Wednesday, January 26, 2022

Mortgage – HousingWire

Mortgage – HousingWire

FOMC indicates taper end in March, rate hike soon

Posted: 26 Jan 2022 12:33 PM PST

High inflation and a strong labor market has convinced Federal Reserve officials of the need to raise interest rates “soon,” though an exact timetable has not yet been disclosed.

"With inflation well above 2% and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate," the Federal Open Markets Committee said in a statement on Wednesday.  

The FOMC decided on Wednesday to keep the target range for the federal funds rate at 0 to 0.25%, but will likely take action on rates in early March.

Policymakers at the central bank said that beginning in mid-February, it will purchase $20 billion in Treasury securities and $10 billion in mortgage backed securities. The previous plan, from January, indicated purchases of $40 billion in Treasury and $20 billion for MBS. The asset tapering program is scheduled to end in early March.

For the mortgage industry, the announcements of a rate hike and the end of the pandemic-era asset purchasing policy signals heightened pressure on mortgage-backed securities and higher rates on loans in 2022.  Mortgage rates are already above 3.5% for a typical 30-year mortgage, and trade group the Mortgage Bankers Association has forecast mortgage rates to climb to 4% by the end of the year.

After raising interest rates, the FOMC agreed that it will reduce the size of the central bank's balance sheet over time in a predictable manner, primarily by adjusting the amounts reinvested of principal payments received from securities held in the System Open Market Account (SOMA).

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"In the longer run, the Committee intends to hold primarily Treasury securities in the SOMA, thereby minimizing the effect of Federal Reserve holdings on the allocation of credit across sectors of the economy," the FOMC said. 

Regarding the pandemic and the omicron variant, the FOMC said the "path of the economy continues to depend on the course of the virus," though it expressed optimism that economic conditions were improving.

In a note on Wednesday, Mortgage Bankers Association's senior vice president and chief economist Mike Fratantoni said that it’s worth watching how the Fed will reduce its $9 trillion balance sheet, which is expected to be quick and at a faster pace once it starts.  

"The principle that they would like to return to a balance sheet that is primarily Treasuries at some point hints at some additional pressure on MBS yields over the medium term," Fratantoni said in a statement. 

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UWM to credit borrowers up to $600 for their appraisal costs

Posted: 26 Jan 2022 12:02 PM PST

For the next two months, United Wholesale Mortgage (UWM) will credit borrowers up to $600 for their appraisal costs, the lender said in a statement Wednesday.

According to the Pontiac, Michigan-based lender, the credit will be available on all primary purchases, including jumbo mortgages. The offer will run from now until March 31.

Mat Ishbia, CEO of UWM, said in a statement that the move is meant to "jump-start purchase season" and that this offering will give independent mortgage brokers a significant edge with real estate agents and borrowers in a rising rate, purchase-focused environment.

"Partnering with an independent mortgage broker continues to be the best choice for real estate agents and consumers, and we're adding one more reason why with the no-cost appraisal," said Ishbia. "This tool will save homebuyers a lot of money and make the homebuying experience better for consumers and real estate agents alike."

In September 2021, the top-ranked wholesale lender announced that it would no longer require its brokers to use appraisal management companies to complete appraisals.

Instead, UWM said that it would offer appraisals in-house, contracting with appraisers directly, which would allow appraisers and brokers to bypass appraisal management companies.

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UWM’s Appraisal Direct program, which officially launched in October, oversees the entire appraisal process including scheduling, execution and delivery of the appraisal.  Appraisers are selected based on a scorecard to asses' geographic competencies and past performance, the wholesale lender said.

When the programs launched last year, UWM's chief strategy officer, Alex Elezaj, noted that the company decided to offer an alternative to AMCs as a result of complaints about bad service, slow turn times and overcharging appraisers.

Elezaj, who was once the CEO of Class Appraisal, said that in a pilot of the AMC-free option, the lender noticed a notable improvement in the time to complete appraisals, without compromising on the compliance that AMCs provide.

"If a broker has an opportunity to sell the loan to us or another lender, they choose us because of speed, technology and service, and they'll look at appraisals the same way," said Elezaj.

The post UWM to credit borrowers up to $600 for their appraisal costs appeared first on HousingWire.

Fintech startup Tomo breaks into jumbo mortgages

Posted: 26 Jan 2022 10:24 AM PST

Tomo, a fintech mortgage startup run by former Zillow executives, is expanding its presence, announcing this week that it will now serve borrowers in Florida, Connecticut and Colorado. And they’re looking to capitalize on higher home prices and the market for jumbo mortgages.

Founded in October 2020 by former Zillow executives Greg Schwartz and Carey Armstrong, the Connecticut-based company, first launched its platform in Seattle, Washington and Austin, Texas.

Schwartz in a statement said that this expansion "is proof that there’s tremendous appetite for what we've built – a digital experience, designed from the ground up to meet the needs of homebuyers today."

"The mortgage is the catastrophe of the real estate transaction," added Schwartz. "For too long, homebuyers have been forced to accept an outdated process that's painful, cumbersome and expensive.”

According to the company, jumbo loans will be available for both 15-and-30-year cycles. For qualifying buyers, loans can be distributed in amounts up to $3 million

Currently, the fintech's product portfolio includes conventional 15- and- 30-year fixed rate loans but the lender does not offer FHA or VA loans. Refinancing is also not an option.

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Last year, the company, which pegs itself as a disrupter of the mortgage market, had a $70 million seed round, one of the largest ever raised in the U.S., the fintech company said.

Ribbit Capital led the financing, which also included participation from partners of DST Global, NFX and Zigg Capital.

Meanwhile, in October 2020, Tomo picked up $40 million in a seed round led by the same investors.

Tomo noted that its purchase-only business operation stand in "stark contrast to the vast majority of lenders that cyclically chase the refinance market."

"Today, many of those mortgage originators find themselves scrambling to contend with new economic and operational realities as refinancings dry up," the company said in a statement.  Tomo does not do refinancings; it will only originate purchase mortgages, and it's specifically targeting areas with especially fast-rising home prices and high demand among millennials, who are generally disadvantaged in today's housing market. 

The digital mortgage lender advertises that it creates pre-approvals for its customer within hours, not days, charges no lender fees, and ensures on-time closings 100% of the time.

Tomo claims its platform is different from its competitors, which range from traditional mortgage companies and banks, all the way to power buyers and hybrid brokerages like Redfin.

Its digital mortgage product focuses on data, automation and third-party API integrations, and Tomo claims it will offer the lowest mortgage rates in the industry by matching competitors' rates. If an appraisal doesn't come in on time or closing documents don't make the deadline, Tomo executives say they will still close on schedule.

The post Fintech startup Tomo breaks into jumbo mortgages appeared first on HousingWire.

Rate pressure pushes down mortgage applications

Posted: 26 Jan 2022 04:00 AM PST

Mortgage applications fell 7.1% from the previous week, following an increase in rates to the highest level since the pandemic onset, according to the Mortgage Bankers Association (MBA) survey for the week ending Jan. 21.

The seasonally adjusted Refinance Index decreased 12.6% in the same period, with applications falling for the fourth straight week. Meanwhile, the Purchase Index declined 1.8%.

Compared to the same week one year ago, mortgage apps overall dropped 34.6%, with a sharp decline in refinance (-46.6%) compared to purchase (-8.5%).

According to Joel Kan, MBA's associate vice president of economic and industry forecasting, all mortgage rates continue to climb, but the 30-year fixed rate rose for the fifth consecutive week to its highest level since March 2020.

The trade group estimates that the average contract 30-year fixed-rate mortgage for conforming loans ($647,200 or less) increased from 3.64% to 3.72%. For jumbo mortgage loans (greater than $647,200), rates went to 3.56% from 3.54% the week prior.

"After almost two years of lower rates, there are not many borrowers left who have an incentive to refinance. Of those who are still in the market for a refinance, these higher rates are proving much less attractive to them," Kan said in a statement.

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Regarding purchases, he said that the decline was led by a 5% drop in government applications, compared to less than 1% drop in conventional loans applications.

"The relative weakness in government purchase activity continues to contribute to higher loan sizes. The average purchase loan size was $433,500, eclipsing the previous record of $418,500 set two weeks ago."

The refinance share of mortgage activity decreased to 55.5% of total applications last week, from 60.3% the previous week. The VA apps went from 10% to 9.9% in the same period.

The FHA share of total applications decreased from 9.3% to 8.6%. Meanwhile, the adjustable-rate mortgage share of activity increased from 3.8% of total applications to 4.4%. The USDA share of total applications went from 0.4% to 0.5%.

The post Rate pressure pushes down mortgage applications appeared first on HousingWire.

Opinion: Don’t shrink the GSEs’ market footprint 

Posted: 25 Jan 2022 03:45 PM PST

The Community Home Lenders Association (CHLA), which represents small and mid-sized IMBs, just sent a letter to the Federal Housing Finance Agency (FHFA), asking for tweaks to FHFA's recently announced fee hikes on second home and high balance Fannie Mae and Freddie Mac loans. CHLA asked FHFA for targeted adjustments to the fee hikes to protect middle income borrowers.

But a major part of the letter dealt with a broader issue that CHLA believes merits much more public and Congressional discussion than it is getting: What is the proper role of Fannie and Freddie and what authority should FHFA have or exercise to shrink the GSEs' market footprint?

With the implosion of the Private Label Securities (PLS) market after the subprime fiasco in 2008, Fannie Mae and Freddie Mac (along with FHA) have assumed an increasing market share of the origination of 30-year fixed rate mortgages. In response, both competitors of the GSEs and individuals who want to shrink the government's role in mortgage markets have argued that FHFA should take actions specifically designed to shrink the GSEs' footprint. The argument is that "private markets" should have more mortgage market share.

The PSPA caps from a year ago January on loans to underserved borrowers, on investor and second home loans, and on small lender access to the cash window appear to have been designed for precisely that purpose. Fortunately, Acting Director Sandra Thompson suspended those artificial caps last September.

CHLA strongly opposed the PSPA caps. And, in our recent FHFA fee hike letter, CHLA argues that it is never appropriate for the FHFA to take actions whose main objective or impact is to arbitrarily shrink the GSEs' footprint. The GSEs' statutory charter directs them to serve the entire mortgage market, including low and moderate income borrowers and underserved communities. 

The statute also identifies what loans the GSEs cannot make, such as loans over certain dollar amount and commercial loans. It does not envision FHFA making these sorts of decisions.

In our letter, CHLA noted that we are never happy with GSE fee hikes, but are open to them if they are part of a larger strategy to keep fees down on core GSE loans and loans to underserved borrowers. But we also laid out a strong case against arbitrarily shrinking the GSEs' footprint.

Let's unpack the argument that the GSEs' footprint should shrink in order to facilitate more "private market" loans. Are these proponents referring to banks? This seems ludicrous. Banks should not assume the significant interest rate risk inherent in 30-year fixed rate loans because of the possible interest rate mismatch with deposits, a phenomenon that sunk countless banks and S&Ls in the 1980s.

Fortunately, banks protect against that interest rate risk through Federal Home Loan Bank (FHLB) advances and access to the Fed discount window. Great – but proponents should not argue that this is the "private market" or that taxpayers aren't on the hook. The FHLB is just as much a GSE as Fannie and Freddie. And the Federal Reserve may not technically be the federal government – but their assistance is hardly the free market.

The other main option for 30-year mortgages is the PLS market. Thirteen years after the subprime crisis, this market is still struggling to find its footing. The simple truth is that the PLS market serves certain areas reasonably well — like low LTV loans and high-income borrowers. But it is not clear if it can ever adequately serve the key mortgage functions of providing affordable higher LTV loans to first-time homebuyers and underserved borrowers.

So, beware when people starting using terms like "private market" and "shrinking the government footprint." In practice, the main impact of actions to accomplish those objectives is to diminish access to mortgage credit for minorities, underserved borrowers, and first-time homebuyers. At a time of rising prices and a generation of younger families at risk of being shut out of homeownership, this would be precisely the wrong approach.

CHLA thinks Thompson is getting this just about right — suspension of the PSPA caps and pricing policies which focus on core, underserved, and minority borrowers.

Unfortunately, we expect the push to arbitrarily shrink Fannie and Freddie under the guise of "private market" rhetoric to continue, if not accelerate. 

So, CHLA is calling on Congress, FHFA and policy holders to thoroughly debate this issue. And we urge policy makers to come down in the end on the side of reaffirming the statutory responsibility of Fannie Mae and Freddie Mac to serve all of the nation's mortgage markets. At a time of rising home prices and a generation of younger Americans at risk of being locked out of homeownership, this imperative is more critical than ever.

Scott Olson is the Executive Director of the Community Home Lenders Association (CHLA).

This column does not necessarily reflect the opinion of HousingWire's editorial department and its owners.

To contact the author of this story:
Scott Olson at scottolson@communitylender.org

To contact the editor responsible for this story:
Sarah Wheeler at swheeler@housingwire.com

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Mortgage – HousingWire

Mortgage – HousingWi...