Jobs and housing make up the lion’s share of our economy, and the two intersect when a house is being built. But what is the exact impact? For any LO giving a presentation to a builder or real estate agent, here’s a recent NAHB breakdown on how 1,000 new homes influence the economy (spoiler: 2,975 jobs).
There is a lot going on with pricing out there. Let's play some catch up on news & trends directly influencing rate sheets & consumers.
Matt Scully sent along a piece from Christopher Maloney with Bloomberg News wrote up a piece titled, "FHA Should Impose 'Cap' on Riskier Borrowers, NY Fed Says." Of course borrowers don't usually wait for a fee change in order to buy a home, but this could impact refis. "A 'sustainable' housing policy would necessitate 'the FHA impose a cap' on borrowers' expected default rates, NY Fed economists W. Scott Frame, Kristopher Gerardi and Joseph Tracy write in a blog post. The FHA should determine the cap at time of origination using the credit score, LTV, and economic outlook. Government-insured mortgages 'are not low-risk loans,' as their high LTV and low credit scores combine 'into extremely high default rates.' The 5-yr cumulative default rates (CDR) during 2000-2011 period varied between 5%-25%; those loans done through Fannie/Freddie showed default rates an 'order of magnitude lower.' The 2002 and 2009 vintage GSE loans had 5-yr CDRs of ~2%; same vintage GNMA loans were 10%/13%.
"The housing price collapse starting in 2006 resulted in FHA's Mutual Mortgage Insurance Fund needing 'financial assistance from the federal government' in 2013. There is an 'important relationship' between credit scores of borrowers and government mortgage performance; lower credit score loans default at higher rate than higher credit score loans. In terms of FICO, loans with FICO scores <600 are 'by far the riskiest segment' with 5-yr CDRs peaking at >40% in 2007. Government-insured mortgages post-crisis peaked at ~35% of total in 2009 (from ~3% in 2000-2005 period) and have been ~20% over last 4 years."
NYCB Mortgage clients were notified, effective for locks on or after 6/10, the loan level price adjustment (LLPA) for Conforming Fixed High Balance transactions will increase as follows: LLPA for All States (except for California) from -0.750 to -0.875 and LLPA for California from -1.000 to -1.125.
National MI posted new rates for BPMI singles and LPMI monthlies. The company modestly raised prices for LPMI monthlies, which are less than 1% of production. The company reduced premiums on BPMI singles with FICOs over 740+ and raised prices for lower FICO loans. BPMI singles were under 5% of total production for the company. The new prices go into effect on June 27. The company raised prices for LPMI monthlies by about 1%. The company reduced premiums on BPMI singles with FICOs over 740+ and raised premiums for lower FICO loans. For example, premiums on loans with FICOs between 720-740 and 95-97 LTVs went up meaningfully to 3.90% from 3.08% (and are now materially higher than the 3.26% charged by MGIC for the same bucket). Premiums on 760+ FICO 95-97 LTV loans fell to 2.10% from 3.08% (and compares to the 3.26% charged by MTG, which charges the same premium for all BPMI singles with FICOs over 720).
Effective June 1 all Ditech delegated and conditional delegated clients will be charged $300 for all condominium reviews regardless of decision (approved, suspended or declined). For loans that fund, the fee will be deducted from purchase advise. For condo reviews that have been completed on loans that don't fund, the $300 fee will appear on the clients monthly e-billing statement.
Effective as of June 6, for all existing active and new locks, NewLeaf Wholesale has updated its Rate Lock Policy.
Citi's premiums offered for MSAs in specified areas changed effective with locks on or after June 1st. Clients should refer to the updated Citi CRA Premium Schedule for complete details.
Beginning with loans disclosed after May 20 Mountain West Financial implemented the following changes to its Sapphire program: The origination fee to the broker will be limited to 1.00%. A 0.50% origination fee will be charged by MWF. The Early Payoff (EPO) Policy, as outlined in the Broker Agreement, will apply for Sapphire loans paid off prior to the receipt of: 6 scheduled monthly payments, regardless of reason for payoff; or 12 scheduled monthly payments if the loan is refinanced by the broker. The EPO Policy is waived if the refinance is completed by MWF. Sapphire production is limited to 50% of a broker's overall quarterly funded units. If Sapphire concentration exceeds 50%, then that broker will no longer be permitted to originate Sapphire products. The first review will take place after Q3 2016.
To answer a few emails: yes, the Federal Reserve Bank of New York was selling MBS securities on May 25th, and no this is not to be misinterpreted as an exit from their current holdings. As stated in the Feds February 17th Operating Policy statement, "In connection with this authorization and consistent with recent practice, the FRBNY Open Market Trading Desk plans to conduct small value exercises from time to time as a matter of prudent advance planning. The conduct of such exercises does not represent a change in the stance of monetary policy, and no inference should be drawn about the timing of any change in the stance of monetary policy in the future from them." The exercises can be an assortment of activities, for instance: repurchase agreements, outright purchases and sales of Treasury securities, outright sales of mortgage-backed securities (MBS), coupon swaps of unsettled MBS holdings, and U.S. dollar and non-U.S. dollar liquidity swap operations. The next scheduled house cleaning was on June 1st, where the NY Fed will be selling approximately $30 million GNMA.
While we're on mortgage-backed securities, they, and U.S. Treasuries, rallied modestly Wednesday as all eyes were focused on today's U.K. referendum on its membership in the European Union. Various polls released throughout the day pushed markets to and fro but betting markets still show that a 'remain' result is about a three in four chance. If you've come to the realization that "the market" becomes fixated on uncertainty, you are correct. Fed Chair Yellen appeared before the House Financial Services Committee, saying nothing new or unusual. The Treasury sold off $28 billion in 7-year notes.
Existing Home Sales data for May showed the fastest seasonally adjusted annualized rate in over nine years and a median selling price at an all-time high of $239,700. First-time home-buyers accounted for 30% of the sales and inventory has fallen to 4.7 months' worth of sales, well below the traditional norm of six months. And the Federal Housing Finance Agency's index of house prices was reported to have risen 0.2% m/m in April. Estimates were for a larger gain and the index's jump in March was revised up to 0.8% from the initial print of 0.7%. Year-over-year growth was 5.9% in April.
But that was all so...yesterday. Today we've had Initial Jobless Claims for the week ending 6/18 (-18k to 259k, lower than forecast). Later, at 8AM MDT, is May's Leading Economic Indicators along with May New Home Sales. Rate sheets are going to look a little worse today: the yield on the 10-year is up to 1.74% and agency MBS prices are down a solid .125.
Jobs and Announcements
On the job side of things, HR recruiter Sonya Brewer sends, "Here we are at the end of the 2nd quarter of 2016, everyone is 'happy,' it is summer & vacation time, right? NOT! The candidate pool is out there on vacation not realizing that right now is the time to get the best opportunity for vacation, benefits, and salaries. All we hear is 'after the summer', 'when my kids are back to school', 'later in year,' but during the 3rd quarter companies are planning for their 2017 budget! Clients are trying to fulfill their staffing goals by 3rd qtr.'s end. The job candidates want is to be had, but they wait, those exceptional compensation opportunities will be slim. The Mortgage Recruiter is searching for a COO for a lender in Colorado, EVP of Operations & Processing Manager, San Diego, CA, and retail & wholesale opportunities in Dallas & Houston. In Denver, retail branch & area managers. On a national level, retail branches & LOs with salaries and wholesale AEs with salaries. Contact Sonya Brewer for more information or to submit a resume, and specify opportunity - you will be interviewing within 48 hours."
Box Home Loans, a national, consumer direct lender headquartered in Lindon, Utah, is growing rapidly and is hiring underwriters. Applicants must have recent VA experience. Applicants must also be comfortable with rapidly evolving technology as Box Home Loans describes itself as a technology company that happens to be in mortgage lending. Its proprietary technology allows it to originate, process, and underwrite with extreme efficiency and compliance. Because Box Home Loans operates in a completely paperless environment, some of its underwriters work remotely. Resumes should be sent to Jeff Reeves.
Today, I was announced as a keynote speaker at Todd Duncan's Sales Mastery Event (Oct. 4-7th, 2016). Click here to check out the announcement and a video I've recorded for Sales Mastery. (Do you have a business success story that you'd like to share? Click here for an opportunity to share your story from stage at Sales Mastery 2016.)
Congrats to Alex Saphos who was with Fannie Mae for almost 30 years but has now joined HomeBridge in the role of Investor Relations Advisor. This is a new position at HomeBridge and Alex will be charged with seeking opportunities to connect HomeBridge's origination abilities with the needs of outside portfolio investors across the country.
Embrace Home Loans announced that Boston-based Eastern Bank, the largest community bank in Massachusetts with $9.9 billion in assets and nearly 100 branches across Massachusetts and New Hampshire, has partnered with Embrace to strengthen its lending operations. Under the partnership, "Embrace Home Loans will provide operational resources to support the loans originated by Eastern Bank...Further, as the demand for home financing grows, Embrace's 33 years of proven experience will allow Eastern Bank to increase its competitiveness by significantly speeding loan closings, enhancing the real-time connectivity with referral partners, and improving the overall borrower experience."
And recently word spread from the American Bankers Association - through its subsidiary the Corporation for American Banking - that it has endorsed the fulfillment and correspondent lending services of Stearns Lending, LLC, an independent mortgage lender and servicer with wholesale, retail, correspondent and strategic alliance production channels. Stearns Financial Institutions Group is the sole independent mortgage banking firm listed as an ABA Endorsed Mortgage Lending Solution. "Selecting Stearns for this endorsement followed a comprehensive due diligence process that included extensive review of the company's mortgage fulfillment capacity, product menu, regulatory compliance framework, management strength and financial soundness. The review was conducted by industry experts and field-tested by bankers to meet stringent customer-service standards, as well as ABA's quality standards.
And remember that in February Citibank has added Mortgage Guaranty Insurance Corporation (MGIC) to its list of approved Mortgage Insurance providers. Correspondents immediately began submitting loans insured by MGIC.
Last month Essent Guaranty announced a full integration with Mortgage Cadence's Enterprise Lending Center Loan Origination System. "With this integration, Essent customers who also use ELC can acquire timely rate quotes as well as experience seamless delegated and non-delegated MI ordering - never having to leave their LOS."
In late May Union Bank announced that it has received a $1.75 million grant that will be used to provide 3-to-1 matching grants of up to $15,000 to low- and moderate-income homebuyers to go toward the purchase of their first home. Julius Robinson, head of Corporate Social Responsibility for the Americas at Union Bank, noted, "We are honored that the FHLB of San Francisco has entrusted us again this year with both WISH and IDEA program funds. Like the FHLB, we believe that home ownership is critical to building strong, vibrant communities and we look forward to putting these funds to work to help even more buyers achieve the dream of home ownership."
Ditech has added Mitsubishi Securities as an approved counterparty for its AOT program.
Outright announced bank M&A continued in the last week. South State Bank ($8.7B, SC) will acquire Georgia Bank & Trust Co of Augusta ($1.9B, GA) for about $335mm in stock. In Michigan Commercial Bank ($407mm) will acquire Mason State Bank ($117mm) for about $14mm in cash (50%) and stock (50%). And in North Carolina First Bancorp ($3.4 billion, Southern Pines) has agreed to acquire Carolina Bank Holdings, Inc. ($706 million, Greensboro) for $97 million in cash (25%) and stock. In the land of armadillos Commercial Bank of Texas ($571mm) will acquire The First National Bank of Emory ($111mm). First United Bank and Trust Co ($3.2B, OK) will acquire American Bank of Texas ($2.3B).