Tuesday, July 12, 2022

Mortgage – HousingWire

Mortgage – HousingWire

Pennymac locks mortgage rates up to 90 days 

Posted: 12 Jul 2022 02:22 PM PDT

California-based Pennymac launched a product that can freeze mortgage rates as many as 90 days, in a bid to attract more borrowers to the market amid volatile rates.

Dubbed "Lock & Shop," the product, rolled out in mid-June, has two terms: the 75-day lock, which gives borrowers 45 days to shop and 30 days to close the contract; or the 90-day lock, giving customers 60 days to find a home and 30 days to complete the contract. 

The product also allows a one-time float down if rates decline. It's available for all loan types, except for jumbo. 

“As we know, the Federal Reserve has indicated they’re going to continue to raise rates, so we can lock in the loan with today’s rate for up to 90 days,” said Scott Bridges, senior managing director of direct consumer lending. “That might prevent you from either not buying the house you wanted or having to buy a lower-priced house because your payment would be higher with a higher rate.”

Pennymac’s product allows borrowers to extend their lock-in period at an updated rate if they do not find a house. Bridges said there’s no upfront fee, but the lender requires a pre-approval to ensure borrowers qualify for a mortgage loan – in this case, the lender gives 50 basis points on the closing costs.

“There’s no point doing a Lock & Shop if your purchase is going to be fairly imminent, but we are seeing it to be a very popular product for our borrowers,” Bridges said. Pennymac has locked more than 100 applications with the product since mid-June. 

Pennymac is the latest mortgage lender to freeze rates for borrowers. In late June, fintech startup Tomo also announced a “Lock & Shop” product, allowing borrowers to lock in a mortgage rate for as many as 120 days, about twice as long as most lenders.

The product does not require a property address to guarantee a mortgage rate. Founded in 2020 by former Zillow executives Greg Schwartz and Carey Armstrong, the fintech startup focuses on the $1.6 trillion purchase mortgage sector.

“Consumers had seen so much news coverage on a threatened recession, inflation and interest rate increases that they got stuck,” Tomo’s co-founder and CEO Greg Schwartz said. “They are saying: ‘I’m afraid that if I start shopping now, by the time I find a place — because there’s still limited inventory, I still have to make multiple offers — and, by the time I find a home, I may have much less buying power.'”

Since January, mortgage rates have risen quickly due to high inflation and the Federal Reserve’s plan to tighten monetary policy. And that has put pressure on mortgage lenders with extended lock-in periods. 

When rates are surging, lenders’ capital markets teams have trouble selling loans locked at a lower rate because investors demand higher returns. That often forces lenders to sell at par or take a loss.

But Pennymac and Tomo said they can offer extended lock-in periods because their capital markets teams are hedging the transactions (so they can avoid losses when selling loans at the current mortgage rate in the secondary market in the future) and the companies have strong balance sheets.

Last summer, Tomo launched its platform after raising $70 million in seed capital and achieving “unicorn” status. In 2022, Tomo said it raised another $40 million in a Series A round led by SVB Capital, which more than doubled the company’s valuation to $640 million.

Tomo, however, is not immune to the volatility in the markets. The digital mortgage lender laid off nearly one-third of its workforce in late May. The company does not disclose its origination volume. 

Pennymac reported $490 million in cash as of March 31, according to Securities and Exchange Commission (SEC) filings.  

The company delivered a pretax net income of $234.5 million in the first quarter, essentially unchanged from the prior quarter. Pennymac expects to  lay off 207 employees in June and July following a workforce reduction filing of more than 230 employees in March.

The post Pennymac locks mortgage rates up to 90 days  appeared first on HousingWire.

Why you should attend HW Annual Oct. 3-5 in Scottsdale

Posted: 12 Jul 2022 02:01 PM PDT

Volatile mortgage rates and economic uncertainty have rocked the housing market this year, challenging mortgage lenders, real estate agents, title companies and appraisal firms to adapt quickly to changing conditions.

That's why we've designed our HW Annual event Oct. 3-5 as the "Davos of Housing," providing real, practical insight for this dynamic market from proven experts and leaders across the housing ecosystem. The All Things Housing agenda includes not only incredible content, but opportunities to share strategies, drive business and discover new technologies with others in the business.

HW Annual will feature a keynote from Ryan Serhant, founder and CEO of SERHANT real estate brokerage, which leverages media, education, entertainment, tech and marketing to sell luxury real estate. After just one year from its launch in 2020, the brokerage became the most followed real estate brand in the world.

The event will include an update on the housing economy, a regulatory super session, panels on the future of title, reaching homebuyers in a purchase market, what's next for appraisal and more.

Featured speakers include Spencer Rascoff, co-founder and former CEO of Zillow, HousingWire Lead Analyst Logan Mohtashami, Haley Parker of Fairway, Josh Hartley of Fathom Holdings, and many more. HW Annual kicks off with a Marketing Leaders Success Summit and also includes a Women of influence forum.

In addition, we've built in time to engage with peers, innovators and power players who can help move your business forward. The event's resort location at the Fairmont Scottsdale Princess provides award-winning bars and restaurants, along with pools, palm trees and fire pits for easy mingling. The Scottsdale area is also one of the world's top golf destinations, with close proximity to 200 golf courses, including the TPC Scottsdale Stadium Course and Champions Course, located right next to the property.

The market shift this year will be a watershed for the housing industry. Join us at HW Annual for the content, connections and technology you need to win in this environment. Register here.

The post Why you should attend HW Annual Oct. 3-5 in Scottsdale appeared first on HousingWire.

Mortgage credit availability falls 0.3% in June

Posted: 12 Jul 2022 12:31 PM PDT

Lenders continued to tighten credit standards in June as higher mortgage rates slowed refinance and purchase activity.

The monthly Mortgage Credit Availability Index (MCAI) fell by 0.3% in June, according to the Mortgage Bankers Association. A decline of the index, benchmarked to 100 in March 2012, indicates lending standards are tightening, while an increase suggests loosening credit. 

Credit availability was mixed by loan type. The conventional MCAI rose 1.2% while the government MCAI dipped by 1.7%. Of the component indices of the conventional MCAI, the jumbo MCAI increased by 1.4% and the conforming MCAI climbed by 0.6%. 

"Mortgage credit availability decreased slightly in June, as significantly higher mortgage rates compared to a year ago slowed refinance and purchase activity and impacted the overall mortgage credit landscape," said Joel Kan, associate vice president of economic and industry forecasting at the MBA. 

Purchase mortgage rates, measured by the Freddie Mac PMMS Index, were at 5.3% last week. While rates are on a downward trend due to concerns about a potential recession, they remain well above last year’s 2.9% 30-year purchase rate. 

Borrowers’ demand for mortgage loans fell last week driven by a 7.7% decline in refi applications and a 4.3% dip in purchase applications from the previous week, according to the MBA.

Although there was reduced supply of lower credit score and high loan-to-value (LTV) rate-term refinance programs, the decline was offset by increased offerings for conventional adjustable rate mortgage (ARM) and high balance loans, Kan said.

In a market with a shortage of inventory and soaring rates, an increasing number of homebuyers have been opting for ARMs this year, which carry lower rates for an initial period of fixed interest and amortize over a 30-year term. Application volume for ARMs hit a 14-year high in May, making up nearly 11% of all mortgage applications. Last week, it consisted of 9.5% of all mortgage applications. 

"With higher rates and elevated home prices, more prospective buyers are applying for ARMs, but activity remains below historical averages," Kan said. 

The post Mortgage credit availability falls 0.3% in June appeared first on HousingWire.

VA official talks future of partial claims and revamping its reputation

Posted: 12 Jul 2022 11:56 AM PDT

In a few months, the loss mitigation measures that have kept close to 100,000 veterans from foreclosure during COVID-19 will end. Decisions of policymakers at the Department of Veterans Affairs will determine what happens to those borrowers.

The VA also faces challenges unrelated to the pandemic. The cost of credit for its borrowers is set by Congress, not the department. The perception of VA loans as risky and logistically complicated — even if an outdated view — continues to impact the competitiveness of the borrowers it serves.

But the VA is hoping to change that.

John Bell, deputy director at the VA, said the agency has made strides in recent years to get loans processed and out the door in a timely manner.

HousingWire sat down with Bell to learn about how the VA is working to revamp the image of the loans it offers, how it plans to modernize its appraisal processes, how it coordinates with other agencies, and whether its COVID-19 partial claim program will get an extension.

Editor's note: This interview has been edited for length and clarity. 

A photo of John Bell, Deputy Director at the VA
Photo credit: Department of Veterans Affairs

Maria Volkova: There are some negative perceptions that the VA product is more cumbersome to deal with and riskier than a conventional loan. How is the VA addressing this?

John Bell: We have been trying to get the word out about improvements to our program and trying to get this message to the right people at the right time. Our borrowers are the cream of the crop. They've got 722 credit scores, they've got 40% debt ratios, they've got average reserves in the bank of $54,000. These are great borrowers, and they need to be given a chance.

We have done a lot of work reducing the time that it takes for certificates of eligibility to be issued. When I started 12 years ago, the average time was 20 business days. That is now 48 hours for 92% of all our requests. We've also done a lot of work in appraisals and trying to reduce the time that it takes not only to assign an appraisal to an appraiser, but also the time an appraisal is delivered to us.

MV: How is the VA educating stakeholders in the industry about improvements made to the program?

JB: We just approved a brand new training department for VA. We now will have our first training group that will be intensely focused on just spreading the word, getting information out to lenders, veterans and real estate agents. We're really excited about building this training team out and hiring a contractor to help us put together the materials.

MV: VA's appraisal process is criticized for being lengthy and costly. Legislation is making its way through the Senate that will modernize appraisals, in part by allowing desktop appraisals. How will this benefit borrowers? Is this a positive development for the VA?

JB: We are thinking about how to best serve the industry in providing desktop appraisals. But remember, we are still a high LTV program and lenders own 75% of the risk in that delegated authority that we've given them. Even if we have a desktop program, that doesn't necessarily mean that a lender wants to use the desktop program, because there is a lot of risk.

It’s really about putting options out there and then letting lenders determine what best suits their needs as well as keeping the veteran competitive. I would love to broad stroke say, ‘Hey, you have this ability,’ but unfortunately it really must be thought out. Procedural information comes out very soon on what we can and can't do, so that's even before any legislative changes that would come out this year.

There are also things that we can do right now at the VA without legislative help. Last year the Assisted Appraisal Processing Program launched. The program allows appraisers to utilize any tools or resources at their disposal to put together an appraisal and to sign off and certify a house’s value. Our problem is getting appraisers and lenders to want to use it. Right now, we only have a 14% usage rate. We're trying to find out why that is.

MV: Approximately 200,000 VA and FHA borrowers are currently in forbearance. What is the VA doing to help veteran’s whose financial wherewithal continues to be impacted by the pandemic?

JB: There are a little less than 100,000 veterans that are still in forbearance or some type of modification mitigation program. We have the partial claim program that sunsets in October, but we also have other tools that veterans can utilize such as COVID refund modifications and loan deferment. These options are available through July of 2023.

MV: Stakeholders in the mortgage industry have been calling for the VA to extend the deadline for the partial claim program and possibly make it a permanent fixture. Why is the VA moving to sunset the partial claim program in October?

JB: Just because the partial claim program is sun setting on October 28, that’s not the end of the story. We are working on other permanent options for our veteran borrowers.

This was a regulation that we put together in six months that normally would take three years. Whenever you do things like that, there are things you miss. There are things you wish you had done differently. As we have gone through this program over the past six, eight months, we’ve seen some of those holes and where we could have done things a little bit better to tie some loose ends together. That would make it easier for servicers, easier for veterans and easier for our staff to be able to maneuver.

We’re currently trying to solve what we should permanently do. You’ll see this from us shortly.

MV: In recent years the Consumer Financial Protection Bureau and the VA have cracked down on deceptive ads targeting veteran borrowers. Why do you think that veteran borrowers have been targeted by these types of campaigns and what is the VA doing to educate borrowers about these types of schemes?

JB: A lot of it had to do with our interest rate reduction refinance loan. It’s a rate and term loan where you’re just signing your name, there’s no appraisal, they’re not underwritten. So they really were easy pickings because you didn’t have to go through that approval.

We have a lot of veterans that work for our program and a lot of veterans that have utilized the program that are getting those same marketing materials. As we receive those marketing materials ourselves, we are [spreading the word to veterans and lenders].

We partnered and we continue to partner with the CFPB to try to crack down and monitor those those type of ads. And it’s not just for the interest rate refi program, it’s also for cash-out refinances. It wasn’t just a one time thing, every month we’re having discussions and sending [the CFPB] materials that we see in the industry.

MV: Certain legislation is in part funded by increasing the cost of credit for VA borrowers. What is the decision process behind adding funding fees to legislation, which inevitably impacts veteran borrowers?

JB: We have zero input when it comes to the funding fee and we basically do what Congress requires us to do. They set the funding fee rates, they set the length of the funding fee they set, who is responsible, or who is required to pay. And then we follow whatever that guidance is.

I understand the frustration. We just don’t have a say in that.

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The hybrid appraisal is here. Who benefits?

Posted: 12 Jul 2022 10:23 AM PDT

HW-appraiser-clipboard

Luke Tomaszewski, an appraiser doing home inspections in the aftermath of the housing bust, was traveling as much as an hour across Chicago just to snap exterior photos of bank-owned properties.

Sitting in traffic, Tomaszewski wished he could pay an Uber driver to take the photos instead.

"When we started, the idea was to obtain exterior photos as fast as possible, at a time when Uber, Lyft and marketing technology was advancing, and anyone with a smartphone could get exterior photos," said Tomaszewski, who worked to turn his idea into ProxyPics.

The company, which employs about 17 people, was founded in 2015, and is one of those approved to provide the Freddie Mac data report for its new remote inspection program.

At a cost to ProxyPics of $50 to $100 per inspection, it’s certainly cheaper than sending an appraiser. It's also simplified and scaled back. For example, in a call-out to prospective data collectors posted on its website, ProxyPics adopts gig-worker language.

"ProxyPics will notify you when photo assignments are available near your current location," according to the website. "Work whenever it's convenient for you, wherever you are."

It's a model in stark contrast to that of inspections for traditional appraisals. It may also be viewed as revolutionary for an industry in which the most significant change to the appraisal process in the past few decades was the advent of appraisal management companies as an intermediary between lenders and appraisers. 

Others may view ProxyPics as the kind of disruptor responsible for creating the same gig economy it now occupies: Uber, Lyft, DoorDash, GrubHub, InstaCart. After all, it wasn't so long ago appraisers received assignments via fax machine.

Companies such as ProxyPics stand to benefit from a major Freddie Mac policy change, which goes into effect this month. Starting in July, the government-sponsored enterprise will allow remote inspections on some refinance loans it buys.

But while desktop appraisals may save a few gas miles, and certainly will provide opportunities for a coterie of private sector companies, it's not yet clear whether they are superior to traditional appraisals, and if they ultimately will reduce racial bias, a key GSE policy goal.

A Freddie Mac representative declined to comment for this story.

Made to order

Beginning July 17, Freddie Mac will accept some mortgages with hybrid appraisals — but the list of caveats is lengthy.

First, the option only applies to refinances. For cash-out refinances, the loan-to-value amount may not exceed 70% for a primary residence, or 60% for a second home. For other refinance transactions, the loan can be for as much as 90% of the home's value.

Mortgages for manufactured homes, investment properties, duplexes and fourplexes are not eligible.

The property data reports Freddie Mac will ingest include some 200 distinct data points. On Freddie Mac's property data report form, the inspector must provide data for whether there is dampness, settlement and infestation evident in the property; the condition and age of the roof; and whether the property has a washer-dryer hookup, among other required fields.

The form also requires the data collector to certify he or she has "unbiased professional conclusions," no interest in the property and no interest or bias toward the parties involved in the transaction.

A certification lightens the legal liability of bias. But an attestation, however comprehensively phrased, can't dissolve deep racial prejudices or make the appraiser workforce more diverse.

Fannie Mae also plans to use hybrid appraisals more often in 2022, as part of its equity plan, which is intended to "reduce costs to the borrower and reduce potential risk of bias by creating greater separation between the appraiser and borrower." 

Fannie Mae representatives said the GSE has evidence alternative appraisal approaches result in fewer instances of confirmation bias. Its appraisal modernization pilot, which used hybrid appraisals, showed an 18% point reduction in confirmation bias compared with traditional appraisals, which rely on human observations and, as such, potentially could be riddled with overt or subconscious bias. Alternative appraisals, however, rely more on objective data and an "arm's-length" process between the appraiser and the homeowner or buyer, sometimes assisted by technology, a spokesperson for the GSE said.

Both desktop and hybrid appraisals, according to Fannie Mae, "have the benefit of reducing contact between borrowers and appraisers, thus lowering the likelihood of valuations being affected by personal or unconscious biases."

The State of Appraisals in 2022

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Presented by: Reggora

Another benefit for the GSEs is access to the vast dataset hybrid appraisals may generate. But it's unclear who else will have access to the data.

Given how reluctant the GSEs have been to share the appraisal data they already have, John Brenan, chief appraiser at appraisal management giant Clear Capital, sees little hope for a public repository of floor plans, for example. The GSEs have so far rebuffed demands from academics, fair housing groups, lawmakers and federal agencies to make appraisal data public.

The GSEs "collect all of this [appraisal] data, but they've kept it close to the vest," Brenan said. "Something has to give. If they say, 'Sure, we'll make it available,' but only 5% of companies can access it, that's not mission accomplished."

Think of the savings

Clear Capital's Brenan describes his vision of a hybrid appraisal as one which can drastically reduce wait times.

"An agent does a floorplan scan when they make a listing. An offer comes in at 5 p.m. that afternoon. The seller accepts it; they go into contract. The borrower says, 'I need a loan,' and the bank says, 'We want to do a desktop appraisal.' Then they submit an order to us and the appraiser gets it the next day. The appraiser can do it all within 24 to 48 hours."

Quicker turnaround essentially means less work per appraisal — as Brenan put it, "The amount of work that an appraiser does for a hybrid appraisal has been less." But the reduced fee may prompt the worker to take on more jobs.

"You can see that appraisers would recognize that and say, 'I can take a percentage of what I used to, I can do more appraisals, and the way I make money is on volume.'"

How much less, Brenan wouldn't say. But Fannie Mae, based on 121,000 property data collection submissions in its pilot from April 2021 through March 2022, said lenders were able to shave off, on average, four days compared to traditional appraisals.

The cost savings was about $90 to consumers, although a spokesperson said pricing for appraisals is set by the market and Fannie Mae is not involved. Appraisal costs vary widely, depending on the complexity of the assignment, but could fall anywhere from $250 to upward of $500.

But while Clear Capital expects appraisers to charge less for desktop or hybrid appraisals, Brenan said the company will not reduce the fees it charges on desktop or hybrid appraisals, versus traditional appraisals.

Many appraisers remain skeptical of efforts to reduce costs in the short term through hybrid and desktop appraisals. Pushing too hard to cut costs also may dissuade appraisers from adopting alternative appraisals.

"You can't go to an appraiser and say, 'You'll do 10 times more at half the price with hybrid appraisals,'” said Mike Walser, president of Incenter Appraisal Management. "Most appraisers would look at you like you have three heads."

Walser thinks asking appraisers to lower their fees also may discourage top appraisers from adopting remote inspections. Long term, he said, the speed of a hybrid appraisal — not just savings on appraisal fees — will be a "huge industry benefit."

The prospect of reducing appraisal costs at scale is tantalizing. It's not discernible, however, how much of the initial savings on desktop appraisal assignments is due to modernization, and how much is the result of the current market, in which overall demand for appraisals has dropped dramatically, amid the ever-increasing cost of borrowing money.

"Since the market has softened, many appraisers are doing appraisals for a lot less, which has translated into a [cost] reduction on desktop appraisal assignments," Brenan said.

The hybrid approach also could reduce reliance on a dwindling workforce of specialists. The appraisal backlog during the height of the refinance boom caused widespread frustration among lenders.

"The average age of an appraiser is 60 years old; there will be a wave of retirements in the next two to five years," said Walser. "There are a little over 40,000 unique appraisers [handling] all loans in [the GSE] portals — and when that drops to 30,000, it will be really difficult."

Sharp edges

As the cost of borrowing money rises, mortgage lenders are implementing a raft of cost-reduction measures. The mortgage industry, per the latest jobs report from the U.S. Bureau of Labor Statistics, hemorrhaged 5,000 jobs in May, Inside Mortgage Finance reported. Property data collection firms, however, are enlisting scores of independent contractors to carry out inspections for hybrid and desktop appraisals.

Of ProxyPic's 65,000-strong panel of property data collectors, 2,000 to 3,000 are inspectors, real estate agents or appraisers — a figure Tomaszewski said he hopes to grow to 7,000 or 8,000. Clear Capital representatives said the company has a pool of 3,000 independent contractors, who are licensed real estate agents and brokers, conducting property data collection for hybrid appraisals.

Freddie Mac requires data collectors to be trained, but that training need not be in person. 

During Fannie Mae's hybrid appraisal pilot, the company required data collectors to be bonded or insured, background checked, vetted and professionally trained by the property data collection vendor, and be a member of an eligible labor force, which includes real estate agents, appraiser trainees and insurance inspectors, a spokesperson said.

Both ProxyPics and Clear Capital provide virtual training for their property data collectors. Clear Capital verifies the license number furnished by property data collectors, so that, for example, data collection candidates can't submit their driver's license number and claim it is a mortgage origination license.

ProxyPics has technology to ensure data collectors are actually taking pictures of the subject property. Using a geofence, its mobile app will shut down if the collector tries taking a picture outside the property's geographic area. It also uses satellite imagery to make sure the floor plan checks out.

But Tomaszewski said there are limits to the company's capabilities. For example, it's not feasible to scrutinize every property data collector to ensure he or she does not have a financial interest in a property, or a bias toward one of the parties in a transaction.

Still, property data collectors must attest that they do not stand to benefit from the transaction, Tomaszewski stressed. But he said, ultimately, "If you want to commit fraud, you will."

Many in the mortgage industry are still getting comfortable with the March introduction of desktop appraisals. Now, as both GSEs move toward another alternative appraisal model, it remains to be seen whether appraisers will embrace it.

"Let's knock off some of the sharp edges," Walser said. "Take the next six months with a big grain of salt."

Editor’s note: This story has been updated to clarify the fee per inspection ProxyPics pays.

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Shared-equity fintech Unison expands Midwest operations

Posted: 12 Jul 2022 09:59 AM PDT

San Francisco-based Unison is extending its reach in the heartland by expanding its shared-equity loan program to homeowners in Nebraska.

The move follows the opening of an office in Omaha earlier this year and reaching the milestone as of June 30 of having in force $6.1 billion in equity-sharing agreements with some 9,000 homeowners across 29 states and the District of Columbia.

“With our recent office expansion to Nebraska, this was the next logical step for us,” said Unison founder and CEO Thomas Sponholtz. “Due to the current market conditions, many consumers are seeking affordable housing options, and we are thrilled we can now offer greater origination capabilities in Nebraska. 

"With this announcement, we are expanding the number of consumers we can partner with to offer an option that doesn't require interest or monthly payments."

Unison currently operates in states bordering Nebraska to the south, including Kansas and Missouri and Colorado. Its operations also extend to the three West Coast states; the Southwest, other than Texas; and most states east of the Mississippi River. It does not yet have operations in most deep South states, other than Florida, nor in most of the Midwest states west of the Mississippi River, other than Minnesota and Missouri — and now Nebraska.

Earlier this year, Unison also completed a $443 million private-label offering backed by shared home-equity loans — with plans to pursue future securitizations as well. The company, 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).

Prioritizing home equity solutions in a rising rate environment

The 2022 housing market has been underscored by interest rate spikes and refi decline and lenders are working hard to adjust to new borrower trends. HousingWire recently spoke with Barry Coffin, managing director of home equity title/close at ServiceLink, about the ways lenders can capitalize on these trends by revving up their home equity solutions.

Presented by: ServiceLink

"Home prices have been increasing rapidly over the past year, creating a record $24 trillion of wealth," Unison said in announcing the securitization transaction. "… This transaction offers the opportunity for investors to access residential real estate equity and increases liquidity for homeowners across the country looking to monetize the equity in one of their most valuable assets — their homes."

Unison, through an REA contract, advances the homeowner a portion of the equity in the property in exchange for a lien position and a share of the home's future appreciation. Unison also shares some of the downside if the property loses value over the course of the contract. 

"Our presence in Nebraska has continued to grow since our office opening earlier this year," added Unison President Ryan Downs, who is leading the Omaha office. "We are seeing greater interest in our solution and are thrilled to have boots on the ground where we can service our clients in person and remotely as well as tap Nebraska's financial services and technology talent pool."

As part of a Unison's REA product, the company will invest up to 17.5% of a home's value after a 2.5% risk-adjustment haircut on the value of the property. The company and homeowner then share in any appreciation, or depreciation, of the home's value over the course of the contract. 

The homeowner has up to 30 years to pay off the initial investment, plus Unison's appreciation cut, through a sale or refinancing of the home — or through a contract buyout after three-year lock-in period. As part of the REA, Unison's share of the home's appreciation can range from 20% to 70%, depending on size of the equity investment advanced. 

"We're sitting in an equity position side by side with the homeowner," said Matthew O'Hara, head of portfolio management and research at Unison Investment Management, which is under the Unison umbrella. "So, if the price goes up, the homeowner benefits, and we benefit as well. 

"If the price goes down, the homeowners are losing some of their equity, but we are also losing equity in our position at the same time." 

O'Hara added that Unison's move into the private-label securitization market supports the company's expansion efforts because it is an optimal way to decrease its cost of financing while also creating more liquidity for originating shared home-equity contracts — with the goal of lowering REI costs for homeowners. 

The post Shared-equity fintech Unison expands Midwest operations appeared first on HousingWire.

Qualia releases Qualia Connect for mortgage lenders

Posted: 12 Jul 2022 09:31 AM PDT

Digital real estate closing platform, Qualia, announced the release of a new mortgage lender edition of its Qualia Connect platform on Tuesday.

According to Qualia, this release means that the Connect platform will now be able to integrate directly into the mortgage lender's loan origination system. Qualia Connect's suit of features will provide lenders with complete control over how they collaborate with any title, settlement or escrow partner, allowing them to automate and standardize how they work with any title company in the country.

In addition, Qualia says this integration will enable mortgage lenders to use milestone-based or data-driven automation triggers to send title orders, request information, exchange documents, and provide progress updates. From there, all of the information and documents received in return from the title company will flow directly into the lender's LOS, with the data auto-populating the loan file. Lenders will also be able to see where in the closing process the loan is with every title, settlement and escrow partner, allowing the lender to monitor turnaround times and fulfillment rates, according to the release.

“Collaboration between everyone in the closing process remains very manual, inefficient, and unpredictable today,” Nate Baker, the CEO and co-founder of Qualia, said in a statement. “We are building products that go beyond just digitizing old processes."

By streamlining and integrating communications between mortgage lenders and title service providers, lenders and title companies are keeping sensitive information out of emails, protecting employees and borrowers from phishing attacks and wire fraud. The automated and standardized workflows will also help errors from arising, creating a smoother closing process.

A recent study by Qualia and the STRATMOR Group found that roughly 25% of lenders work with more than 100 title companies in a given month. In addition, the study found a significant difference in efficiency depending on how often lenders and title companies work together. On a scale of 1 to 10, 63% of lenders surveyed rated their efficiency with title companies they work with regularly a 7 or higher, contrasted with 89% of lenders who rated their efficiency with the title companies they work with infrequently a 6 or lower on the same scale. With 25% of respondents reporting that they make more than 30 calls or emails per loan with their title firm, it is clear how important familiarity and efficiency are to pulling off a smooth closing.

The obstacles to a digital mortgage are changing – Here's what lenders need to know

HousingWire recently spoke with Armando Falcon, CEO of Falcon Capital Advisors, about the continued growth of digital mortgage solutions such as eClosings and what lenders can do to implement eMortgages into their business models. 

Presented by: Falcon Capital Advisors

“We have already used Qualia to share information with our title partners, but this new functionality in Connect is making a dramatically positive impact across our entire operation,” Andrew McElroy, the senior vice president at American Federal Mortgage, said in a statement.

The post Qualia releases Qualia Connect for mortgage lenders appeared first on HousingWire.

Struggling loanDepot to cut nearly 5,000 jobs in 2022

Posted: 12 Jul 2022 06:48 AM PDT

Nonbank lender loanDepot is making what appears to be the largest series of cuts in the mortgage industry this year, eliminating 4,800 jobs over the course of 2022.

Overall, the California-based lender is implementing a program dubbed “Vision 2025” to save between $375 million and $400 million annualized, including headcount reduction, process optimizations, real estate consolidation and reduction in marketing and third-party spending. 

The company will go from 11,300 employees at the end of 2021 to 6,500 by the end of 2022, loanDepot said in a filing with the Securities and Exchange Commission on Monday. The workforce reduction will result in the lender paying $3.5 million to $4.5 million in severance and benefits in the second quarter and $25 million to $28 million in the year’s second half.  

As of July 12, the company had 8,500 employees. 

“In 2020 and 2021, like other mortgage companies, we scaled our organization to meet the demands of unprecedented mortgage volumes, especially refinancing transactions,” Frank Martell, president and CEO, said in a statement. “After two years of record-breaking volumes, the market has contracted sharply and abruptly in 2022. We are taking decisive action to meet this challenge head on.” 

The 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. In 2021, loanDepot made $427.9 million in profit. With the cost reduction, the company continues to target a return to run-rate operating profitability exiting 2022. 

“We anticipate continued challenging market conditions, with mortgage originations projected to decline by roughly half in 2022 from 2021, including an accelerated decline in the second half of 2022, followed by a further decline in 2023,” Patrick Flanagan, chief financial officer, said in a statement.  

LoanDepot expects to save $2 million of real estate office costs and $2.5 million to $3 million outside service expenses in the second quarter. For the year’s second half, it says the moves will save between $2.5 million and $3.5 million in real estate and $9 million in outside service costs. 

The company has $1 billion in cash, according to SEC filings.

LoanDepot is also making some leadership changes. Jeff Walsh, mortgage president, will lead mortgage origination functions. Zeenat Sidi, digital products and services president, will be responsible for digital lending and mortgage-adjacent products and services. Meanwhile, Dan Binowitz, the managing director of operations and servicing, will lead loan fulfillment and servicing functions.  

The company’s stock was trading at $1.50 around 9:45 am on July 12, up 4.35% from the previous day.

The post Struggling loanDepot to cut nearly 5,000 jobs in 2022 appeared first on HousingWire.

Lower-rate loans dominate PLS pipeline

Posted: 12 Jul 2022 04:00 AM PDT

HW+2022

The loan quality of mortgage pools backing private-label securitization (PLS) deals has remained solid this year through the end of June, even as deal volume slowed appreciably between the first and second quarters. 

In addition, the average coupon for PLS note offerings so far this year has not yet caught up with current market rates, according to the Kroll Bond Rating Agency's (KBRA's) most recent RMBS Credit Indices report.

The yield for both prime and nonprime PLS issuance, as measured by the weighted average coupon (WAC), fell below conforming mortgage rates as of June 2022, the period covered by the KBRA report. For the final week of June, the conforming 30-year fixed mortgage hovered in the 5.7% range. 

Even with big drop in rates in the first week of July — the sharpest decline since 2008, to 5.3% for a 30-year fixed rate mortgage, according to Freddie Mac — the spread between the prime WAC and current conforming rates remains wide. For nonprime, the spread is much tighter when looking at the WAC in isolation, but that obscures the fact that nonprime loans in a normal market are priced considerably higher than the conforming rate.

For the prime sector, the WAC as of June 2022, according to the KBRA report, stood at 3.36%. That's down slightly from January's mark of 3.44%. The nonprime WAC stood at 5.44% in June, KBRA data show, compared with the January average coupon of 5.87%. 

Tom Hutchens, executive vice president of production at non-QM lender Angel Oak Mortgage Solutions, said previously, however, that for nonprime mortgages (or non-QM loans), the interest rate normally averages about 1.5 percentage points higher than the conforming rate — which would put the market rate for the newest 30-year fixed-rate loans near the 7% range.

Jack Kahan, KBRA's senior managing director of RMBS [residential mortgage-backed securities], said interest rates hit a low point in 2021 at or slightly below 3% and remained there much of last year. He added as new loans were securitized each month at those historically low rates, they were added to the KBRA index, effectively lowering the overall weighted average coupon measure because of the huge volume of loans involved — a majority of them refinances, a market that has since evaporated in the rising-rate environment. 

Last year's record low-rate loan volume continued to affect securitization volume and metrics into 2022 as well, helping to suppress the WAC figure. Evidence of the expanded loan volume moving through the PLS pipeline this year so far, compared to 2021, can be seen in the PLS deal data tracked by KBRA.

Year to date through June 2022, KBRA data shows that 111 prime and nonprime securitization deals hit the market backed by loan pools valued in total at some $52.8 billion. Last year, over the same time frame, 97 PLS transactions were recorded backed by mortgage pools valued at $39.6 billion. 

Also of note is that the bulk of the prime and nonprime PLS deal volume in 2022 so far is from the first quarter of this year — 67 deals valued at $33.9 billion. Volume dropped off in the second quarter, as rates continued to rise, to 44 deals valued at $18.9 billion, according to KBRA data,. 

So, every new deal issued and added to the KBRA index that was backed by lower-rate loan pools from 2021 or at the start of the year, relative to future months, "was decreasing the WAC," Kahan said, "and so many new [PLS] deals were added in 2021 [and into this year] that this was reflected in the average."

"You can also tell this [the ramp-up in deal volume] by looking at the WALA," Kahan added.

That latter measure is the weighted average loan age, or WALA, also known as the loan seasoning. It can serve as a measure of deal velocity — or the time between loan origination and securitization. 

Kahan explained that starting in the second half of last year, new PLS deals backed by lower-rate loans "began to make up a significant portion of the outstanding deal count." That deal velocity also affected the rolling measure of the average loan-seasoning age. The effect was most pronounced in prime deals, where loan seasoning averaged 41.7 months as of June 2021, nearly twice as high as the June 2022 average of 21.6 months.

"In nonprime it's a similar story, but to a lesser degree," Kahan added, in explaining the KBRA index report. The WALA for the nonprime sector hit a high last year of 28.1 months in November, the KBRA report shows, and has continued to inch downward through June of this year, when it dropped to 24.4 months.

The KBRA June 2022 report includes analysis from 415 outstanding prime transactions backed by mortgage collateral valued in total at $95 billion. It also includes 172 nonprime transactions valued at $32.1 billion. The KBRA rolling indices include data dating back to the fall of 2016.

On other fronts, year to date through the end of June, the KBRA RMBS Credit Indices report shows loan-delinquencies, net losses, and loan prepayments all are trending downward since the pandemic's peak in 2020 — with prepayments exhibiting the sharpest contraction. 

"June remittance reports showed mostly stable credit performance across securitized residential mortgage pools," the KBRA report states. "… Mortgage prepayment rates continued their multi-month decline, as the sharp rate rise over the past six months has greatly reduced any incentive to refinance. Since early January [of the year], 30-year fixed mortgage rates have risen from 3.3% to just under 6%, as of the end of June."

Prepayments in the prime category reached the mid-40% to 60% range between October 2020 and July of 2021 — during the refinancing boom. Since late summer 2021, however, the prime prepayment rate has declined steadily — down to at 8.7% as of June of this year, KBRA reports.

The typical prepayment rate for a given mortgage pool, absent refinance pressure, "is typically 8% over the history of data — simply due to relocation, divorce, death, etc.," according to Tom Piercy, managing director of Incenter Mortgage Advisors.

In the nonprime sector, prepayment rates have declined as well, from the mid-40% range in the summer of 2021 to the low 40% range starting in the fourth quarter of last year­ — and ending June of this year at nearly half that mark, 23.4%

Loan delinquency rates for prime RMBS issuance, which includes prime jumbo loans, also are in retreat.

  • Early-stage delinquency rates (loans 30-59 days past due) stood at 0.36% of the outstanding prime PLS collateral balance of $95 billion as of June 2022, compared with 0.44% in December 2021. Early-stage delinquencies represent the front end of the delinquency pipeline, given such loans will move to the next level if not made current.
  • At that next level, the mid-stage delinquency rate (loans 60-89 days past due) there also was downward motion over the period — to 0.36% in June of this year, compared with 0.44% as of December 2021.
  • For late-stage delinquencies (mortgages delinquent 90 days or more and at the highest risk of foreclosure) rates also are down, from 0.65% in December of last year to 0.26% as of June 2022.

For nonprime RMBS issuance — which includes alternative-documentation loans to the self-employed, real estate investors as well as credit-challenged borrows — the pattern is similar, although delinquency rates are higher due to the riskier nature of the loans.

  • Early-stage delinquency rates on the outstanding nonprime PLS collateral balance of $32.1 billion as of June 2022 declined from 2.01% as of December of last year to 1.57% as of June 2022, the KBRA report shows.
  • Mid-stage delinquency rates declined from 0.69% in December 2021 to 0.50% as June of this year.
  • And late-stage delinquency rates declined by more than a percentage point over the period, from 2.97% in December 2021 to 1.85% as of June 2022.

Loan modifications, which are a trailing performance measure relative to delinquencies, were down as well for both prime and nonprime collateral. For prime deals, the modification rate declined from 2.47% as of December 2021 to 1.15% as of June 2022. Nonprime issuance recorded a similar sharp decline in the loan-modification rate over the period, from 7.57% as of December to 4.34% as of June.

Another key metric in the KBRA report is the "annualized net loss rate," which is a measure of the losses a given collateral pool would incur "if every month of that year had the same amount of loss as the observation month," Kahan explained. In the case of both prime and nonprime PLS deals, the loss rate is only a fraction of a percentage point — reflecting the relative underwriting quality of the mortgages.

Annualized net losses for prime issuance stood at 0.0103% as of June 2022, down about 2.3 basis points from December 2021's mark of 0.0332%. For the nonprime sector over the same period, the figures are a bit more volatile, with the December 2021 rate at 0.0184%, nearly 3 basis points lower than the June 2022 rate of 0.0477% — which was down some 5 basis points from April's rate of 0.0970%.

It's important to keep in mind that the KBRA report is a data snapshot measuring a very dynamic PLS market. So, as higher-rate loans continue to be originated and securitized, the metrics will change, likely pushing the weighted average coupon upward in the coming months, for example, barring a sudden rate plunge.

"[The credit indices] are rolling indices calculated each month based on the observations available in that month," the KBRA report notes. "New transactions are added as they are issued, after an initial seasoning period."

The post Lower-rate loans dominate PLS pipeline appeared first on HousingWire.

Wells Fargo taps Kleber Santos to lead consumer lending

Posted: 11 Jul 2022 02:11 PM PDT

As Wells Fargo contemplates a smaller footprint in mortgage, the nation’s fourth-largest bank named Kleber Santos as chief executive officer of consumer lending.

Santos joined the bank in November 2020 as head of diverse segments, representation and Inclusion (DSRI), a role he will keep until the bank names a permanent replacement. Before Wells Fargo, he worked for Capital One for 15 years in different positions, including as retail and direct banking president. 

Santos will continue to report to Wells Fargo’s CEO, Charlie Scharf, who said Santos has “built the DSRI function over the past two years and driven significant outcomes in both representation and inclusion,” according to the news release. 

Santos will replace Mike Weinbach, who is leaving in mid-September “to do something different,” Scharf said in the news release Monday. Weinbach joined Wells Fargo in April 2020 to lead consumer lending .  

Santos will be responsible for a shrinking line of business at a moment when the bank has struggled with scandals related to minority lending and fake interviews with minority candidates for job positions. 

In the first quarter, the home lending, auto, credit card and merchant services, and personal lending businesses, which will be under Santos’ leadership, notched $3.5 billion in revenues, a 12% decline from the prior quarter, and down 21% year-over-year. 

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Wells Fargo’s mortgage revenues totaled $1.5 billion in the first quarter of 2022, a 19% drop compared to the previous quarter and 33% lower than the same period in 2021. 

As mortgage rates rise, the bank will lay off 125 employees in its home lending division in Iowa by the end of August. The bank eliminated 72 mortgage jobs in Iowa across earlier layoffs. 

The post Wells Fargo taps Kleber Santos to lead consumer lending appeared first on HousingWire.
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