As residential origination volumes and margins contract, plenty of lenders are looking at construction, non-QM, bond, government, ARM, SBA, and USDA lending opportunities. Who are Acore Capital, Apollo Commercial Real Estate, Blackstone Mortgage, KKR Real Estate, Mack Real Estate, Madison Realty Capital, Mesa West Capital, Starwood Property and TPG Real Estate Finance? They are non-banks thought to be doing something right and are on the forefront of construction lending. In other lending news, the OCC may encourage depository banks to increase short-term lending to cut down on abuses at locations like check-cashers, pawnshops, etc.
Down Payment News, LTV Guideline Shifts
In 2016 the home ownership percentage dropped to its lowest rate since 1965. Rates are decent, there’s an incredibly strong job market, but renters continue to struggle coming up with a down payment. Rents have gone faster than any other component of the Consumer Price Index, which hasn’t helped, student debt payments impact many, and other bills add up. Interestingly, in metro areas around the nation, a mortgage payment is less expensive than a rent payment. There’s general agreement that potential buyers are more than capable of affording a monthly mortgage payment but saving for the down payment is a problem.
Enter down payment programs (DAPs). There are a wide variety of programs, although grants and DAPs typically have limitations and restrictions, and some require the borrower to pay back the down payment over the life of the loan. But other programs are springing up…
This week Mortgage Guaranty Insurance Corporation (MGIC) announced its partnership with Down Payment Resource (DPR). “Through this partnership, MGIC customers will have access to discounted Down Payment Resource services that make it easy for lenders to research down payment assistance programs and match borrowers to programs for which they may be eligible. MGIC and DPR will also work together to enhance consumer understanding of the availability and benefits of down payment assistance.”
And recently mortgage lender CMG Financial launched HomeFundMe, a crowdfunding website for prospective homeowners. Appealing to millennials saddled with student loan debt and other cost-of-living expenses, HomeFundMe donations are treated as gifts with no perks for the donor. HomeFundMe is “the first online platform that allows borrowers to crowdfund the down payment on a home purchase without fees and with the backing of mortgage giants Fannie Mae and Freddie Mac…Most business crowdfunding platforms offer returns on the investment, but this has none — it is simply a gift. Individual gifts will be small, in the $50 to $250 range. The platform can be linked to wedding and baby registries.”
“As an incentive for encouraging prospective homeowners to attend credit education courses and counseling, borrowers can also receive grants of up to $2,500 once they've completed the free classes. After that, the platform will match donations at $2 for every $1 raised, up to $2,500.”
Freddie Mac announced updates in its Single-Family Seller/Servicer Guide Bulletin 2018-5. Updates include increasing the maximum LTV/TLTV/HTLTV ratios for purchase and “no cash-out” refinance mortgages for second homes and 2-unit primary residences. Revising the requirements for condominium unit mortgages. Allowing an attorney’s opinion of title for mortgages secured by units in a planned unit development.
A primary residence two-unit property is now permitted for ditech High Balance LPMI Fixed Rate Product with the following guidelines: Purchase and Rate &Term Refinance, Max 85% LTV/CLTV, Minimum credit score 620, Fannie Mae eligible only, DU Approve Eligible and No Manual Underwriting.
Banc of California addressed LTV calculations. “On a Rate and Term Refinance, we will use current value after 6 months. On a Cash Out Refinance, we will use current value after 12 months (previously it was 12 months on both).”
Non-Prime Wholesale Residential Lender, Citadel Servicing Corporation (CSC), announced it will begin offering a 5/1 Hybrid Adjustable Rate Mortgage (ARM) and 5/25 Interest Only (IO) term. CSC has also introduced their easiest qualification program for full doc income to date by allowing a single year’s Returns or W-2 as documentation. The company has also expanded their 12-month bank statement program to 90% loan-to-value (LTV) with no mortgage insurance requirement.
Plaza is now offering an interest only feature with its Solutions Program. 40-year total product term. 10-year interest only, followed by 30-year amortization. 5/1 ARM, 7/1 ARM and 40-year Fixed Rate products. Borrowers qualify using the 30-year fully amortized payment. 80% maximum LTV/CLTV. All other Solutions guidelines and eligibility are the same. Pricing will use the same base price and adjustments plus an IO adjustment (hit) based on LTV/CLTV.
Capital Markets
Most believe that rates will continue higher. Looking at this morning’s news, with a huge tariff-fueled stock market move downward, why aren’t rates moving much lower? As the first quarter wound down, economic data remained generally positive and continued to point towards GDP expansion through the beginning of 2018. The third estimate of fourth quarter GDP was up to 2.9 percent as stronger consumer spending and inventory accumulation fueled the increase. The first estimate of 2018 will be released on April 27.
Employment, wages and hours worked all increased in February and nominal personal income increased a modest 0.4 percent. Personal consumption increased 0.2 percent in February both at the headline and excluding food and energy. After adjusting for inflation, real consumer spending was flat. Autos remain weak and are expected to remain so as the market adjusts to last fall’s swell of replacements for hurricane and flood damaged vehicles.
Looking ahead at to the rest of the Federal Reserve’s open market committee meetings, current market expectations put the remaining potential three rate hikes at the June, September, and December though the year is still young, and expectations change frequently.
Arrgh, it be the curse of the commentator. Just as I was discussing the recent drop in rates Monday, the 10-year shot up 5bps Tuesday, causing a steepening of the Treasury yield curve and frustrating LOs everywhere. A lot of you ask me where rates are going, and I usually like to respond that if I knew, I’d probably be giving an assistant my approval for publication of this commentary from a beach in the Caribbean and not here as Myrtle’s food lackey and door man.
But I digress. We were witness to a reprieve in funding rates as balance sheet availability slowly returned following the quarter end funding squeeze. Speaking of supply, final supply for March was released, which showed gross supply coming in well below February’s total at $83.3bn vs. $90.0bn with net supply. The only other news of note from yesterday was that San Francisco Fed President John Williams will replace New York Fed President William Dudley after his retirement later this year.
Today’s calendar kicked off with weekly mortgage applications from the MBA for last week: -3.3%, purchases -2%, refis -5%. The March ADP employment report came out: +241k with a back month revision higher versus expectations of a 225k increase in private payrolls. Ahead are some second-tier numbers: Markit Services PMI for March, the ISM Nonmanufacturing PMI, and February factory orders. And those rascally Fed speakers will be out: Brainard, Bullard, and Mester all taking to the stage. Wednesday starts with the 10-year yielding 2.75% and agency MBS prices only better a smidgeon versus Tuesday’s close.
Lender Products
“A recent commentary by Andrew Hong of the Tobe Agency highlighted some of the problems and challenges that LOs face in their jobs – 54% of the LOs who participated in his SURVEY consistently indicated the need to improve and grow their referral relationships. Enter HomeScout, a national MLS for lenders by HBM and powerful contact conversion system that provides LOs with a technology platform to close more transactions by leveraging their referral base of Realtors. Whether you’re an office of 2 or 200, we have an affordable solution for you that creates an immediate ROI. For more information or to schedule a demo, reach out here or give us a call at 952-831-0623. You can also schedule an appointment with us at the MBA Technology Solutions Conference, in Detroit, MI April 15-18 and stop by our booth #345.”
Floify, the leading end-to-end mortgage point-of-sale (POS) solution, has been experiencing a surge in the number of enterprise lenders looking to acquire their services to streamline the mortgage process across their operations. This widespread adoption among enterprises is due in part to growing support of Floify’s centralized and LOS-integrated Disclosure Desk, as well as the upcoming release of Floify’s remastered “interview-style” 1003 application, which promises to give borrowers a beautiful, simple, and secure online loan application. If you’ve been considering Floify for yourself, your brokerage, or your enterprise, now is a great time to take advantage of this incredible solution. Floify helps LOs close loans an average of 8x faster and increase annual loan volume by more than 11%. To experience the power and efficiency of Floify, and discover how the platform can improve your operations, request a live demo.
Employment and Promotions
XINNIX, the mortgage industry’s premier provider of sales and leadership performance programs, is expanding its team and looking for four National Sales Executives regionally located in California, the Midwest, New England, and Texas. Each National Sales Executive is responsible for having a strategic plan for each client, implementing that strategy and managing the client relationship. Want to join a dynamic team with award-winning culture and a passion for transforming the industry? Send your resume to Kevin Knause, VP of National Sales.
Bay Equity Home Loans continues its national growth plan in 2018 opening branches in Texas, Florida, California, Washington, and Kansas. Bay is now searching for production opportunities in the Mid-Atlantic region. “Our LO centric model can accommodate regional managers, branch managers or even top producers who want to operate and run an expense management branch in addition to a corporate branch model. Next month we kick off our internal Bay Equity mastermind program to share ideas amongst our producers to help them achieve their career goals. If you would like to learn more about Bay Equity and our unique family culture, please reach out to Sean Wilson. Sean and the ownership will be in Washington DC area the week of April 8 to connect.”
Primelending’s Award-Winning Culture Continues to Rack Up Best Workplace Recognition. PrimeLending ranked #4 on this year's Best Workplaces in Financial Services & Insurance list created by Great Place to Work© and Fortune. It’s the fourth year in a row the premier lender has landed inside the top 10 list, which is compiled based on surveys from 60,000-plus industry employees nationwide. PrimeLending employees rated the company in the 95th percentile in leadership strength and integrity, pride in their work/organization, opportunities for professional growth and support for work-life balance. The company’s people-centric culture creates a team environment in which everyone shares the same focus – finding ways to help customers win. PrimeLending has also been recognized as a Best Workplace for Women, Diversity, Parents and Generation X. If you value integrity, teamwork and work-life balance, PrimeLending may be the best workplace for you, too. Contact Dudley Strawn at (469) 737-5743 today!
There are immediate job openings at Colonial Companies for key production positions! Its CU Members Mortgage and Colonial National Mortgage divisions are seeking the best of the best, mortgage loan officers nationwide, including Dallas, TX, Las Vegas, NV, and Washington, DC. Take your career to the next level - apply today at ColonialCareers.com!
#IamColonial EOE/M/F/Disability/Vet. Member FDIC | Equal Housing Lender | NMLS ID 401285.
Commitment to profitable growth requires extraordinary field leadership and operators that know and understand what it takes to assemble high performing sales teams. With this commitment to growth in mind, it’s with great excitement, that Sierra Pacific Mortgage announces the promotion of two exceptional leaders within the Sierra Pacific family. Brian McGinley and Lex Sheriff have been promoted to Retail Regional Managers and will be charged with growing their individual regions and to provide leadership and growth initiatives for our existing branch footprint. Brian will be focused on the mid-west, growing Kansas, Oklahoma and Missouri while Lex will be leading the southeast teams in Virginia, North and South Carolina, Maryland and Pennsylvania.
Planet Home Lending has opened two new branches: Denver, with industry veterans Wesley Tool and Derrick Strauss as branch managers and Shreveport, Louisiana, managed by Steve Hebeisen. “We came to Planet because we share the same values of teamwork and caring about the customer,” said Tool. “The company vision is in line with ours. Plus, we’re seeing competitive rates, low fees, and quick processing of transactions.”
In other personnel news, congrats to Chris Herbert who is Freddie Mac’s newest director on its board. Mr. Herbert, 57, has “extensive experience relating to housing policy and urban development, and has been the Managing Director for Harvard University’s Joint Center for Housing Studies and a lecturer in Urban Planning and Design at the Harvard Graduate School of Design” as well as prior posts.
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