The U.S. is divided up into regions. Have you ever noticed that we say, “Out West” or “Back East” – a holdover from centuries ago. It’s never, “Back West” or “Out East.” Historically, new housing nationwide led to more local shopping, and thus higher local sales tax revenues. But due to online shopping, that relationship has lessened. Warehouse banks usually operate nationwide, and I received this short question: “Rob, do you know of any warehouse lenders out there that don’t require audited financials?” Are you kidding? Every reputable warehouse bank requires year-end audited financials (despite 2019 being “long ago”) along with monthly (or quarterly) financials (aka, “interims”) signed by an officer of the company. There are a handful of captive warehouse providers that are also investors that require the funded loan be sold to them, but watch their pricing and terms.
Lender Products and Services
For those who would like to learn more about Johnston Thomas’s team of mortgage banking attorneys and how their firm can assist your company with its compliance and other industry related legal needs, Mr. Brody will be in attendance with his colleagues and is scheduled to speak at TMC’s upcoming Winter Conference in New Orleans, between February 16-18. However, if your company is not yet a member of TMC, Mr. Brody and his colleagues will also be attending the MBA’s upcoming Legal Issues and Regulatory Compliance Conference in New York, between May 3-6.
Join us and learn to market new VA mortgage opportunities in 2020! The recently implemented Blue Water Navy Vietnam Veterans Act of 2019 has provided new mortgage benefits for jumbo borrowers, active duty Purple Heart recipients and more. As a leading VA lender, Freedom Mortgage Wholesale’s No Down Payment VA Jumbo program enables eligible jumbo borrowers to exceed published FHFA county loan limits without a down payment requirement! No jumbo overlays or loan limits! Sign up for 2020 VA Mortgage Marketing training on 2/10 and 2/21.
Mr. Cooper Wholesale will be at the Texas Mortgage Roundup in San Antonio on February 11th. Stop by booth #124 and hear about all of our great offerings and new technology coming soon. If you are unable to attend please connect with us at https://www.mrcooper.com/wholesale
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Credit and Program Changes
This decade has seen a widening income gap and a homeownership gap. As loan officers everywhere know, leases are more predominant than mortgages in cities across the nation, and part of the reason is the credit rating of the potential borrower.
The House has approved a bill that would require credit reporting agencies to delete derogatory information more promptly and to boost consumers' ability to dispute information they deem inaccurate. The bill would also give the Consumer Financial Protection Bureau greater authority to ensure the accuracy of credit scores and to outlaw some methods of calculation.
The Federal Reserve Bank of Chicago undertook a study to identify geographic patterns in the locations of subprime-scored households across Midwest zip codes. LOs know that differences in credit scores and other attributes across neighborhoods are likely to affect the overall supply and nature of lending and investment in those places, as individuals with subprime scores face higher borrowing costs and may be unable to obtain bank credit, leading to use of more costly alternative financial products that have fewer consumer protections.
Credit scores also affect access to other products and services, such as cell phone contracts, employment, and housing. Households are classified as subprime (less than 620), near prime (620 to 760), or prime (above 760) based on the highest risk score in the household. Subprime households are more highly concentrated in urban centers, and include a much higher non-white share of the population, weaker labor market outcomes, lower educational attainment, and higher housing vacancy rates. Suburban areas tend to have very few subprime households in comparison.
The distribution of zip codes by percent subprime and population density suggests that the most subprime places tend to be densely populated urban areas, while the least subprime places are a mix of urban, suburban, and rural areas. Mean household income is much lower in the most subprime neighborhoods than in the least subprime neighborhoods, roughly $42,000 versus $102,000. The unemployment rate in subprime neighborhoods is also much higher, at 10.8 percent on average, versus 6.6 percent overall, and just 4.2 percent in the least subprime neighborhoods. The share of black households in zip codes with the highest concentration of subprime-scored households is 31 percent, but only 5.7 percent in the next-highest quartile. In the most subprime quartile, only 18.7 percent of adults have a bachelor’s degree, compared to 45 percent in the first quartile.
There are also noteworthy differences in housing market characteristics, including higher vacancy rates, lower homeownership rates, and older housing stock in the most subprime zip codes. Additionally, the most subprime neighborhoods are less likely to have credit card accounts or mortgage debt, as these lines of credit are likely not even an option. This means households in the most subprime zip codes borrow smaller amounts than households in less subprime zip codes.
This study highlights an important challenge confronting policymakers and the private market: namely, the creditworthiness of households is intertwined with economic adversity at the neighborhood level. Neighborhoods with a greater share of subprime-scored households exhibit more signs of economic adversity and lower levels of credit use compared to neighborhoods where the distribution of credit scores skews higher. Private market lending volume was substantially higher in neighborhoods with higher income and greater share of white residents. Because the flow of credit and investment has major implications for the economic vitality of communities, enforcing existing policies and applying creative solutions to strengthen fair and sustainable lending to disadvantaged neighborhoods are important goals for policy. Additional policy concerns may arise if there is a self-reinforcing mechanism of hardship for households whose lower credit scores may have already played some role in neighborhood selection.
Of course borrowers want to borrow and lenders want to lend. Let’s take a random look at who is doing what, program-wise. (Lenders can always visit www.mortgageelements.com to check on wholesalers.) Similar to A-paper lenders and subprime lenders fighting over the middle ground in 2007, non-QM is becoming more commoditized like every other loan where price is now a significant factor in choosing where to send loans, and more mainstream where exceptions are the norm.
Athas Capital Group will finance non-warrantable condominiums up to an 80% LTV and no HOA questionnaire required.
Plaza’s Solutions Non-QM program allows for a flat 50% expense ratio for loans qualified using business bank statements. Borrowers with expenses less than 50% may still qualify using the 3rd party expense statement, or P&L options. The borrower P&L option has been retired. Please note that businesses with high expense factors are not eligible for the Fixed Expense Factor. The housing payment history requirements have been updated to provide guidance for qualifying borrowers without a recent housing payment history.
Land Home Financial Services offers one-year income documentation on its Alpine Jumbo Product. Other highlights include 620 Minimum FICO, 80% Maximum Loan-to-Value (LTV); 75% LTV on Cash Out, Up to 50% Debt-to-Income (DTI), Up to $2,000,000 Loan Amount at 70% LTV; $1,500,000 Loan Amount at 80% LTV, Both Wage Earners and Self Employed, Owner Occupied, 2nd Home, & Investment and I/O Available.
HomeXpress has new and improved underwriting guidelines on its Bank Statement Loan Programs.
Among other programs, ACC Mortgage offers an ITIN program.
U.S. Treasuries ended last week’s volatile week rallying again as global growth concerns emanating from China drove markets in a risk-off mode. The Fed said the corona virus epidemic presents a new risk to the U.S. economic outlook, warning of disruptions to global markets. It’s also triggering more onerous travel restrictions and allegations of discrimination. That meant a stronger than expected January payrolls report (though perhaps not the 500k downward revision for all of 2019) was largely ignored. It would seem to me that markets are presently “numb” to news about the coronavirus, though the 10-year did end Friday -7 bps to 1.58 percent.
Unfortunately Friday’s jobs report was overshadowed, despite adding 225k jobs when the figure was expected to be 164k. Joel Kan, the MBA’s AVP of Economic and Industry Forecasting, observed, “Last month’s increase in construction employment (44,000 jobs) was a positive development for housing, as the homebuilding sector has been challenged by labor shortages and high costs. Wages firmed in January, a welcome sign for households looking to buy a home this spring.”
Capital markets folks tuned in to the large swings in dollar rolls led by the UMBS30 3 percent and 4 percent and GNII 3.5 percent rolls, which caused large swings in G2/UMBS swaps with the UMBS 3.5 percent fly as much as 12 ticks cheaper before recovering into the close. The bid to the 3 percent and 4 percent rolls was even more surprising, with FN30 speeds slowing, but less than expected, while 15s were slowed less than half of what was expected as GNIIs slowed a little more.
This week’s calendar highlights are likely to be the Quarterly Refunding, tomorrow through Thursday, as well as Fed Chair Powell’s testimony on the Monetary Policy Report before the House tomorrow and Senate on Wednesday. Other first tier economic releases include CPI on Thursday with retail sales, industrial production / capacity utilization, business inventories and Michigan sentiment on Friday. In mortgages the NY Desk is conducting a GNII FedTrade operation tomorrow when they purchase up to $429 million 3 percent and 3.5 percent, and will release a new FedTrade schedule as well as the four-week MBS reinvestment on Friday afternoon when many industry folks will have likely already headed for the exits ahead of the long weekend.
Today sees an extremely light calendar, beginning later this morning with remarks from Fed Governor Bowman. The only economic release today is the January Employment Trends Index, which comes before Philadelphia Fed President Harker closes the calendar with remarks this afternoon. We begin the day with Agency MBS prices roughly unchanged and the 10-year yielding 1.56 percent.
Jobs and Transitions
First Continental Mortgage, LTD. (FCM) is seeking to fulfill the position of Marketing Manager (MM). FCM is an independently owned mortgage banker headquartered in Houston, TX for the last 27 years with operations in Texas, Colorado, and Washington. The MM will develop and implement marketing strategies for our builder mortgage partnerships. The MM will work directly with FCM management to establish, enhance, and execute marketing processes and to build overall brand awareness for the business. The MM will promote the development of relevant, timely and measurable marketing initiatives for key objectives of the company. For a full description of this opening and to submit your resume, FCM Careers.
New American Funding has taken the biggest step yet in its market expansion growth in Arizona and Texas. With the hiring of Sean Casey as the new SVP of Retail Sales for Arizona and Texas, the company has put unprecedented focus on building elite teams of Loan Originators to uniquely serve customers’ regional loan needs in these territories. Sean has spearheaded massive year-to-year growth throughout his career. In his previous position as a Retail Division Manager, Casey helped drive growth of 5596 units for $1.7 billion in loan volume for 2017 to 6087 units and $1.9 billion in loan volume for 2019. “Sean displays the exceptional leadership and strong background we targeted to help fuel our expansive growth efforts,” said Jon Reed, EVP of Retail Sales for New American Funding. “Having held many key positions across multiple channels—including managing call centers as well as distributive retail, Sean is uniquely positioned to lead and succeed in this role.”
Congratulations to Leora Ruzin, CMB, who was recently named the new Managing Editor for Mortgage Women Magazine. She takes over for Kristin Messerli, who successfully ran the magazine for three years. Leora is currently looking for new contributors, and can be contacted here for article ideas.
Nations Lending announced the addition of Doug Opdycke as VP of Sales Recruitment to lead Nations’ recruiting team at corporate headquarters in the Cleveland, Ohio area as well as supporting branch development within the company's 83 existing locations across the U.S. Nations broke the $2 billion mark in loan volume in 2019.
Congratulations to Ginger Wilcox whom Home Point Financial announced is its new, and first, Chief Experience Officer (CXO) to work across the organization to drive innovation and accelerate the company's already considerable growth.