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MBS Day Ahead: How did Such a Good Week Happen?

May 24,2018
by admin

If you’d just had your worst week in 7 years, it’s always nice if the next could be markedly different. That’s the case for bond markets this week, assuming nothing outrageous happens for the rest of the day. In fact, if markets closed right now, this week’s gains would easily outpace last week’s losses.

Who can we thank?

In a word: Italy.

More than anything, it’s been the downward spiral in Italian politics fueling a rally in safer-haven bonds (like Treasuries and German Bunds).

2018-5-25 open

Who cares about Italy?

More people than you might think. Even though it’s only one of 19 countries in the Eurozone, it’s important for a few reasons. First off, it’s the 3rd biggest economy in Europe, so the economic impacts of any Italian drama can’t easily be brushed off. Just as important is the fact that it’s a Eurozone nation (meaning it shares the Euro currency).

In thinking about why the Euro currency is a factor, remember Greece–a much smaller economy that nonetheless was seen as a harbinger of doom for the entire European Union. At least in Greece’s case, quarantine would have been much easier if it was not sharing the same currency with the rest of the Eurozone. In Italy’s case, however, its size means that the rest of the European economy will take a hit if there are any big, negative changes.

But even more important than economic fallout or shared-currency concerns is the risk that the new political party in Italy pushes the country out of the Eurozone and/or the EU itself (a la Brexit). To many, this would be the proverbial 2nd domino that all but guarantees additional EU departures by other countries with populist uprisings. The economic and monetary impacts of such an unraveling can only be guessed at, but none of the guesses are positive. And massively negative risks are where big, stable bond markets shine. Thus the shiny week for Germany and the US.

Homebuyers Battle the Trifecta: Rates, Inventory, and Prices

May 24,2018
by admin

The May edition of Freddie Mac’s monthly Outlook, produced by its Economic & Housing Research Group, is focused on the resiliency of the American homebuyer. It notes that, “Through the first five months of 2018, home shoppers have battled the trifecta of climbing home prices, higher mortgage rates and low supply.”

One entry in the trifecta is interest rates, and Freddie Mac’s economists see firming inflation continuing to put upward pressure on rates in general, including mortgage rates. They continued to climb during May, reaching 4.66 percent by the middle of the month. Rates, according to their forecast, will average 4.9 percent in the fourth quarter of this year and 5.4 percent by the same quarter in 2019.

Higher mortgage rates have not yet slowed home purchase demand. Buyer resiliency in the face of higher rates reflects the healthy economy and strong consumer confidence and Freddie Mac sees home sales continuing to grow over the next two years, although more modestly. The prediction is that total new and existing home sales will increase to 6.32 million this year and to 6.44 million in 2019, respective year-over-year gains of 3 percent and 2 percent.

This healthy demand coupled with a limited supply of both new and existing homes continue to put pressure on prices which are now increasing nationally at around 7 percent per year. As rates continue to rise, higher borrowing costs along with the rising prices should temper demand. This will be helped along with more supply coming on line. The National Association of Realtors reported this week that inventories of existing homes jumped 9.8 percent between March and April, and housing starts are gradually rising. With easing demand, price gains should also moderate. The company is forecasting home prices to increase 7.0 percent this year, but moderate to 3.1 percent in 2019.

While buyer demand and the strong labor market are providing a lift to purchase mortgage originations, borrowing costs are taking a toll on refinancing and Freddie Mac sees the impact of higher mortgage rates on the latter will outweigh the positive factors lifting the former. Refinancing activity declined by $300 billion or 32 percent from 2016 to 201 and it is expected to fall back by another 26 percent or $175 billion this year. Higher home sales and larger loans due to rising prices will boost purchase originations by 5 percent, recouping about $60 billion of the refinancing losses. Full year originations are forecasted to fall about 6 percent in 2018 to $1.75 trillion and stabilize at $1.74 trillion in 2019.

“While this spring’s sudden rise in mortgage rates are taking up a good chunk of the conversation, it’s the stubbornly low inventory levels in much of the country that are preventing sales from really taking off like they should be,” said Freddie Mac Chief Economist Sam Khater. “The underlying demand for buying a home is holding up, and will continue to do so, as long as the economy is generating solid job and income growth. Most markets simply need a lot more new and existing supply to cool price growth and give buyers enough choices.”

Turning to the broader economic parts of the forecast, Freddie Mac says the U.S. labor market “keeps chugging along,” generating many new jobs. Through April, the economy has added jobs for 91 consecutive months, helping to push the unemployment rate to 3.9 percent last month, the lowest level since 2000. Wage gains, however, have been tepid. Average hourly earnings increased 2.6 percent year-over- year last month, barely keeping ahead of the 2.5 percent annual increase in inflation. Freddie’s economists are forecasting consumer prices to rise 2.7 percent this year and 2.5 percent in 2019.

Real Gross Domestic Product (GDP) faded in the first quarter of 2018, falling from 2.9 percent in the fourth quarter of 2017 to 2.3 percent, mainly because of the lowest growth in consumer spending in nearly five years. The “outlook” is for the stimulus from the tax cuts to kick in more vigorously later in the year and real GDP to kick up to 3.1 percent in the second quarter and 2.7 percent for the full year.

Flipping; Turning into a Dangerous Game?

May 24,2018
by admin

CoreLogic says flipping is back. The term applies to the act of buying, renovating and/or repairing a house, then reselling it, all within a short timeframe. Investors who specialize in flipping are always out there, but when prices are rising, or appear about to, lots more people join in the game.

Bin He, writing in CoreLogic’s Insights blog, looked at the current levels of flipping, using as the criteria a house that is bought then sold in under 12 months. He found that 6.2 percent of home sales in the first quarter appeared to be flips. This matches the previous post-crash high in the first quarter of 2013.

But, he points out, it was a different world back then. Prices were just beginning to rebound from their 2012 lows, the supply of homes was outstripping demand, and distressed sales had a 30 percent market share. That share had dwindled to 4.4 percent at the end of 2017, (and the National Association of Realtors reported on Thursday that only 3.5 percent of existing home sales in April fit the distressed category.) Inventories are notoriously tight, with many home selling after competitive bids. Prices? Well everyone knows what has happened there in the last five years.

CoreLogic puts the acquisition cost for a typical flipping candidate at about $170,000 in 2006. That cost bottomed out under $100,000 in the 2011-2012 period. Today it is back to $160,000. He says the high acquisition cost and tight inventories along with rising flipping activity can only mean investors are speculating, betting on continuous home price growth.

Is it just us, or is this story not only an old one, but a little disturbing?

Jumbo, Non-QM, ARM Lender and Investor Trends

May 24,2018
by admin

Did you know that the number of female chief executives of Fortune 500 companies this year declined by 25 percent (from 32 to 24)? Not good. One of the highlights for me of this week’s MBA Secondary Marketing Conference was the mPower lunch. Besides some great networking and meeting some new folks, the lunch featured author Joanne Lipman who spoke about unconscious biases that many have (if you want to test yours, visit this site), strategies for improving your workplace, and closing the gender divide. Yes, there are differences between men and women, but companies are better off by constructively realizing them and using them to their advantage. (If you have questions about the mPower program, which is also having events at various conferences around the nation, please contact the MBA’s COO Marcia Davies.)

Alt, Jumbo, Non-QM, and ARM Changes

If you own a factory, and have the manpower, to produce blue jeans made from cotton, and the market shifts away from cotton to polyester, well, you shift some of your production to polyester. Many lenders have veered away from non-QM lending due to the perceived class action liabilities, the reputational stigma, and the sales challenge while seated in front of a borrower. And, while any downtown appears far off, plenty of lenders are wading into the non-QM pool to give their LOs, and back office staff, more flexibility. Hey, it’s not subprime, right?

On the investor/demand side, it isn’t new. In fact, last summer the financial markets observed that big money managers were swapping corporate debt for mortgage backed securities, particularly subprime MBS from before the crisis. Corporate debt simply got too expensive, and MBS got too cheap. The supply of subprime MBS has been shrinking however as loans get paid off, and non-agency MBS outstanding are about 25% of what they used to be. For fixed income managers, MBS outperformed most everything. The appetite for MBS paper was encouraging, as it opened the origination business to more outside-the-box product and allow credit to be extended to borrowers who have been more or less shut out of the market post-crisis.

And the WSJ discussed how banks have ramped up subprime lending not directly but instead by extending credit to nonbank financial firms who in turn are making loans to individuals. It’s all counter-party risk, right? Who is responsible? The article singled out WFC the most exposure among large US banks to this type of subprime lending.

A paper suggests that the ratings agencies largely got it right with the bubble-era RMBS. The AAA tranches (even subprime) were largely money good, and the study pours cold water on the popular narrative that inflated ratings on RMBS caused the financial crisis.

In jumbo land, as the competition for business has gotten fiercer in the mortgage market, banks and other lenders have eased up on their lending criteria, making it easier for borrowers to obtain a jumbo loan. A few years ago, jumbo borrowers had to make significant down payments and hold hefty cash reserves. Now a few lenders are lending up to 95 percent of the value of a home, and a 10 percent down payment jumbo loan is becoming the norm.

We might assume that skyrocketing home prices are forcing more and more people to apply for high-balance loans. Jumbo loans remain the norm in pricey cities. On a nationwide basis, however, the demand for jumbo loans appears to be cooling off somewhat. Looking at the MBA data, jumbo purchase apps leveled off in the first four months of 2018 after demand rose significantly in 2016 and 2017. The MBA’s index measuring the monthly application counts for home-purchase loans with balances over $729,000 was up just 30 basis points in April compared to the same period in 2017.

Chase Correspondent has posted an update to its guidelines which applies to its Agency ARM product line(s) Maximum LTV/CLTV.

CALCAP Lending LLC is offering Jumbo loans, loan amounts to 5 million and LTVs to 75%, no income or employment. Contact Brett Griffin for details.

Ditech Financial rolled out its new Jumbo product that offers 95 LTV with No MI, allows unlimited financed properties for investment properties & second homes (with a 70 LTV) and has a Non-Warrantable Condo option.

Have you been searching for a NIVA (No Income – Verification of Assets) Program? At ACC, contact Kelly Brown for information on its 3-1 and 7-1 ARM programs. Up to $2 million, low as 640 FICO,

Angel Oak Mortgage Solutions offers a Non-Prime program benefiting people with credit scores as low as 500. Non-prime mortgages require 10% or more down to qualify.

Plaza added more flexibility to its trade line guidelines for five of its programs including Preferred Purchase Jumbo Program, Elite Jumbo & Elite Plus Jumbo Programs, Closed-End Second Liens and Solutions Non-QM Program.

made several credit changes when it announced “Portfolio Prime”, officially changing the name of its “NonQM” program to “Portfolio Prime”. “The new name speaks to the product being a portfolio product as well as the ‘Prime’ supporting prime credit. “We have increased our cash out limits on our Portfolio Prime Program. For example, on a primary residence, the cash out limits match our loan amounts/LTV’s. We will allow a recoup of funds within 12 months (previously had to be done within 6 months) and will consider it a Rate & Term refinance. We now require 4 years seasoning on a short sale, modification and NOD (previously this was 5 years) and we require 5 years seasoning on a foreclosure and bankruptcy.”

A while back (and be sure to check for its current guidelines!) Impac Mortgage Corp. lowered its FICO scores to 600 on all IQM products. It has also added a 90% Tier on Agency Plus Purchase and R/T Refi’s, an 85% Tier for Agency Plus Cash Out Refi’s., a 90% Tier on Alt Doc Purchase and R/T Refi’s, and an 85% Tier for Alt Doc Cash Out Refi’s.

Plaza has introduced its new Credit Policy, formally known as Conventional Underwriting Guidelines. The new Credit Policy streamlines credit guidelines. Its Program Guidelines are where you will find all loan level requirements, including overlays for all loan programs. The Credit Policy will supplement the Program Guidelines with additional information needed when submitting loans to Plaza. For requirements not addressed in the Credit Policy and/or Program Guidelines, Plaza defers to the guidelines established by Fannie Mae, Freddie Mac, VA, USDA or HUD guidelines.

Sun West has updated its manual underwriting guidelines specifically for the review of a borrower’s credit. The updated guidelines include additional information on how various risk factors associated with a borrower’s credit are analyzed during a manual underwriting review.

Capital Markets

Yes, the trend in rates is higher, but it won’t be a straight path, as we’ve seen this week. Nonetheless, overall the U.S. economy is doing well enough to warrant the Fed to have 2-3 more short term rate increases in 2018. The Conference Board Leading Economic Index (LEI) for the U.S. increased 0.4 percent in April, with positive contributions from the yield spread, weekly hours in manufacturing, the ISM new orders index, initial claims for unemployment insurance and consumer expectations for business conditions outweighing negative contributions from stock prices and building permits. The increase points to moderate growth throughout the second half of 2018; however, the six-month growth LEI rate declined slightly, suggesting a strong acceleration in growth is not likely.

Industrial production increased 0.7 percent in April, its third consecutive monthly increase. The increase was driven by mining and utilities which were up 1.1 and 1.9 percent respectively. After being flat in March, manufacturing rebounded for a 0.5 percent increase. Capacity utilization rose 0.4 percentage point to 78.0 percent which is 1.8 percentage points below the long-run average. Capacity utilization is a signal of how much the economy can continue to grow before becoming inflationary. Manufacturers continue to voice concerns over trade policy and tariffs on steel and aluminum driving up commodity prices.

Overall, the economic indicators from mid-May remain positive and point to continued growth throughout the second and third quarters of 2018. The financial markets remain convinced that an increase in the fed funds rate range to 1.75-2.00 is imminent in June with a strong probability of another increase in September. If there is a fourth rate hike this year, it will likely come at the end of the FOMC meeting in December, however at this time the markets are only pricing in a 41 percent probability.

Turning to the housing market, housing starts fell 3.7 percent in April though they were 10.5 percent higher than one year ago. The decline was led by a 12.6 percent decline in multi-family housing starts but completed multi-family projects were 18.7 percent above March’s deliveries and the number of single family homes under construction continues to trend higher. Though the headline is disappointing, optimism remains strong with builders. Housing news continues to point to the same thing: notable supply constraints continue to act as a drag on overall sales. The limited inventory — and the high prices on available inventory — is crimping affordability, particularly for first-time buyers; moreover, all prospective buyers are going to feel added affordability pressures from rising mortgage rates.

Looking at the bond market & interest rates, we have an early close today ahead of Monday’s holiday. News out of the U.S. is not nudging rates lower, although the $30 billion 7-yr Treasury note auction was met with very good demand. It is international unrest which usually results in a flight to quality: U.S. securities.

This morning we’ve had the usually volatile durable goods: -1.7%, more than forecast due to commercial airline orders (+.9% ex-transportation). We’ll have a volley of Fed speakers (Powell, Bostic, Evans, and Kaplan), along with the University of Michigan Consumer Sentiment number. Friday begins with the 10-year yielding 2.94% and agency MBS prices better nearly .125 versus last night’s close.

Employment and Personnel Moves

Pacific Union Financial named experienced wholesale ‘rock star’ Michael Royer EVP of Wholesale Lending. ‘As Pacific Union makes strategic moves to build our Wholesale team, Michael Royer is the obvious choice to lead the division. His reputation in the industry is without comparison. Michael led his previous organization to the number one Wholesale position in the industry. We are confident that with Pacific Union’s onboarding team, great marketing, and rock Star company culture, Michael will be able to take our Wholesale team to new levels,’ Evan Stone, Pacific Union Founder and CEO said. Pacific Union is raising the bar and redefining the standard for Wholesale Lending.” If you are interested in joining the Pacific Union Wholesale Lending team contact Brad Hoke.

Arch MI is searching for an Account Manager in Northern CA who builds and maintains long-term relationships in customer organizations to ensure that growth and quality targets are met or exceeded. The AM develops advocacy with key branch level decision makers and grows profitable market share by proactively identifying and capitalizing on new business opportunities. S/he provides support to National Accounts consistent with organizational objectives and ensures customers receive superior quality and responsive service. Will be responsible for Arch’s visibility in the marketplace, calls patterns, and results of lender client relationships. Achieves or exceeds stated account growth and NIW goals. Uses Solution Selling to sell a variety of complex products and services that will improve customers’ business. Understands competitors’ strengths and weaknesses and how Arch US MI stands in comparison. Effectively articulates to customer the differentiated impact of Arch US MI’s offering on the customers’ business and processes. Interested parties should contact Tonya Battle, HR.

Recently Freddie Mac announced that John Krenitsky has joined the company as SVP and chief compliance officer (CCO). “Krenitsky brings with him extensive experience in managing compliance programs gained from over two decades working in the global financial services industry,” and will fully transition to the position of CCO effective June 1 following the retirement of current CCO Carol Wambeke.

Another Reminder Not to Trust Mortgage Rate Headlines

May 23,2018
by admin

Mortgage rates moved lower again today, bringing them to the best levels in at least 2 weeks. This assertion is very much at odds with the prevailing mortgage rate headlines today. News stories abound with talk of sharp increases to fresh 7-year highs (google news search if you don’t believe me), yet nothing could be more of a disservice to the demographic that typically looks for mortgage rate news (people who are in the market)!

If you are indeed in the market or otherwise have a vested interest in day-to-day mortgage rate fluctuations, you need to understand that all those news stories are based on Freddie Mac’s weekly rate survey, and that Freddie Mac is wrong. To be fair, it’s not so much “wrong” as it is “late.” Unfortunately, Freddie’s survey typically captures lenders’ claimed rate quotes for Monday and Tuesday.

Given that last week saw rates move much higher on Wed/Thu and that this week didn’t see much improvement until Wed/Thu, it makes sense that Freddie’s reported rate would be higher. But rest assured, TODAY’s ACTUAL mortgage rates are lower than anything seen since May 14th at the earliest.

Now, if someone wants to argue that May 14th’s rates were effectively in line with 7-year highs, I’d be the last person to argue. The bigger picture is indeed ugly. But the point is that it’s much less ugly than it was a few days ago–a fact that could be very important to the decision-making process surrounding homebuying and the mortgage rate lock process.

Loan Originator Perspective

Unexpected rally today. If you have been floating, take advantage of the improved pricing and lock. – Victor Burek, Churchill Mortgage

The canceled N Korean summit helped rates improve marginally today. With tomorrow’s early close and a 3.5 day weekend looming, pricing’s likely as good as we’ll see until Tuesday (at the earliest). I’m locking these gains in. –Ted Rood, Senior Originator

Today’s Most Prevalent Rates

  • 30YR FIXED – 4.75%
  • FHA/VA – 4.5%
  • 15 YEAR FIXED – 4.25%
  • 5 YEAR ARMS – 3.75-4.25% depending on the lender

Ongoing Lock/Float Considerations

  • Rates have been moving higher in a serious way due to headwinds that cannot be quickly defeated. These include the Fed’s increasingly restrictive monetary policy outlook, the increased amount of Treasury issuance to pay for the tax bill (higher bond issuance = higher rates), and the possibility that fiscal stimulus results in higher growth/inflation.

  • While we may see periodic corrections to the broader trend toward higher rates, it’s safer to assume that broader trend can and will continue. Until that changes, it makes much more sense to remain heavily-biased toward locking as opposed to floating.
  • Rates discussed refer to the most frequently-quoted, conforming, conventional 30yr fixed rate for top tier borrowers among average to well-priced lenders. The rates generally assume little-to-no origination or discount except as noted when applicable. Rates appearing on this page are “effective rates” that take day-to-day changes in upfront costs into consideration.

MBS RECAP: Bonds Confirm Yesterday’s Strength

May 23,2018
by admin

Yesterday was an important one for anyone hoping NOT to see the bond market completely give up hope in the fight against higher rates. To be fair, the fundamental realities in place over the past few years have clearly pointed toward higher rates, but there’s always some uncertainty regarding how quickly we move and which levels will end up being important. With a break beyond the weakest levels in 7 years, it was (and still is) fair to wonder if we were on the precipice of a more abrupt move.

As of right now, that more abrupt move is clearly on hold. This week’s strong round of Treasury auctions sends the message that there’s even some sponsorship for the bond market beyond the “risk-off” motivations from European political drama. That said, if European political drama suddenly takes a less dramatic turn, rates have recovered enough from recent highs to feel some pressure (i.e. there’s “room to sell” now, if the short-term beneficial inputs abate).

Indeed, today’s gains were again linked to an even stronger move in Europe. Italian spreads vs Germany widened further and stocks lost ground fairly abruptly after the North Korean Summit was canceled. All of the above was bond-friendly. How, then, would bonds respond to something unfriendly? We got a bit of a hint when stocks recovered starting at 11am.

Specifically, bond yields didn’t move higher nearly as willingly as they moved lower earlier in the day. This is at least somewhat reassuring when it comes to fearing for our lives in the near-term, even if it’s not a guarantee of a huge continuation of the rally. Before talking about such things, we’d need to see the next technical floor broken at 2.95% in 10yr yields.

April Delinquencies Improve Despite Historic Pattern

May 23,2018
by admin

Loan performance continued to improve in April, even though Black Knight says mortgage delinquencies have a historic pattern of increasing during that month. The overall delinquency rate declined 1.6 percent from March to a national rate of 3.67 percent. That rate is down by 10.17 percent from the previous April.

Black Knight notes, in its “first look” at the month’s loan performance data, that not only did April’s improvement buck a trend that has affected the month’s numbers 85 percent of the time, it also ended seven months of annual increases, behavior that started with last fall’s hurricanes.

Areas in Texas, Florida, and Georgia where Hurricanes Harvey and Irma hit drove the improving numbers. However, over 90,000 mortgages on homes impacted by the storms are still seriously delinquent.

After the April decline there remained 1.885 million mortgages nationwide that were 30 or more days past due but not in foreclosure. Just under 600,000 of those were seriously delinquent, that is 90 or more days past due. Delinquencies were down 27,000 from March and 187,000 from April 2017 while the improvement in serious delinquencies was 34,000 and 17,000 from the two earlier periods.

The foreclosure inventory, homes that are in some process of foreclosure, fell 2.26 percent to 0.61 percent of all active loans. The inventory, containing 314,000 homes, was down 7,000 units from March and 119,000 from a year earlier. The latter represented a 28.41 percent decline. It was the lowest point for active foreclosures since August 2006.

The highest delinquency rates in April were in Mississippi and Louisiana at 9.34 percent and 7.52 percent respectively. Florida, Alabama, and West Virginia followed, all with rates ranging from 6.62 to 6.11 percent. Serious delinquencies were highest in Florida, Mississippi, Louisiana, Alabama, and Texas, but all had rates under 3.0 percent.

Prepayment activity, generally an indicator of refinancing, fell 4.3 percent in April from the previous month and was down slightly from last year’s level.

The company will provide a more in-depth review of this data in its monthly Mortgage Monitor report. It will be published on June 4.

Tax Cut Gains Forecast to Fade Away in 2019

May 23,2018
by admin

Fannie Mae is backing down slightly on its economic forecast for the remainder of 2018. The first quarter GDP growth of 2.3 percent was the slowest in a year, down from 2.9 percent a year earlier. The company’s economists, led by vice president and chief economists Doug Duncan, say they expect growth to pick up later in the year but the economic boost from last December’s Tax Cuts and Jobs Act and this February’s Bipartisan Budget Act of 2018, will fade next year and the labor market will tighten more than previously thought. The earlier full-year 2018 forecast remains at 2.7 percent, but the company is lowering its projections for 2019 by two-tenths to 2.3 percent.

They see substantial downside risks to their forecast, especially the rising price of oil. Crude prices have risen by about $11 per barrel since December to reach $71. Rising gasoline prices decrease disposable income and are therefore likely to negate some of the increase in disposable income from the tax cuts. They also may push inflation higher, leading the Fed to pick up the pace of interest rate hikes. The administration’s protectionist trade policy is also a barrier growth.

The economists call first quarter housing activity “lackluster.” Consequently, real residential investment was not a contributor to the GDP. Homebuilding activity was mixed, with multifamily starts posting the largest quarterly increase since the second quarter of 2016, while single-family starts suffered a slight decline. New home sales increased while the sales of existing homes, which make up 90 percent of the total, fell during the quarter.

The inventory of existing homes for sale has been down on a year-over-year basis for nearly three years, constraining sales while boosting prices. Appreciation, according to the major indices was running between 6.3 percent and 7.2 percent in February.

Leading indicators suggest an improving outlook for home sales going into the spring selling season: pending home sales rose in March for the second consecutive month and purchase applications increased in April for the second time. The company continues to expect total home sales to rise about 2.5 percent this year.

The Census Bureau’s Housing Vacancy Survey (HVS) put the homeownership rate at 64.2 percent in the first quarter, unchanged from Q4 2017, but higher on an annual basis for the fifth consecutive quarter. In addition, the annual increase in owner households exceeded one million for the third time in four quarters and significantly outpaced the drop in renter households, which posted a year-over-year decline for the fourth consecutive quarter.

The HVS also showed the for-sale vacancy rate down by two-tenths compared to a year ago, at 1.5 percent it was the lowest for a first quarter reading since 2001. The rental vacancy rate was unchanged from a year ago, remaining at 7.0 percent.

Fannie Mae updated its estimated mortgage purchase originations for 2017 by $42 billion and lowered refinancing originations by $58 billion. The revisions, based on benchmarking of Home Mortgage Disclosure Act Data, resulted in a net decline in total mortgage originations of $16 billion to $1.83 trillion in 2017. The refinance share was revised lower by 2 percentage points from the prior estimate to 36 percent.

Total mortgage originations are expected to decline this year by approximately 9 percent from 2017 to $1.67 trillion, as a 26 percent drop in refinance originations outpaces a 1 percent rise in purchase originations. The refinance share is projected to fall 7 percentage points from 2017 to 29 percent.

Broker Products; Upcoming Events; Financial Services and Acquisitions

May 23,2018
by admin

The conference this week? I attended various presentations dealing with housing finance and the economy in general. Even in the face of rising rates, the outlook on the housing market is bullish for prices – but with continued inventory problems. Labor shortages and environmental provisions/local zoning are expected to continue to contribute to extended times to complete the construction of new homes. Now that we are a decade past the financial crisis, we are seeing increased non-agency mortgage lending, as reflected through securitizations, and it is expected that the non-QM market will continue its expansion but still small on a relative basis to QM. Demographic factors play a dominant role in the housing market as millennials embrace homeownership, just as we knew they would. Given how this generation has embraced technology, experts expect “fintech encroachment” on the mortgage space – it is a trend that is not going away.

Lender Products

MAXEX reports that it continues to add loan buyers and sellers to LoanExchange, its rapidly growing exchange and clearinghouse for residential mortgage loans. “Both sellers and buyers are signing up because we are not just a pricing service. Our single counterparty structure and standardized product guidelines, seller guide, loan delivery, loan review, settlement, and custodial and servicing transfer efficiently facilitate a many-sellers-to-many-buyers transaction capability that our clients access simply by executing a single loan purchase and sale contract,” said CEO Tom Pearce. “With increased operational efficiency and transparent pricing – no signup costs and no monthly fees – why wouldn’t you sign up?” LoanExchange has traded over $1.5 billion in jumbo A and agency high balance loans, some of which were placed into thirteen private label MBS transactions. If you wish to learn more about becoming a seller and/or a buyer on LoanExchange, please e-mail: Tom Pearce.

PromonTech, the technology unit of Promontory MortgagePath, is now the exclusive point-of-sale (POS) solution for ISGN’s MORVision LOS. ISGN MORVision users can now leverage PromonTech’s Borrower Wallet to engage and originate more loans via their digital channel. The Borrower Wallet is a white-labeled, digital mortgage POS that helps borrowers easily apply for a mortgage on either a self-serve or assisted basis with a loan officer. It makes it easy to enter information, approve automated data collection of asset and income verifications, upload/e-send documents, e-sign disclosures, run credit/AUS and stay informed throughout the loan process. To learn more about Borrower Wallet, contact Tony Pietrocola.

For brokers, as Memorial Day approaches, a day to reflect and remember the valiant men and women who have sacrificed so much for our freedom, AFR Wholesale continues to offer programs dedicated to support our veterans and active military duty personnel. For over a decade, AFR Wholesale has created financing programs that help brokers assist veterans in acquiring, building and improving their homes. AFR has closed nearly $2 billion in loans to military families through a variety of uniquely developed programs, such as the VA Renovation loan. AFR was one of the first wholesalers to offer this program. It offers many attractive features such as zero down payment financing and may also be used as part of a refinance to make non-structural repairs. Since June 2017, AFR has assisted their lending partners in helping hundreds of families evaluate if the VA Renovation program is right for them. Contact AFR wholesale today to learn more about this and other programs for military.


NALHFA, the National Association of Local Housing Finance Agencies, is hosting a live webinar on June 7th that will dig into two reports that show how many millennials are actually mortgage-ready and, furthermore, how many could qualify for a homeownership program available in their market. Speakers will include executives from Freddie Mac, Down Payment Resource and the Urban Institute’s Housing Finance Policy Center. Register for the June 7 webinar.

On May 24th, Richey May & Co. will hold its 3rd webinar in its series regarding Tax Reform and the Mortgage Industry. The focus of this webinar will be provisions impacting business income under the new tax reform.

The Indiana Mortgage Bankers is having its 2018 IMBA State Convention and 60th Anniversary Gala in early June in Indianapolis.

Get a head start on the Single Security initiative, A joint initiative of Fannie Mae and Freddie Mac to develop a common MBS. Join MBA and leading industry experts on Wednesday, June 27th, for what will be the beginning of an ongoing conversation impacting every mortgage lender and those that work in real estate finance. This webinar is complimentary to MBA members. Use promo code WEBINAR at check out.

This year’s MBAH Annual State Conference, “Loan Rangers” is scheduled for June 28th and 29th at The Hawaii Prince Hotel Waikiki in Honolulu. Presentations by key speakers will discuss the mortgage industry, the local economy and what to expect in 2018. Click here for conference details and registration information.

Company Expansion/Transitioning

In House Realty, a subsidiary of Rock Holdings and sister company to Quicken Loans and several other national real estate technology brands, has acquired In-House Realty, a Detroit-based subsidiary of Rock Holdings Inc., the nation’s leader in FinTech real estate services, and sister company to America’s largest mortgage lender, Quicken Loans, has purchased from Tronc, Inc. “According to a recent report by the National Association of Realtors (NAR), over 90% of all existing home sales in the United States are sold with the assistance of a licensed real estate professional, while approximately 10% of consumers are successful selling their home on their own. In-House Realty sees natural synergies between the platform and their existing business working hand-in-hand with its Partner Agent Network.”

The Federal Savings Bank (TFSB) and Union Bank & Trust announced a definitive agreement to team together to offer TFSB residential mortgages. TFSB will offer a wide range of residential mortgage products and services from Union locations and Union will begin winding-down the operations of Union Mortgage Group (UMG), its wholly owned subsidiary. “…the best way to offer a mortgage loan solution is through allowing TFSB to offer its mortgages from Union locations instead of operating UMG as a vertically integrated, stand-alone mortgage subsidiary,” said John C. Asbury, president and CEO of Union Bankshares Corporation. TFSB expects to hire the vast majority of UMG employees. TFSB, which originates loans in all 50 states, plans to hire more exceptional mortgage professionals to support the group’s ongoing efforts and grow the business and the arrangement with Union is expected to create many new jobs in the region.

Capital Markets

PIMCO executive Mihir Worah has told delegates at the Fixed Income Market Structure Seminar that bonds have been a reliable hedge against volatility in the past nine years of low inflation, but now that the balance of risk is changing, their effectiveness as a hedge against stocks is waning. Several advisors and planners have commented they are trimming their long positions in bonds. Rates are a matter of supply and demand, right?

Rates were down yesterday in response to the FOMC Minutes from the May policy meeting. The Minutes were viewed as somewhat dovish, considering the FOMC noted that a “temporary” period of inflation modestly above 2.0% would be consistent with the committee’s goal. Reaching that goal should prompt the FOMC to slow the pace of rate hikes. There was a discussion regarding forward-guidance where some participants indicated that the Fed Funds rate will remain for some time below levels that are expected to prevail in the longer run. Fewer participants felt that the neutral level of the funds rate might be lower than previous forecasts.

New home sales decreased 1.5% MoM in April, though lower-priced homes ($399,999 or less) accounted for a smaller percentage of new homes sold in April than the prior month, reflecting perhaps the lack of supply at more attractive price points for prospective buyers.

Besides White House chatter about tariffs on autos from Europe, today is packed with Fedspeak with five Fed Presidents scheduled to speak: outgoing NY President Dudley, Atlanta’s Bostic, Dallas’s Kaplan, Philadelphia’s Harker, and Richmond’s Barkin. Weekly jobless claims kicked off today’s data calendar (234k, up from 223k – very low). Also due out are the FHFA House Price Index for March, April existing home sales (seen declining), and the NY Fed’s report on MBS purchases for the week ending May 23. After the jobless claims number, we find the 10-year yielding 2.99% and agency MBS prices nearly unchanged versus Wednesday’s close.

Employment and Personnel Moves

For AEs and LOs, LoanStream Mortgage, innovating the mortgage market for over 30 years, is continuing to add to its non-prime lending channel, as the “One Lender” any broker or branch needs and continues to lead in this space. Serene Vernon, COO, said “Many lenders have now put some sort of Non-QM into their offerings. We love to see many of the smaller companies bringing up the programs we pioneered. It means we have done our job over the last 5 years in bringing attention to this much needed space. We are confident that we will continue to innovate and bring more value to our clients while investing in our employees.” Licensed in most of the country, LSM is looking for Senior Account Executives for its wholesale channel and experienced producing branches for its retail channel. Confidential notes of interest can be sent to Serene or to Based in Irvine, CA, experienced operations and management employees are also encouraged to apply.

Assurance Financial is quietly growing into a nationwide leader in lending. Just ask Mike Killmeyer who recently opened a branch for Assurance Financial in Denver, Colorado. Mike was equipped to take loan applications immediately with little downtime and is now poised to add to his growing professional staff. Mike and his team saw that our compensation structure is excellent, and our back-office support was second to none – 16 years of working, changing, and perfecting it. He also saw that we have an unwavering mission to close loans on time, every time! We have immediate openings for proven, successful, producing Branch Managers and MLOs in Wilmington, Charlotte, Denver, Austin, and many other branch locations throughout the country. For immediate consideration, contact Paul Peters, CMB, Assurance Financial, Recruiting Manager (225-239-7948).

Caliber Home Loans, Inc. is actively seeking a Manager, Counterparty Risk to join its Enterprise Risk Management group. The manager will oversee the counterparty financial review process and work closely with the Correspondent and Wholesale client approval team. Other responsibilities include managing special projects, preparing and presenting required reporting to Caliber’s senior management and strategic planning. The position requires that you collaborate with internal partners including, but not limited to, Sales, Legal, Finance and Secondary Marketing. If you’re a Correspondent/Wholesale professional, read more about the position’s requirements and/or apply online at Caliber’s web site. A bachelor’s degree in Finance or Accounting and at least 10 years’ experience in mortgage lending is preferred. This position is based at Caliber’s corporate office in Coppell, Texas.

Congrats to Brian Montgomery whom the U.S. Senate voted to confirm as the next Federal Housing Administration (FHA) Commissioner. The confirmation vote passed easily despite a long period between the nomination in September 2017 and now. (He previously ran the FHA from 2005 to early 2009.) Most expect the FHA to keep premiums unchanged given its modest capital levels, and there remains some possibility that the FHA could reduce its footprint in areas which are well-served by private capital. For the six big private Mi companies, growth in private mortgage insurance (MI) remains meaningfully ahead of the FHA, a trend that KBW expects to persist.

Congrats to Mickey Schilling, the new Director of Strategic Growth and Business Development for The Mortgage Firm. She is tasked with expanding and growing The Mortgage Firm’s retail presence in key markets in the Southeast and West. The Mortgage Firm, established in 1996, and based in Altamonte Springs, FL, offers a truly unique purchase loan-centric production culture.

MBS Day Ahead: Green Shoots? Maybe. Opportunities? You Bet!

May 23,2018
by admin

One short week after hitting the worst levels in nearly 7 years there’s suddenly a semblance of hope again for bonds. It was one thing to see last Friday’s correction–which merely stopped the most abject bleeding–or the first 2 days of indecisive stability this week. It was another thing to see an unmistakably strong rally yesterday followed by even stronger levels today.

The critical development over the past 48 hours for US bond markets has been the break below the 3.05% floor that had blocked progress since last Friday. If we wanted to be extra cautious about where we set our technical levels, we could use the previous 4-year ceiling of 3.04% and reserve judgment until bonds broke and closed below.

With yields starting out the day well under 3.0%, it seems like there’s not much risk that this technical break will fail.

2018-5-24 open

The big question: is this the beginning of a bigger bounce off this long-term ceiling? While that’s always possible, it’s good to remember what long-term ceiling bounces have looked like so far this year. The first came in February and resulted in a rally that could best be described as “sideways to slightly stronger.” The next bounce at long-term highs can be seen on the chart above in late April. It had such a small effect on rate sheets that it’s not really fair to call it a bounce–more like a leveling-off.

Add to this the fact that we’re heading into Memorial Day weekend and we can be sure that more than a few traders have squared up trading positions (i.e. they’ve gotten neutral). In a market that is predominantly betting on rates moving higher “getting neutral” means buying bonds. I’m more interested in what momentum looks like when they get back into the office next week as that will tell us more about the potential for this week’s bounce to have longer-term staying power.

Caveats aside, it’s still better than a sharp stick in the eye (or a continuation of last week’s selling, if you’re not into pointed metaphors). The gains create opportunities for all types of risk profiles. Conservative clients can use it to take advantage of short-term lock opportunities. Risk-tolerant clients can use it to enjoy some breathing room between current levels and overhead lock triggers (2.99-3.00 on the conservative side and 3.04-3.05% on the riskier side).