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- 1st & 10
1st & 10
By Jeff Walton & Kelly Guest
October 14, 2024
It's a historic first for the nation's 10th largest bank: TD Bank will pay $3B to the U.S. Justice Department to settle allegations that the institution's lax practices facilitated massive money laundering. In announcing the settlement, Attorney General Merrick Garland said, “TD Bank created an environment that allowed financial crime to flourish. By making its services convenient for criminals, it became one.” While the housing industry remains ever vigilant to make sure donuts and co-marketing don't violate RESPA, the Justice Department detailed scenarios that have gotten two dozen TD Bank employees prosecuted (so far) for schemes involving "fentanyl and narcotics trafficking, terrorist financing and human trafficking," according to Deputy Treasury Secretary Wally Adeyemo.
In other news, Maxwell's Sidelined Home Buyer Report found that 77% of bench-warming buyers said they are somewhat or very prepared to purchase if mortgage rates fall significantly; however, 39% of would-be buyers said they have not connected with a lender. That begs an interesting question…
CHATTER
OH SNAP: The Connecticut State Banking Commissioner revoked LoanSnap's license to operate, alleging originators operated there without licenses.
NIBBLING ON NAR: The American Real Estate Association Goes on Offense
The startup trade association has been actively advocating for the repeal of the National Association of Realtors' (NAR) Clear Cooperation Policy, claiming it has placed unnecessary restrictions on the ability to serve clients. AREA is collecting names of agents and homeowners who have been affected by this policy - with the goal of a class action lawsuit.
27 & 65: Rocket and UWM Bigwigs Make Forbes 400
Rocket Mortgage's Dan Gilbert came in at #27 and United Wholesale Mortgage's Mat Ishbia is #65 of Forbes' 400 richest people.
EARNINGS UP, REVENUE DOWN: Wells Fargo shares were up 5% in Friday morning trading after beating earnings expectations. Adjusted earnings per share: $1.52 vs. $1.28 expected, while revenue was $20.37 billion versus $20.42 billion expected. WF posted $11.69B in net interest income, an 11% decrease from the same quarter last year and less than the FactSet estimate of $11.9B.
SOFT LANDING POSSIBLE: JP Morgan Chase talks about earnings and concerns
Profits were down 2% YoY, and Chase increased provisions for credit card losses to $3.1B. Still, CFO Jeremy Barnum put a positive spin on things: "Broadly, I would say these earnings are consistent with the soft-landing narrative. And the fact that companies are optimistic is pretty consistent with this kind of Goldilocks economic situation."
FREDDIE & MERIDIAN MAKE UP: Freddie Mac will resume considering Meridian Capital Group-brokered loans provided they adhere to new conditions.
FANNIE FORECASTS: ESR Group on economic indicators
“Overall, the Fed appears on track for a 25-basis point cut in November, in line with our expectations.”
MOVING & SHAKING
Rocket Companies recruited Venmo and PayPal tech exec Papanii Okai to be its Executive Vice President of Product Engineering.
Mr. Cooper beefed up its leadership team, moving Sridhar Sharma into the role of Executive Vice President and Chief Innovation and Digital Officer, and Jeff Carroll to Chief Technology Officer.
The company also welcomed David Graham as SVP, data governance, and Prerna Kandhari as SVP.
CRM platform Aidium brought fintech veteran Tony Farnsworth on board as Vice President of Sales.
Assurance Financial named Jim Clapp to newly created position of Chief Lending Officer (CLO).
INTROS & INNOVATIONS
CORELOGIC UNVEILS ARAYA: The AI-driven property and location intelligence platform professes to deliver CoreLogic’s data with AI-enabled analytics to fuel comprehensive property, market and portfolio insights to "enable users to quickly navigate dynamic housing conditions and make faster, more confident decisions."
REMODEL NOW, PAY LATER: HW Reports on HouseAmp/Renovation Sells Partnership
HouseAmp finances pre-sale remodels and says sellers can skip what they call the "lengthy" HELOC process and repay at closing; Renovation Sells claims to complete projects in weeks vs. the time it takes typical construction companies/contractors.
POS TO VOIE: Floify announced “Floify Verify”
The company says their "electronic verification of income and employment (VOIE) service allows lenders to verify income and employment at a cost-effective price point without the hassle of managing additional third-party vendors."
MARKET/INDUSTRY
Freddie Says It's a Surge
Following the release of a stronger-than-expected September jobs report, the 30-year fixed rate mortgage saw the largest one-week increase since April. However, the rise in rates is largely due to shifts in expectations and not the underlying economy, which has been strong for most of the year. Although higher rates make affordability more challenging, it shows the economic strength that should continue to support the recovery of the housing market. Bill Bodnar ponders the long-gone 50bps rate cut and explains how "the trend has not been our friend" in his latest Master the Markets segment.
Mortgage applications decreased 5.1% from one week earlier: MBA Survey for the week ending 10-4-24.
The Market Composite Index decreased 5.1% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 5% compared with the previous week.
The Refinance Index decreased 9% from the previous week and was 159% higher than the same week one year ago.
The seasonally adjusted Purchase Index decreased 0.1% from one week earlier. The unadjusted Purchase Index increased 0.1% compared with the previous week and was 8% higher than the same week one year ago.
Consumer (non-mortgage) credit outstanding increased by $8.9 billion in August following a $26.6 billion jump in July, according to the Federal Reserve Board.
The Producer Price Index (PPI) was flat in September, bringing the year-over-year comparison down one-tenth to 1.8%, according to the BLS.
The Consumer Price Index (CPI) increased 0.2% over the month in September and 2.4% compared to a year ago, another cycle low, according to the BLS Core inflation was a bit stronger, rising 0.3% over the month and 3.3% compared to a year prior, an acceleration of one-tenth compared to last month for the latter.
OPTIMAL ACTIVITY: Optimal Blue September Market Advantage
Refinance volumes surge: On an absolute basis, refinance production reached the highest level seen since January 2022. Rate-and-term refinance lock volume was up nearly 50% MoM and 700% YoY. Cash-out refinance volume rose a more modest 6% MoM but was still up more than 50% YoY.
Conventional and VA production grew market share: The share of conforming loan production rose roughly .5% to 54.4%, and the share of non-conforming production – including jumbo and non-QM loans – rose .25% to 12.6%. The share of FHA loans fell roughly 1% to 18.7%, while VA rose .2% to 13.7%.
Average borrower credit increased across the board: The credit scores of rate-and-term refinance borrowers rose an average of 6 points to 737. The average conventional borrower credit score rose to 757, the highest since December 2020.
Average loan amounts and home prices rose: From August 2024 to September 2024, the average loan amount increased from $372.4K to $383.7K. The average home purchase price ticked up $10K to $475.8K after falling the previous two months.
INSIDIOUS INSURANCE: ICE October Mortgage Monitor says insurance costs spiking at 3x rate of PITI
Average PITI on loans originated in the last two years is $600 per month higher than that of 2020/2021 vintage mortgages, with two-thirds of each payment devoted to paying down interest
In contrast, just 12% of the monthly payment among 2023/24 mortgages goes directly toward principal reduction – less than half the comparative average for other recent vintages
Though older loans have lower PITI, 35% of those payments go toward variable costs, such as taxes and insurance, that are at risk of increase even as principal and interest components remain fixed
Increased property insurance costs stand out; the average monthly insurance payment is up 52% since the start of 2020, with increases in some higher-risk areas as high as 90% over that same period
Rising premiums are due, in part, to higher home prices, but a direct comparison of mortgages analyzed shows a sharp jump from an average $4.65 per $1K covered from 2013-2022 to $5.38/$1K in July 2024
In New Orleans and Miami, property insurance is ~$17/$1K in coverage, more than 3X the U.S average; higher costs also extend beyond hurricane zones and into the tornado and hail risk of the central states
On average, insurance premiums account for 9.4% of monthly mortgage payments, up from less than 7.7% from 2013-2020, hitting their highest share on record
In high-risk areas, property insurance can make up as much as 25% of the average mortgage holder’s overall monthly PITI payment
ENCOURAGING INDEX: Fannie Mae's Home Purchase Sentiment Index (HPSI) Rises in September
Fannie's HPSI rose 1.8 points to its highest point in two years. The index is up 9.4 points YoY. “Although most consumers continue to think it’s a ‘bad time’ to buy a home, the recent shift in attitude toward mortgage rates is pushing overall housing sentiment higher, and a growing share are now pointing to high home prices rather than high mortgage rates as the primary sticking point for affordability.” - Mark Palim, Fannie Mae Senior Vice President and Chief Economist.
AGE & EQUITY: NRMLA/RiskSpan Q224 Reverse Mortgage Market Index (RMMI)
The National Reverse Mortgage Lenders Association says homeowners 62 and older saw their housing wealth increase by $600 billion in the first quarter to $14 trillion in Q2. “Senior home equity levels reached $14 trillion for the first time, which is an impressive milestone. Housing wealth represents a critical, yet underutilized resource, that can provide greater financial security for America’s aging population.” - NRMLA President Steve Irwin.
DEFAULTS DROP: ATTOM Data's Q324 US Foreclosure Report
87,108 U.S. properties with foreclosure filings during the third quarter of 2024, down 2% from the previous quarter and down 13% from a year ago.
“Moving forward, we anticipate foreclosure levels will stay relatively low, but there could be localized increases in areas struggling with affordability or other market pressures.” - ATTOM CEO Rob Barber
UPS & DOWNS: Redfin Touts 2%, States Obvious
Redfin reported that pending U.S. home sales rose 2% from a year earlier during the four weeks ending October 6, the biggest increase in three years. Meanwhile in the wake of Helene and Milton, the brokerage also points out that pendings are falling in some places, most notably Florida during the same timeframe: West Palm Beach was down 17.6%, and Tampa -15.5%. Coastal Florida’s housing market has been slowing over the last several months as insurance and HOA costs surge due to the increasing prevalence of climate disasters.
CAMERAS NEARLY TIED WITH HEAT: NAHB Asks Buyers About Must-Haves
The National Association of Home Builders asked consumers to rate how technology features would influence their home purchase decision. The following features were rated "Essential/Must have," meaning buyers would be unlikely to purchase a home without a particular design or feature. Buyers named the following as essentials:
29% Programmable thermostat
26% Video doorbells
26% Security cameras
23% Wireless security system
21% Multi-zone HVAC system
20% Wired security system
18% Lighting control system
17% Energy management system/display
REMODEL REGRETS: Clever Real Estate's 2024 Home Renovation Trends
The survey revealed 63% of homeowners would prefer to remodel their home rather than move to one that has already been renovated. The key reasons homeowners said they renovated:
To repair damage (35%)
To increase comfort (35%)
To improve the livability of their home (32%)
To enhance their home's aesthetic appeal (32%)
To personalize their home (31%)
To increase their home's value (30%)