Mortgage – HousingWire |
- Fannie Mae income drops amid mortgage market troubles
- Opinion: why HELOC demand will surge
- Fractional home-equity lender Point raises $115 million
- CoreLogic: U.S. home-price gains hit all-time high in March
| Fannie Mae income drops amid mortgage market troubles Posted: 03 May 2022 09:16 AM PDT Fannie Mae, the government-sponsored enterprise that backs the majority of conventional mortgages, is not immune to the sharp decline in mortgage refinances. The enterprise reported $7.5 billion in first quarter revenue, a $700 million jump from 2021. But net income income was down 12% from nearly $5 billion first quarter 2021, to $4.4 billion this quarter. Fannie Mae’s net worth is now $51.8 billion, up from $47.4 billion at the end of last year. Fannie Mae's net income decrease was mainly due to the expense of managing credit risk on mortgage loans. That’s because as fixed-term mortgage rates rise, borrowers are less likely to prepay, or refinance, their mortgages. And, as mortgage terms lengthen, so too does the cost of possible loan impairment or credit loss. Provisions for those eventualities amounted to a reduction of $1 billion from the $765 million in credit-related income generated in the first quarter of 2021. Fannie Mae reported a $240 million loss in credit-related income for the first three months of 2022. These credit-related expenses were at least partly offset by rising home prices. Continued home price growth, which Fannie Mae predicts will decelerate from 19% year-over-year in 2021, to around 11% in 2022, increases borrowers equity. That increase can reduce the risk of loan impairment — since borrowers with more equity are less likely to default — and lead to new cash-out refis for even higher principal amounts. Increasing home prices also adds to the amount Fannie Mae can recover from the underlying property in a foreclosure sale. Still, Fannie Mae projects refinances will be a shadow of 2021 levels. While it forecasts total originations will decrease from $4.48 trillion in 2021 to $2.82 trillion in 2022, refinances will decrease from $2.61 trillion in 2021 to just $889 billion this year, a 193% decrease. The share of refinance activity in Fannie Mae's portfolio has already declined substantially. The company acquired $135 billion worth of loans stemming from the refinancing of single-family mortgages in the first quarter of 2022, less than half of the $301 billion in quarter one 2021. Since the loan to value ratios for home purchase loans are typically higher than they are for refinances, the percentage of single-family loan acquisitions with ratios over 80% grew to nearly a quarter in the first three months of the year, from 19% in the first quarter of 2021. The decline in refinance share also brought the average credit score down from 2021, when the average credit score for a Fannie Mae borrower was 761. The average credit score in Fannie Mae's portfolio is now 748. Fannie Mae also pointed out in its earnings report that new seller servicer requirements, which its conservator the Federal Housing Finance Agency re-proposed in February, would increase liquidity requirements for its non-depository sellers and servicers. Trade groups representing smaller non-depositories said the liquidity requirements for non-depositories would lead to fewer consumer choices and less competition. A report from the Urban Institute called the liquidity requirements "punitive." A large portion of its seriously delinquent loans, Fannie Mae said, are serviced by non-depositories, and would be impacted by the new rules. One percent of Fannie Mae's single-family portfolio is seriously delinquent. More than two-thirds of those loans have been delinquent for more than six months, and 12% have been delinquent for more than two years. Although not mentioned in Fannie Mae’s quarterly report, the company is dealing with a continued exodus of high level officials. In April, Fannie Mae's CEO, Hugh Frater, and Sheila Bair, the chair of its board, both announced they would resign from the mortgage finance behemoth May 1, shortly after Fannie Mae announced the resignation of COO Kimberly Johnson. Fannie Mae now has its president, David Benson, as interim CEO, and has said it is conducting a nationwide search for a permanent enterprise leader. Michael Heid, a board member since 2016 and before that an executive at Wells Fargo for 20 years, is presently board chairperson. The post Fannie Mae income drops amid mortgage market troubles appeared first on HousingWire. |
| Opinion: why HELOC demand will surge Posted: 03 May 2022 07:30 AM PDT Between February 2020 and January 2022, we witnessed something in the mortgage industry that we thought we'd never see — 30-year fixed-rate mortgages under 3.5%. These rates drew a record number of people refinancing their homes, with cash out refinances reaching $1.2 trillion in 2021. Then, in what felt like an instant, in Q1 2022 mortgage rates skyrocketed and the refi boom ended. As people look for alternate means to access the equity in their homes, home equity lines of credit (HELOCs) are poised to make a comeback. Here's why: Homeowners will still want to use the record levels of equity in their homesThe residential real estate industry faces an interesting dynamic of rising mortgage rates while, at the same time, homeowners have record equity in their homes. According to CNBC, homeowner equity is an aggregate $9.9 trillion. The average homeowner has about $185,000 in equity they can access while still keeping a 20% stake in their home. Taking out a HELOC is a viable option for homeowners who want to keep their primary mortgage, and still tap the equity in their home. A HELOC is now cheaper than a refiWhile the interest rate on a HELOC today is probably higher than the rate on a primary mortgage, homeowners will likely to find that refinancing no longer makes mathematical sense. Most households have a low rate on their primary mortgage, so doing a cash-out refi will yield a higher monthly payment than keeping the mortgage they already have and adding a HELOC on top. For example, if a homeowner has a $400,000 mortgage at 3.25% and wants to tap another $100,000 of their equity, they might consider accessing $100,000 of equity through a HELOC versus a cash-out refi:
HELOCs offer flexibilityIn the current market conditions, here are a couple of aspects of a HELOC homeowners will find most attractive: First, HELOCs are arguably more flexible than a traditional cash-out refi. Once approved for a HELOC, they can access the line of credit as needed, as opposed to having cash sitting in a savings bank from a refi. In cases where the homeowner ends up needing to take only the minimum required draw from a HELOC, they would only end up paying back that part of the loan. In contrast, when they do a cash-out refi, they're committed to paying the new principal and interest balance for the duration of the mortgage — likely 15 or 30 years. Second, and very much related, the monthly payback amounts on HELOCs are more flexible. During months where you need additional capital to finance a home repair, or a move, they may choose to pay the interest only part of the loan. For the foreseeable future, I anticipate HELOCs being the equity-access vehicle of choice for many U.S. homeowners. Much like 2021 was a record year for refinancing, 2022 could be a record year for HELOCs. David Friedman is the CEO and co-founder of Knox Financial. This column does not necessarily reflect the opinion of HousingWire's editorial department and its owners. To contact the author of this story: To contact the editor responsible for this story: The post Opinion: why HELOC demand will surge appeared first on HousingWire. |
| Fractional home-equity lender Point raises $115 million Posted: 03 May 2022 07:24 AM PDT Fintech and fractional home-equity lender Point has raised an additional $115 million through a Series C fundraising round led by venture capital firm WestCap. The capital will be used to accelerate Point's growth in the $25 trillion home-equity market, according to the company's co-founder and CEO Eddie Lim. The Palo Alto, California-based Point plans to use the funding to expand its product line as well as its market footprint — from an existing 16 states and the District of Columbia to 28 markets over the next year. Point raised about $30.4 million in venture capital through three previous funding rounds, according to business-information platform Crunchbase. The venture capital investment is in addition to $1 billion in separate capital commitments from investors that Point has lined up to help fund what it calls home-equity investment (HEI) contracts. "We expect this additional capital to accelerate our growth as we help cash-constrained homeowners and home buyers build financial stability and achieve their financial dreams," Lim said. Point's HEI contracts — which have 10- or 30-year maturities, the latter the standard since early 2020 — address many variables in a complicated, nuanced housing market. The general premise, however, is that Point provides the homeowner with cash upfront in exchange for a contract providing the company with a slice of the homeowner's equity. That share is typically around 10 percent or so. Plus, Point gets a cut — up to a preset cap — of the home's future appreciation after making a 15% to 20% downward adjustment to the home's market value at the time the HEI contract is signed to account for its risk. Point also shares some of the downside risk with the homeowner in the event the home price drops. Homeowners, in turn, get to cash out a slice of their home equity with no payments due until the contract matures. There are no prepayment penalties, and the payoff is achieved via a home sale, refinancing or after the HEI contract is otherwise bought out by the homeowner. Also participating in Point's latest Series C funding round were existing investors Andreessen Horowitz, Ribbit Capital, Redwood Trust, Atalaya Capital Management and DAG Ventures — along with new investors Deer Park Road Management, The Palisades Group and Alpaca VC. Last year, investor Redwood and Point, the latter founded in 2014, completed a first-of-its- kind securitization backed by HEI contracts. The private-label securities (PLS) transaction, which closed in late September 2021, involved issuing $146 million in securities through a conduit dubbed Point Securitization Trust 2021-1. The unrated PLS offering was structured in two tiers — with $120 million of unrated senior class A-1 notes and about $26 million of unrated class A-2 securities. Bo Stern, head of portfolio strategy and risk for Redwood, said previously that security holders get paid a monthly coupon from the cash flow generated by HEI contract pay-offs. Earlier this year San Francisco-based fintech company Unison completed a $443 million private-label offering backed by fractional home-equity assets — in which investors and the homeowners share in both the upside and downside of a property's value over time. Similar to Point, Unison, through its fintech platform, offers homeowners the opportunity to tap their home equity without taking out a loan — via Unison's shared home-equity product called a residential equity agreement (REA). Another firm on the cutting edge of the fractional-equity market is Vesta Equity, which offers a platform for home equity investments using blockchain and tokenization, with the tokens, or NFTs, backed by verified real-word real estate. The transactions are conducted in stable coin that can be converted into U.S. dollars or another government-backed currency — known as fiat. Vesta, like Point and Unison, allows homeowners to sell a percentage of their equity — in Vesta’s case funded by stable-coin investors. In exchange, homeowners can use the funds as they wish while retaining full rights to their property. Upon sale of the home, the percentage of the equity acquired by investors is disbursed to them through Vesta Equity. "Most Americans have the majority of their wealth tied up in their home, limiting their ability to cover unforeseen expenses or diversify wealth," said Laurence Tosi, founder and managing partner at WestCap. "Point has created … [a] solution that empowers homeowners to utilize their home equity to eliminate debt, overcome periods of financial hardship and unlock new opportunities for wealth without taking the risk of traditional term loans." The post Fractional home-equity lender Point raises $115 million appeared first on HousingWire. |
| CoreLogic: U.S. home-price gains hit all-time high in March Posted: 03 May 2022 05:00 AM PDT U.S. home prices in March climbed a record 20.9% year over year, but the explosive pace of appreciation is expected to cool down to the single digits by the same time next year. The jump in March marks the 122nd consecutive month that the annual housing-price measure has increased, according to CoreLogic's recent national Home Price Index report. Mounting mortgage rates and home prices are creating increasing affordability pressures for some prospective buyers. "The annual growth in the U.S. index was the largest we have measured in the 45-year history of the CoreLogic Home Price Index," Frank Nothaft, chief economist at CoreLogic, said in a statement. "In April, 30-year fixed mortgage rates averaged nearly 2 percentage points higher than one year earlier. "With the growth in home prices, that means the monthly principal and interest payment to buy the median-priced home was up about 50% in April [2022] compared with last April." As of April 21, the payment-to-income ratio for homeowners was 32.5%, just 1.6 percentage points shy of the record of 34.1% in July 2006, according to Black Knight's latest monthly Mortgage Monitor report. Black Knight forecasts that a 5% increase in home prices would push affordability to its worst level on record. Housing prices are up 5.9% since the start of the year. Buyers who closed on a property in March had a good chance of locking in mortgage rates at around 4%. By late April, rates had climbed past 5% — and were up by more than 200 basis points from the same period last year. That trend might derail more prospective buyers, CoreLogic noted. Interest rates hit 5.10% last week, compared with 2.98% a year ago, according to Freddie Mac PMMS. Black Knight's Optimal Blue OBMMI pricing engine, which considers refinancings and additional data from the Mortgage Bankers Association, measured the 30-year conforming mortgage rate at 5.317% last week. Florida led all states in home-price gains, up 31.4% in March 2022, compared with the same period last year, according to the CoreLogic report. Arizona ranked second, at 28.7%. New York and Washington, D.C., metro areas were at the lower end of the price-growth spectrum, each posting gains of 9.9% year over year. The post CoreLogic: U.S. home-price gains hit all-time high in March appeared first on HousingWire. |
| You are subscribed to email updates from Mortgage – HousingWire. To stop receiving these emails, you may unsubscribe now. | Email delivery powered by Google |
| Google, 1600 Amphitheatre Parkway, Mountain View, CA 94043, United States | |
No comments:
Post a Comment