Conforming Loan Standards Loosened in January

Access to mortgage credit increased again in January. The
Mortgage Bankers Association (MBA) said its Mortgage Credit Availability Index
(MCAI) rose 2.0 percent to 124.6. A decline in the MCAI indicates that lending
standards are tightening, while increases in the index are indicative of
loosening credit.

The two components of the Conventional MCAI posted
significant increases. The Conforming MCAI jumped 7.7 percent and the Jumbo
component was up 2.2 percent, pushing the parent index up 4.8 percent compared
to December. This was slightly offset by an 0.1 percent decline in the
Government MCAI.  

“The growth in credit availability in January coincides with a housing
market that is poised for a strong start to the year
. Improvements were driven
by the conventional segment of the mortgage market, as lenders added ARM loans
with lower credit score and higher LTV requirements,” said Joel Kan, MBA’s
Associate Vice President of Economic and Industry Forecasting. “Despite
ARM loans accounting for a very small share of loan applications in recent
months, lenders are likely looking ahead to a strong home buying season by
expanding their product offerings.”  

Added Kan, “Ongoing strength in home-purchase applications and home
sales continue to signal robust housing demand, even as low housing inventory
remains a constraint. However, even with overall credit availability picking up
in three of the past four months, credit supply is still at its tightest level
since 2014
.”  

The MCAI was at 181.3 in February
2020 as news of the pandemic broke. It declined by 16.1 percent in March and
another 12.2 percent in April. Subsequent smaller decreases ultimately took the
index to 118.6 in September before it began what is so far a stop and go recovery.

The MCAI and each of its components are calculated
using several factors related to borrower eligibility (credit score, loan type,
loan-to-value ratio, etc.). These metrics and underwriting criteria for over 95
lenders/investors are combined by MBA using data made available via a
proprietary product from Ellie Mae. The resulting calculations are summary
measures which indicate the availability of mortgage credit at a point in time.
Base period and values for total index is March 31, 2012=100; Conventional
March 31, 2012=73.5; Government March 31, 2012=183.5.

Source: mortgagenewsdaily.com

Mortgage rates set new record low, falling below 3% as concerns rise about coronavirus second wave – CNBC

Prospective home buyers arrive with a realtor to a house for sale in Dunlap, Illinois.

Daniel Acker | Bloomberg | Getty Images

Barely a week ago it looked like mortgage rates were finally breaking higher, but in a sudden reversal, they just set a new record low.

The average rate on the popular 30-year fixed mortgage hit 2.97% Thursday, according to Mortgage News Daily, as the stock market sold off and investors rushed to the relative safety of the bond market. Mortgage rates loosely follow the yield on the 10-year U.S. Treasury. 

For top-tier borrowers, some lenders were quoting as low as 2.75%. Lower-tier borrowers would see higher rates.

“This is a very abrupt and arguably unexpected change given that last week looked like a potentially scary lift-off for rates after an extended stay near the previous all-time lows,” said Matthew Graham, chief operating officer at Mortgage News Daily. “It suggests we shouldn’t count out the ability of interest rates to maintain these levels (or improve upon them) even if the economy continues showing signs of healing.”

The market sell-off is being fueled by new concerns that there may be a second wave of the coronavirus, which already decimated the economy in April and May. Rates have been hovering above 3% for much of the past month and only broke higher last week, following a surprisingly more optimistic May employment report. That, on top of cities across the country reopening, fueled more selling in the bond market.

Interest rates also benefited from an announcement by the Federal Reserve on Wednesday that it would continue buying mortgage-backed bonds. That will keep liquidity in the lending market. 

 “I think rate levels will be directly tied to the ability of the economy to recover. If it goes better than expected, rates would rise, and vice versa if things remain sluggish. Either way, the Fed is committed to keeping shorter-term rates lower for longer, and that will help to anchor longer-term rates like mortgages to some extent,” added Graham.

Low rates have fueled a sharp and fast recovery in the housing market, especially for homebuilders. Mortgage applications to purchase a home were up 13% annually last week, according to the Mortgage Bankers Association. 

A new housing recovery index from realtor.com, which combines home search activity, prices and inventory, showed continued improvements in the market, even as social unrest erupted in several large cities.

“The general sentiment from consumer surveys is that now is not a good time to sell a home because of Covid, economic uncertainty, and social unrest, but the data is saying the opposite,” said Danielle Hale, chief economist for realtor.com. “Home prices are back to their pre-Covid pace and we’re seeing listings spend slightly less time on the market than last week.”

Mortgage rates are just one piece of the puzzle. Mortgage credit availability is still key, and it fell last month to the lowest level in nearly six years, according to an MBA survey.

“Under the current economic environment, low rates are having very little impact due to depleted mortgage availability and a decline in savings, which are putting potential buyers on the sidelines, unfortunately, just as mortgage rates are making homes more affordable,” said George Ratiu, senior economist at realtor.com.

Source: cnbc.com

Mega Capital Funding returns to non-QM lending space

Mega Capital Funding just became the latest company to re-enter the non-Qualified Mortgage space with the launch of several new product lines.

Its new “Mega Elite” non-QM and debt service coverage ratio product lineup includes alternative income documentation products such as its three- and 12-month bank statement products, CPA and borrower prepared P&L and asset utilization, and its investment properties debt service coverage ratio with 1:1 and no ratio options.

According to the rate sheets, through its “Elite Non-QM” product, Mega Capital has loans between $250,000 and $2 million, with a max debt-to-income ration of 50%. The max LTV is 70% for purchase and 65% for refi.

The offering team will be led by Mega Captial Funding CEO Brian Na as well as non-QM veterans Rikki Danganan and Will Fisher.

“With our initial proprietary product offering we’ve set out to focus on a specific segment of non-QM, that will allow our brokers to provide enhanced solutions and our capital partners to achieve their yield goals,” Na said.


Non-QM lending is poised for growth in 2021

HousingWire recently spoke with Mike Fierman, managing partner and co-CEO of Angel Oak, about the non-QM lending outlook for 2021 and how Angel Oak’s “originate to hold” model benefits originators.

Presented by: Angel Oak

Back in March, Mega Capital Funding became one of many mortgage lenders that ceased all non-QM operations.

The company sent out a message to brokers that stated: “Due to retractions in the financial markets as a response to the coronavirus pandemic, and the uncertainty in the non-QM space, MCDI will suspend funding on any and all of our non-QM and non-QM related products. This includes registering, locking or pre-locking loans. Any loan with docs signed, we will fund. Any loan without signed docs will be suspended for the foreseeable future or until market stability returns.”

Now, many investors are once again returning to the non-QM space. Mike Fierman, Angel Oak managing partner and co-CEO, recently told HousingWire he expects the non-QM market in 2021 to grow quickly as the economy recovers from the pandemic.

He noted that, in a normal year, a healthy non-QM market should report approximately $300 billion in originations per annum. In 2020, Fierman said, non-QM origination totaled around $18 billion, so there is plenty of room for growth.

And in addition to an apparent increase in appetite for non-QM on the investor front, there is also room for significantly more risk in the market overall.

The Housing Finance Policy Center’s latest credit availability index shows that mortgage credit availability was just under 5% in the third quarter of 2020, down from 5.1% in the second quarter of 2020 and the lowest it has been since the introduction of the index.

Overall, credit availability in the mortgage market continues to loosen. Mortgage credit availability increased in January, according to the Mortgage Credit Availability index from the Mortgage Bankers Association. The MCAI increased by 2% to 124.6 in January. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. The index was benchmarked to 100 in March 2012.

“The growth in credit availability in January coincides with a housing market that is poised for a strong start to the year,” said Joel Kan, MBA associate vice president of economic and industry forecasting. “Improvements were driven by the conventional segment of the mortgage market, as lenders added ARM loans with lower credit score and higher LTV requirements. Despite ARM loans accounting for a very small share of loan applications in recent months, lenders are likely looking ahead to a strong home buying season by expanding their product offerings.”

Source: housingwire.com

It’s still really difficult to get a mortgage, but getting easier

Mortgage credit is still the tightest it has been in more than six years, but steady loosening in January revealed lenders are preparing for a rebounding economy, the Mortgage Bankers Association said in a report on Tuesday.

The group’s Mortgage Credit Availability Index rose 2% to 124.6 last month, still hovering near levels previously seen in 2014, though it is the third month in the past four that credit availability has picked up as supply eases out. The index plunged from record highs seen in late 2019 after the COVID-19 pandemic caused the worst economic contraction since the Great Depression.

Measuring credit availability by loan type, the Conforming MCAI that tracks loans backed by Fannie Mae and Freddie Mac rose 7.7% while the Jumbo MCAI measuring high-balance loans rose 2.2%, and the Conventional MCAI that measures loans not backed by the government rose 4.8%.

The Government MCAI that includes mortgages backed by the Federal Housing Administration, the Veterans Administration and the U.S. Department of Agriculture fell by .1%, MBA said.

A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit.


What happens when borrowers have more control of the lending process?

FormFree is launching a blockchain-based exchange for consumers to take control of the mortgage lending process. The idea behind the distributed ledger technology is to provide faster close times and more choice for both loan seekers and lenders by giving consumers access to their own ATP.

Presented by: FormFree

According to Joel Kan, MBA’s associate vice president of economic and industry forecasting, an uptick in credit availability coincides with a housing market that is poised for a strong start to the year.

“Improvements were driven by the conventional segment of the mortgage market, as lenders added ARM loans with lower credit score and higher LTV requirements,” Kan said.

Despite ARM loans accounting for a very small share of loan applications in recent months, Kan noted lenders are likely looking ahead to a strong home buying season by expanding their product offerings.

And even with tighter standards throughout the pandemic, the lowest mortgage rates on record still pushed $4 trillion in originations, insane year-over-year compensation for LO’s and opened the gate for several lenders to finally go public in 2020.

Fannie Mae’s economic and strategic group also upgraded its 2021 forecast in January setting expectations higher for GDP, increased home sale growth in the beginning of the year and even more purchase originations than the year prior.

“Ongoing strength in home-purchase applications and home sales continue to signal robust housing demand, even as low housing inventory remains a constraint,” Kan said.

motgage-credit-January

Source: housingwire.com