Tuesday, May 10, 2022

Mortgage – HousingWire

Mortgage – HousingWire

loanDepot reports loss of $91.3M in Q1

Posted: 10 May 2022 11:56 AM PDT

Nonbank heavyweight loanDepot reported an unprofitable quarter largely due to a steep decline in origination volume and expense reductions that did not keep up with the rapidly changing environment. The firm said it doesn't expect to have a profitable fiscal year, citing pressures on margins and lower market volume. 

The California-based company reported a net loss of $91.3 million in the first quarter, compared to a net income of $14.7 million from the previous quarter. A year ago, loanDepot made $427.9 million in profit.

"The increase in mortgage rates during the quarter happened much more quickly and sharply than anyone anticipated when the quarter began and resulted in significant and rapid decreases in profit margins," said Anthony Hsieh, loanDepot's founder and executive chairman, to analysts. 

Hsieh noted the environment of shrinking market size and surging mortgage rates "may turn out to be one of the most challenging" that the industry experienced, which were reflected in the firm's first-quarter earnings. 

The decrease in rate lock volume and gain on sale margin were responsible for the massive quarter-over-quarter decline, according to loanDepot. 

Rate lock volume in the first three months of 2022 dropped 13.7% to $30 billion from $34.8 billion in the previous quarter. Gain-on-sale margin was down to 1.96% in the first quarter from 2.23% in the previous quarter.

Loan origination volume dropped 26% to $21.6 billion from the previous quarter, bringing the company's market share down to 3.1%. 

The firm's total expenses in the first quarter of 2022 fell 13% to $606.3 million from the previous quarter. Year over year, expenses dropped 30% from $869.9 million from the same period in 2021.

"We are aggressively managing our cost structure to return to profitability by the end of the year," said Patrick Flanagan, loanDepot's chief financial officer. "We expect to achieve this goal by further reducing marketing expenses and personnel expenses through the addition of headcount reductions," Flanagan added without offering details of potential layoffs.  

In April, former chief executive officer of CoreLogic Frank Martell was appointed as loanDepot's new president and CEO, a newly created role within the firm. Hsieh, founder and the firm's main shareholder, is now the executive chairman and no longer leads daily operations.

While loanDepot doesn't expect to be profitable this year, the firm plans to generate more purchase volume, hedge its servicing portfolio, and add new products and services. 

The unpaid principal balance of the servicing portfolio dropped to $153 billion as of the first quarter this year from $162 billion in the last quarter 2021. While loanDepot reported a net loss of $68.4 million on the change in the fair value of its servicing rights in the first three months of this year, the figure is an improvement from the previous quarter when the firm reported a $118.7 million net loss on the value of its servicing rights. 

The multichannel lender's cash-out refinance and purchase volume rose to 83% of total production in the first quarter of 2022 from 75% in the last three months of 2021. 

loanDepot announced in January that it is bringing the servicing of the Federal Housing Administration, Department of Veterans' Affairs, and United States Department of Agriculture-funded Ginnie Mae loans in-house. The move leverages "ongoing investment in the firm's servicing platform, allowing the company to scale for operational efficiency and enhanced customer service," loanDepot said at the time of launch. 

The company also aims to capitalize on its new home equity line of credit [HELOC] product, which it plans to roll out in the third quarter of this year. The first offering of a mello business unit, which launched in 2017 and operates side-by-side with loanDepot's mortgage origination and servicing division, will be a digital-first product where consumers can apply for and get approved in as few as seven days. 

The lender expects loan origination volume to post between $13 billion and $18 billion in the second quarter of this year. A pull-through weighted rate lock volume was forecast between $12 billion and $22 billion dollars, reflecting the recent increase in interest rates weighing on demand. 

loanDepot shares tumbled to a 52-week low of $2 per share on Tuesday morning, dropping more than 25% since market close on Monday. The firm went public in 2021 at $14 a share.

The post loanDepot reports loss of $91.3M in Q1 appeared first on HousingWire.

Risk of mortgage fraud is on the rise in the current market

Posted: 10 May 2022 10:34 AM PDT

HW+ hiring

Eric Hill, an Atlanta real estate agent representing a nationwide homebuilder, had a plan to help more than 100 homebuyers get mortgages. The problem: They did not qualify for the loans. 

Hill's scheme, also enabled by a group of co-conspirators, caught up with him, in part because many of the loans started going south. In the end, some $850,000 in claims had to be paid on defaulted government-backed mortgages insured by the Federal Housing Administration (FHA). 

Hill instructed the homebuyers on how to game the system by submitting fraudulent asset, income and employment information on loan applications. He later found himself the target of a federal investigation that alleged the criminal conspiracy he engaged in resulted in more than $21 million in fraudulent mortgage loans being originated, many insured by the FHA. 

Hill also was accused of defrauding his employer out of $480,000 in sales commissions. 

"Eric Hill engaged in premeditated criminal acts with the sole purpose of enriching himself, without regard for millions of American homebuyers who rely on federal housing programs to insure their mortgages," Wyatt Achord, special agent in charge with the Department of Housing and Urban Development (HUD) Office of Inspector General, said in a U.S. Department of Justice (DOJ) statement released on the case. "His fraudulent actions strike not only at the fiscal integrity of the FHA, but also our neighbors and communities who are victims of these schemes." 

Hill, 52, and nearly a dozen co-conspirators, eventually were convicted and sentenced for their crimes. In Hill's case, he was sentenced this past January to two-and-a-half years in federal prison to be followed by three years of supervised release. 

The Hill case is not a common occurrence in the world of housing finance, but it is far from rare. As the housing market enters a purchase-market cycle sparked by rising mortgage rates that have killed off a long-running refinance boom, we can expect to see mortgage-fraud schemes proliferate, industry experts say.

"The main drivers of the increase in fraud risk are the lower volumes of rate-term refinances and higher share of mortgages for the purchase of a home," wrote Molly Boesel, an economist with CoreLogic, in an article summarizing the findings of the firm's annual Mortgage Fraud Report. "Purchase transactions have higher fraud risk than refinances. 

"In a purchase, there are more parties involved, more commissions, and more motives to 'make the deal work.'" 

According to Boesel, CoreLogic estimates that the current overall mortgage-application fraud rate is at about 1 in 120 loans. For purchase-only loans, that ratio tightens to 1 in 90 loans. "It becomes a more concerning 1 in 23 if we only look at investment [property] purchases," she added.

The extent of the mortgage-fraud problem and its national reach can be gleaned from DOJ press releases gathered from across the country. A website tracking some of those cases, the Mortgage Fraud Blog, highlights 10 federal cases from March, April and early May. All were winding their way through the federal court system — with defendants facing Indictments, arraignments, plea hearings or sentencing for mortgage-related fraud. 

Following are some of the DOJ presser headlines for those cases and links to the official releases describing the charges.

CoreLogic's most recent quarterly fraud report showed that its Application Fraud Risk Index jumped by 10.4% in the fourth quarter of 2021, compared to the prior quarter — from 125 to 138. Year over year as of Q4 of last year, the index was up 26.7% — from 109 in Q4 2020.

Rising rates slowed the rate-term refinance train in the fourth quarter of last year, according to the CoreLogic report, moving the market toward purchase loans — and increased mortgage-fraud risks. 

In fact, rate locks for rate-and-term refinances were down 89.2% year over year as of April and 36.4% month over month. Likewise, cash-out refinance rate locks were down 31.1% over the month of April and 51.7% from a year earlier, according to a recent report by Mortgage Capital Trading Inc. Purchase rate locks, by contrast, were up 2.2% month over month in April and 7.55% from a year earlier.

The 10 major metro areas where fraud risk was highest as of the fourth quarter of 2021, according to the CoreLogic report, were Las Vegas; San Jose, California; Miami/Fort Lauderdale; Los Angeles; New York/Newark; San Francisco/Oakland; New Orleans; San Diego; Austin, Texas; and Tampa/St. Petersburg.

Scott McNulla, a senior director overseeing regulatory compliance at loan due-diligence firm SitusAMC, said one way to guard against or spot red flags in the mortgage origination and/or securitization pipeline that can cause problems down the road is to ensure the loan-input data is correct from the start.

"I think as people shift to try to maintain their volume, it’s going to be important that they document their files well," he said. "Having well-documented files is going to be key, especially as people look to sell to different entities with different guidelines and different overlays that will require additional scrutiny."

Another source of data and a good indicator for mortgage fraud are the Suspicious Activity Reports (SARs) that financial institutions must file with federal regulators to comply with the Bank Secrecy Act when they suspect criminal activity might be occurring, such as money laundering or other fraud. The U.S. Treasury Department's Financial Crimes Enforcement Network, or FinCEN, tracks those filings and publishes the aggregate findings on its website.

A tally of FinCEN's SARs data collected between 2014 and 2021 shows that total filings have generally trended upward since 2014 across depository institutions (banks); finance companies, which includes nonbank mortgage lenders; and the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. 

In the specific area of mortgage fraud, however, SARs filings have trended downward at depository institutions, from a high of 35,258 filings in 2014 to 8,805 filings in 2021. The decrease in filings coincides with the rise of nonbanks as a major source of originations in the country.

"The nonbank share for agency [mortgage] originations has been rising steadily since 2013, standing at 75.1 percent in February 2022," a March report by the Urban Institute's Housing Finance Policy Center states.

There were 1,150 SARs filings lodged in 2015 related to potential mortgage fraud involving the GSEs, according to the FinCEN data, and last year that number stood at 5,042. For finance companies, mortgage-related SARs filings increased from 963 to 15,805 over that period. (The data for the GSEs and finance companies for 2014 represents only a partial-year reporting, so it was not used for comparison.)

It's important to note that SARs filings related to mortgage fraud are only indicators of potential criminal activity, not proof positive. In addition, the filing trends are a byproduct of the strengthening, increased awareness and broader enforcement of anti-fraud laws in the years since the 2007-2008 housing market crisis. 

Following is a breakdown of SARs filings by institutional category for 2021, compared with 2020. Some SAR filings may list multiple suspicious activities.

Depository Institutions – Banks 
SARs Filings Related to Mortgage Fraud
2020: 11,349
2021: 8,805
Down: 22%

GSEs
SARs Filings Related to Mortgage Fraud
2020: 3,343
2021: 5,042
Up 51%

Loan or Finance Cos. – includes nonbanks
SARs Filings Related to Mortgage Fraud
2020: 10,766
2021: 15,805
Up 47%

An FBI backgrounder on mortgage fraud explains that it "is crime characterized by some type of material misstatement, misrepresentation or omission in relation to a mortgage loan, which is then relied upon by a lender."  

"A lie that influences a bank's decision — about whether, for example, to approve a loan, accept a reduced payoff amount or agree to certain repayment terms — is mortgage fraud," the law enforcement agency's overview states. "The FBI and other entities charged with investigating mortgage fraud, particularly in the wake of the housing-market collapse, have broadened the definition to include frauds targeting distressed homeowners."

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United Wholesale Mortgage Q1 profits up 89% despite lower production

Posted: 10 May 2022 09:18 AM PDT

The nation's largest wholesale lender, United Wholesale Mortgage (UWM), in the first quarter of 2022 posted an increase in margins and profits over the prior quarter, increasing its purchase volumes to record levels.

But the Pontiac, Michigan-based lender's total loan production fell during the same period, reflecting a shrinking mortgage market. 

The company on Tuesday reported $453.2 million in profits from January to March, up 89% from $239.8 million registered in the fourth quarter of 2021. Compared to the first quarter of 2021, however, profits fell 47.3%.

First quarter earnings were buoyed by a $172 million increase in the fair value of mortgage servicing rights (MSRs). UWM had $303.4 billion in the unpaid principal balance of MSRs as of March 31, 2022 compared to $221 billion exactly a year earlier.

"Our servicing book is strong. We make money there too. But we're not dependent on fair value," said Mat Ishbia, chairman and CEO of UWM, during a call with analysts. "The broker channel continues to grow: 35,000 unique loan officers submitted loans to UWM in 2021, and we think we will have more unique loan officers submitting to us in 2022."

According to its earnings report, UWM originated $38.8 billion in mortgage loans in the first quarter of 2022, a 29.7% decrease compared to the previous quarter and a 20.8% decline year-over-year.

Purchase loans grew from 24.9% of the total origination volume in Q1 2021 to 49% in Q1 2022 to $19.1 billion, the lender said. Gain-on-sale margins increased to 0.99%, compared to 0.80% in the fourth quarter of 2021 and 2.19% in the first quarter of 2021.

"We control our margins; we are not reactive to the market," Ishbia said. "Purchase market is a lot less rate-sensitive, so we feel strong about our position right now." 

Speaking for the company, Ishbia said: “We feel really good about putting pressure on some competitors." That was evident during the company’s most recent initiative in early May, when UWM announced it will price-match loans up to 40 basis points with that of 20 different competitors. 

UWM forecasts loan production between $26 billion and $33 billion for the second quarter. Meanwhile, gain-on-sale margins are expected to be between 0.75% and 0.90%. 

During the conference call with Ishbia, analysts raised concerns about costs in a landscape defined by less origination volume. Unlike many competitors, UWM is not aggressively cutting costs by laying off employees.

Total expenses went from $316.9 million in Q1 2021 to $364.4 million in Q1 2022, with a significant increase in servicing, general and administrative and direct loan production costs. Salaries, commissions and benefits reached $160.6 million, which Ishbia considered a "solid" number. 

"It's very important that we continue to manage our expenses. We have complete control of this, and we feel great about where we're at," Ishbia said. 

As of 12:10 p.m. EST Tuesday, UWM's stock was trading at $43.59 a share, up 3.3% from the previous day.

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Finance of America reports a $64M loss in Q1

Posted: 09 May 2022 03:27 PM PDT

Fast-rising interest rates hit Finance of America Companies hard in the first quarter of 2022 and the company cut almost 600 jobs between March 2021 and March 2022.

Like many of its competitors, the lender reported that its traditional mortgage business saw reduced originations and margins from January to March, mainly due to a drop-off in refinance volumes and an increase in spreads on non-agency mortgage products, which resulted in a reduction in revenues.

The lender’s traditional mortgage business reached $5.1 billion in funded volume in the first quarter, down 26% quarter over quarter and 39% year over year. Meanwhile, gain-on-sale margins declined from 3.41% in Q1 2021 to 2.52% in Q4 2021 and then to 2.11% in Q1 2022.

“The devastating war in Ukraine and rapidly rising inflation resulted in the fastest increase in interest rates in decades,” said Patti Cook, FoA’s CEO, to analysts. “We don’t expect interest rates to return to the level we’ve seen earlier in the year.”

The executive said refinance, as a percentage of overall volumes in the company, reached 45% in the first quarter, still not reflecting the roughly 50 basis point increase in rates during March. As a result, the lender expects the percentage to be much lower in the second quarter.

To manage the business during the storm, FoA has reduced its headcount. The company cut 598 jobs onshore and offshore between March 2021 and March 2022. According to Cook, the company will keep the headcount aligned with the volume of business.

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The executive mentioned that recently the company consolidated the wholesale channels in mortgage and commercial businesses to bring efficiency and enhance cross-sell. The direct-to-consumer channels also were reduced in one operation to lower fixed and variable costs. In early February, the company announced that Cook will retire as soon as the company finds a successor. Cook will remain on the board of directors until the annual meeting of stockholders.

On the positive side, FoA is diversifying its portfolio, increasing the share of non-agency products, which grew to 22% of the overall mortgage volumes in the first quarter, from 18% in the previous quarter. Also, purchase loan origination grew 4% quarter over quarter.

The company is diversifying beyond traditional mortgage products, with the best performance in reverse originations for the quarter. The product’s funded volume increased from $1.32 billion in Q4 2021 to $1.47 billion in Q1 2022, up 12%. Compared to the same period in 2021, when the volume was $769 million, it increased 92%.

Commercial originations increased 68% year-over-year, to $573 million, but declined 1% quarter over quarter.

“Our reverse and commercial originations businesses faced pressures in the first quarter as rates and spreads rose at the fastest pace in decades; however, the pipeline for reverse and commercial originations continues to be strong,” said Cook. “Our reverse pipeline has never been bigger, driven by strong home price appreciation over the past couple of years.”

In total, FoA funded $7.1 billion in the first quarter of 2022, considering traditional and nontraditional mortgage products, down 19% quarter over quarter and 25% year over year. 

On paper, FoA posted a $64 million loss from January to March, improving from a $1.33 billion loss in the previous quarter. However, in the first quarter of 2021, the company had a $124 million profit.

The company said the spreads on triple-A mortgage-backed securities (MBS) widened by 50 basis points in March. As a result, FoA recorded substantial negative fair value marks against revenue. 

“Credit spreads widened on most financial assets, as investors proceeded to increase risk in the market,” said Cook to analysts. “While we are hedged against rising interest rates, we cannot efficiently hedge our balance sheet against widened spreads.”

For the second quarter, the company forecasts total revenue for the traditional mortgage business to be between $125 million and $145 million, with an adjusted net income margin between 0-2%. Meanwhile, for the specialty finance and services, the company forecasts $195 million to $215 million in revenues and a 12%-14% margin.

Finance of America shares closed at $2.46 on Monday, down 1.20% from the previous close.

In April 2021, the company made its public debut by merging with the special purpose acquisition company Replay Acquisition Company valued at $1.9 billion. It began trading at $10 a share. On Monday, its market value was $153 million. 

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Mortgage rate locks tumble amid sharp rate rise

Posted: 09 May 2022 01:21 PM PDT

Fewer buyers rushed to lock mortgages last month amid a rapid climb in long-term mortgage rates, reflecting home affordability concerns, reports from Mortgage Capital Trading and Black Knight showed. 

Total mortgage rate locks by dollar volume were down 5% in April from the previous month, according to MCT's monthly Mortgage Lock Volume Indices report. Compared with the same period last year, the number of rate locks by mortgage volume was down 25.4%. 

The average 30-year conforming mortgage rate climbed to 5.27% last week, marking the highest average since 2009, according to Freddie Mac PMMS. Black Knight’s Optimal Blue OBMMI pricing engine, which considers refinancings and additional data from the Mortgage Bankers Association, finished the month of April at 5.42%.

Refinancing has seen the biggest impact of the rising-rate pressure. Rate locks for rate-and-term refinances, which is driven primarily by a drop in interest rates to lower monthly mortgage payments, were down 36.4% in April from the previous month. Compared with April 2021, rate-and-term refinances were down 89.2%. 

Cash-out refinance activity, in contrast, is led by increasing home values by homeowners seeking to tap into their home equity. In April, cash-out refinance rate locks were down 31.1% from March and slumped 51.7% from a year earlier.

Black Knight's monthly originations market monitor report showed a similar downward trend of mortgage rate locks. Rate lock production volume activity was down 20.3% month over month, driven by a 50% drop in rate-term-refinance lending activity.

Cash-out refi locks dipped 40% in April as homeowners likely sought other products including Home Equity Line of Credits [HELOCs] or second linens, to access tappable equity without sacrificing historically low first-lien mortgage rates, which were secured with real estate as collateral.

In a traditional home equity product, the lender disburses a lump sum of cash upfront to the buyer, who then pays the loan back in fixed-rate payments. A HELOC, by contrast, is a revolving line of credit that allows borrowing as needed, with a variable interest rate. 

April's decline in rate lock activity is "hardly surprising," said Scott Happ, president at Optimal Blue, citing half of all mortgage holders holding current first lien rates below 3.5%. The combined decline in refinance locks pushed the refi share of the market down to 20% last month, marking the lowest point on record since at least January 2018, when Optimal Blue began tracking the metric. 

"That being said, while purchase locks were down somewhat from March, they remained flat from last April, reflecting consistent and resilient demand from homebuyers," Happ said in a statement. 

Purchase rate locks measured by MCT, however, were up 2.2% month over month in April and 7.55% from a year earlier, "a bright spot even as mortgage rates have increased rapidly in 2022.”

MCT, founded in 2001, launched its first monthly mortgage lock volume report on Monday. The indices are based on the actual dollar volume of locked loans, not the numbers of applications. 

"Especially in a tight purchase market. Applications are a less reliable metric for the mortgage industry as there is a higher likelihood of having multiple applications per funded loan,” the MCT report noted. 

Black Knight’s monthly market monitor reports provide origination metrics for the U.S. and the top 20 metropolitan statistical areas by share of total origination volume. The New York-Newark-Jersey City regions had the highest rate lock volume at 4.1% in April. The Los Angeles-Long Beach-Anaheim regions had the second-highest lock volume rate (3.9%) trailed by the Washington-Arlington-Alexandria (3.8%) region. 

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FHA gives investors cold shoulder on foreclosed properties

Posted: 09 May 2022 01:05 PM PDT

The Federal Housing Administration said that nonprofit organizations and owner-occupant buyers will have first dibs on foreclosed properties that get auctioned off through its Claims Without Conveyance of Title (CWCOT) program, specifically prioritizing these groups over investors.

For the first 30 days, a foreclosed property listed for sale can only be bid on by owner-occupant buyers, approved nonprofits, and government entities, the FHA announced last week. The administration added that these buyers would also enjoy an additional 60 days for conveyance from the date that the sales contract is ratified.

The FHA noted last Thursday that these changes — first announced by the Biden-Harris administration last year — will increase the supply of single-family homes available to families. Typically, FHA-insured foreclosed properties are snatched up by large investors and turned into rental properties.

The changes are effective immediately, but these provisions must be implemented for all post-foreclosure sales by early August (90 days from the date of the administration’s announcement).

Lopa Kolluri, principal deputy assistant secretary for housing, said in a statement that establishing exclusive listings for targeted buyers “is critical” in helping families achieve homeownership.

"This policy change is critical as the nation continues to address the challenges of a real estate market in which home prices are high and the availability of affordable housing supply is low, making it difficult for individuals and families to achieve the dream of homeownership,” Kolluri said.

In September 2021, the Department of Housing and Urban Development , said that it hopes to ensure that at least 50% of these properties will be purchased by governmental entities, non-profits, and owner-occupant buyers.  

A post-foreclosure sale is a last-ditch effort for a lender to sell an FHA-insured foreclosed property to an independent third-party prior to conveying the property to the HUD. If sold to a third party, the HUD pays insurance benefits for losses to the lender.

Potential buyers are not privy to information about the condition of these properties prior to purchase. The administration said that the properties are sold in an "as is" condition and may include defects, possible health or safety hazards, or debris, or be located in a flood hazard area.

The program was designed to expedite the disposition of foreclosed-on properties and reduce the amount of time a property sits vacant. The FHA said the program is beneficial to lenders and the department because it reduces costs for both.

In the past couple of weeks, the administration announced a flurry of additional changes that will impact lenders and borrowers in the near future.

In mid- April, the FHA told mortgage servicers that they can now offer a 40-year loan term as a COVID-19 recovery option. For now, only borrowers financially impacted by the pandemic can opt for this loss mitigation option, and it may only be used in combination with a partial claim option. However, the administration is moving to make it a permanent fixture in its loss-mitigation handbook.

In early April, the FHA initiated a rule-making process to allow all borrowers with FHA-insured loans, regardless of whether they were financially impacted by the pandemic, to opt for a 40-year loan modification, if necessary.

The proposed rule would change repayment provisions for FHA borrowers, allowing lenders to recast a borrower's total unpaid loan for an additional 120 months. HUD said that the implementation of such an option could prevent "several thousand borrowers a year from foreclosure."

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Title insurance industry premiums spike $7B year over year

Posted: 09 May 2022 12:06 PM PDT

The American Land Title Association saw a nearly 36% year-over-year increase in title insurance premium volume in 2021 for a staggering $7 billion spike, according to the trade group's Market Share Analysis, published Friday.

The title insurance industry generated $26.2 billion in premiums last year compared to $19.2 billion in 2020, an increase that ALTA attributed to historic mortgage origination activity and the substantial increase in home values. Despite such explosive increases during those years, the focus in early 2022 seems to be how long it will last and to what extent title insurance premiums might normalize under radically changing economic conditions.

"Incredibly low mortgage rates (led) to an unprecedented increase in real estate transactions and substantially higher home values," Diane Tomb, the CEO of ALTA said in a statement. "Those factors — caused in part by the unique circumstances of the COVID-19 pandemic — contributed to the record title insurance premium volume, which the title industry won't see again soon. The majority of title professionals were busier in 2021 than they ever have been."

The five states with the largest year-over-year increases in title premium volume in 2021 were Florida (52.1%), New York (42.8%), Pennsylvania (42.2%), Texas (39.5%) and California (24.6%). The same five states held the top spots during the third quarter of 2021.

Of those top states, Texas generated the largest volume of title premiums, with more than $3.5 billion.

Total operating income for the industry was up 33.4% in the third quarter compared to a year prior, though operating expenses were also up 32%. Loss and loss adjustment expenses were up 2.3% year-over-year. Overall, title underwriters paid out almost $475 million in claims for the year.

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Top underwriters by market share for the year included First American Title insurance Co., with 20.5%; Old Republic National Title Insurance Co., with 14.8%; Chicago Title Insurance Co., with 14%; Fidelity National Title Insurance, with 13.5%; and Stewart Title Guaranty Co., with 8.9%.

However, it should be noted that Chicago Title is part of Fidelity. And with almost 34% of the market, it ended 2020 as the largest company by share of premiums written.

Also at the close of 2020, First American's market share was 23.3%, while Old Republic's was 15% and Stewart's was 9.6%. Stewart — which finished 2021 on a bit of an acquisition spree —has been looking to reclaim some of the title premium it lost in recent years. As recently as 2019, Stewart's market share was 10.62%.

Rounding out the top 10 for 2021, Westcor Land Title Insurance Co. maintained 5.9% of the market, good for sixth place. Commonwealth Land Title Insurance Co. had 4.1% of the market share, WFG National Title Insurance Co. had 2.8%, Title Resources Guaranty Co. had 2.4% and Doma Title Insurance Co., helmed by Max Simkoff, held 1.9%.

This is an impressive feat as Simkoff’s company has thus far failed to report a profitable quarter.

Although the "Big Four" still command the overwhelming majority of the market with a combined market share of 71.1%, their collective grip could be slipping. In 2019, independent title underwriters such as Westcor, WFG and others, had a combined market share just shy of 15%.

According to ALTA, the cost of title insurance coverage has decreased 7% since 2004, meaning for each dollar of premium a consumer purchases, they get an extra $26 in coverage, comparatively. 

There’s no denying 2021 was a strong year for title insurers and underwriters. But as housing inventory remains scant, refinance volume continues its steady decline due to rising mortgage rates and prices continue to soar, pricing additional homebuyers out of the market, it’s safe to say the title industry faces an uphill battle in 2022.  

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First-time homebuyers feeling squeezed out of the market

Posted: 09 May 2022 11:01 AM PDT

Budget-tightening constraints of inflation, higher mortgage rates, and housing price gains are constraining consumers from buying houses. Fannie Mae‘s Home Purchase Sentiment Index, which tracks the housing market and consumer confidence to sell or buy a home, dropped by 4.7 points to 68.5 in April, marking the lowest level since May 2020. Compared with the same period in 2021, the HPSI is down 10.5 points.

All six of the index’s components, which ask consumers whether it's a good time to buy, sell, and in what direction mortgage rates will move, decreased from last month. A survey-high of 76% of consumers believe it’s a bad time to buy a home. About 73% of the survey respondents expect mortgage rates to climb over the next 12 months, also marking a survey-high.

"The current lack of entry-level supply and the rapid uptick in mortgage rates appear to be adversely impacting potential first-time homebuyers in particular, evidenced by the larger share of younger correspondents aged 18 to 34 reporting that it's a 'bad time to buy a home,' Doug Duncan, senior vice president of Fannie Mae, said in a statement. 

The benefit of the historically low mortgage rate environment appears to have diminished and affordability is poised to become an even greater constraint going forward, Duncan added. 

Mortgage rates, following the Federal Reserve's inflation-fighting monetary policy, surged to 5.27% as of May 5, the highest average since 2009, according to Freddie Mac‘s PMMS. The Fed raised the interest rate by a half percentage point on Wednesday and signaled further hikes in efforts to cool inflation and the overheated housing market. Higher mortgage costs may push out prospective homebuyers and ease competition for a scarce supply of home listings.

While less people were worried about losing their jobs, more households expected their income to drop in April. About 84% of those surveyed said they are not concerned about losing their job in the next 12 months, a drop from 86% in March. About 26% of the respondents said their income is significantly higher than it was 12 months ago, a decrease from 29% month over month. 

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The Fannie Mae Economic and Strategic Research Group in a separate commentary said the Fed’s aggressive monetary policy tightening through 2023 will likely slow housing activity. In April, the ESR Group said home sales, house prices, and mortgage volumes are expected to cool over the next two years. 

“If mortgage rates remain relatively elevated, we expect the added affordability constraint to price out some would-be first-time homebuyers and contribute to the slowing of demand,” Duncan said in a statement. 

The ESR Group noted factors including strong mortgage credit quality and a far less-leveraged residential real estate and mortgage finance system are what sets apart the projected downturn from resembling the severity of the duration of the Great Recession. 

The post First-time homebuyers feeling squeezed out of the market appeared first on HousingWire.

Guaranteed Rate’s Owning continues layoffs

Posted: 09 May 2022 10:08 AM PDT

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California-based Owning Corp., a direct-to-consumer mortgage lender acquired by Guaranteed Rate in February 2021, is planning a workforce reduction amid higher mortgage rates and lower refinance volumes.

According to a Worker Adjustment and Retraining Notification (WARN) notice submitted to the Employment Development Department (EDD) in California, the company cut 108 jobs in three rounds from February to April but intends to add 81 to the list.

"A total of 189 individuals have and will be impacted," wrote Tammy Jetton, executive vice president of human resources at Guaranteed Rate, in a letter to EDD on April 18 reviewed by HousingWire. Affected employees will receive 60 days of equivalent pay and benefits.

The layoffs affect mainly mortgage consultants, specialists, and assistants, but it targets underwriting and closing professionals. The list includes top executives, such as lending directors and vice presidents for credit and underwriting.  

HousingWire sent a message seeking comment to Guaranteed Rate, which was not returned.

Founded in 2001 in Chicago, Guaranteed Rate picked up Owning to further accelerate expansion in the direct-to-consumer segment, said the lender's president and CEO Victor Ciardelli during the deal announcement.

Owning's platform processed more than $20 billion in total loan volume in 2020. It specializes in low-rate mortgage refinances, in which it originates a loan with no closing costs, including appraisal, credit report, escrow and title.

Guaranteed Rate is ranked No. 7 among the biggest lenders in the U.S., according to Inside Mortgage Finance (IMF). The lender's origination volume reached $17 billion in the first quarter of 2022, down 25.8% quarter over quarter and 48% year over year.

Surging mortgage rates are reducing margins and volumes. In this context, Owning is the second company acquired by Guaranteed Rate in 2021 to face layoffs in the challenging mortgage market this year.

Early in January, Texas-based Stearns Lending, acquired in January 2021 from the financial giant Blackstone Group for an undisclosed sum, laid off 348 workers following the decision by Guaranteed Rate to discontinue operations of its third-party wholesale channel. 

Stearns, founded in 1989, had a sizable partnership business, led by Steve Stein, a more limited retail operation, and a wholesale channel that was the largest in the industry as recently as 2013 but has lost market share to UWM.

But Guaranteed Rate now has a "laser focus" on leveraging its purchase platform augmented by the lender's top officers, said Ciaderlli in an email to brokers announcing the closing of Stearns.

He added that to ensure success, the company "sometimes makes hard decisions," according to the email reviewed by HousingWire.

Guaranteed Rate is just the latest lender to face layoffs, following others such as Interfirst, Mr. Cooper, Union Home Mortgage, Flagstar, Wells Fargo and Better. Rocket has not laid off workers but has offered a voluntary buyout to some of its staff.

The post Guaranteed Rate’s Owning continues layoffs appeared first on HousingWire.

CoreLogic: Jump in home-purchase closing costs outpaces refi loans

Posted: 09 May 2022 05:00 AM PDT

Closing costs for homeowners who jumped on the refi wave in 2021 increased at less than one-third the pace of closing costs for home purchases as homebuyers had to cope with a hot market that fueled higher home-sale prices and related settlement costs.

The national average closing costs for a single-family property refinance in 2021 was $2,375, up $88, or 3.8%, from the previous year, according to CoreLogic‘s ClosingCorp. While refinance closing costs increased marginally, the bump was still less than 1% of the average refinance loan amount of $304,909 and below the national inflation rate of 7% in 2021, the report said. 

Closing fees for nearly 5 million single-family refinances in 2021 were analyzed for the study, according to the tech vendor. 

"Much of the cost control can be attributed to growing use of technology solutions by both lenders and settlement-services providers, which enabled the industry to scale up capacity while holding the line on closing costs," Bob Jennings, executive of CoreLogic Underwriting Solutions, said in a statement. 

Hawaii had the highest average closing costs for refinance loans, at $4,730 in Hawaii. New York ($4,679), Florida ($3,956) and Texas ($3,588) trailed. Refinance-cost calculations include lender’s title policy, appraisal, settlement, recording fees, and various state and local taxes. 

By contrast, closing costs for the purchase of a single-family property in 2021 rose 13.4%, to $6,905, compared with the previous year. 

How to avoid home closing delays in 2022

HousingWire recently spoke with Westwood Insurance Agency's Tom Kriby about how insurance issues can hold up a home closing and how lenders can integrate insurance into their process to help their homebuyers avoid delays.

Presented by: Westwood Insurance Agency

Homebuyers in certain locations paid more, such as New York, Delaware, and Maryland, where average closing fees exceeded $14,000. Washington, D.C., was the most expensive market for closing costs at an average of $29,888.

Closing costs include expenses related to paying off lender's fees, underwriting mortgage loans and real estate commissions. The bulk of these costs are taxes involved with finalizing the sale of a new home. 

The major difference between average closing costs for refinances and home purchases is that owner title insurance and several inspection fees common for purchase transactions are not required for refinances.

The increase in closing costs overall, which are now more than $1,000 more expensive than pre-pandemic levels, is largely due to lenders raising their fees to offset soaring loan-production expenses and the decline in business due to lower sales volume. 

On average lenders originated 2.4 loans per month per production employee in the fourth quarter of 2021, compared with 3.6 loans in the previous quarter, according to the Mortgage Bankers Association. 

The post CoreLogic: Jump in home-purchase closing costs outpaces refi loans appeared first on HousingWire.
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