The state of most commodity prices around the world? Prices are higher. What is the current state of donating blood? I tried donating blood again yesterday in San Luis Obispo, CA. Never again! Too many intrusive questions. ‘Whose blood is it? Where did you get it? Why is it in a bucket?’” The current state of the real estate market? Let’s see what these “rappers” have to say about it. The status of cryptocurrency mortgages is worth knowing. How about the current state of the jumbo biz? There’s more jumbo and non-Agency news below, but from the production perspective for many independent mortgage bankers (IMBs) it’s ugly as banks continue to use their ample deposits to price “under” market. (But if that’s where they’re pricing, isn’t that the market?) From an ops perspective, the #1 problem is disagreement about the income calculation. Of course there’s always the question about collateral… How about from the compliance perspective? The CFPB has made no secret of its focus on Fair Lending, and nearly everything associated with it. The California’s MQAC committee is hosting a webinar on Fair Lending today at 11am PT. (Today’s audio version of the commentary is available here and this week’s is sponsored by ICE Mortgage Technology, the leading cloud-based loan origination platform provider for the mortgage industry, with solutions that enable lenders to originate more loans, lower origination costs, and reduce the time to close, all while ensuring high levels of compliance, quality and efficiency.)
Lender and Broker Products and Services
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ACES Quality Management adds key industry experts to conference line-up! Taking place at the historic Broadmoor Hotel in Colorado Springs on May 23-25, 2022, ACES ENGAGE will bring together the nation’s top financial services quality management professionals to discuss industry trends and best practices across the mortgage lending, loan servicing and consumer lending spectrums. With an agenda featuring industry experts, a keynote speaker with a harrowing story, the latest ACES product innovations, and client-led discussions, key session highlights include a keynote session led by Aron Ralston, NYT best seller, Between a Rock and a Hard Place & Oscar-nominated film, 127 Hours. An Economic Update and Outlook led by Dr. Eddie Seiler, AVP of Housing Economics at MBA. How to Best Prepare for a MORA Audit led by Steve Spies, President at SWS Risk Advisory LLC. A Compliance Update led by Amanda Phillips, EVP of Compliance at ACES Quality Management and Richard Andreano Jr., Practice Leader at Ballard Spahr's Mortgage Banking Group.
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Jumbo and Non-Agency Items
Some $20.13 billion of jumbos were originated through correspondents, up 15.3% from the third quarter. Inside Nonconforming Markets reports that, “The retail platform (where most jumbo products come from) experienced a 1.2% quarter-over-quarter decline while lending through brokers dropped 26.5%. Jumbo production through brokers was up on an annual basis in 2021. “Among a large group of lenders that originated $119.85 billion of jumbos in 4Q21 and reported production by channel, correspondent lending grew on a sequential basis while retail and broker volume declined.”
Citi Correspondent Lending implemented a loan level pricing adjuster change for Non-Agency purchase transactions, reflected on page 5 of the 3-11-2022 Best Efforts rate sheet.
First Community Mortgage updated its Summit/Peak Guidelines, details available in FCM Wholesale Announcement 2022-11.
United Wholesale Mortgage (UWM) announced it will accept personal or business bank statements instead of income documents or tax transcripts to qualify for a loan. Bank Statement Loans will be available for self-employed borrowers only, for loans up to $3 million, up to 90% LTV with no mortgage insurance required. This will give independent mortgage brokers another competitive edge when it comes to working with non-W2 borrowers. In addition, UWM extended its No-Cost Appraisals for primary purchases until the end of April.
Non-owner? The UWM product is called “Investor Flex” and offers 30-year terms. Borrowers can qualify for the loan based on the property’s monthly rental income rather than the applicant’s wage earnings. “It’s available on purchase and refinance loans up to $2 million, and can be used to finance up to 20 properties.”
Home equity lender, Spring EQ, announced significant home equity product updates and improved guidelines for investment properties, second homes, bridge loans, and more.
Examples of Spring EQ’s recent home equity product updates include Availability of Bridge Loans in all licensed states, Maximum total financing increased to $3 million on primary residences and Acreage limit increased to 20 acres. Also, Spring EQ’s investment properties and second homes guidelines have been expanded on its fixed-rate home equity loan product.
Whether or not a renter can afford to own a home is impacted by a few key components, including interest rates, income, and housing prices in general. Homebuyer affordability decreased in February, with the national median payment applied for by applicants jumping 8.3 percent to $1,653 from $1,526 in January. This is according to the Mortgage Bankers Association's (MBA) new Purchase Applications Payment Index (PAPI), which measures how new monthly mortgage payments vary across time (relative to income) – using data from MBA’s Weekly Applications Survey (WAS).
What happened? “Low unemployment has spurred strong income growth in early 2022, but homebuyer affordability has decreased due to the quick rise in mortgage rates amidst steep home-price growth,” said Edward Seiler, MBA's AVP, Housing Economics, and Executive Director, Research Institute for Housing America. “The 30-year fixed-rate mortgage spiked 73 basis points from December 2021 through February 2022. Together with increased loan application amounts, a mortgage applicant’s median principal and interest payment in February jumped $127 from January and $337 from one year ago.”
(The rent data series calculated for MBA’s national mortgage payment to rent ratio (MPRR) comes from the U.S. Census Bureau’s Housing Vacancies and Homeownership (HVS) survey’s median asking rent.)
Capital markets: Higher Rates are not a Surprise
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Rates don’t move in a straight direction, and the recent bond market selloff finally abated yesterday, helped in part by a sense that Treasuries had gotten oversold on a short-term basis and were due for a bounce. That is not to say that a 50-basis point hike and the announcement of quantitative tightening at the May FOMC meeting have gone away: a hard landing is still the most likely outcome. Despite the selloff easing, aided by a strong 20-year bond auction, rising inflationary pressures are fueling concerns that the world economy won’t be able to weather a sustained period of higher financing costs. And despite a wobbly stock market, geopolitical nervousness, and festering growth concerns, the allure of holding debt to investors, even in safe government bonds, is waning.
Mortgage pricing is determined by supply and demand, so reports on statistics that have any bearing on that are of great interest to MBS investors. We saw yesterday that new home sales fell 2 percent month-over-month, to a seasonally adjusted annual rate of 772k units, and 6 percent on a year-over-year basis according to the Census Bureau. This was well below expectations. The sale of lower-priced homes lessened as a percentage of overall sales, likely due to less supply resulting from cost pressures for builders and emerging pressures from rising mortgage rates that are reducing affordability for lower-income buyers. It is now so expensive to build starter homes that people with a starter home income cannot afford them. For builders, it is easier to build luxury homes than it is to build starter homes which is leading to higher-priced homes accounting for a larger percentage of new homes sold, driving up both median and average selling prices (+25 percent year-over-year to $511,000).
Also having an impact on MBS pricing is the reliability of loans being paid back. Black Knight reported that February saw the national delinquency rate rise for the first time in nine months, driven by a 97k rise in early-stage delinquencies (loans 30/60 days past due). Early-stage delinquencies are still well below pre-pandemic levels. And while the total number of past-due loans rose 1.8 percent last month, that delinquency rate remains near pre-pandemic levels. Meanwhile, seriously delinquent mortgages (those 90 or more days past due) fell by 72k as borrowers leaving forbearance plans continue to return to making payments. And despite a 39k increase in active foreclosures, they’re still 32 percent below the same time last year.
Today’s busy calendar is under way with the Q4 current account balance ($217.9 billion, as expected), February durable goods orders (-2.2 percent, weak) and weekly jobless claims (-28k to 187k, the lowest level since 1969!). Later this morning brings preliminary March Markit PMIs, Freddie Mac’s Primary Mortgage Market Survey, KC manufacturing for March, and a Treasury auction of $14 billion reopened 10-year TIPS. Today is also packed with Fed speakers starting with Minneapolis’ Kashkari and followed by Governor Waller, Chicago Evans, and Atlanta’s Bostic. The Desk will purchase up to $2.1 billion 30-year 2.5 percent through 3.5 percent. We begin the day with Agency MBS prices worse nearly .5 and the 10-year yielding 2.38 after closing yesterday at 2.32 percent.
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