundation’s third expansion outside California, where it launched the first of its two units, First Foundation Advisors, in 1990. In 2012, it opened a branch location and an adviser office in Las Vegas and two years later did the same thing in Honolulu. Today, the company has 20 branches, all but two in California, and employs about 500 people, roughly 75% of them based in Irvine. Over time, certain operations and other back-office jobs in Irvine will shift to Dallas, but how quickly that will happen hasn't been decided, Kavanaugh said. “I’ve had quite a few CEOs call me and ask” about the relocation, he said. “A lot of people are saying, ‘We think it’s a smart move.’ ”

CFPB considers halting implementation of QM, debt collection rules

February 5th, 2021|

The Consumer Financial Protection Bureau is looking to delay the implementation dates of the Qualified Mortgage and debt collection rules and will resume collecting data on home loans, credit cards and prepaid cards. Acting CFPB Director Dave Uejio wrote in a blog post late Wednesday that the CFPB needs more time to consider rules that were implemented — but have not yet gone into effect — under the Trump administration. “I will be assessing regulatory actions taken by the previous leadership and adjusting as necessary and appropriate those not in line with our consumer protection mission and mandate,” Uejio wrote, adding that changes include ways to “explore options for preserving the status quo with respect to QM and debt collection rules.” In June, the CFPB extended the QM rule until April 2021, further delaying an exemption from strict underwriting guidelines given to Fannie Mae and Freddie Mac during the last financial crisis. The changes are not a surprise. Many had expected the CFPB under President Biden would move to delay the effective dates of several rulemakings started under former CFPB Director Kathy Kraninger, including two recent debt collection rules finalized in October and December. The debt collection rules for the first time would restrict how often debt collectors can call borrowers, to seven calls per week, and also require that collectors provide detailed disclosures on old debts that have exceeded the statute of limitations. To aid consumers and military veterans suffering financially from the coronavirus pandemic, Uejio also directed the bureau’s research division to resume collecting Home Mortgage Disclosure Act data that had Kraninger put on hold in March. The CFPB originally required quarterly HMDA reporting to understand when markets are under stress or in flux and some experts saw the suspension of quarterly data collection as a mistake. The CFPB said it will also resume data collection for credit cards, small-business and clean energy loans to help better understand who is receiving credit and assess how borrowers are faring during the pandemic. Uejio made clear that he is moving quickly to implement changes even before Rohit Chopra, President Biden’s nominee to lead the agency, is confirmed. Chopra, a commissioner at the Federal Trade Commission, also has shown an interest in small-businesses' access to credit. “I want to make sure that we are doing all we can for the small businesses across the country that are on the brink of extinction,” Uejio wrote. “The Bureau enforces critical laws that protect small-business owners, including from harmful discrimination, in their access to and use of credit.” Lucy Morris, a partner at Hudson Cook and former CFPB deputy enforcement director, said she "would not be surprised to see some expansive, creative approaches to small business lending that might push the envelope of the bureau’s authority. The CFPB under Democratic control is expected to use all of its tools — enforcement, supervision and market monitoring — to aid consumers. The Dodd-Frank Act gave the CFPB the authority to monitor financial markets for risks by gathering information and conducting research. The CFPB can also require financial firms to file annual or special reports or to answer specific questions in writing related. It is currently analyzing several issues related to the pandemic, including foreclosures, mobile home repossessions and landlord-tenant evictions, though it is unclear whether landlord issues fall under the CFPB’s authority. “Our agency now faces a test on whether we can, using all the tools Dodd-Frank gave us, forestall further similar economic and social catastrophes,” Uejio wrote. “In doing so, we need to sharpen our focus on the consumer experience. We were as a nation too late and too slow to respond to the warning signs in the mortgage market just over a decade ago.”

Originators predict more outsourcing and consolidation in 2021

February 5th, 2021|

Managing costs and creating operational efficiencies are foremost on the minds of the mortgage lenders, with the ongoing pandemic creating pressure on their profit margins. Outsourcing was the leading choice for producing those efficiencies, by 41% of those surveyed for Altisource Portfolio Solution's latest the State of the Originations Industry report. That edged out using more technology and digital services to reduce the need for staff, cited by 39% of the respondents to the survey of 200 people conducted between Aug. 17 and Aug. 29, 2020. Those shares were unchanged compared with the previous year's survey. "With costs rising and revenues down in many cases due to the pandemic, it makes sense. Rather than spending time and money hiring and training full-time staff, service providers can support and strengthen an originator's workforce by handling a portion of the lender's volume," the report said. "In this way, an originator can avoid the typical hiring/firing cycles that significantly distract an organization from closing more loans." When asked what they predict for the mortgage business over the next two-to-three years, 80% of the respondents — up from 79% the previous year — said originators will outsource more to third-party vendors to better deal with market fluctuation, especially as total volume is expected to shrink due to lower refinance activity.That was the third most-cited prediction, with the No. 1 being that growing costs will drive smaller lenders out of the business or into merging with other lenders. That was cited by 84% of respondents, up four percentage points from the previous year's survey. Sandwiched between those two choices was the return of private money into the mortgage securitization market, predicted by 82% of the respondents. That share was unchanged from the previous year, but it was the most cited answer for that period. Ranked fourth among the predictions cited by the respondents was the likelihood of a market crash in the next 24 months, at 68%, while fifth, at 64%, was a new option for the latest survey, nonbanks will dominate the originations business over the next two-to-three years. Prior surveys gave respondents the option that big banks will come back in and dominate the mortgage business; in the previous year's survey, that was the second most cited response at 81%. Regulatory constraints was the most-cited challenge in today's mortgage market, by 27% of respondents. This was followed by technology at 24%; staff retention, 21%; margin compression — which is why many lenders are worried about costs — 19%; capacity, 10%; and other, 1% When asked to rank the initiatives that are most important in differentiating their individual business compared with their competition, technology enhancements edged out customer service, 21% to 20%. Pricing was third at 19%, followed by marketing at 11%, quickest timeline at 10% and artificial intelligence at 9%. In terms of what makes mortgage products more attractive to consumers, 38% said improved customer experience was key. Lower loan costs was cited by 23%, followed by fully digital closings at 22% and fasting closings at 18%. "While the road ahead is still unclear, as always, mortgage companies that are ready for whatever comes will have the best chance of thriving in the market," Brian Simon, president of three Altisource subsidiaries including the Lenders One cooperative, said in a press release.

What will the post WFH housing market look like?

February 5th, 2021|

Vaccines are being distributed. Hospitalizations seem to be on the decline in several areas. Now it’s time to think about life after the pandemic. What habits and cultural shifts are going to stay? Which ones are going to be thrown to the wind as soon as possible? Experts at HousingWire believe that, for the most part, whatever happens in a crisis stays in a crisis. This is to say, they don’t expect that we will continue to bake our own bread and make time for afternoon walks once all businesses and commerce are back to full steam.  Continue reading What will the post WFH housing market look like? at Movement Mortgage Blog.

A purchase mortgage is an opportunity, not an obstacle

February 5th, 2021|

Change is coming. Very recently, the U.S. 10-year Treasury yield touched 1.187%. In spite of a great, albeit volatile, year for many investors, there are plenty of indicators suggesting inflation will make some kind of return later this year. We have a new administration, which may have a very different approach to the market than we’ve seen for the past four years. And yet, the mortgage and housing industry is still feeling the positive effects of a historically profitable 2020. It won’t last forever. Nor will historically low interest rates. It feels like we’ve been experiencing a refinance wave for 20 years. Thanks in no small part to Federal Reserve policies leading to unbelievably low interest rates, originating refinance mortgages has become one of the easiest and most profitable ways to mortgage lending success. Many of our industry’s newer or youngest professionals can’t even remember what a true default cycle or purchase cycle looked like. And when, for just a moment, we anticipated the rise of a purchase cycle around 2018, it was almost as if the sky were falling. Once upon a time, ours was an industry that could thrive through multiple cycles. We simply anticipated them and prepared. But now, I’m seeing and hearing too many who believe that the inevitable end of the refinance surge will mean difficult times. Challenging? Yes. But the opportunity for profitability and success would remain. I’d argue, in fact, that a purchase market is an excellent way for the best-prepared lenders to differentiate from the competition and grow market share. Some of us seem to have forgotten that. It’s time for those who truly fear the cyclical nature of our industry to toughen up. A purchase market means opportunity, but only if you’re willing to put the work into it. We have become an industry that’s far too dependent on federal interest rates. And why not? Every time we think this cycle has run its course, yet another spark comes along to prod even another round of refinancing. It’s not sustainable, but that doesn’t mean the mortgage industry should fall on hard times when it does end. An impending purchase mortgage market is not the ominous sign some make it out to be. It’s simply a signal to shift gears. Is a purchase mortgage as profitable as a refinance? Of course not. Can a smart business do exceedingly well in such a market? Of course. Remember, we saw interest rates around 16 percent in 1981. And yet, the best prepared lenders still sold mortgages. They even made a profit. And their weaker competitors disappeared. Part of the challenge may be that we’ve grown to overvalue “process.” One could argue about how well the mortgage industry has done to streamline our process, but the fact remains that a refinance mortgage is more process-oriented than the traditional purchase mortgage. It’s less messy. There are fewer actors. Fewer variables. The borrower is far less emotional. There are far fewer surprises or unexpected occurrences impacting the transaction — like a lower-than-anticipated appraisal or a bad home inspection. It’s easier to predict and cheaper to produce. What originator wouldn’t love that? That doesn’t mean, however, that we should be battening down the hatches when purchase mortgage volume rises. Even though the mortgage world is (rightfully) working toward a better production process with the use of technology and automation, this will always be a people-focused transaction, especially on the residential side. It costs more to ramp up staff and marketing. That’s simply an investment. We can also use emerging technologies to ease the cost and shorten the time it takes to make that transition. Just because it’s less predictable to get out into the marketplace with real estate brokerages and borrowers doesn’t mean it’s not worth it. Good businesses take qualified risks. Sure, it’s a little messier when we have to juggle vendors and partners; communicate with them and collaborate on the closing. Yet, at the heart of it, that’s really what mortgage lending is all about, isn’t it? It’s time for us to stop treating the purchase mortgage as some kind of market impediment or red flag for our forecasts. It’s not time to cut costs, hunker down and wait for the next refinance cycle. The great lenders will have long since passed you by. Instead, let’s get back to our industry’s basic purpose and prepare to meet that challenge. There’s still a lot of success to be had, and a lot of people to put into homes.

New York State accuses lenders of redlining in Buffalo, settles with Hunt Mortgage

February 5th, 2021|

State financial regulators cited Buffalo-based Hunt Mortgage Corp. on Thursday for weakness in lending to minorities and minority neighborhoods, as they released a report finding an overall lack of lending by nonbank mortgage companies in Buffalo despite laws banning the practice of redlining. The report by the State Department of Financial Services found a "distinct lack of lending" by mortgage lenders particularly nonbanks in Buffalo, which remains one of the most segregated cities in America. According to the report, while 17% of the region's population is Black or Hispanic, just under 10% of the loans went to minority borrowers, based on data from 2016 to 2019 provided under the Home Mortgage Disclosure Act. And nonbank lenders lent money in mostly minority neighborhoods at a lower rate than banks. State regulators found that several lenders "made little to no effort" to do business in those neighborhoods. Those lenders also did not track "whether or how well" they serve minority populations, and don't have "adequate fair lending compliance programs," the report found. "The findings of this report are particularly troubling," said Linda A. Lacewell, superintendent of financial services. "Homeownership is a critical path to building wealth and economic stability, and the data is clear families of color, particularly African Americans, do not have equal access to mortgage lending in Buffalo compared to white households." As part of its report on redlining in Buffalo, the state agency is investigating several lenders, but only specified Hunt on Thursday. The state didn't directly accuse Hunt of redlining or "intentional discrimination" and said it did not find evidence that the company violated any laws. But the agency found that the company's compliance programs and fair lending efforts had weaknesses. And the department suggested that a "lack of sufficient attention to fair lending issues contributed to the company's poor performance in lending to people of color and in majority-minority neighborhoods." Hunt is a subsidiary of Hunt Real Estate Corp., the region's No. 2 real estate brokerage firm, and by extension a major provider of mortgages for its brokerage customers. The state said that the firm, in "a good faith effort," agreed to increase its marketing to minorities and mostly minority neighborhoods, and to develop a special financing program to provide $150,000 in discounts or subsidies on loans for properties in mostly minority communities. It also agreed to provide annual training in fair lending practices to its employees and agents, and to conduct an annual compliance audit of its fair lending efforts. "We appreciate the state's findings of no wrongdoing by Hunt Mortgage, and we feel as an industry, we should do everything possible to help every U.S. citizen achieve the goal of homeownership," said Hunt Mortgage CEO Linda C. Mallia. "We see this as an opportunity to implement programs to strengthen our service in all of our communities, especially those that are underserved. We are looking at this as a positive to help." Lawmakers were hardly surprised by the report's findings. "I live it every day," said Assemblywoman Crystal Peoples-Stokes, a Buffalo Democrat, of constituents' concerns about being cut out from home ownership opportunities. Sen. Sean Ryan, D-Buffalo, said the new report shows that redlining is an ongoing problem for the city. "The way Buffalo looks today didn't just happen. Our segregated neighborhoods are the direct result of redlining," said Ryan, a member of the Senate Housing Committee, and a former housing activist. "Redlining may have been officially banned long ago, but discriminatory policies run deep throughout the city of Buffalo." The report and investigations follow a State of the State proposal by the Cuomo administration to increase homeownership rates and access to mortgages in communities harmed by redlining. Redlining is the illegal practice by companies of refusing to do business in a particular neighborhood based on its racial or ethnic makeup, or discriminating by imposing harsher terms in those areas, such as higher rates. The report noted that about 36.7% of Buffalo's population is Black and 11.6% is Hispanic, while the metro area is 12% Black and 5% Hispanic. It also cited a statistic that 85% of people who identify as Black live east of Main Street, in areas that were historically subject to redlining in the 1930s. Mortgage lending is also increasingly dominated today by nonbank lenders, which originated 37% of the mortgages in Buffalo and more than half nationwide from 2016-2019. Unlike banks, they are not subject to the federal or state Community Reinvestment Act. The report recommended that the state law be extended to nonbanks, and also called for federal bank regulators to investigate banks under their purview for fair lending violations in Buffalo. It also urged the State Department of State to probe real estate agents that several nonbank lenders relied upon for referrals. Senator Tim Kennedy, a Buffalo Democrat, is already looking to introduce legislation to apply a state law aimed at reducing discrimination in the lending sectors to all mortgage entities, not just banks and other depository lenders. "Redlining is an exceptionally devastating form of institutionalized racism that has persisted for decades in this country and in the City of Buffalo," said Kennedy, a member of the Senate banking committee. Mallia said Hunt supports those changes. "It will level the playing field," she said. "It will make it clear what the expectations are." Hunt isn't the only lender that struggles with lending to minorities. Fifteen of the 22 lenders on the DFS ranking were also below 5%, including Rochester-based Premium Mortgage Co. and First Priority Mortgage, a subsidiary of Howard Hanna Real Estate Services, as well as several banks and credit unions that aren't regulated by the state. By contrast, Evans Bank, Five Star Bank and M&T Bank topped the state report's ranking. Evans and Five Star had previously settled allegations of redlining in Buffalo and Rochester, while a predecessor to M&T did so in New Jersey. The agreement with Hunt followed a review of the company's publicly available date for lending in Buffalo and Syracuse from 2016 through 2019. DFS found that Hunt originated 4,123 residential loans in the Buffalo metropolitan area, but only 4.71% or 194 loans were to Black or Hispanic applicants. Also, only 91 loans or 2.21% were made to purchase properties in mostly minority areas, and only 23 of those went to a minority applicant. In Syracuse, Hunt originated 880 loans in the same time period. Of those, 43 or 4.89% went to a Black or Hispanic applicant, while 14 or 1.59% went for a purchase in a minority neighborhood, and only three of those were to a minority borrower. Those numbers prompted a more formal investigation into the firm's practices, procedures and compliance, including its marketing materials and policies and its underwriting, DFS said. Hunt also provided additional data, but the state agency said that only "confirmed the demonstrable lack of lending" to minorities and minority neighborhoods, according to the agreement. As part of the settlement, Hunt will evaluate its compliance and update its policies and procedures, while also clearly defining its mortgage service area to include the Buffalo, Rochester and Syracuse metropolitan areas. It will introduce credit and pre-application counseling, and a consumer complaint policy. It will also direct 25% of its marketing and advertising to minorities and minority neighborhoods, and will track those efforts. And it will spend $50,000 on outreach and promotions designed to reach those applicants, including posters, billboards, brochures, direct mail and online advertisements, as well as specific in-person events as allowed under the pandemic.

CoreLogic acquired by Stone Point, Insight Partners for $6 billion

February 4th, 2021|

Data and analytics provider CoreLogic ended a months-long battle with two of its shareholders after reaching a definitive merger agreement with outside entities. The company’s board of directors approved an acquisition by private equity firms, Stone Point Capital and Insight Partners, to buy the company for $80 per share or $6 billion. The price is a premium of 51% to CoreLogic’s share price on June 25, 2020. The winning offer beat out competing bids of $6.7 billion from real estate analytics firm CoStar Group and an undisclosed all-cash offer from another private equity giant, Warburg Pincus. CoreLogic chose the Stone Point and Insight bid because they “recognize the value and potential” of its offerings, according to CEO Frank Martell’s press release comments. Meanwhile, the new acquirers confirmed as much, pointing to CoreLogic’s “proprietary” and “powerful” data technology. The deal — still subject to shareholder and regulatory approval — is expected to close in the second quarter. If it does, it should be the final chapter in CoreLogic’s hostile takeover saga. The company has been at war with stakeholders Senator Investments and Cannae Holdings since June 2020, when the two first made an offer of $65 per share. After a series of back and forths, which included denied due diligence requests, attempts to replace CoreLogic’s entire board of directors, a revised bid for $66 per share, and the removal of three board members, CoreLogic management deemed the bids inadequate, citing better offers. Its record high revenue in 2020’s third quarter supported its position. CoreLogic’s stock price closed at $80.78 per share on Feb. 3 and opened at $80.10 on Feb. 4.Neither Senator or Cannae returned calls to confirm the current status of their stakes in CoreLogic. The most recent public filings from December 2020 and January 2021 show the pair collectively owns about 15% of CoreLogic’s outstanding shares. Today’s announcement marks the latest in a recent string of related investments by CoreLogic’s new majority owners. Stone Point invested in Roostify’s Series C fundraising round and is the lead backer of Home Point Capital — which just launched its initial public offering — while Insight led SimpleNexus’ Series B round. Mergers and acquisitions played a large role in the mortgage industry over the past year, with Ellie Mae, Black Knight and First American headlining the deals.

7 ways to reignite the love for your home this Valentine’s Day

February 4th, 2021|

Houses are a lot like relationships. You want a sturdy foundation, that warm and cozy feeling, room to grow and of course — you want to feel at home. But just like relationships, houses require regular maintenance and care to keep that initial excitement alive.  Think back to the time when you first fell in love with your new house. You could see it had all the potential in the world. Continue reading 7 ways to reignite the love for your home this Valentine’s Day at Movement Mortgage Blog.

Residential Mortgage Services Review: A Home Purchase-Focused Lender in the Northeast

February 4th, 2021|

Posted on February 4th, 2021 Today we’ll check out “Residential Mortgage Services Inc.,” or RMS for short, which refers to itself as a leading independent purchase-focused mortgage lender. The retail direct-to-consumer mortgage lender primarily serves the Northeast, Mid-Atlantic and Eastern Seaboard markets. RMS said purchase loans accounted for 58% of last year’s volume, compared to an estimated 40% industry average. The rest consisted of mortgage refinances for existing homeowners. That made them the top purchase lender in both Maine and New Hampshire, the #2 purchase lender in Rhode Island, and the #3 in Massachusetts. Clearly they’re doing something right if so many home buyers are turning to them for what is often their most important purchase. Let’s learn more. Residential Mortgage Services Fast Facts Direct-to-consumer retail mortgage lender Calls itself a home purchase-focused company (but also does refis!) Headquartered in South Portland, Maine, founded in 1991 Licensed in 23 states and the District of Columbia Employs more than 850 workers, including about 250 loan officers Funded a company record $8.5 billion in home loans during 2020 Most active in Massachusetts, Pennsylvania, and New Hampshire Named #1 lender by MassHousing and received Top USDA Lender Award in Pennsylvania As noted, Residential Mortgage Services is a retail mortgage lender that offers home purchase loans and mortgage refinances. While they say they’re mostly focused on helping home buyers obtain financing, they do billions in refinance volume as well. In fact, the company just had its best year on record, with $8.5 billion in origination volume last year, a whopping 70% increase compared to the $5 billion funded in 2019, and more than double the $3.9 billion in 2018. At the moment, they are licensed in 23 states and the District of Columbia, and have a physical presence in 14 states nationwide. Those states include Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, West Virginia, and D.C. They are most active in the state of Massachusetts, followed by Pennsylvania, New Hampshire, Maine, and Maryland. To summarize, they have a major presence in the Northeast and Mid-Atlantic, especially with home buyers. How to Apply for a Home Loan with Residential Mortgage Services You can go to a branch or visit their website and click on “Apply” to get started You’ll be asked to select your state, followed by a branch location and a loan officer From there simply create your account and you can apply for a mortgage from any device Their digital home loan process allows you to link financial accounts, scan/upload docs, and eSign disclosures Residential Mortgage Services makes it easy to apply for a home loan, and gives you multiple options to get it done. To get started, simply visit their website and click on “Apply.” This will take you to list of states where they’re licensed to do business. Once you select a state, it’ll show you branches that serve that particular state, and when you select a branch, you’ll be able to see which loan officers work there. While you can get started on your own from an individual loan officer’s webpage, you may want to call them first to discuss loan options and pricing. If you’re happy with what you hear, you can begin the digital application process from any device, including a smartphone. They even offer a smartphone app called RMS Ready that lets you complete many tasks along the way. Like other digital mortgage offerings, you can link financial accounts, scan/upload necessary paperwork, eSign disclosures, and check loan status 24/7 via the borrower portal. Their Loan Center is powered by Encompass from fintech company Ellie Mae. Alternatively, you can visit a local branch if one is located nearby and you prefer to do business face-to-face. At last glance, they’ve got brick-and-mortar branch offices in 14 states. Loans Programs Available at Residential Mortgage Services Home purchase loans Refinance loans: rate and term, streamline, and cash out Home renovation loans: FHA 203k and Fannie Mae HomeStyle Conventional mortgages Jumbo home loans FHA, USDA, and VA loans Interest-only mortgages State housing agency mortgages Piggyback second mortgages Fixed-rate and adjustable-rate options Residential Mortgage Services offers a ton of different home loan programs, including stuff you won’t find with other lenders. Aside from home purchase loans and refinance loans, they also offer home renovation financing, including the FHA 203k loan and Fannie Mae HomeStyle programs. Additionally, you can get a jumbo home loan or an interest-only mortgage, along with a piggyback second mortgage (a home equity line of credit) if you want to extend your financing and avoid PMI. They also partake in the many state housing agency mortgage programs available, which are geared for first-time home buyers and those with limited incomes. You can get any type of loan, whether it’s a conforming loan backed by Fannie/Freddie, an FHA loan, USDA loan, or VA loan. In terms of loan programs, you can get a fixed-rate mortgage (30-year fixed or 15-year fixed), or an adjustable-rate mortgage such as a 5/1, 7/1, or 10/1 ARM. All in all, you shouldn’t be limited when it comes to home loan choice, which is a big positive for borrowers who work with Residential Mortgage Services. Residential Mortgage Services Rates One area where they leave us in the dark is mortgage rates. They don’t post them online so I’ve got no idea where they stand pricing-wise. In order to get a mortgage rate quote, you’ll need to speak with a loan officer, either at a local branch or over the phone. When you do get pricing, be sure to ask about their lender fees as well, which you also won’t find on their website. Taken together, this makes up the home loan’s APR and can be used to shop your mortgage with competitors. Always take the time to gather several quotes to ensure you get a good deal. The one hint we have about their rates comes from their Zillow reviews, where a good chunk of customers indicated that the rate received was lower than expected (and often the closing costs were too!). Given their amazing level of customer service, my hope is they’re competitively priced as well. Residential Mortgage Services Reviews On Zillow, RMS has an astounding 4.98-star rating out of a possible 5 from nearly 4,000 customer reviews. That’s truly impressive given the massive number of reviews and shows how consistent they’ve been over time. One reviewer even referred to working with them as a “wonderful experience,” which you don’t hear too often in the mortgage world. On LendingTree, they have a perfect 5-star rating from nearly 100 reviews, with every rating a 5 out of 5. You can find various reviews online for their specific brick-and-mortar locations as well, with many also quite positive. Lastly, Residential Mortgage Services is an accredited business (since 2010) and currently has an ‘A+’ rating with the Better Business Bureau. Residential Mortgage Services Pros and Cons The Good Stuff Can apply for a mortgage on their website in minutes Offer a digital and paperless home loan experience Lots of different loan programs to choose from including jumbos, second mortgages, and interest-only options Has brick-and-mortar retail branch offices in 14 states Excellent customer reviews from past customers A+ BBB rating, accredited company Free smartphone app (RMS Ready) Free mortgage calculators and knowledge center The Maybe Not Not licensed in all states Do not list mortgage rates or lender fees on their website (photo: Paul VanDerWerf)

UWM's 4Q volume reflects tighter lending standards, Ishbia says

February 4th, 2021|

While UWM Holdings Corp. logged record mortgage production in the fourth quarter, those numbers might have been higher were it not for some credit tightening the company did earlier in the year. "We have chosen, even in the fourth quarter, less volume, less market share for quality and that's what we're always going to focus on because we're trying to win long-term," President and CEO Mat Ishbia said on the first conference call the company held since going public on Jan. 22. The company reported fourth quarter income of $1.37 billion, largely driven by record origination volume of $54.7 billion. It was able to achieve a gain on sale margin of 305 basis points. This compares with net income of $1.45 billion in the third quarter. UWM produced $54.2 billion at that time, with a gain on sale margin of 310 bps.For the fourth quarter in 2019, UWM earned $148.9 million. It originated $31.9 billion, but the gain on sale margin was 110 bps. In particular, the company's purchase volume — not just in the fourth quarter, but for all 2020 — was lower than it could have been. That's because, at the start of the pandemic, UWM stopped originating Federal Housing Administration loans and jumbo mortgage products. The former presented the potential for higher delinquency rates, he said, while the jumbo mortgage secondary market's future seemed uncertain at the time. "I'm OK doing less business, because I'm going to make sure we steer this ship safely for the long-term," Ishbia said. UWM brought back FHA products in December and plans to add jumbo back to the menu in March; both moves should boost purchase volume during 2021. For the full year 2020, UWM originated $182.5 billion, of which just $42.9 billion was purchase. In 2019, the company did $107.8 billion, with $49.8 billion coming from purchase. In the first quarter, UWM said it expects to have closed loan volume of between $52 billion and $57 billion. In the first quarter of 2020 it did $42.4 billion. However, it is expecting to record a gain on sale margin of between 200 bps and 235 bps, which on a quarter-to-quarter basis would be 23% to 34% lower. But when compared with the first quarter of 2020, it would be an increase of between 111%-and 142%. Ishbia aims to grow UWM's market share of 35% in the wholesale channel to 50% by 2025 or 2026. At the same time, he expects the wholesale share of the originations pie to grow from its current 25% to 33%. "I think that share…will actually come from some of the top players in wholesale, the top 10. There's a wide gap in technology, in delivery, in speed of close where we are winning right now and a lot of other people have to significantly lower their margins just to get even close to the amount of volume that they want to compete with us," Ishbia said in response to a question. Going public enhanced UWM's liquidity profile, Ishbia said, and the company expects to generate excess cash on its books. "We will not let it sit here and go to waste," he said. "We either use it to grow the business or deliver it back to the shareholders."

Mortgage rates stable for now but volatility may lie ahead

February 4th, 2021|

While the interest rate for the typical home loan went unchanged during the latest week tracked by Freddie Mac, recent benchmark bond yield fluctuations indicate that it could become more volatile soon. The 10-year Treasury yield rose 2.7 basis points to 1.158% initially Thursday morning, after jobless claims fell by 33,000 at the end of January. But other indicators present reasons for economic pessimism, which could put downward pressure on yields. For example, U.S. productivity dropped at 4.8% annual rate in the fourth quarter. “The longer-term trajectory for yields and rates is almost certainly upward, the near-term outlook is currently at a bit of an impasse,” Zillow Economist Matthew Speakman said in a separate press release. At 2.73%, that 30-year rate matched the previous week’s but was markedly lower than the 3.45% seen a year ago, according to the government-sponsored enterprise. “Mortgage rates remained flat this week and near record lows, signifying an economy that continues to struggle,” said Sam Khater, Freddie Mac’s chief economist, in a press release.Resiliency in the service sector activity and a relative drop in coronavirus case volumes point to economic improvement but on the other hand, the labor market remains troubled, Speakman said. “If [the jobs] report reflects renewed improvements in the labor market, and especially if it coincides with meaningful progress regarding more fiscal relief, then mortgage rates could move upward quickly. If not, the pattern of modest weekly oscillations in mortgage rates is likely to continue in the coming weeks,” Speakman said. Lower-income households are being left behind in the refinancing boom, Khater noted. “While many have already refinanced, the evidence suggests that upper income homeowners have taken advantage of the opportunity more so than lower income homeowners who could stand to benefit the most by lowering their monthly mortgage payment,” he said.

GOP adds three senators to Banking Committee

February 4th, 2021|

WASHINGTON — Three Republicans are joining the Senate Banking Committee for the 117th Congress, according to a list of assignments released by Senate Minority Leader Mitch McConnell's office. The new members are Steve Daines of Montana, Bill Hagerty of Tennessee and Cynthia Lummis of Wyoming. Hagerty and Lummis were elected in November for their first terms in Congress. Daines was first elected in 2014 and won reelection in November. Sen. Ben Sasse, R-Neb., will no longer serve on the banking panel. Former Sens. Martha McSally, R-Ariz., and David Perdue, R-Ga., who sat on the committee in the last Congress, lost their elections in November. Two new Democratic senators — Raphael Warnock and Jon Ossoff, both of Georgia — will also be joining the committee. Sen. Sherrod Brown, D-Ohio, will chair the committee, while Sen. Pat Toomey, R-Pa., will serve as the ranking member.

FHA issues COVID safety measures for servicers and borrowers

February 4th, 2021|

In an effort to impose social distancing measures amid a still-raging pandemic, the Federal Housing Administration on Wednesday issued waivers on standard servicing procedures that require in-person contact. The three temporary changes to theSingle Family Housing Policy Handbookwill remain in place until Dec. 31. The first allows servicers to find alternative means of interviewing borrowers regarding early default interventions when their FHA-insured forward and home equity conversion mortgages face foreclosure danger. Another measure waives the signature requirement on occupancy certifications from HECM borrowers. The final change, aimed at increasing financial relief for HECM borrowers, waives the $5,000 arrearages cap on recalculated repayment plans. Seniors account for many reverse mortgage borrowers; that makes such measures all the more important, Acting HUD Secretary Matthew Ammon said in an announcement about the waivers. "President Biden has made it clear that protecting the health, safety, and homeownership security of the nation’s most vulnerable populations, including seniors, are urgent and immediate priorities," he said. "The policy waivers issued today are another important step in addressing these priorities." The servicing measures come as the expiration of the first CARES Act-related 12-month forbearance periods approach next month. Seriously delinquent mortgages — those late in payment by 90 days or more — totaled 3.43 million at the end of 2020 according to Black Knight’s latest forbearance report. December’s overall delinquency rate was 6.08%, up from 3.4% the same month the year before. FHA extended the deadline for borrowers to request a new COVID-19-related forbearance through March 31, 2021.

Acting CFPB chief signals tougher stance against redlining

February 4th, 2021|

Banking attorneys are bracing for an immediate sea change in the Consumer Financial Protection Bureau's approach to fair-lending cases even before the Biden administration's nominee to run the agency is confirmed. Many in the industry view lending discrimination probes as a primary focus of acting Director Dave Uejio's tougher stance toward financial institutions compared to his predecessor. Observers expect Uejio to revive the agency's controversial "disparate impact" standard — used to punish lenders that unintentionally discriminate against minorities — that the industry has long criticized. They expect him to fast-track investigations that could be reviewed by Rohit Chopra, once he is Senate-approved as the permanent director, for possible fines and other penalties. “The playbook is to use the fair-lending hook to go after big banks and mortgage lenders whenever possible,” said Brian Levy, of counsel at the law firm Katten & Temple. Uejio made clear his intent in a recent blog to be aggressive despite his interim appointment, taking a page from other interim appointees such as former acting CFPB Director Mick Mulvaney, who was an outspoken chief of the bureau until he passed the baton to Kathy Kraninger upon her Senate confirmation. Democrats criticized the CFPB for a dearth of fair-lending cases under former Director Kathy Kraninger. But the agency is expected to use disparate impact more aggressively under acting Director Dave Uejio, center, and Rohit Chopra, the Biden administration’s choice to run the agency longer-term. Bloomberg News (Kraninger and Chopra) While Mulvaney and Kraninger slowed enforcement activity, and fair-lending cases in particular, Uejio signaled a return to Obama-era policies. More aggressive enforcement of fair-lending laws points to interest among Biden-appointed regulators in addressing racial-equity issues. Uejio's post said the CFPB will consider using the disparate impact legal standard to punish lenders for discriminatory effects that result even from neutral policies. “The country is in the middle of a long overdue conversation about race, and as we all know, practices and policies of the financial services industry have both caused and exacerbated racial inequality,” Uejio wrote last week. “I am going to elevate and expand existing investigations and exams and add new ones to ensure we have a healthy docket to address racial equity.” And such investigations will not be limited to mortgages and other consumer loans, he said. Lenders that took part in the Paycheck Protection Program to dispense government-backed loans to small businesses seeking pandemic relief could also be in the CFPB’s crosshairs. "Examiners found that the widely used policy of banks only taking PPP applications from pre-existing customers may have a disproportionate negative impact on minority-owned businesses," he said. His comments worry lenders that already go to significant lengths to avoid discrimination against minorities but are concerned that they could get punished anyway. “Lenders are already fearful of this, they are already very aware of it," said Levy, adding that lenders he "encountered ... [don't] want to make a loan because of the color of someone’s skin.” Most banks and mortgage lenders think disparate impact is an unfair way to analyze the legality of financial institutions’ credit policies that determine lending decisions — specifically credit scores, loan-to-value ratios and a borrower’s income. These long-standing credit measures are said to have a disproportionate effect on minority neighborhoods. Kali Bracey, a partner at Jenner & Block and a former CFPB senior counsel, said, "Financial institutions and nonbank mortgage lenders may find it intimidating to do a fair-lending analysis to make sure they are not having a disparate impact on fair lending with customers." Moreover, in the wake of the murder of George Floyd and the social unrest that followed, the biggest banks specifically may be unwilling to fight the CFPB and have opposed any effort by trade associations to press back against disparate impact, sources said. "All the different investigations are going to be a headline risk," said Ed Mills, a managing director and Washington policy analyst at Raymond James. Democratic lawmakers criticized Kraninger for filing just two fair-lending enforcement actions in two years. None were filed under Mulvaney, whereas the agency issued 12 enforcement actions related to fair lending under former Obama-appointed Director Richard Cordray. Uejio could be putting in motion a new set of priorities likely to be the focus of Rohit Chopra, a progressive consumer advocate chosen by the administration to run the agency longer-term. By initiating investigations now, the bureau does not have to wait for Chopra's confirmation process; he will be able to more quickly sign off on pending lawsuits and civil demands as soon as he starts. Last year, banks joined civil rights groups and consumer advocates in urging the CFPB not to rush a proposed overhaul of the Equal Credit Opportunity Act. Under Kraninger, the CFPB proposed making changes to ECOA, the 1974 law that bars discrimination in any aspect of a credit transaction. Under the Biden administration, the effort to change ECOA is expected to be scuttled as the CFPB takes an expansive view of the legal doctrine of disparate impact. Still, actual litigation under ECOA is rare, experts said, and the statute has never been the subject of a Supreme Court case. “There is no corresponding Supreme Court case law having to do with disparate impact under ECOA but the CFPB’s position is that because ‘an effects test’ is specified in Regulation B, ECOA’s governing regulation, then disparate impact applies to ECOA,” Bracey said. While the CFPB’s view on disparate impact is consistent with the Biden administration’s priorities on equity and fairness, the issue is still the subject of much debate. When Republicans controlled the House Financial Services Committee, they issued reports claiming the CFPB does not have authority to use the disparate impact theory under ECOA, which is the only fair-lending statute under its authority. Banks and lawyers representing lenders were dismayed by Uejio’s comments that appeared to call out financial firms on the issue of racial equity. Lenders are concerned that the focus on enforcement will be punitive but that enforcement actions do not solve the pressing issues dealing with race that now are the subject of national debate. “Fair lending, fair housing are actual problems,” said Levy, “But 50 years of fair-lending enforcement has not moved the needle in terms of the racial gap in housing. We need some new ideas.” The CFPB under Uejio and then Chopra could face a legal challenge over its fair-lending authority. Of the bureau's two fair-lending actions during the Trump administration, one went to court. In the only redlining case against a nonbank, last year the bureau alleged that the Chicago-based Townstone Financial engaged in “unlawful redlining” when the CEO made “discouraging statements” on radio programs that resulted in fewer Black applicants applying for loans. But Townstone claims the CFPB is overstepping its authority under the ECOA. Another issue the case raises is that nonbank mortgage lenders are not subject to the Community Reinvestment Act, so they currently have no legal obligation to market their loans in a specific geographic area, said Richard Horn, a partner and founding member of Garris Horn who represents Townstone. “The bureau is reading into ECOA an affirmative obligation to market to specific areas,” said Horn, a former CFPB senior counsel and adviser. “They are turning a statute of exclusion into an obligation for mortgage lenders to go out and include and get enough business from minorities.”

InterFirst Mortgage Review: A Private Equity-Backed Lender Looking to Grow

February 3rd, 2021|

Posted on February 3rd, 2021 Today we’ll examine “InterFirst Mortgage,” which bills itself as a private equity-backed mortgage originator that is motivated to grow. Their game plan is to acquire consumer-direct call centers and “strategically located licensed conforming/government wholesale mortgage operations” throughout the United States using their available capital. While they briefly placed operations on hold in 2017 in light of what they believed was “oversaturation and overvaluation in the mortgage market,” they relaunched in mid-2020 with an expanded business model and proprietary loan origination platform. Let’s learn more about them. InterFirst Mortgage Fast Facts Private equity-backed direct-to-consumer mortgage lender Founded in 2001, relaunched in 2020 by current CEO Dmitry Godin Headquartered in Rosemont, Illinois (Chicago suburb) Offers home purchase loans and refinance loans Also operates wholesale and correspondent lending divisions Parent company is Chicago Mortgage Solutions LLC Interfirst Mortgage Company refers to itself as a $35 billion mortgage originator, though with the year we’ve had recently, they may need to increase that number. The point is that despite a relaunch in 2020, they’ve been around a while, and know what they’re doing. In fact, their leadership team has more than 100 years of mortgage experience. The company was initially launched all the way back in 2001, then relaunched in 2020 by current CEO Dmitry Godin with a brand-new look. They operate a retail direct-to-consumer division, along with a wholesale lending department and a correspondent lending division. This means you can apply directly on their website, with an approved mortgage broker, or via a bank/credit union that acts as a correspondent. My understanding is they do not have branches you can visit, so you’ll be working remotely if you go the direct-to-consumer route through their website. InterFirst is currently licensed in 19 states, with plans to expand to all 50 in the near future. Here’s where they’re currently doing business: Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Illinois, Louisiana, Michigan, Minnesota, Mississippi, New Mexico, Ohio, Oregon, Texas, Utah, Virginia, West Virginia and Wisconsin. I believe they’re only doing wholesale lending in the state of Utah at the moment, meaning you’ll need to work with a mortgage broker if financing a property there. How to Get Started with InterFirst Mortgage You can also call/email them or fill out their online contact form If you don’t want to wait you can simply jump right into the application on their website Their Blend-powered mortgage application allows you to complete most tasks paperlessly But it might be best to get pricing first then apply with the assistance of a loan officer One thing I like about InterFirst Mortgage is the ability to just dive into the mortgage loan process without having to speak to anyone or jump through hoops. Once you arrive at their website, all you need to do is click on “Buy a Home” or “Refinance” and you’ll begin the home loan process. Their digital experience is powered by fintech Blend, which is one of the biggest names in the game. You’re able to complete most tasks paperlessly, including linking financial accounts, scanning/uploading paperwork, and eSigning disclosures. Once your loan is submitted, you’ll be given a timeline of events, current loan status, and a list of tasks that need to be completed to get to the finish line. While you don’t need a human to help you get going, it’s probably smart to call in and speak with a loan officer first to get pricing. Since mortgages are price-sensitive, you should check to see where they stand on interest rates and fees before you formally apply. But if you’re already sold on them, you can forgo that step. Just note that at the beginning of the application, they’ll ask if you’re working with someone, and if yes, you’ll need to provide that name. InterFirst Mortgage is big on technology, but will still pair you with an expert lending team consisting of a loan officer, process, underwriter, and funder. Loan Programs Available at Inter