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Safe House
By Jeff Walton & Kelly Guest
November 11, 2024
The election is over and the commercials might be gone, but talk of various apocalyptic possibilities hasn't abated in the political arena. However, the housing sector can take solace from National Association of Realtors' Chief Economist Lawrence Yun who said, "… the likelihood of a market crash is minimal." In NAR's latest Metropolitan Median Area Prices and Affordability report, Yun also said, “Home prices remain on solid ground as reflected by the vast number of markets experiencing gains. A typical homeowner accumulated $147,000 in housing wealth in the last five years. Distressed property sales and the number of people defaulting on mortgage payments are both at historic lows.” We'll take it.
"No." In a press conference following a 25 bps rate cut Thursday, a reporter asked Fed chair Jerome Powell if he would resign if president-elect Trump asked him to. His answer was a swift and snippy "No." The follow-up question was about whether Powell would be legally required to go if asked: Powell replied with another staccato "No," and subsequently said that the president doesn't have the power to fire or demote him. NMN explores what changes could occur at Federal Reserve Board of Governors during the new Trump term.
CHATTER
FOMC Commentary: MBA's Mike Fratantoni
“Financial markets fully anticipated this rate cut, and the FOMC’s statement provides no new information regarding the likelihood of future cuts. MBA expects that mortgage rates will remain within a fairly narrow range over the next year, with mortgage rates moving higher on signs of economic strength and more stimulative fiscal or monetary policy, or lower if it’s the opposite. Housing markets continue to be primed for a stronger spring homebuying season, boosted by more housing supply and slower home-price growth.”
$80M for Consumers, $15M in Penalties: CFPB orders Navy Federal Credit Union to refund "illegal overdraft fees" charged from 2017 to 2022. The bureau says consumers were hit with surprise overdraft fees on certain ATM withdrawals and debit card purchases, even when their accounts showed sufficient funds at the time of the transactions.
New Prod Weak, MSRs Expected to be Strong: Mortgage Capital Trading Nov Report
Recent bulk MSR trading values reflect levels of 4.95x – 5.20x multiples of servicing fees for agency loans. Until mortgage lending activity shows a more steady and robust increase in production levels, many MSR holders prefer to wait a little bit more before selling some of their MSR holdings.
Bankruptcies Up 16% Yoy In Oct: Epiq
Individual bankruptcy filings totaled 44,522 in October 2024 - a 16% YoY increase
Chapter 7: 27,358 individual chapter 7 filings in October – up 22% YoY increase
Chapter 13: 17,091 individual chapter 13 filings in October – up 8% YoY
“We continue to observe a rise in overall filings, with notable increases in individual filings, reflecting the financial pressures faced by households. Factors such as higher consumer loan delinquency rates, increased interest rates, record-high national average mortgage payments, sharp increases in insurance premiums, and overall increased expenses are significantly impacting household budgets, driving the upward trend in bankruptcy filings.”- Michael Hunter, vice president of Epiq AACER.
End '24 Strong: Rocket Pro TPO is offering a 24 bps credit for eligible purchase or refi for conventional, FHA and VA loans through 11-17.
Zillow reported Q3 revenue of $581M, up 17% YoY, and a 63% increase in mortgage revenue to $39M, attributed to purchase volume of $812M.
Mr. Cooper Group Inc. announced that it has closed the acquisition of Flagstar Bank N.A.'s mortgage operations. The transaction included acquisition of MSRs, advances, subservicing contracts, and Flagstar’s third-party origination platform for approximately $1.3B in cash.
Net Income Down, Gain Margin Up: UWM reported net income of $31.9M in Q324 compared to $76.3M in Q2. The company also said total gain margin was 118 bps in Q324, up from 106 bps in Q2 and 97 bps in Q323.
Guild reported a $6.4M increase in origination profits, along with a net loss of $66.9 million compared to net income of $37.6 million Q2.
FOA reported adjusted net income of $15M or $0.67 adjusted earnings per share for Q3, and said this marks the fifth consecutive quarter of improved operating performance on an adjusted net basis.
Newrez parent Rithm Capital reported origination and servicing segment pre-tax income of $245.9 million.
Angel Oak Mortgage REIT reported a 22% YoY net income increase over Q323.
loanDepot reported revenue of $315M, up 18% compared to the prior year, and adjusted revenue of $329M, up 26% compared to the prior year.
Onity's Q324 results included adjusted pre-tax income of $35M , resulting in adjusted pre-tax return on equity of 31% and net income of $21M, return on equity of 19%.
MOVING & SHAKING
Fannie Mae appoints Capital Thirteen Founder, CEO, and President Scott Stowell to Board of Directors. Stowell currently sits on the Board of Directors at Toll Brothers, Pacific Mutual Holding Company, and HomeAid America.
Fathom Realty promoted Joanne Zach to Chief Financial Officer (CFO).
MARKET/INDUSTRY
Mortgage Rates Continue to Rise: Freddie 11-7-24
Mortgage rates continued to inch up this week, reaching 6.79%. It is clear purchase demand is very sensitive to mortgage rates in the current market environment. As soon as rates began to rise in early October, purchase applications fell and over the last month have declined 10%. We’re now just 1% away from last year’s peak of 7.79%.
We got a 25 bps cut last Thursday, Fed Chair Powell's blunt stance on finishing his term and an expression of concern about our country's debt trajectory. In his latest Master the Markets segment, Bill Bodnar points out what to watch when it comes to monetary policy in the post-election months.
Mortgage applications decreased 10.8% from one week earlier: MBA Weekly Survey for the week ending 11-1-24.
Temporary Gains? Homebuyer affordability improved in September, with the national median payment applied for by purchase applicants decreasing to $2,041 from $2,057 in August. This is according to MBA’s Purchase Applications Payment Index PAPI. “Overall affordability is now at its highest level since August 2022, but the recent jump in rates will likely cause conditions to plateau. MBA is forecasting for rates to be around 6.3 by the end of the year." – Edward Seiler, MBA AVP, Housing Economics
Slow Go: Home Prices Still Grow: CoreLogic
Source: CoreLogic
“Like much of the housing market at the moment, home prices remained relatively flat coming into the fall. Despite some improved affordability from lower mortgage rates during August, homebuyers mostly kept on the sidelines and decided to wait out the mortgage rate drop for a potentially better opportunity next year [ ]. And while the mortgage rate and economic outlook is full of questions, home prices are likely to maintain their leveled path until early next year when buyers return to the housing market.” – Dr. Selma Hepp, CoreLogic Chief Economist
Renters Outpacing Homeowners: Redfin Report
The number of renter households grew 2.7% in the third quarter, the second biggest year-over-year gain since 2015. The number of homeowner households grew 0.9%.
Renter households have formed faster than homeowner households for the past four quarters as the cost of buying a home rose faster than the cost of renting.
The national rentership rate remained steady at 34.4%.
Housing & The Grim Reaper: Updated MBA Research Report
Mortgage Bankers Association's (MBA) Research Institute for Housing America (RIHA) examined shifting demographics for older Americans over 50 and the impact on housing supply.
“It is evident that older households are aging in place, leading to updated predictions that show that there will be no excess supply of homes to the markets from older Americans moving or dying over the next decade.”
There will be 7 million more homeowners ages 65-85.
It is projected that there will be over 8 million homes supplied by older Americans as they age and die, rising to about 9 million over the next decade, of which approximately 1 million will be due to the death of older Americans.
Over the next decade, there will be an excess demand for homes for sale as older homeowners age and die. Overall, there will be no demographic dividend to the net supply of existing homes.
Increasing Opportunity: ATTOM Data's Q324 Opportunity Zone Report
The report found that median single-family home and condo prices increased from the second quarter of 2024 to the third quarter of 2024 in 53% of Opportunity Zones around the country with enough data to measure. They were up annually in 61% of those zones. The report analyzes qualified low-income Opportunity Zones targeted by Congress for economic redevelopment in the Tax Cuts and Jobs Act of 2017.
Delinquencies Down, But Up: MBA
The delinquency rate was down 5 bps from Q224 but up 30 bps from one year ago. The percentage of loans on which foreclosure actions were started in the third quarter rose by 1 bps to 0.14 percent.
Bad Credit?
(Un) Fair Isaac? FICO announced wholesale royalty will be $4.95 per score for mortgage originations. In a press release, the company said, "We have chosen to communicate in this forum because there remains a substantial amount of misinformation and confusion around FICO’s role in the mortgage industry, the wholesale royalty we receive, and the downstream markups to the FICO® Score price charged and retained by the credit bureaus and their tri-merge resellers."
MBA has a different take:
“Lenders are required by the government to obtain FICO scores and three credit reports to make most loans. It is troubling that these providers have the audacity to use their oligopoly powers to raise prices at many times the pace of inflation during this time of constrained housing affordability. “When the government mandates the use of specific providers, those providers should act responsibly and with transparency. [ ]…we renew our call for federal housing regulators to examine the role the government’s requirements play in driving up these consumer credit transaction costs.”