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Rate Wait
By Jeff Walton & Kelly Guest
October 21, 2024
The good news first: Fannie's Economic & Strategic Research Group (ESR) predicts mortgage rates will average 5.7% in 2025. The not-so-good news is that the latest ESR forecast didn't adjust its originations forecast for this year.
$5B more on home renovations next year? Harvard's Joint Center for Housing Studies' Leading Indicator of Remodeling Activity (LIRA) projects that annual expenditures for home renovation and maintenance will grow by 1.2% through the third quarter of 2025. More specifically, the LIRA expects expenditures will grow from $472 billion today to $477 billion through Q325. Cash-out refi or HELOC anyone?
We're not talkin' about Jim Brown or Walter Payton: NMP wrote last week about a term that's emerged over the last decade plus, "Halfbacks." It refers to people who fled colder climates for warm winter locales, but for various reasons move "half back" toward their original home states. Catastrophic storms will likely be high on the list of reasons motivating this group for a while.
CHATTER
SHOOTING THE MESSENGER: Consumers Blame Lenders for Interest Rates
There wasn't much score difference between the top spot and last in the American Customer Satisfaction Index (ACSI)'s 2024 Insurance and Mortgage Lenders Study. Rocket was #1 with a score of 80, Pennymac came in last at 70.
Customers satisfaction score on interest rates averaged 71 and 69 on fees and costs, calling them the worst part of the mortgage experience.
The good news? Lenders do a good job of providing digital channels as customers seem comfortable in their ability to interact with their lender online. Mobile apps (scoring 82 for quality and 80 for reliability) and websites (81) are the most favorable aspects of the customer experience.
Room for improvement: Lenders have work to do when it comes to ease of use (75) of online tools and visual appeal (74).
FAIRWAY SHELLING OUT $10M: CFPB Says "Red-lining," Fairway Disagrees
Fairway disputes the bureau's accusation, says it used a "quota analysis" to manipulate the perception of discrimination. The CFPB and DOJ filed a proposed order that would require Fairway to:
Pay a $1.9M penalty: The proposed order imposes a $1.9M civil penalty against Fairway for redlining allegations.
Provide $7M for a loan subsidy program: Fairway must offer home purchase, refinance, and home improvement loans on a more affordable basis than otherwise available in majority-Black neighborhoods in the Birmingham metropolitan area.
Pay at least $1M to serve neighborhoods it allegedly redlined.
CREDIT UNIONS SHOULDN'T BE EXEMPT: NCRC Says Citadel Proves CRA Should Apply to Them
Citadel FCU in October agreed to a $6.5M settlement with the Department of Justice (DOJ). DOJ alleged that Citadel discouraged would-be homebuyers in Black and Hispanic neighborhoods of Philadelphia from applying for mortgages and systematically declined to make mortgages in those neighborhoods. Citadel maintains its innocence.
THREE'S A CHARM: FICO Plans to Raise Prices 3rd Straight Year
FICO covers more than 95% of securitizations; meanwhile, Fannie and Freddie are moving toward the FICO Score 10 T and VantageScore 4.0 models.
90% LTV & NO PMI? UWM Announces Conventional Cash-Out 90
The program allows borrowers to unlock even more equity with an offering big banks and retail lenders don’t have: a cash-out refinance up to 89.99% LTV with a simplified process and a competitive interest rate without requiring mortgage insurance.
BUSY MONTH: Truist says revenue will exceed expenses in 2025, got dinged with a $3M penalty for failure to maintain required records as a swap dealer, and announced $1M in relief for those affected by Hurricane Milton.
PLANNED LOSS: Texas Capital Bancshares/Texas Capital Bank announced a $61.3M net loss, but President & CEO Rob Holmes said they, "…achieved significant financial milestones [in Q3] as our multiyear transformation is increasingly delivering financial outcomes consistent with realized success."
+30M IN Q3: M&T Bank reported net income rose to $721 million from $690 million YoY, saying it grew "consumer and business lending while allowing the proportion of commercial real estate credits to decline."
CA CHANGES ADU LAWS: New Bills Force Municipalities to Follow State Guidelines
California's governor signed three new bills affecting accessory dwelling units, with the goal of increasing housing access and affordability. One provision allows ADUs to be sold separately from the lot’s primary dwelling if certain conditions are met.
ONGOING WRANGLING: NMP chronicles ongoing legal battle over UWM's "All-in Initiative."
SETTLED SUITS: HW's Brooklee Han on KW Commission Suits
Keller Williams announced in 2023 that it was cutting its profit-share distribution for vested “former” KW agents — those who joined the company before April 1, 2020, and left for another brokerage — from 100% to 5%. Prior to this change, vested “former” agents benefited from a 100% profit-share distribution even after their departure. Recently filed documents in Nevada stated that they “finalized the terms of the settlement agreement for this and the other pending claims.
MOVING & SHAKING
Flagstar cuts 700, more to come: 1200 more employees are expected to be laid off once the sale of its mortgage servicing and third-party origination business to Mr. Cooper closes this quarter.
Guild taps former Freddie Sr. Manager Nora Guerra as new SVP, Community Lending Solutions.
Citizens told NMP that Raman Muralidharan has joined as new head of mortgage.
Canopy Mortgage welcomes former Open exec Brenda Hedeen as CFO.
INTROS & INNOVATIONS
BORROWING WITH BETSY: Better.com Introduces Voice-based AI Assistant
The company says its new feature improves its customer experience with more intelligent, timely and accurate answers to customer inquiries on an instant basis.
Betsy leverages AI and large language models (LLMs) to accelerate a customer’s entire mortgage journey from pre-approval start to closed loan. The platform is programmed to communicate with prospective and existing Better.com customers to answer mortgage application inquiries and to collect and verify outstanding application data, all while interfacing with their proprietary LOS in real-time.
ROBOT REVIEW: Figure announced CHATGPT-powered solution to tackle what it calls "lending’s biggest, costliest, most time-consuming headaches first, starting with document reviews." Dubbed a “stare and compare” killer, the release aims to reduce costs, manual work, and bias while increasing speed and customer satisfaction across loan origination and purchasing processes to benefit lending partners and consumers.
MARKET/INDUSTRY
ANOTHER INCREASE: Freddie 10-17-24
The 30-year fixed-rate mortgage increased for the third consecutive week, moving closer to 6.5%. In general, higher rates reflect the strength in the economy that is supportive of the housing market. But notably, as compared to a year ago, rates are more than one percentage point lower and potential homebuyers can stand to benefit, especially by shopping around for the best quote as rates can vary widely between mortgage lenders. In his latest Master the Marketssegment, Bill Bodnar says the fireworks will come in early November, as the election, Fed meeting and the October payrolls report will hint at the next direction of the financial markets.
MORTGAGE APPLICATIONS DECREASED 17% FROM ONE WEEK EARLIER: MBA’s survey for the week ending 10-11-24.
SEPTEMBER NEW HOME APPS UP 10.8% YOY, DOWN 6% MOM (MBA)
CREDIT GOT TIGHTER: Mortgage Credit Availability Index (MCAI), fell by 0.5% to 98.5 in September. A decline in the MCAI indicates that lending standards are tightening.
PRICE PROLIFERATION: Fannie HPI Shows 5.9% YoY Growth in Q324
“Despite decelerating slightly, home price growth remained robust in the third quarter, as the supply of homes for sale, particularly on the existing side, remained weak relative to historical levels.” -Mark Palim, Fannie Mae Senior Vice President and Chief Economist.
110% PROFIT?! Yep, According to ATTOM Data's Q324 US Home Sales Report
Typical profit margins – the percent difference between median purchase and resale prices – stayed the same or decreased from Q2 to Q324 in 79 (50.6%) of markets analyzed.
The leaders among areas with a population of at least 1 million in Q324 were San Jose, CA (typical return of 109.8%); Seattle, WA (90.3%); Providence, RI (84.6%); Miami, FL (83.9%) and Grand Rapids, MI (81.9%).
The lowest among areas with a population of at least 1 million were in New Orleans, LA (24.8 %); San Antonio, TX (25.1%); Austin, TX (33.3%); Houston, TX (37.3%) and Dallas, TX (37.4 %).
68.6% of metro markets are getting ROI above 50%.
STARTS UP, COMPLETIONS DOWN: HUD/Census Bureau September Numbers Out
Housing starts rose 2.7% MoM in September, completions were down by 2.7% MoM.
BUILDER BOOST: NAHB/Wells Fargo Housing Market Index (HMI)
Builder confidence in the market for newly built single-family homes was 43 in October, up two points from a reading of 41 in September. All three HMI indices were up in October:
Current sales conditions rose two points to 47.
Sales expectations in the next six months increased four points to 57.
Traffic of prospective buyers posted a two-point gain to 29.
FRAUD DOWN, BUT SO IS VOLUME: CoreLogic 2024 Mortgage Fraud Report
Calling it relatively stable, CoreLogic found an 8.3% increase in fraud risk at the end of Q224. The company attributes high interest rates keeping loan volumes below norms is a primary driver for the minimal changes in the risk index.
ZTATISTICS: Nuggets from Zillow's 2024 Housing Trends Report
BUYERS: The share of first-time buyers dropped from 50 to 44%, the 30-44 age group was the biggest share of buyers at 34%. The typical buyer only gets one lender pre-approval: 32% get pre-approved by 2 or more lenders.
SELLERS: 82% of sellers said that at least one life event influenced their decision to move and sell their home, like a change in household or family size (56%), or marriage, divorce or separation (37%). The average seller reported living in their home for 12 years. 42% of sellers moved to a home they already owned.
RENTERS: 35% of households live in rented homes; of those rented households, 33% moved in the past year. The annual median income among renter households is approximately $51,300, compared to the overall national median of $74,600. Renter households are more likely to report having at least one pet (58%) or plant (47%) than a child (33%).