“You never realize how many people you hate until you have to name a baby.” Plenty of folks in their 20s and 30s are, of course, having babies and buying homes – why rush either? Most in that age group are weary of being studied by marketing firms or surveyed by pollsters. But in one example, Qualtrics research finds 53% of millennials now own homes and 88% of those who do not yet wish to do so in the future. A problem is money: If someone is paying a lot of rent, it's tough to save up for a down payment - more on what lenders and LOs are doing about it below. With Freddie making $1.7 billion and Fannie making $3.2 billion in the 2nd quarter, the Agencies must be doing something about it.

Trends in Down Payments, DPA programs, and Rent

Fannie and Freddie began offering 3% down payment programs in 2014. Are they a huge portion of their business? No. Going back to early this year, as a measure of inflation, overall CPI (Consumer Price Index) growth in January 2017 grew at a pace of 2.5 percent on a year over year basis, the fastest pace since 2012, eclipsing core inflation - which excludes food and energy - for the first time since 2014. What was of interest to the industry were shelter prices. These are dominated heavily by rental costs, increased 3.5 percent in January compared to the year before. Sustained increases in rental costs have burdened renters since 2007 and are often blamed for preventing future homeowners from being able to save for a down payment on a home. Certainly, the large companies that own swaths of rental houses are reaping the benefits.

Learn how HomeReady mortgage can help your low- to moderate-income borrowers become homeowners with a 3% down payment. Join Fannie Mae on Aug. 16 at 2 p.m. ET for a live webinar geared toward loan officers. DU 10.1 impacts to HomeReady will be discussed and there will time to answer questions.

Of course, borrowers, eager to put as little skin into the game as possible, ask LOs about minimum down payment programs and some lenders have gone down that path. For example, FreeAndClear Mortgage is out promoting, "1% Down Payment Mortgage Programs Overview; There are a number of mortgage programs that enable borrowers to buy a home with a down payment as low as 1%..."

Pacific Union Financial is eliminating the current Stand Alone Down Payment Assistance (DPA) Policy and replacing it. The updated policy allows Pacific Union Underwriters to approve DPAs that meet the following requirements: No outlay of funds by Pacific Union is required.

Lender approval to participate is not required. All documents and disclosures are provided by the DPA provider. The Underwriter must document the process used to validate the acceptability of the DPA. This policy is not applicable to Delegated Correspondents.  When submitting a loan in which a DPA is utilized, the Seller must represent and warrant that the DPA meets the requirements for the applicable loan program.

"Pacific Union Financial bulletin PACUCL-2017-024 issued June 20, 2017 erroneously referenced our PacificPlus Down Payment Insurance (DPI) product. PacificPlus is not yet available to our Correspondent clients. The affected bulletin will be revised to correct this oversight and republished."

Land Home Financial Services, Inc. announced House2Home, an exclusive down payment assistance and educational program aimed at helping prospective first-time and repeat homebuyers achieve the dream of homeownership. House2Home is a suite of community grant programs providing down payment assistance in the form of a grant (gift money up to 5%) combined with a purchase money first lien mortgage for buyers on their primary residence. House2Home is geared to accommodate the financing most suitable based on borrower needs and requirements.

"Treat your lease-purchase transactions as a refi with built in equity. Angel Oak has guidelines that address that."

Of course, a pre-approval holds significantly more weight than a pre-qualification for renters looking to buy. Apartment rent growth is decelerating, which fuels concern about activity in the coming quarters. While the pace of asking rent growth advanced a record-high 5.5 percent in early 2015, a steady decline has brought that rate down to just 2.4 percent in the most recent quarter. Much of this deceleration can be traced back to moderating activity in once robust markets that saw strong growth from recent technology booms, such as San Francisco and San Jose whose markets saw peak growths around 10 percent, but now both are found with percent changes of less than one percent in Q1 as deliveries ramp up. Sacramento, however, due to its limited supply, posted the strongest pace of rental rate growth in the nation in Q1 at 9.2 percent. Given the expected slower pace of housing completions this year, overall asking rent growth should stabilize near its long-run average at around 2 percent.

LOs are eying demographics. Fifty-two of the largest 100 cities have more renters than owners. Foreclosures in the last ten years shifted millions from owners to renters, and now many want to come back. You also have people in their 20s and 30s coming into first-time buyer years, along with a rising Hispanic population. Mortgage rates are just fine. A Rent.com survey says that more than half of people in their 20s and 30s are spending more than 40% of their annual income on rent.

LOs are putting testimonials from renters-turned-buyers on their websites, and lenders are sponsoring Happy Hours, seminars, and classes on home buying near apartment complexes. Most renters find their information online, so marketing efforts need to include digital, photography, and video. LOs are also in touch with property managers since they are aware of upcoming lease expirations. And LOs stay up on down payment assistance programs as well as low down payment options.

Capital Markets

I just watched "The Big Short" again a few nights ago. In an unrelated issue, Kroll Bond Rating Agency, which was founded in 2010, recently upgraded the first-loss tranches of an RMBS deal, JPMMT 2014-IVR3, backed by prime jumbo mortgages. Strong home price appreciation and lower LTVs were among the key reasons for KBRA reducing its lifetime loss estimate on the collateral. Don't be surprised if this news helps other issues.

The issuance of newly originated non-Agency MBS since the financial crisis has been limited almost entirely to prime jumbo. SIFMA estimates total issuance since 2010 has been roughly $51 billion with Redwood Trust's mortgage REIT having the most meaningful jumbo exposure. TWO shut down its jumbo conduit business last year, but has retained some subordinate bonds.

Looking at interest rates, they seem happy where they are and volatility is dropping - a good thing for capital markets folks. There was one interesting piece of news, however. While next week's refunding was unchanged at $24 billion 3-year notes, $23 billion 10-year notes, and $15 billion 30-year bonds, the Treasury Borrowing Advisory Committee (for those who want more acronyms in their lives, the TBAC) recommended increases across 2-, 3-, 5-, 7-, 10- and 30-year securities beginning in November due to the Fed's shrinking of its balance sheet.

The 10-year note closed Wednesday yielding 2.26% while the 5-year and MBS prices worsened a few ticks (32nds).

This morning we've seen Challenger Job Cuts (down to 28k), initial jobless claims (-5k to 240k). Coming up, after I send this out, are some secondary, non-market moving numbers like Services PMIs for July, ISM's non-manufacturing PMI, and June Factory Orders. We start Thursday with the 10-year yielding 2.24% and agency MBS prices better by .125 compared to Wednesday's close.


A well-capitalized independent mortgage lender is looking to enhance its growth in the wholesale lending channel by launching an inside sales call center. This agency direct lender is seeking a seasoned mortgage professional with experience in developing, managing, and growing an inside sales team. This individual will be joining a highly motivated and experienced management team with a unique, relationship first approach. The goal of the position is to compliment the lender's existing TPO footprint through the development and growth of an inside sales team. Come be part of something special. Resumes can confidentially be sent to me; please excuse any delays due to travel in the Northwest.

Lakeview Wholesale is expanding its Wholesale Account Executive Team. "Our AEs enjoy unlimited potential by working with nationwide accounts with large territories, offering a full range of products including conventional, government and portfolio at very competitive rates and a strong compensation plan. We are looking for experienced AEs who want to growth their business by offering exceptional products and customer service. Learn more at our website or reach out to Kiely Hall-LaValley."

In retail job news, "American Bancshares Mortgage is a reliable, time-tested retail Mortgage Banker. For more than 22 years, we have empowered our partners, assisted our communities and expanded our footprint across the nation. We are direct seller/servicers with a retail channel focus. Our superior centralized platform is a fully integrated solution that covers the entire loan lifecycle. Our corporate culture is based on an environment of creative and collaborative communication, always keeping our core values of commitment, integrity and transparency as the pillars of our organization. As we continue to reach our goals and expand our nationwide presence we are looking to add Regional retail managers to our team. Current openings are in the North East, South East United States and Texas. If you are ready to join our dynamic fast-growing organization that focuses on empowering and inspiring you, contact Sandy Garcia for a confidential conversation to discuss our many benefits and opportunities!"

In TPO news, "Planet Home Lending's Emerging Banker Program delivers common sense underwriting and quick condition review to keep your pipeline flowing and maximize your warehouse turn-time capability. Visit Jan Manning, Silvia Garcia, and Ken Cudia at booth #607 at the Florida Association of Mortgage Professionals in Orlando Aug 9-11. Pick up the details on our innovative wholesale, non-delegated and delegated lending partnership programs. If you're looking for that next "good fit" partner to support your long-term plans, it's time to talk to Planet Home Lending - an investor you can grow with for years to come. Ask Jan or Silvia about our commitment to SLAs, great communication, and competitive pricing to meet your business channels' needs. Please reach out to Jan Manning (727) 249-6304, Silvia Garcia (407) 252-3819, or Kenneth Cudia (561) 488-2963 to learn more."

Starkey Mortgage, a nationally recognized residential mortgage company, announced the launch of its Reverse Mortgage Division. While Millennials are the largest segment of borrowers, the population of 65 years and older is expected to grow over 60% from 2010 to 2030, reaching a projection of 70 million seniors. (U.S. Census) Headed up by Ken Witte, branch manager and reverse mortgage specialist, the Reverse Mortgage Division allows Starkey Mortgage to better serve everyone from the first-time borrower to the last time borrower with a full range of forward and reverse mortgage options.  With customer satisfaction and closing times that outperform the industry, Starkey Mortgage has been creating memories since 2000. Visit here to learn more about reverse mortgages at Starkey Mortgage. 

A warm congrats to Kristy Fercho whom Flagstar Bank has hired to lead its mortgage business starting in September. Flagstar is no babe in the woods, having originated $32 billion in home loans in 2016 and is #5 of bank originators in the U.S.A. Ms. Fercho wraps up 15 years at Fannie Mae where she was previously a SVP and customer delivery executive overseeing the mortgage production of nearly 2,000 lenders, and was responsible for the customer delivery strategy and business performance of all customers in the western U.S., delivering single-family home loans to the agency. (Any questions should be addressed to Lee Smith, EVP and COO.)

National MI welcomes Matt Allison as Account Manager for Central and West Texas and New Mexico. Matt joins National MI with an extensive background in both lending and mortgage insurance, with most of his career at RMIC, and his experience as both a mortgage insurance provider and customer will benefit him in his new position.

According the STRATMOR Originator Census, Originators turnover was 29 percent for 2016, and the rate varied dramatically for the top 20 percent versus the bottom 20 percent. Do you know if your top originators are leaving at a faster pace than originators working for your peers? The STRATMOR Originator Census Survey is your link to valuable insights into loan originator production, age, turnover and tenure with your company as compared to your peers. Registration for the Fall 2017 census is now open and includes studies for Retail and Consumer Direct originators. http://bit.ly/2v9ah0R