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Mutual Mortgage Insurance Fund Outperforms for Fourth Year in a Row

November 15,2018
by admin

The Federal Housing Administration (FHA) said on Thursday that its Mutual Mortgage Insurance Fund (MMI Fund) exceeded its congressionally mandated minimum reserves in FY2018 for the fourth year in a row. In its 2018 Annual Report to Congress the agency said its Capital Reserve Ratio was 2.76 percent at the end of the year, an 0.58 percentage point increase from FY2017. The Economic Net Worth of the fund was $34.8 billion an increase of more than $8 billion from the previous year. The figure is comprised of Total Capital Resources of $49.24 billion and a negative Cash Flow NPV of -$14.38 billion.

FHA is required to maintain reserves to cover estimated losses plus a capital cushion of 2.0 percent of all Insurance-in-Force (IFF). This ‘Capital Ratio’ is calculated by dividing the Fund’s Economic Net Worth by total IFF of $1.26 trillion. The MMI Fund supports FHA’s single-family mortgage insurance programs, including all forward mortgage purchase and refinance transactions, as well as mortgages insured under the Home Equity Conversion Mortgage (HECM), or reverse mortgage program.

“The financial health of FHA’s single-family insurance fund is sound,” U.S. Housing and Urban Development Secretary Ben Carson said. “FHA is in good hands, guarding against excessive risks, protecting the American taxpayer, and remaining true to our core mission to facilitate safe and affordable mortgage options for qualified borrowers.”

Losses during the financial crisis drove the MMI Fund below its required minimums, forcing both increased fees to borrowers and an eventual cash infusion from the U.S. Treasury, the first in FHA’s three-quarter century history. The Fund posted its first profit after the crash, $4.8 billion, in 2014, and at that point its parent agency, the Department of Housing and Urban Development warned that the required minimums would not be met for another two years. However, with the rapidly recovering housing market, it did jump above the 2.00 percent cushion the following year.

The report says that FHA endorsed over one million forward mortgages in FY 2018 (including 776,284 purchase loans) totaling $209 billion in unpaid principal balances. The average loan amount was $206, 041. First-time homebuyers accounted for 641,921 or 82.7 percent of all FHA forward purchase loans. The average credit score declined slightly, from 676 in FY 2017 to 670. Almost exactly one-third of forward loan lending was to minority homebuyers

While the value of FHA’s forward mortgage portfolio is growing, FHA warns that its reverse mortgage portfolio continues to decline, representing a continuing drain on the MMI Funds from its books of business for 2018 and earlier. The fiscal condition of FHA’s forward mortgage portfolio is also materially better than the HECM portfolio. Excluding HECMs, FHA’s FY 2018 forward mortgages have a capital ratio of 3.93 percent and a positive Economic Net Worth of $46.8 billion. By contrast, the 2018 HECM portfolio has a negative capital ratio of 18.83 percent and a negative economic net worth of $13.63 billion.

HECM endorsements declined 12.6 percent since last year, with 48,327 new mortgages endorsed. Total Capital Resources in the HECM portfolio totaled $2.11 billion for FY 2018, which was offset by a negative $15.75 billion in Cash Flow Net Present Value.

Last year FHA implemented a set of changes to mortgage insurance premiums and Principal Limit Factors (PLFs) for reverse mortgages and followed with changes to appraisal requirements this year. The agency said it will continue to monitor the impact of the changes on new HECM endorsements and the performance of the portfolio.

FHA Commissioner Brian Montgomery added, “As we look to the future, FHA must continue to seek the right balance between facilitating access to mortgage credit and managing risk. Our number one mission is to make certain FHA remains a stable and reliable resource for first-time and minority homebuyers, and other underserved borrowers.”

Through a statement from its new President and CEO Robert D. Broeksmit, the Mortgage Bankers Association (MBA) said it welcomed news of the continued improvement in the Capital Reserve Ratio and that FHA is continuing to closely monitor its forward book of business as it continues to perform well. But, Broeksmit added, “The drain on the fund presented by the HECM program continues a trend that MBA has highlighted previously and remains a topic of concern. Reverse mortgages are an important financial tool that, if used properly, can allow the growing number of retirees to age in place. MBA applauds the recent steps FHA has taken to stabilize and improve the HECM program, and policymakers should continue considering ways to insulate the forward program from the volatility in the reverse program.”

Profitability and Commission Products; HELOCs, Servicing, Digital…Geocoding Bid Tapes!

November 15,2018
by admin

Why is the housing market sluggish despite a solid U.S. economy, solid demographics, and pent-up demand? Those don’t matter if prices are out of reach relative to incomes, and housing appreciation has outpaced income growth for a long time. And lending standards have remained more rigorous than they were during the last housing boom, so it has been harder for people to stretch to buy a home. (Veteran lenders will tell you, however, that not everyone deserves to own a home.) The inability of people to buy homes they can’t really afford is great news in terms of avoiding another crisis or even a bubble, but not so great for the near-term outlook for housing.

Lender Services and Products

Is your correspondent lending business prepared to grow in 2019? To find out, check out this new and trending industry blog from TMS. Don’t risk your business by not being ready for the next year! As a top 15 correspondent lender with more than 20 years of experience, TMS taps into the expertise of its leaders to give a fresh take on what you need to know to increase your margins now and through all of next year. Learn about industry trends, the latest news around the election, and how to grow your business in TMS’s CAREspondent Connection.

“Tired of fighting your software only to end up behind a stack of spreadsheets? After spending over a year trying to configure its generic commission management system to meet its mortgage industry-specific needs, BBMC Mortgage (which will soon join forces with Synergy One Lending/Mutual of Omaha Mortgage) had to cut its losses. Producing over $2B annually, BBMC needed a technology partner that understood the difference between a first and second lien and a system that could automatically handle tiered commission plans based on custom business rules. That’s why BBMC turned to LBA Ware’s CompenSafe™, the first mortgage industry-specific automated compensation calculation platform. According to Stephen Bennett, BBMC’s senior vice president and regional director, implementing CompenSafe has cut payroll processing time by 95% and all but eliminated payroll errors. Download the free case study to learn how CompenSafe helped BBMC take the spreadsheets out of payroll and automate a tiered commission program.”

Evolve Mortgage Services offers a seamless way to reduce costs and increase profitability without worrying about LO Comp or lengthy technology integrations. For 25+ years Evolve has offered a truly variable cost model that helps you scale your business during periods of growth, and greatly minimizes losses during slow periods. We provide cohesive solutions across the entire loan lifecycle that interoperate or work independently. From Safe Act underwriting, to closing and loan delivery for originators and acquisition due diligence for investors, we adapt our solutions to fit your business. Plus, if you already deliver to one of our many large aggregator clients, we can offer additional cost-saving opportunities and benefits. Our unique structure allows us to deliver off-shore cost structures using on-shore resources. Whether you are a retail, wholesale, or correspondent lender, Evolve can help you manage your business and improve your margins in this increasingly challenging environment. Click here to learn more.


What’s New Out There?

It’s always good for lenders and vendors to have a sample of who’s doing what out there. In no particular order…

Think there’s no new companies or innovation in loan servicing? I hinted at that recently in Kansas, and the head of capital markets with whom I was speaking countered with, “Have you heard of Scratch?” I hadn’t.

HELOCs are a hot topic what with millions of borrowers happy with their 3.5% 30-year fixed-rate mortgages. Prosper, a leading peer-to-peer lending firm, is launching a new digital HELOC product in January 2019 that will deliver loan estimates in 1 to 2 seconds and a soft pull on credit. “Applying for and obtaining a HELOC has historically been a difficult and lengthy process, leaving many consumers frustrated with an approval process that can take days to weeks. According to a recent TransUnion study, as home values rise, more and more people will be looking at a HELOC as a potential option for accessing credit. The study reported that an estimated 10 million consumers will take out HELOCs between 2018 and 2022, which would be more than double the number originated from 2012-2016.” (Write to Shelby Sabat if you have questions.)

Equator, a leading provider of residential loan default software and marketing solutions for many of the country’s top servicers, real estate agents and vendors, announced the launch of a mortgage servicing blockchain solution. Through an agreement with Factom, Inc., the Factom® Harmony blockchain-as-a-service (BaaS) platform is integrated into the Equator® PRO software-as-a-service (SaaS) solution. The addition of Factom’s Harmony provides Equator customers the opportunity to incorporate the recordation of data, documents and key audit events onto Factom’s blockchain solution. Factom’s Harmony provides options for individual loans to be tracked as individual chains of data on the blockchain. This design allows Equator PRO customers the option to embed blockchain preservation into their various workflows, allowing for an immutable and encrypted blockchain audit record to be built for each loan and each workflow step.

Digital home loan closings? Redfin has partnered with Notarize: Online closings are now available to customers of Title Forward, Redfin’s title and settlement company, and Redfin Mortgage, Redfin’s lending arm.

Mortgage fintech LoanSnap launched VA Smart Loans, which will provide personalized options to current and former service members applying for a home loan.

Citadel Servicing Corp. debuted its new product for five to 35-unit properties and mixed-use containing a livable unit with a bed. The Outside Dodd-Frank Plus Program builds on the company’s highly successful Outside Dodd-Frank Program to offer loans on properties up to 35 units. Loan amounts are up to $3 million with a max LTV of 75%. “Basically, if it has a bed or living residence attached to it, we can fund it”, said CSC’s founder and CEO Daniel Perl. Kyle Gunderlock, President & Chief Operating Officer, stated, “We saw the need in the market and created a program that would build on our popular ODF product.” For the first time, CSC will offer products to business entities and trusts. A Personal Guarantee is required as the major addition to the normal and usual due diligence items.

You can qualify your self-employed and 1099 borrowers with 12 Months of Bank Statements. Contact inquiry@citadelservicing.com for more information.

Pacific Bay Lending Group has a new product: Pacbay Portfolio VOE (PBPV) starting at only 4.65%. Contact Jennie Ensunsa (323-346-7474) for details.

LoanStream Mortgage has an all new Credit Grade on NanQ Product Line: LoanStream “Select”. Questions? Contact LoanStream at Inquiries@lswholesale.com

The Lending Answer’s SIVA Elite is now available to both W2 and Self-Employed Borrowers. An incredible product for individuals who have too many write-offs on their tax returns to qualify for a Full-Doc Mortgage or just haven’t had long enough seasoning at their current employment. Contact The Lending Answer for details.

A bank statement loan is the perfect solution for the self-employed who do not have the tax documents proving their ability to repay. Contact Angel Oak Mortgage Solutions for non-QM alternatives: info@angeloakms.com

PennyMac posted an announcement: Release of Non-Delegated VA.

Have you been searching for NIVA loan options? Check out the ACC Mortgage product matrix and contact Kelly Brown for details.

DocMagic Inc. announced that QRL Financial Services, a nationwide provider of residential mortgage lending services for community banks and credit unions, has leveraged its eVault technology to purchase eNotes. The deal will make QRL one of the first investors outside of the GSEs to begin purchasing eNotes. Because QRL is using DocMagic’s SmartDocs, all documents retain a tamper evident seal to ensure data and document integrity. “Offering a truly paperless solution is the future. Consumers will expect and demand a closing experience that is more timely, convenient and informative,” says Alex Rivera, managing director at QRL Financial Services. “QRL’s ability to purchase and service eNotes will allow the credit unions and community banks that we service to stay ahead of the technology curve as they compete with the larger institutions in the race to improve the mortgage experience.”


Capital Markets

90% of all secondary market transactions expose borrower addresses to non-buying bidders. This dissemination of address data is a growing data security concern, especially for parties concerned with EPO performance and servicing pre-payment speeds. MCT is moving to improve this process by replacing addresses with geocode data during whole loan bidding, an industry first. “The only investor that should eventually see the property address is the winner of the loan,” stated Phil Rasori, COO. “Our solution to this security concern is a proprietary geocoding process specific to our BAM platform that enables investors to price LMI-CRA incentives without the address.”

MCT is currently coordinating with all correspondent investors on implementing this upgraded process with a goal of completely replacing addresses by 2019. Learn more about the most efficient, secure, and profitable way to conduct loan sales by registering for an upcoming webinar on MCT’s Bid Auction Manager (BAM).

Western Asset Management which specializes in fixed income, has a new research report about the Freddie/Fannie Single Security. The good news is that Western is viewing the new security exactly as Fannie and Freddie had hoped – as a fungible security (meaning there’s no distinction between the two GSE issuers) with a Treasury backstop. Lisa Tibbitts with Legg Mason writes, “As we move closer to June 2019, when the UMBS will first be issued, it’s noteworthy that a large fixed income investor is on board and working with its clients to be sure they understand UMBS. This was a big unknown about three years ago when the GSEs began working toward a single security.”

Blue Water Financial Technologies announced it has developed an electronic co-issue pricing and trading platform, MSR-X. This cross investor and fully integrated web-based technology solution for co-issuing purposes allows lenders and investors to view portfolios and transactional data in real time. The platform brings greater efficiencies to the co-issue process and lowers costs for both investors and originators by reducing any manual input of pricing and increasing the immediacy of information. Buyers and sellers can access MSR-X via the web and view information in real-time. Originators can use the platform to reduce margin exposure, lower costs and streamline their secondary market operations. And the originators don’t pay to participate, rather, the investors do. In return, the investors obtain transactional data, they have better yield certainty through the purchase process and much of the administrative paperwork has been simplified. If you are an originator or investor who would like to access MSR-X, call 866.217.0246 or email inquiries@bluewater-fintech.com.

Turning to yesterday’s bond market, and therefore rates, the U.S.10-year halted this week’s downward trend Thursday, closing yesterday’s session unchanged at 3.12% as Treasuries across the curve ended the day on a mixed note. Across the Pacific, China presented a list of several concessions that officials would be willing to make in order to resolve the ongoing issues with the United States, though the list does not mention structural reforms that have been demanded by President Trump. Across the Atlantic, British Prime Minister Theresa May said she intends to push forward with her draft of the withdrawal bill despite the resignation of four ministers, including Brexit minister Dominic Raab. Despite some international doom and gloom, the week hasn’t been short on optimism, with optimistic comments from both Fed Chair Powell on the economy and U.S. Trade Rep Lighthizer on the next tariff tranche on Chinese imports potentially being put on hold.

Today sees a busy economic calendar which precedes a light U.S. calendar next week with markets celebrating the Thanksgiving holiday: October industrial production and capacity utilization at 9:15am ET, the KC Fed Manufacturing Index for November at 11AM ET, Chicago Fed President Evans in a moderated Q&A, and finally, at 4PM, the Treasury will release the September TIC data. Friday begins with rates little changed from Thursday’s close: the 10-year is yielding 3.09% and agency MBS prices are unchanged.

Jobs and Layoffs

Ethos Lending is looking for the best AEs. “In a rising and volatile rate environment, just one day’s market movement can mean the difference between winning or losing a borrower. Ethos Lending – the mortgage industry’s best kept secret – can help solve that problem. Our proprietary technology gives us the ability to significantly reduce the cost to manufacture a loan, which allows for Ethos to consistently offer a top-3 price in both agency and Non-QM. In addition, our lock to fund velocity is 50% faster than the industry and our world class operations provides industry leading customer service, including direct access to underwriters. While the rest of the industry is contracting, we are expanding. We are looking to add only best-in-class sales professionals and have select territories open across the country. If reading this excites you, please contact Bryson Bede.”

Wells Fargo notified 1,000 employees, including 900 mortgage lending professionals, that their jobs will soon be eliminated. It’s the first major round of layoffs in a previously announced plan to cut the bank’s workforce by as much as 10% over the next three years. The decreases in the company’s mortgage division primarily reflect ongoing decreases in the number of customers in default and declines in application volume. In Des Moines, where its home lending division is based, “The Coach” will eliminate 400 jobs. (Those impacted can post their resumes for free online at www.LenderNews.com.)

Lowest Mortgage Rates This Month!

November 15,2018
by admin

Mortgage rates hit their lowest levels of the month today! Sure, that’s only 10 business days for the mortgage world, but we’ll take every little victory we can get these days. Why is that? Because “these days” have been pretty rough. Exactly one week ago, rates were at their highest levels in nearly 8 years.

The assertion about today’s rates runs counter to quite a few news stories. Major media outlets are reporting rates as being ‘unchanged’ this week. That wasn’t necessarily incorrect until today. In those cases, reporters are relying on Freddie Mac’s weekly survey data. The survey only collects responses from Monday through Wednesday and the results tend to over-represent Monday and Tuesday’s rates on any given week. Long story short, as of yesterday, it would have been fair to say rates were indeed unchanged this week. Nearly all of the improvement happened today.

The likelihood of additional improvements remains to be seen. As far as the past several months are concerned, we really haven’t seen stretches of good luck look much better than this one. As such, those who’d been floating last week may want to consider locking this week, assuming that’s an option. It’s not out of the question for rates to improve further, but that’s dependent on several other volatile variables.



Loan Originator Perspective

Bond markets posted small gains today, while rates remained above early November levels. While Brexit discord may still become a factor, it appears our mini-rally is hitting resistance levels. I’m recommending risk averse clients lock in these gains, for loans closing within 30 days. –Ted Rood, Senior Originator


Today’s Most Prevalent Rates

  • 30YR FIXED – 5.0%
  • FHA/VA – 4.5%-4.75%
  • 15 YEAR FIXED – 4.5%-4.625%
  • 5 YEAR ARMS – 4.375%-4.875% depending on the lender



Ongoing Lock/Float Considerations

  • Rates continue coping with several big-picture headwinds, including: the Fed’s rate hike outlook (and general policy tightening), 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 (which certainly seems to be the case so far in 2018).

  • While rates were able to recover and stay sideways in the summer months, September and October have seen a surge up to the highest levels in more than 7 years.

  • Upward pressure can continue as long as economic growth and inflation continue running near long-term highs. Stay defensive (i.e. generally more lock-biased). It will take a big change in economic fundamentals or geopolitical risk for the big picture to change. Such things tend to not happen as quickly as we’d like.
  • 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.

Fannie Mae Offering Relief Programs in Wildfire Areas

November 15,2018
by admin

Fannie Mae has expanded the menu of post-disaster services it is offering to its borrowers. The new services are in addition to the up to 12 months of forbearance, waived fees, and temporary foreclosure moratorium that Freddie Mac and Fannie Mae (the GSEs) traditionally offer in the wake of hurricanes, wildfires, and other disasters.

A press release from Fannie Mae, probably prompted by the unprecedented destruction and loss of life from wildfires in both the northern and southern parts of California, announces personalized case management services through its Disaster Response Network. The program will provide personalized support “to address safety and basic needs, property repairs, employment, and financial recovery-all of which affect a borrower’s ability to meet their mortgage obligations.”

“Communities face extraordinary challenges dealing with the impacts of a natural disaster,” says Michael T. Hernandez, Vice President Disaster Recovery & Rebuild, Fannie Mae. “For homeowners, the process can be complex, stressful, and time-consuming. We want to help families regain their personal and financial footing beginning with mortgage relief, but also by helping more broadly to ensure a successful recovery.”

Services offered by the Network include:

  • A comprehensive case assessment and action plan.
  • Assistance with filing claims and forms with FEMA, insurance companies, and the Small Business Administration and providing referrals for disaster recovery resources.
  • A web-based platform with information, resources, and updates and the ability to interact with others facing similar challenges.
  • Tri-party calls with assistance providers and homeowners, plus ongoing counselor-homeowner check-ins to help ensure a successful recovery.

Fannie Mae will be operating the project through Clearpoint Credit Counseling Solutions and their Project Porchlight Program. Fannie Mae borrowers with properties located within FEMA-declared disaster zones may utilize Clearpoint’s call center which is staffed by HUD-certified counselors. Assistance is also available to those whose homes are not damaged but whose employment or income were negatively affected by the event.

Homeowners needing assistance can contact their mortgage servicer for a referral or call Fannie Mae directly at 1-800-232-6643. Those who are unsure whether their loan is owned or guaranteed by Fannie Mae can check that at www.KnowYourOptions.com/loanlookup.

MBS RECAP: Bonds Pulled 2 Ways by Stocks and Global Gloominess

November 15,2018
by admin

Remember the middle of 2016 when rates managed to make it all the way back in line with all-time lows despite having almost no justification in terms of economic data and policy outlooks? Those low rates were mostly about Brexit.

Something about Brexit is utterly captivating for global financial markets. When it first happened, there was a bit of an anticlimactic response, largely due to the time window involved in working out the nuts and bolts.

Now more than 2 years later, we’re getting into the more serious phases of the process. Markets aren’t nearly as rattled as they were in 2016, but shifts in potential Brexit outcomes have nonetheless been relevant market movers this week. In general, they made a case for bond market gains (i.e. lower rates) this morning, and never really reversed that stance throughout the day.

Stocks, on the other hand, managed to rally in the afternoon. Bonds have also been keenly interested in the plight of stocks. Being forced to choose between two guidance givers, as it were, bonds opted to split the difference, rising just slightly in the afternoon to follow stocks, but not so much as to give the impression that Brexit headlines didn’t matter.

Whether any of the above remains relevant in the coming days is another matter. With Thanksgiving coming up next week, US bond market movement is very close to what has historically been a much more random trading pattern for a few days. The fact that there’s no big-ticket data on the calendar tomorrow only compounds that issue. Playing the range discussed on MBS Live today is a viable strategy (both in the Day Ahead and the Huddle).

Buyers Not Holding Their Breath for Short Term Market Relief

November 14,2018
by admin

It ain’t going to get any easier…

The National Association of Home Builders (NAHB) tells us these cheery words encapsulate the attitude of respondents to its survey regarding home purchasing. The company’s Housing Trends Report for the third quarter of the year found that seven out of 10 of prospective homeowners think that shopping for a house is either going to get harder or stay about the same.

The report focuses on the 13 percent of survey respondents defined as prospective homebuyers, that is persons planning on purchasing within the next year. This percentage was 24 percent in the fourth quarter of 2017 and has declined steadily since. Among Millennials surveyed, 19 percent had short term purchase plans as did 13 percent of Gen Xers. Only 7 percent of Baby Boomers and 3 percent of seniors fell into the potential buyer category. Fifty-eight percent of those who planned to buy would be first-timers, rising to 75 percent among Millennials.

Across the generations potential buyers said their first choice would be an existing home. The second largest group would be happy with either an existing or a newly constructed house.

The expectation that purchasing a home could get more difficult in the future was fairly universal across generations. Only about two of ten prospective buyers expect it might get easier, with Millennials being the most optimistic.

Responses to another question sheds some light on these responses and it boils down to affordable inventory. Buyers were asked for their perceptions about available housing in their markets; are the numbers of listings with their desired features and within their price range rising or falling compared to three months earlier. Sixty-one percent said they saw fewer or about the same number as earlier. Rose Quint, writing in NAHB’s Eye-on-Housing Blog says, “Put shortly, most prospective buyers have seen no improvement in the availability of housing. A majority of buyers in each generation shares that opinion.”

Accounting, Subservicing, Warehouse Products; Freddie and Fannie Changes Roll On

November 14,2018
by admin

Lender Products and Services

As of October 2018, 100 mortgage lenders have signed with Loan Vision to utilize its financial management and accounting solution. Martin Kerr, President of Loan Vision shared, “On a monthly basis there is approximately 60,000 loans and $14 billion being accounted for across the US using Loan Vision. When you annualize that, those numbers are staggering to me. We absolutely believe the lenders embracing Loan Vision are doing that to have best in class systems across the organization, to streamline their whole organization to better serve the borrower.” For more information, read the press release about Loan Vision’s journey to 100 customers or contact Carl Wooloff.

Unfortunately, as we have all witnessed, natural disasters and hurricanes will happen. The real question, though, is do you know if your subservicer is prepared to handle the aftermath of the crisis? Don’t wait until it’s too late to test the strength of your subservicer. They need to be proactive — not reactive! To help ensure your borrowers move through the recovery process as efficiently as possible, run through this new checklist from TMS that goes through everything your subservicer needs to be doing to successfully navigate a crisis.

Are you looking for a warehouse lender that understands your business needs? Maybe one that is not competing for market share with your branches or correspondent division? Comerica Bank’s approach to warehouse lending spans six decades and is just one piece of a much-larger, diversified business banking strategy. Comerica Bank is a $71 billion bank that focuses on serving the needs business owners. At Comerica Bank, our relationship begins with you, the mortgage banker. Please allow us the opportunity to tailor a warehouse solution to support your strategy and goals. With lines of credit from $5 million to over $100 million, we are proud to serve a broad spectrum of mortgage companies across the country. To see how Comerica Bank can raise your expectations of what a bank can be, contact Von Ringger (313-222-9285). Member FDIC. Equal Opportunity Employer.


Fannie/Freddie News

Let’s play some catch up on Agency news. It’s good to see what they’ve been up to in the primary markets over the last several weeks to keep things in context, especially as lenders inevitably follow their lead. So, in no particular order…

The Freddie Mac Guide Bulletin 2018-20 provides temporary selling requirements and flexibilities for certain mortgages secured by properties, or for borrowers with places of employment (as applicable), in eligible disaster areas impacted by Hurricane Michael.

…announcing an update to our Private Mortgage Insurer Eligibility Requirements (PMIERs), which will become effective on March 31, 2019. Many of the changes to the eligibility standards have been previously announced via the PMIERs Guidance. Our announcement underscores Freddie Mac’s commitment to working with the Federal Housing Finance Agency (FHFA), mortgage insurers and other stakeholders in the housing industry to strengthen the housing finance system.” For more information see PMI Eligibility Requirements and Frequently Asked Questions.

So yes, under the direction of the FHFA, Fannie Mae has worked jointly with Freddie Mac to update the Private Mortgage Insurer Eligibility Requirements (PMIERs), which were issued Sept. 27. The effective date for these PMIERs is March 31, 2019. Refer to FHFA’s news release and Fannie Mae’s Mortgage Insurers page for more information.

Freddie Mac has expanded its support in shared equity and sweat equity . Read the Single-Family News Center article to learn more about financing opportunities for rural housing and preserving affordable housing.

For certain home purchase transactions in rural high-needs areas, Fannie Mae may offer to waive the appraisal in exchange for a mandatory home property inspection. The rural high-needs appraisal waiver seeks to help low- to moderate-income borrowers avoid unanticipated, potentially high-cost, post-purchase repairs. This offer will be considered only for property locations designated as rural high-needs by the Duty to Serve requirements. Click here to view a heat map of the High Needs Counties throughout the United States.

Freddie Mac has a Loan Advisor tool… its Condo Project Advisor. Request unit-level condo waivers for existing condo projects that need special review or consideration.

It’s well known that Native Americans face homeownership challenges, which has made them one of the most underserved populations in the country. To better understand this group’s unique cultural views on homeownership, Fannie Mae has conducted interviews with a small sample of lower-income Native Americans who plan to purchase, or have recently purchased, a home on tribal lands. Read the blog by Kellie Coffey, product development manager for rural initiatives at Fannie Mae, or check out the full report.

You can now submit to Loan Product Advisor® and start delivering Freddie Mac’s consolidated Home Possible® mortgage – with new flexibilities for your borrowers with very low to moderate incomes. Read the Single-Family News Center article for additional information on what’s been added to Home Possible and how it can help you expand your business.

As part of normal operations and prudent risk management, Fannie Mae is implementing DU® Version 10.3 the weekend of Dec. 8th. The release notes have been updated to include a reserve requirement for cash-out refinance loan casefiles with debt-to-income ratios exceeding 45%. This update is a part of adjustments to the DU credit risk assessment to account for 2018 market conditions (rising interest rates, waning refinances, and higher loan-to-value lending). Refer to the “Debt-to-Income Ratio” section of the release notes for details.

Fannie Mae issued a reminder that applications for DU Refi Plus™/Refi Plus™ under the Home Affordable Refinance Program® (HARP®), will be accepted through the end of this year. DU Refi Plus/Refi Plus applications must be started no later than Dec. 31, and loans must be delivered by Sept. 30, 2019. Visit the Making Home Affordable page for more information.

Freddie Mac has released its third, fourth and fifth white papers of the eight-part Duty to Serve series designed to shed light on underserved multifamily housing markets. The papers examine state incentives through the Low-Income Housing Tax Credit (LIHTC) program that encourage affordability in high opportunity areas, and the use of mixed-income housing in areas of concentrated poverty.

Fannie Mae has updated the Servicer Self-Assessment to help you effectively manage the Fannie Mae loans you service and ensure that you meet its requirements. Two new sections, “Master Servicer Oversight” and “Shared Processes,” will provide additional guidance. Visit the STAR Program page to find more resources, and contact your Fannie Mae account team if you have questions.


Capital Markets

Rates have slid lower with the 10-year settling last night at 3.12%. Why? Thoughts that the Administration’s policies are hurting the U.S. economy, more international geopolitical news, this time surrounding Brexit. British Prime Minister Theresa May announced that her cabinet has approved the draft withdrawal agreement. Elsewhere, the Italian government replied to the European Commission’s request for a corrected budget, but the main points of the plan were left unchanged. The European Commission will issue a formal reply next week. And China reported disappointing Retail Sales for October (+8.6% YoY; expected +9.2%).

Domestically, CPI figures point to a firming in consumer inflation, which fits the Federal Reserve’s inclination to raise rates again in December. Markets this morning are digesting remarks from Fed Chair Powell and Dallas Fed President Kaplan, though neither showed much wavering in the Fed’s commitment to hike rates December, with odds still over 75%.

We’ve already had a busy economic calendar today: Retail Sales (+.8% vs. expected unchanged), import prices (expected unchanged, imports were +.5%), weekly jobless claims (216k, about as expected), and both the Empire State (expected to decline, it rose to “23.3”) and Philadelphia Fed’s (down to “12.9,” as expected) manufacturing indices. September business inventories are seen increasing 0.3% MoM versus 0.5% previously. Today’s Fed speak calendar also starts at 10AM ET with Governor Quarles, Chair Powell, Atlanta’s Bostic, and Minneapolis’ Kashkari all on the docket. After the initial spate of news, we find rates slightly lower with the 10-year at 3.10% and agency MBS prices better by .125. Deceleration?


Jobs

MBS Day Ahead: Brexit Strikes Back

November 14,2018
by admin

Ah Brexit… You thought you’d heard the last of it back in 2016? No such luck. Actually, it is a bit lucky to be hearing about it, at least as far as domestic rates are concerned. Both in 2016 and in the past week, Brexit-related developments helped rates move lower.

The current iteration of Brexit drama is not anywhere near that of 2016 and neither is the market reaction. That said, there certainly has been a market reaction. Yesterday afternoon, that reaction was noticeable, but barely. The overnight session brought an even bigger move in British currency (Pounds Sterling), and a more direct response in US bond markets.

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Much like bonds’ relationship with stocks, it will take quite a bit of drama in Sterling to motivate additional gains (at least if we’re talking about gains that would result from Brexit-related updates. I can’t tell you whether or not we’re likely to see additional Brexit drama, only that markets seemed to have positioned for it fairly quickly. Sterling is nearly as low as it’s likely to go without a complete breakdown in the Brexit process.

That’s important at the moment for two reasons. First, it means we shouldn’t expect much more help from this specific topic. Second, to whatever extent we do get any help, yields are very close to a trendline that may govern the lower side of a consolidation trend heading into the end of 2018. Keep in mind, this is just one option for bonds, but in the absence of strong motivation, such consolidations are often good bets. If the lower line can be broken, it would be a strong signal about 2018’s yield highs being behind us.

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Afternoon Mortgage Rate Improvements For Most Lenders

November 14,2018
by admin

Mortgage rates began the day in roughly unchanged territory. Some lenders were microscopically stronger or weaker compared to yesterday, but not enough to impact the average mortgage borrower. For the first few hours of the day, it looked as if rates would stay unchanged or possibly move slightly higher. That all changed when stocks began losing ground.

It’s always worth remembering (and this will be especially true when the next time it’s proven) that there’s no magic rule that says stock prices and interest rates must move in the same direction. It is true that there are frequent examples of such correlation, but there are plenty of other examples where the correlation complete breaks down. All that to say that stock losses helped rates today, but will not always necessarily help rates in the future.

Bond markets (which underlie mortgage rates) improved by enough this afternoon for most lenders to release “positive reprices” (where a lender recalls the morning’s mortgage rate offerings and replaces them with less costly offerings). These reprices were modest by most standards, but they could be enough to make a meaningful difference for a prospective borrower who avoided locking last week in the hopes of a recovery this week.



Loan Originator Perspective

Bond markets caught a break today, as Brexit drama prompted safe haven demand. The unknown factor is whether we’ll retain them if/when Brexit is resolved. Although some lenders repriced better mid-day, I think it’s worth waiting for tomorrow’s rates to come out before locking. There’s some smoke, let’s see if it turns into a Brexit fire. –Ted Rood, Senior Originator


Today’s Most Prevalent Rates

  • 30YR FIXED – 5.0%
  • FHA/VA – 4.5%-4.75%
  • 15 YEAR FIXED – 4.5%-4.625%
  • 5 YEAR ARMS – 4.375%-4.875% depending on the lender



Ongoing Lock/Float Considerations

  • Rates continue coping with several big-picture headwinds, including: the Fed’s rate hike outlook (and general policy tightening), 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 (which certainly seems to be the case so far in 2018).

  • While rates were able to recover and stay sideways in the summer months, September and October have seen a surge up to the highest levels in more than 7 years.

  • Upward pressure can continue as long as economic growth and inflation continue running near long-term highs. Stay defensive (i.e. generally more lock-biased). It will take a big change in economic fundamentals or geopolitical risk for the big picture to change. Such things tend to not happen as quickly as we’d like.
  • 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: More Stock Losses Bring More Bond Bounces

November 14,2018
by admin

The narrative has grown (remained?) the same for bonds lately. If stocks are losing ground, then it’s time to rally. If stocks are stabilizing or recovering, it’s time to sell. Today was more of the same in that regard.

For the first few hours of the day, yields moved gradually higher despite the inability of core inflation to even meet forecast levels (in its defense, it was really really close!). But when stocks began losing ground in a fairly convincing way, bonds began to improve.

Stock losses were compounded by headlines surrounding the Brexit process, where there was apparently some drama today regarding Theresa May’s cabinet and its ability to agree on the current draft proposal. After a few conflicting reports, it finally came out that there was sufficient agreement. British currency snapped back to previous levels, but US equities only bounced modestly. As such, bonds were able to maintain most of their stock-inspired gains by the close.