Mortgage – HousingWire |
- Ledn raises $70M to grow Bitcoin-backed mortgage product
- Federal Reserve accelerates tapering program
- Refi interest is down 41% from last year
- Automation is coming to non-QM lending
- Freedom Mortgage cuts jobs in Fort Mill, SC office
- Critical defects increase as refi market fades
| Ledn raises $70M to grow Bitcoin-backed mortgage product Posted: 15 Dec 2021 02:32 PM PST Toronto-based cryptocurrency lending platform Ledn has raised $70 million in a Series B funding round to support the growth of its digital assets lending business, including a new Bitcoin-backed mortgage product. The round valued the company at $540 million and was led by 10T Holdings, the company announced on Wednesday. Other investors included Golden Tree Asset Management, Raptor Group, and FJ Labs. Another 11 existing venture investors, such as White Star Capital and Kingsway Capital, followed on in the round. Founded in 2018, Ledn focuses on saving and lending products for Bitcoin and other digital assets. It claims that the startup has over $1.7 billion in assets from clients in 127 countries. Loan originations in dollars increased by more than 25% since the third quarter of 2020, and 44% of loan clients are in Latin America. The Bitcoin-backed mortgage product accepts Bitcoins and properties as collateral for loans to clients that want to purchase new real estate or finance a property they already own. Loans amounts are equal to 50% of the combined value of both Bitcoins and property. The product is currently offered with a two-year term, with the possibility to be renewed. It requires regular monthly interest payments. Rates will depend on market conditions, but the inclusion of the collateral can reduce costs, the company explains on the website. According to Ledn, if Bitcoin prices drop, the client needs to deposit more collateral or pay down some of the principal. Otherwise, the company will sell part of the currency to meet the required loan-to-value of 50%. Clients, however, will gain when Bitcoin value increases. Already in pilot mode in Canada, the product is expected to be offered broadly in the country and the United States early in 2022. The company targets $100 million in originations by the end of the first quarter of 2022. Adam Reeds, CEO at Ledn, said in a statement that most people that hold extensive wealth in Bitcoin can’t use their assets to qualify for a mortgage at a bank, and the product is for those who choose to invest outside the mainstream of legacy banks. “Our clients want to diversify their portfolio in order to protect their wealth and then utilize that wealth for instances such as purchasing a home, but one should not come at the expense of the other,” he said in a statement. The cryptocurrency market was worth over $2.2 trillion on Wednesday, according to CoinGecko. Some banks, lenders, and fintechs are testing the technology, but the lack of regulatory clarity and fears of volatility have kept these currencies from becoming fully integrated into products and services. Regarding the mortgage industry, the acceptance of cryptocurrencies by investors lags the development of new products. Among government agencies, there remains significant resistance to accepting cryptocurrencies. Early in December, Freddie Mac said that due to the high level of uncertainty, borrowers’ income in cryptocurrency may not be used to qualify for the mortgage. Also, borrowers may exchange cryptocurrency for U.S. dollars for mortgage transactions. The agency said it will continue to monitor cryptocurrency developments to update requirements in the future. In September, the Pontiac-based wholesale mortgage lender United Wholesale Mortgage accepted its first-ever cryptocurrency mortgage payment – and five more in October. The transactions, however, were used as models to “better assess scaling cryptocurrency payments for consumers,” the company said. Due to “incremental costs and regulatory uncertainty in the crypto space,” the lender decided to keep this initiative in the pilot phase for now,” said Mat Ishbia, president and CEO of UWM. Figure Technologies, the lender founded by former SoFi chief Mike Cagney, is building a platform based on blockchain technology, which in the future could facilitate cryptocurrencies used for home buying, but is years away. The post Ledn raises $70M to grow Bitcoin-backed mortgage product appeared first on HousingWire. |
| Federal Reserve accelerates tapering program Posted: 15 Dec 2021 12:33 PM PST The Federal Reserve announced that it is accelerating its tapering of bond-purchases starting in January. The central bank's Federal Open Markets Committee said that "in light of inflation developments and the further improvement in the labor market," it will reduce the pace of its monthly purchases by $20 billion for Treasury securities and $10 billion for agency mortgage-backed securities. That means that on January 14, 2022, the trading desk at the Federal Reserve Bank of New York, responsible for the purchases, will buy at least $40 billion Treasury securities and at least $20 billion agency mortgage-backed securities. Regarding agency MBS, purchases will continue to concentrate on recently produced coupons in 30-year and 15-year fixed-rate in the to-be-announced market. In a note on Wednesday, Goldman Sachs said that if the FOMC does not change the pace of tapering in the January meeting, the taper would conclude in March. The trading desk has been buying mortgage-backed and Treasury securities since March 2020, when Federal Reserve Chairman Jerome Powell announced the move in response to the coronavirus pandemic. In November, the tapering started with a reduction in monthly purchases by $10 billion for Treasury securities and $5 billion for agency mortgage-backed securities, which means that the Fed is accelerating the tapering in 2022. In its prepared statement, the FOMC said it expects similar reductions in the pace of net asset purchases, but it is ready to adjust by changes in the economic outlook. "The Federal Reserve’s ongoing purchases and holdings of securities will continue to foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses." The FOMC also mentioned it sees progress on vaccinations and strong policy support, solid job gains, and improvements in sectors most adversely affected by the pandemic in recent months. But supply and demand imbalances related to the pandemic and the reopening of the economy have continued to contribute to elevated inflation levels. "The path of the economy continues to depend on the course of the virus," the FED said. "Risks to the economic outlook remain, including from new variants of the virus." The post Federal Reserve accelerates tapering program appeared first on HousingWire. |
| Refi interest is down 41% from last year Posted: 15 Dec 2021 04:00 AM PST Mortgage applications fell 4% for the week ending Dec. 10, large part because fewer borrowers are looking to refi their exiting mortgages, according to the Mortgage Bankers Association (MBA) survey published on Wednesday. The decrease was mainly driven by the refi index falling 6.4% from the previous week on a seasonally adjusted basis. Concurrently, the purchase index increased 0.7% from the week prior. Compared to a year ago, mortgage applications declined across the board. The overall market composite index dipped 30.9% on a seasonally adjusted basis. Refi apps fell 41.4% year over year, and purchase applications decreased 10.3% in the same period. "Fewer homeowners have a strong incentive to refinance at current rates," Joel Kan, the MBA's associate vice president of economic and industry forecasting, said in a statement. The trade group estimates that the average contract 30-year fixed-rate mortgage for conforming loans ($548,250 or less) remained unchanged at 3.30%. For jumbo mortgage loans (greater than $548,250), rates decreased to 3.32% from 3.33% the week prior. The keys to lending in a post-refi boom world As record refinance volumes disappear, lenders need to get intimately familiar with their database of customers. Being a resource for all real estate financing needs for your customers will become more important in the next few years than ever before. Presented by: CIVIC FinancialRegarding the purchase market, Kan said mortgage applications increased slightly because a 1.7% rise in conventional applications offset a 1.6% decline in applications for government loans. Would-be homebuyers are finding it hard to compete with FHA and VA loans in a purchase market defined by low inventory. Sellers today are prioritizing cash offers and prospective buyers with conventional mortgage approval, particularly given that the Federal Housing Finance Agency just approved higher loan borrowing limits. "The strength in conventional purchase activity continues to support higher loan balances, which moved back over $400,000. Housing demand remains strong as the year comes to an end amidst tight inventory and steep home-price growth," Kan said. Refinances represented 63.3% of total mortgage applications, down slightly from 63.9% the previous week. VA loans comprised 10.6%, decreasing one basis point. Meanwhile, FHA loans went from 9.9% to 9.6% in the period. The USDA share was at 0.5% of the total. The post Refi interest is down 41% from last year appeared first on HousingWire. |
| Automation is coming to non-QM lending Posted: 14 Dec 2021 01:27 PM PST  The non-QM mortgage market, which encompasses most home loans not backed by a government-sponsored guarantee, is expected to reach the $25 billion mark this year in private-label securitization volume. Over the next several years, however, assuming interest rates continue to tick upward absent great volatility, the non-QM (or non-qualified mortgage) market has the potential to grow tenfold, according to some industry executives. To accommodate that growth in both loan origination and related private-label securitization, lenders in the space will need to evolve their underwriting capacity in an industry already facing a shortage of loan underwriters. That has some producers of non-QM loans, which require specialized underwriting expertise, looking to technology, big data and the development of automated underwriting platforms as the solution for dealing with the anticipated surge in loan volume in the years ahead. "Automated underwriting for agency [Fannie Mae and Freddie Mac] products is definitely much easier because there's a defined set of scenarios that you have to meet," says Keith Lind, executive chairman and president of Acra Lending (a non-QM lender formerly known as Citadel Servicing). "With non-QM, the scenarios are just everywhere, and it requires an expertise and a skill set that takes years to learn. "Could someone one day come up with the right technologies [for automating underwriting of] non-QM? It’s going to happen at some point, or at least make it much easier." Non-QM mortgages, Lind explained, include everything that cannot command a government, or "agency," stamp through Fannie Mae, Freddie Mac or via another government-backed loan program, such as the Federal Housing Administration. It's a wide and growing segment of the mortgage-finance market that is expected to expand rapidly as rising home prices, changing job dynamics and upward-sloping interest rates push more borrowers outside the agency envelope. The pool of non-QM borrowers includes real estate investors, property flippers, foreign nationals, business owners and the self-employed, as well as a smaller group of homebuyers facing credit challenges, such as past bankruptcies. "We are looking at the current $25 billion-a-year market [for non-QM] growing to $200 or $300 billion [over the next several years], and it’s going to require automation," said Tom Hutchens, executive vice president of production at Angel Oak Mortgage Solutions, part of Angel Oak Companies, a long-time player in the non-QM market. "Automation just increases efficiencies," Hutchens added. Angel Oak Companies, Hutchens said, is focused on originating and securitizing non-QM loans to the self-employed and real estate investors, which represent about 90% of the company's loan-origination base. And it is growing fast, he added. "We’re expecting close to 100% growth [in 2022] from 2021, and this year, 2021, is our biggest year ever," he said. "We think non-QM is in a high-growth mode, and that’s going to continue for years to come." Consequently, Angel Oak is embracing automation to better accommodate that projected growth across its product lines. In fact, this past spring, Angel Oak made a $3 million seed-round investment in a Dublin, Ireland-based fintech called Asset Class that is focused on creating greater efficiencies for affiliate Angel Oak Capital's private fund investors. "Asset Class removes the inefficiencies and waste that come from largely paper-based interactions across our target markets," said Ferdinand Roberts, CEO and founder of Asset Class, in a statement announcing Angel Oak's investment. "We are delighted to welcome Angel Oak as a strategic investor to help us accelerate the development of next-generation solutions for the financial services marketplace." Hutchens said that technology and underwriting automation will not replace human underwriters, but rather just make them more efficient by allowing the computer to handle the functions that can be automated. "So, maybe instead of underwriting three loans a day, they could underwrite five or six or seven" because technology is creating efficiencies in the process. A recent Fitch Ratings report on Angel Oak's most recent private-label securitization, its eight this year, states the following: "Angel Oak is also working on the rollout of a non-QM desktop underwriter tool to speed up and standardize the manual underwriting of non- QM loans." The Fitch report also reveals that Angel Oak is in a high-growth mode in the non-QM space. "Through July 2021, AOMS [Angel Oak Mortgage Solutions] has originated $1.52 billion in non-QM loans and AOHL [Angel Oak Home Loans] has originated $260.88 million," the report states. "Angel Oak forecasts its origination volume for non-QM loans to be $400 million per month combined for both platforms." Hutchens is convinced that greater automation of the underwriting process for non-QM loans is achievable today, despite the extra loan-review challenges these anything-but-cookie-cutter mortgages pose. The hurdles include underwriting for interest-only or 40-year terms and making use of alternative documentation — like bank statements, assets or debt-service coverage ratio — to verify ability-to-repay. Hutchens said a potential, though unlikely, headwind that concerns him is if the current upward slope in interest rates reverses itself in the year ahead for some reason and rates begin to trend downward. He said the housing industry went from slightly more than $2 trillion in origination volume in 2019 to $4.5 trillion in 2020, driven largely by the impact of the pandemic and low interest rates. "So that was a headwind for non-QM, simply from a capacity standpoint," he explained. "Originators didn’t have time to do anything but refinance their prior customers. Their phones were ringing off the hook all year to refinance their prior business." Many market observers anticipate the Federal Reserve over the next several years to slowly bump up the benchmark interest rate, in part to stem inflation in a fast-growing economy but also to recharge its monetary-policy tool chest. Given that context, Hutchens said he is confident the tide has turned toward a non-QM lending expansion — one that can be assisted with technological innovation. "I’m not a forecaster of macro-economics," Hutchens said, "but I’m pretty optimistic that non-QM is well positioned for the next few years." The post Automation is coming to non-QM lending appeared first on HousingWire. |
| Freedom Mortgage cuts jobs in Fort Mill, SC office Posted: 14 Dec 2021 11:35 AM PST  Layoffs swept through Freedom Mortgage's Fort Mill, South Carolina office last Friday, sources familiar with the situation confirmed to HousingWire this week. The exact numbers have not been publicly disclosed, but laid off employees said it's in the hundreds. A manager at Freedom, who requested anonymity, told HousingWire that the sales side of the Fort Mill office was let go. The source also noted that some operations people also received pink slips last week. The layoffs are believed to have taken place in Roundpoint's headquarters—a subsidiary of Freedom. Freedom Mortgage, the top FHA and VA lender in America, did not respond to HousingWire's request for comment. Roundpoint, an originator, servicer and subservicer, was acquired by Freedom in 2020, but the initial courtship was not amicable. Roundpoint sued Freedom Mortgage after it tried to back out of the transaction in response to a credit facility Roundpoint took out in 2018. In response, Freedom countersued, resulting in the two companies voluntarily settling the matter. Earlier this year, Roundpoint announced the addition of a new leadership team. It installed Patrick McEnerney as CEO, Joseph Gormley as chief administrative officer, and Scott Bristol as executive vice president of retail lending. In statements to the press, the company spoke of its growth trajectory. McEnerney told the Charlotte Business Journal that Roundpoint was building out its retail mortgage operations with a particular focus on first-time homebuyers. It led to a rise in originations and refinancings, but some existing customers refinanced with other mortgage firms, he said. The company in April said it was planning to add 90 retail offices nationwide, with the South Carolina office providing corporate support. The news of the layoffs in Fort Mill comes amid rapidly thinning profit margins and a big decrease in refinancings. Industry insiders have been forecasting for months that a wave of layoffs will follow suit once the refi wave ends. Meanwhile, a Mortgage Bankers Association‘s finance forecast found that the share of refi activity in the market has dropped from 64% in 2020 to 59% in 2021. Furthermore, the trade association predicts that refis will continue plummeting in 2022, dropping to 33%. Thus far, Better.com and Interfirst Mortgage have gotten ample media attention after laying off hundreds of employees at their shops. The post Freedom Mortgage cuts jobs in Fort Mill, SC office appeared first on HousingWire. |
| Critical defects increase as refi market fades Posted: 13 Dec 2021 02:19 PM PST Mortgage lenders generated more defective loans in the second quarter, reflecting the transition from a refinance to a purchase market, according to ACES Quality Management's latest critical defect report. The critical defect rate climbed to 2.27% in the second quarter of 2021, ending the trend of improvement in the previous two quarters. In the most recent quarter, it was 2.01%, according to the report published on Tuesday. For the coming months, the expectation is that the rate may be volatile. The report is based on post-closing quality control data from around 100,000 unique records. Defects are categorized using the Fannie Mae loan defect taxonomy. Volpe mentioned volume stabilizations and declining unemployment numbers as silver linings in the second quarter findings. However, he cited the effect of inflation on interest rates as potentially dampening the outlook. The post Critical defects increase as refi market fades appeared first on HousingWire. |
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