If you’re a lender in only one state, just think about the state and federal regulations you must deal with, not to mention the investor or agency rules. If you’re a nationwide lender, you can grapple with 49 other rules and regulations. If you service loans, throw on some more. What if you’re a worldwide bank? Citigroup will place a global regulatory affairs team" in Washington, D.C., to help the bank "assess the impact of existing and proposed regulations on our franchise, clients and customers," according to an internal memo.

It is always good for residential loan originators to know the rental situation in their area. If rental rates, or house prices, are going up 5% a year and incomes are only going up 2% a year, well, that is a problem. Until recently, the combination of a shortage of multifamily units, booming demographic demand from Millennials, and an improving economy meant strong demand for apartments. This resulted in strong rental growth and large increases in supply. But, things are reversing. The largest cohort of Millennials is almost 26, job growth is slowing, years of new supply are saturating the market, and now banks are becoming skittish about lending to multifamily developers.

RentRange identified 25 markets with the largest rental rate increases. First prize went to McAllen, Texas while Orlando, Florida rent growth was the lowest. RentRange, a provider of market data and analytics for the housing industry, released data ranking the top 25 U.S. Metropolitan Statistical Areas (MSAs) by average rental rate increase for single-family homes between the fourth quarter (Q4) of 2016 and the same quarter in 2015. The data analysis also identified the average vacancy rate within these markets in Q4 2016.

"The Q4 2016 RentRange data identified rental rate increases in areas like Cape Coral and Portland, both of which moved up the list into the top five, as well as newcomers including McAllen, Denver, Boston, Nashville and Miami. While rents remain high in the Bay Area, San Francisco dropped several positions, indicating that the year-over-year rent change was not as significant as seen in past years. Comparatively, San Jose made the list as a new addition in Q4 2016."

The highest vacancy rates are in the Southeast region, where vacancy rates range from 10.5 percent in Charleston to 20.4 percent in Myrtle Beach. "In these areas, builders and investors may need to compete for a limited number of renters. An oversupply of new properties can drive up the vacancy rate and eventually push rental rates down, and this is currently happening in Myrtle Beach, where more than 3,100 new homes were built in 2015, a 94 percent increase compared to two years earlier."

"As we begin 2017, it continues to look bright for single-family rental investors," said Wally Charnoff, chief executive officer, RentRange Data Services. "Compared to the Q3 2016 change in rent, we are seeing the percentage change begin to lessen while rents continue to increase, which should ultimately stabilize demand, keeping vacancy rates down. It remains important for investors to look at stability within a market, focusing on the market's activity over time to ensure there is a good balance - low historical volatility with a current upswing."

It seems that landlords are taking over the U.S. housing market.  As Wall Street backs off of buying rental homes, small investors are picking up the slack. Rising home prices slow new home construction, and demographic shifts push homeownership rates to 50-year lows, the U.S. is increasingly a country of renters and landlords.

First time homebuyers face a shortage of real estate going into 2017, according to Redfin. For starter homes, the problem is acute. Over the past year, prices have risen 7.5% as inventory fell 12%. This increased the percent of income needed to buy a median home in that segment to 38.5%, an increase of about 2 percentage points. They are hopeful that the bottom is in with respect to tight inventory, however some of that will depend on regulatory policies of the new administration. On the plus side, credit will probably ease a bit as the financial system gets more clarity on regulation. On the negative side, immigration limits will exacerbate the construction labor shortage we currently are experiencing.

Rental trends are greatly influenced by demand, and much of the demand comes from people in their 20s. And the trend is evident at the end of 2016. While mortgages for home purchases made up the bulk of loans taken out by millennials over the second half of 2016, they gradually declined as a percentage of all loans as the year went on. The Ellie Mae Millennial Tracker first started tracking in June of 2016. More than half (57 percent) of millennial borrowers took out conventional loans during the latter part of 2016, followed by FHA loans (40 percent) and VA loans (1 percent). FICO scores on closed purchase loans by millennials hovered in the low 720s from June through November. The average FICO score on refinances started at 721 in June, rose to a peak of 750 in October, then tapered off to 747 in November.

"While we have seen a steady increase in refinances among millennials, the bulk of this generation is still entering the market as first-time homebuyers," said Joe Tyrrell, executive vice president of corporate strategy at Ellie Mae. "Across the board, we're continuing to see strong interest in home ownership from this younger generation."

And when you think "first time home buyer" it is good to know about...Ginnie & FHA changes.

In case you missed Ginnie Mae's recent Notes & News.

Back in early January, FHA announced its intention to implement the new Loan Review System (LRS), which will provide an electronic platform for FHA's Title II Single Family quality control functions. FHA is in the final stages of technology development, and will announce the implementation date soon. Loan Review System (LRS): Implementation and Process Changes. Mortgagees are encouraged to view the recording accessible from the Single Family Housing Archived Webinars page. This recorded webinar provides an overview of LRS functionality and related process changes.

Effective Tuesday, February 28, PennyMac is updating the FHA loan DTI overlay for Best Effort and Mandatory deliveries.

Down Payment Resource has a new program that tackles student loan and down payment challenges. Find out how it works. Wondering who qualifies for the down payment program? Find out eligibility requirements.

Ditech has rolled out Home Possible & Home Possible Advantage. Ditech now offers a full complement of low down-payment programs... FNMA 97, Home Ready, Home Possible, Home Possible Advantage, FHA, USDA & VA.

US Bank issued underwriting guideline updates that effect 2^nd Appraisal Requirements, 2017 FHA / VA Loan Limits, and VA - Student Loan Debt Calculations. Refer to the full Guidelines, in the Seller Guide, for complete details. These changes are effective immediately for any new registration / lock or loans in the pipeline.

Effective immediately, M&T Bank will no longer require the completion of a Warranty form for FHA Streamline Refinance Condominium or PUD transactions. Lenders are reminded to underwrite all projects to meet FHA requirements as published in FHA Handbook 4000.1.  

Mountain West Financial announced product enhancements which include FHA deduction of #2106 expenses - no deduction of #2106 expenses will be required for wage earners, or commission earnings of 25% or less. Direct Pricing is no longer required for 5 - 6 financed properties.  Conforming conventional guidance applies. DU Refi Plus 12-month reserve is no longer required for DTI greater than 50%. FHA High Balance with lowered FICO score to 620. FHA High Balance lowered FICO score to 680 for DTI up to 55%, cannot exceed 55%.

Effective immediately, NewLeaf Wholesale added Manufactured Homes located in Condominium Projects or Planned Unit Developments (PUDs) as an eligible property type under the following products: NewLeaf 1 - DU-LP Conforming Manufactured Housing. NewLeaf 2 - DU Conforming Manufactured Housing. NewLeaf FHA Conforming and High Balance. NewLeaf VA Conforming, High Balance and IRRRL.

Capital Markets

Seasonal patterns going back decades suggest that Treasury yields may slide, despite business-friendly policies of the Trump administration and indications that the Federal Reserve will increase rates. "I would make sure to respect the seasonals in thinking about the odds that we get a significant sell-off based on Trumponomics," said Ian Lyngen of BMO Capital Markets.

Interest rates continue to be range-bound although last week we closed near the lower end of the rate range. In fact, if one uses the 10-year T-note as a proxy for the general interest rate environment, it hit its lowest rate in over a month (2.31%, closing at 2.32%). On the mortgage side rates were helped by the continuing slowdown in supply and the continued strong demand for product (especially by the NY Fed). On Friday, the 10-year improved .625, the 5-year (which more closely mimics MBS) and MBS prices improved about .375.

This week's economic calendar is busy despite February payrolls not being released until the following week on March 10. This morning we've already had January's Durable Goods (+1.8%, but ex-transportation -.2%). Coming up are January Pending Home Sales Index, at 10:00am, expected higher. Tuesday brings GDP, International Trade in Goods, S&P/Case-Shiller HPI, Chicago PMI and Consumer Confidence. Wednesday has the MBA's application figures, Personal Income and Outlays, PMI Manufacturing Index, ISM Manufacturing Index, Construction Spending, and the Fed's Beige Book. Thursday brings the usual Jobless Claim but also Challenger Job Cuts. Friday closes out with ISM Non-Manufacturing Index (no unemployment data).

That's a lot of economic news. Will it make any difference? Perhaps. The bond market certainly believes that the Fed is going to raise short-term rates a couple times this year, although global problems could certainly drive money into our bond market pushing down rates. Or our economy could slow slightly, which would also push rates lower. In the meantime, we start the week with the 10-year yielding 2.34% and agency MBS prices worse .125 from late last week.

Jobs and Announcements

In job news, Fannie Mae has an opportunity to join its team of Quality Control Specialists. "In this role, you will provide oversight and consultation to many of our lenders on all aspects of loan quality. The ideal candidate will have 10+ years' experience in underwriting and quality control with an in-depth knowledge of the Selling Guide's QC requirements for lenders. Strong analytical, creative problem solving, and negotiation skills. The preferred locations are Chicago, Dallas, Philadelphia, or Pasadena, although alternative locations may be considered. To join our talented team of risk analysts, please apply here." For more information contact Lorna Kamau.

In wholesale & job news, Mid America Mortgage has been quietly establishing itself as the premier national agent of eClosings and eNotes for the Wholesale and Emerging Banker space. To that end, we have collaborated with Calyx to create an interface allowing Calyx users to obtain MAM pricing indications, guidelines and eligibility criteria, as well as generate a timely, compliant LE, without leaving the Calyx platform. MAM is also giving its brokers free access to the validation services offered as part Fannie Mae's Day One Certainty initiative and eliminating the 4506-T requirement for agency loans that use AUS findings that qualify under Day One Certainty. Finally, MAM has released a series of pricing enhancements to its FICO adjusters on government products, which can be found in Optimal Blue, Mortech, Calyx Point and MortgageElements.com. Our Wholesale & Non-Delegated Correspondent division is selectively seeking regional Account Executives to support our efforts in this area. Interested parties should contact Adam Rieke, MAM's Director of TPO Lending.

And in appraisal management news, InHouseUSA will discuss Predictive Estimated Due Date (PEDD) technology, how they provide clear proactive communications during appraisal process and their secret to reducing appraisal turn times at the Ellie Mae Experience 17. The InHouseUSA team will be found at Booth 12, their private meeting suite, or at the cocktail reception that they will host at Senor Frog's on Tuesday, March 7^th. InHouseUSA offers lenders integrated with Ellie Mae Encompass the bandwidth to work compliantly with a lender's panel and a limitless number of AMCs to maintain a single system for reporting and a consistent quality control policy. The Encompass Experience 2017 is at the Wynn Las Vegas on March 6-8. Do not miss the chance to have a live session by booking a meeting with an InHouseUSA team member here or sign up here to get on their invitation list to Senor Frogs.