No one has a crystal ball, but CNBC makes the point that, as a nation, home prices won't fully recover until 2025, and that "price gains during the last housing boom were juiced almost entirely by an incredibly loose mortgage lending market that no longer exists." (Is the Ability to Repay standard enough to stop a "loose mortgage market" from re-occurring?) CNBC notes that, "In fact, most of the U.S. housing market has not recovered from the epic crash...Only about one-third of homes have surpassed their pre-recession peak value, according to a new report from Trulia."
Can the Origination Process Itself Become a Selling Point for Millennial Homebuyers?
Last October, the industry was introduced to a new era of automation at MBA Annual, which seeks to redefine lenders' decisioning and underwriting processes and set a new standard in borrower evaluation. Fannie Mae announced its latest version of Desktop Underwriter (DU), which was enhanced with an advanced validation service. Also playing a part in setting a new industry standard, Equifax announced several integrations (including one with Fannie Mae) and partnerships, all aimed at reducing two things: borrower documentation requirements and underwriting times. In addition, the initiatives were developed to strengthen credit risk assessment for lenders and deepen the pool of creditworthy borrowers.
Since these improvements were made to the origination process, the Federal Reserve has increased interest rates twice. Naturally, there's concern in the industry that rising rates will limit origination growth potential and impact the performance of the mortgage landscape overall, but lenders should be more optimistic - and here's why.
Ellie Mae's Millennial Tracker shows that mortgages to this generation for new home purchases accounted for 84 percent of closed loans. In other words, most borrowers purchasing a new home prioritize convenience over everything else. Paper-based processes are unappealing and cumbersome. Lenders are concerned about rising interest rates, but millennials are keeping an eye on what they're paying in rent. We've seen rental prices climb annually for nearly 20 years and it was only recently that the pace of that increase has slowed. Comparing the cost of an appreciating monthly lease to that of a lower mortgage payment makes purchasing a home even more appealing to money-conscious, younger homebuyers. What's more, findings from qualtrics and Accel's report, "The Myth of the 'Don't-Own' Economy," show that of the 47 percent of Millennials that do not own a home, an overwhelming 88 percent have one on their wish list.
Many believe that the timing of Fannie Mae's Day 1 Certainty program couldn't have been more ideal. The program makes the origination process simpler, faster and more user-friendly than ever, thanks to the inclusion of third-party data that automates the verification process and reduces risk. Partnering with a company like Equifax, lenders can verify employment and income information in seconds with employer-provided payroll records. In addition, these data sources allow lenders to easily retrieve tax transcript forms direct from the Internal Revenue Service. This level of automation digitizes many elements of the mortgage process, providing millennials with the convenience they desire.
The convergence of improved access to detailed verification data with the latest mobile technology is already having an impact on how lenders market to (and communicate with) borrowers who now can simply download an app, enter in some basic information, and obtain approval for a residential mortgage within minutes. The digital mortgage isn't new, but the speed with which mobile mortgage apps are now able to pre-qualify borrowers is, making access to analytics very important.
The very nature of the mobile origination process requires lenders to more quickly evaluate borrowers without the benefit of meeting them in person (or even over the phone) or taking the time to secure necessary employment and income information through the traditional paper-based process. For a borrower to qualify for a mortgage more expediently, there is some necessary evaluation that must happen first behind the scenes to pre-qualify the borrower. The reality is that not all borrowers will qualify for a more expedited mortgage, only ones that meet certain predetermined criteria. Credit scoring still plays an important role but lenders must also determine a borrower's true ability and propensity to repay the loan. This requires access to the right verification data and the ability to provide a faster, smoother origination process.
Many never thought they'd see the day when the origination process would be considered a key selling point for millennial homebuyers, but by removing friction points, such as requiring hard copy W-2s and pay stubs to apply for a mortgage, that time has come. The efforts of Fannie Mae, Equifax and every other organization that is working to help lenders embrace evolving technology and that successfully communicate data-driven verification processes should be applauded. These efforts will create growth opportunities with younger homebuyers, mitigate risk in the verification process and help reduce underwriting times.
Speaking of which, is there a hotter topic in the industry today than "Digital Mortgage?" STRATMOR recently conducted a Spotlight Survey on the level of adoption of Digital Mortgage. Many digital tools, including Day 1 Certainty, are being marketed as a risk management tool, but lenders don't perceive that to be one of the more significant benefits. Lenders are pursuing Digital in the name of customer experience and not to reduce risk. The report will help you understand what your peer lenders believe are the benefits and barriers to adopting Digital Mortgage and how far these lenders are in adopting 28 unique digital capabilities. Click here to purchase the comprehensive report and assess how you stack up to your peers in terms of Digital Mortgage.
Events and Training
This month MGIC will offer separate webinars for Evaluating Borrower Assets and Evaluating and Calculating Borrower Income.
Register for Plaza's June 12th complimentary webinar to gain insights from the NAR profile for home buyers and sellers. Get to know your target audience's characteristics and purchasing habits.
On June 15th, join Buckley Sandler and invited panelists for a discussion of the final CDD rule, the issues and ambiguities it presents, and practical advice for implementing the new requirements.
OpenClose and QuestSoft will hold a webinar on June 21 from 1 - 2:15 PM EST on the new CFPB HMDA regulations, how they will impact your organization, and specific plans to make compliance with the new HMDA rules the most efficient and time-saving process in the industry.
Simpler, more certain underwriting guidelines are coming with the release of Fannie Mae's Desktop Underwriter (DU) Version 10.1, during the weekend of July 29. For loan casefiles underwritten through DU, the maximum allowable debt-to-income (DTI) ratio will be adjusted in DU Version 10.1 to consider applications with a DTI ratio up to 50%. For details, review the DU Version 10.1 Release Notes. To learn more about the DU Version 10.1 enhancements, register for an upcoming webinar.
Wish you were in Hawaii? Register for this year's MBAH Annual State Conference, "Game of Loans" June 29th & 30th being held at the Hawaii Prince Hotel Waikiki in Honolulu. This years' speakers include Speakers include yours truly, Chris George, Phil Guth, Sue Woodard, Kristin Messerli, Ben Wu, and many more.
This year's Ultimate Mortgage Expo is being held at the Hotel Monteleone in New Orleans, July 10th-12th. There is a great lineup of speakers this year with topics that range from motivational speakers to special insights and tech opportunities as well as industry trends.
Join MBA for a 1-day collateral underwriting workshop in Washington D.C. on July 21st. This workshop will help improve your decision-making ability, loan file quality, and increase productivity throughout the processing and underwriting process for conventional and government loans. You will also learn how to use Fannie Mae's Collateral Underwriter tool and review its applications through a live demo and case studies.
It's time to register for California MBA's 22nd Annual Western States Loan Servicing and Technology Conference August 6th - 8th in San Diego.
Although US Bank is no longer offering live weekly UniteUS training sessions, recorded training sessions are in its Seller Guide > Client Resource folder > M3: On Demand Training.
Where would the world economy be without borrowing? (Some would say in a habitually better place, financially.) The demand for borrowing capital impacts rates, and vice versa. U.S. household borrowing has hit a record $12.73 trillion, and the proportion that is overdue has climbed for two quarters. Banks are raising standards for auto loans, and credit card companies are increasing reserves for potential loan losses. Yellow alert?
You say that the Federal Reserve's Open Market Committee is going to raise rates next week? You sure about that? The Federal Reserve is expected to raise interest rates next week, but an earlier intention of a further series of increases appears in jeopardy. Factors such as low wage growth, sluggish economic growth and doubt about tax reform might force the Fed to rethink its schedule and could complicate shrinkage of its balance sheet.
In terms of the actual bond market and rates, U.S. Treasuries and agency MBS prices moved lower yesterday (and the yield curve steepened with the 10-year losing .250 in price and closing yielding 2.18%) despite a sharp decline in crude oil prices following the EIA crude inventory data release. There is some thinking that rates have dropped too much, especially given that the Fed is highly likely to hike rates next Wednesday and the global economy is strengthening.
Jobs and housing drive the economy, and this morning we've seen our usual initial jobless claims figure: -10k to 245k - still strong. We see this every week; what we don't see every week is the European Central Bank decision (leaving them unchanged), the UK election results, and Comey's appearance before the Senate Intelligence Committee - the investigation will go for months if not longer. With all this, we find the 10-year yielding 2.20% and agency MBS prices worse nearly .125 versus Wednesday's close.
Jobs and Announcements
A growing super community bank, located in five western states, is looking for producing Regional Production Manager (RPM) to expand its existing footprint in the greater Sacramento area. The ideal candidate will either come with a team or have a proven track record for recruiting and retaining loan officers. The bank's product & business mix includes direct lending to Fannie and Freddie, FHA, VA, Cal Housing, USDA, as well as portfolio lending to include lot loans, custom construction to 95% LTV, CRA specific programs, and several jumbo products. Please send confidential inquiries to me; please specify the opportunity.
"We are a fast paced, San Francisco-based mortgage company seeking an onsite Sr. Loan Processor with excellent communication skills, experience with a variety of LOS's and strong analytical skills. This position is not the same old operations based processing role; our processors are a primary point of contact with our business partners and consumers as well as our talented software engineers and designers building a better consumer experience. If you're looking for a new challenge that includes a role of communication and analytics and the opportunity to improve the process - let's talk. Strong candidates will have experience with FHA, Conforming, Non-Conforming, DO, DU and LP submissions. We offer an excellent salary, generous vacation, and benefits such as medical, dental, vision, 401(k) plans, and commuter benefits." Please send me your confidential note of interest and specify the opportunity.
Home Point Financial Corporation announced its executive team, including executives in new leadership roles to position the company for growth and success. Following the recent completion of its acquisition of Stonegate Mortgage, Home Point now has full coverage in all channels of origination, as well as warehouse lending offerings. Members of the executive team include Willie Newman, Jim Smith, Howard Nathan, Matthew Goodman, Brian Brizard, Maria Fregosi, Sheryl Johnson, Paul Orlando and Kelly Henry. Additionally, former Stonegate Mortgage executives including Steve Landes, David Dill, Doug Gilmore, and David Kress have assumed senior leadership roles at the company. Willie Newman, President and Chief Executive Officer at Home Point noted, "The depth, experience and expertise of the team provides us with the leadership required to build an industry leader."
If you are a mortgage lender and have 3 min, here's an opportunity to win a $250 VISA Gift Card. To enter, just fill out this quick survey focused on the use of technology in mortgage origination. (The terms for the prizes are noted in the link.) Hurry over to the survey today to enter the prize draw before it's too late.
Congrats to Amy Tierce who has joined Massachusetts' Mortgage Equity Partners as the VP of Sales & Marketing.
In lender news, Stearns Lending announced that it acquired the mortgage production channels of Primary Capital Mortgage: the wholesale, non-delegated correspondent, and consumer direct lending businesses. Primary Capital is no slouch, having originated $1.9 billion in loans in 2016. Stearns said that the company has offered positions to the Primary Capital mortgage production related employees that impacted by the deal.