Women pay higher mortgage rates in 49 states

In Mississippi, single women on average paid 3.47% on a 30-year, conventional fixed-rate mortgage in 2019. But single men on average paid 3.37%, according to the latest HMDA data available. Over the lifespan of the mortgage, the single woman in this instance will have roughly $7,000 more in mortgage payments than the single man.

Patrick Boyaggi, CEO and founder of Massachusetts-based lending startup OwnUp, says this issue hasn’t drawn enough attention in the mortgage space. His analysis of HMDA data found that women paid higher mortgage rates than men in 49 out of 50 states, the lone exception being Alaska (the analysis assumes that the loan size averaged $345,000 and the prime rate was 3.00%).

“The latest HMDA data makes it startlingly clear – women are largely being left out of the conversation,” Boyaggi said. “Recent HMDA data confirms that discrimination in the home-financing process is very real.
The main reason? Many female borrowers simply fail to shop around for the best possible rate, which translates into losing thousands of dollars over the total life of their loan.”

Boyaggi admits his analysis is not exactly revelatory – it’s been well documented that women pay higher mortgage rates, and the reasons for it are many and complex.

He said he didn’t intend to undertake a sociological study to determine all of the reasons women pay more. It’s more important to acknowledge there’s a problem and take action, he said.


Should lenders look to non-QM when the refi boom slows?

HousingWire recently sat down with Tom Hutchens, Angel Oak EVP of production, who shared how non-QM lending could be an effective way for lenders to replace lost business in the event of a refi boom slowdown.

Presented by: Angel Oak

“I am not certain everybody is aware of it or believes it’s a real issue,” Boyaggi said. “We believe it is a systemic-wide problem…women are not being treated fairly…For us, it’s really about it not being 50-50. And therefore, it’s a systemic problem. Let’s bring that to light first and let’s start worrying about the solutions versus trying to nitpick as to why it is an issue. It is an issue. We know it’s an issue. How do we make it better, versus trying to justify it or come up with some kind of rationale for it.”

According to Boyaggi’s analysis of HMDA data, the five states where women overpay most on a mortgage were Mississippi (delta of $7,077 over the course of the mortgage), Alabama (delta of $6,006), Ohio (delta of $5,856), Florida (delta of $5,591) and New Jersey (delta of $5,515).

Single women typically paid between 8 and 10 basis points higher on a mortgage. In Alaska, single women paid an average of 3.21% while single men paid 3.23%, Boyaggi found. The four other best states for women applying for mortgages were Maine, Wyoming, Montana and Oregon. Single women paid between 1 and 3 basis points more on mortgage rates in those states than single men.

An Urban Institute study from 2016 found that single women were better at paying their mortgages than single men, even though they paid higher rates. The study also found that single borrowers, particularly women, are more likely to be minorities, from lower-income areas, and they are more likely to have a mortgage that eats up a higher percentage of their income.

“One possible explanation is that women, particularly minority women, experience higher rates of subprime lending than their male peers,” the UI study said. “Another explanation is that women tend to have weaker credit profiles. We find that both these explanations are true and largely account for the higher rates.”

Though subprime lending has declined since the study’s publication, mortgage underwriting standards in general are much tougher since the financial crisis, and aren’t particularly flexible.

“There is somewhat of a plain vanilla, one-size-fits-all mortgage underwriting standard, and that’s not very good at accommodating minority borrowers in general, or anybody with any sort of a non-typical, non-generic credit profile,” Guy Cecala, CEO of Inside Mortgage Finance, told Wharton Business Radio in 2016. “Minority buyers in general are getting fewer mortgages than they did before. The good news is that they’re not getting subprime loans, because the subprime market has dried up completely, but they’re not getting mortgages at all in many cases.”

Asked if there could be a potential level of bias against women borrowers, Cecala said in the same interview, “I think there can be. The mortgage market prides itself on being color blind, and essentially using a black box, but any sort of black box basically discriminates against single borrowers, lower-income borrowers and borrowers with lower credit scores. If those happen to be predominantly women, you have to assume that they are getting that kind of treatment from the mortgage market.”

Boyaggi, whose firm Own Up helps consumers shop for mortgages and negotiates prices on their behalf, said more awareness simply needs to be raised.

“There’s a lot of things that happen in this industry where if you just looked at it you’d be like, ‘Oh 10 basis points, .010%. What are we talking about?’” he said. “But if you were to say, ‘Hey, this gas station charges women 10 cents more than men,’ we would be in an uproar. There would be stories about it everywhere, right? People would vilify that gas station, and rightly so.”

Source: housingwire.com

Even with high lumber prices, new home sales beat

Extreme increases in lumber prices have caused some people to go bearish on new home sales. Not this one! If we play a version of rock, paper, and scissors with lumber prices and mortgage rates, mortgage rates will win. Mortgage rates have a much more significant influence on the new home sales market than lumber prices, even at their current highs.

Proof of this is the recent new home sales report released by the Census Bureau. New home sales beat expectations by a lot, and all the revisions to the last report were positive.

Last month, I wrote that we should have expected new home sales to moderate after their parabolic rise.

Sales are still working to find a sustainable trend after the massive distortion in all housing data lines due to COVID-19. This recent report, especially regarding the positive revisions to the last report, tells a solid story for new home sales in 2021 as long as rates stay low.


From Census:  “Sales of new single-family houses in January 2021 were at a seasonally adjusted annual rate of 923,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.3% (±18.1%)* above the revised December rate of 885,000 and is 19.3% (±19.5%)* above the January 2020 estimate of 774,000.

When reviewing new home sales data, it is wise to keep an eye on the monthly supply. When the monthly supply is 4.3 and below, builders will have the confidence to continue building. This is especially true when the 3-month average is 4.3 months or below. Currently, inventory is at four months with a three-month average of 4.06 months of supply, so it’s looking pretty good. The revisions on this report showed a lower monthly supply than in the previous month.

The low monthly supply is why builders’ confidence is high, despite the massive spike in lumber prices. As a high school basketball coach in my previous life, I know that sometimes all that matters is that you shoot better than your opponents. Don’t overthink it. Better sales plus lower inventor equals increased builder confidence.

Today, the MBA’s purchase application data was also positive by 7% year over year, even with the President’s Day holiday and the Texas snowstorm — two factors that typically hurt applications. Positive year-over-year growth is a good thing. 

So far this year, our year-over-year comparisons have been against a “pre-covid” housing market. March 18 is almost here, which means year-over-year comparisons of housing data are going to get funky. If you see scorching year-over-year growth – don’t be fooled that it will be a sustainable trend. 

Purchase applications in 2021 have exceeded my estimated peak rate of growth of 11%. I expected to see a trend growth rate between 1%-11% year over year, up until March 18.  We are currently trending at 12.375%. The substantial purchase application growth speaks well for housing sales 30 to 90 days out.

The take-home message is that sales are strong, which will contribute to hotter home prices. Right now, we want the rate of growth to cool down.

Next week for HousingWire, I will explain why we should expect to see some purchase application data show weaker year-over-year data in the second half of 2021. There is more to this story than higher mortgage rates.

Source: housingwire.com

Existing home sales are still too hot

The National Association of Realtors reported that existing home sales for January were at 6,669,000, which beat estimates. The year-over-year growth was an impressive 23.7%. The median sales price also jumped 14.1% year over year, which I warned could happen during the years 2020-2024. On a recent HousingWire podcast, I discussed the need for higher mortgage rates to cool down this growth rate.

Currently, the 10-year yield is 1.35%, which is now above a critical level that I have talked about for some time. We should all be jumping for joy as the bond market shows the American bears that America is back. Mortgage rates should also creep higher. When the 10-year yield gets into the range of  1.33%-1.60%, we will have achieved our goal for the “America is Back”  economic model that I proposed last year, which I believe could only happen in 2021.

With the yield in that range, we can expect the mortgage rate to move up toward 3.375%. We still have a lot of work to do to earn the right to create this range in the bond market; the first would be hitting 1.60%, which we haven’t yet. The chart below shows the 10-year yield as of the close of Thursday. Today, bonds are selling off and yields are higher.

Mortgage rates are still meager, historically speaking, but 3.375% or higher may be enough to slow the home price growth rate – which, right now, is simply too hot. The days on the market went from 43 days last year to 21 days currently.

So far this year, the MBA purchase application data is running stronger than even I thought. This metric is a predictor trend of demand 30-90 days out. I believed the peak rate of growth in purchase applications would be around  11% year over year up until March 18th. It is trending at 13.1% this year, so we are off to a good start for 2021.

New home sales, existing home sales, and the builder’s confidence index that went parabolic towards the end of 2020 have stopped going up and started to fall.  The last report on new home sales shows that housing data moderates and moves back to the trend.

The monthly sales prints for existing home sales show that this metric has stopped its parabolic move higher, but it still has not moderated enough. We still have not  completely made up for the lost sales in 2020 due to COVID-19.  We should have ended 2020 with 5,710,000 -5,840,000 in existing home sales but only realized 5,640,000.  This number is only 130,000 higher than what we had in 2017, so this isn’t the booming speculative buying we saw during the height of the housing bubble years.

Once this makeup demand is exhausted, existing-home sales should moderate toward 6.2 million or even lower to get back to the trend. If existing home sales stay above 6.2 million on the monthly sales print for the entire year, we can consider the demand to be even better than expected.

For the rest of the year, the single most important and healthy event for the housing market would be higher mortgage rates to cool down home prices’ growth rate. We will see if mortgage rates rise high enough to cool demand and reduce the multiple bid situation we currently have in many markets.

Nobody wins when the housing market is too hot – not even sellers because they will need to find somewhere else to live. We have enough supply to grow sales to pre-cycle highs, but when choices are limited, the willingness to sell and move becomes less attractive.

Source: housingwire.com

Fannie Mae reports rising confidence in housing market

Following two months of steady declines, Fannie Mae’s Home Purchase Sentiment Index (HPSI), a composite index designed to track the housing market and consumer confidence to sell or buy a home, rose in January.

The HSPI rose 3.7 points last month to 77.7. Though it’s undoubtedly a positive sign, the HPSI has yet to recover to pre-pandemic levels and is still down 15.3 points year over year.

Doug Duncan, Fannie Mae’s chief economist, noted a slight chasm has formed in confidence among lower and higher- income groups based on recent stimulus and fiscal policies.

According to Duncan, this newfound optimism in lower-income borrowers and renters could indicate those who have been more negatively impacted by the pandemic may be starting to feel the economic recovery.

“Among homeowners in higher income groups, however, the other five components of the index remained relatively flat or slightly negative, suggesting to us that some consumers are waiting to gauge the effectiveness of any new fiscal policies and vaccination distribution programs on both housing and the larger economy,” Duncan said.


Making housing more affordable by bridging the affordable supply gap

In the last few years, the number of existing single-family homes for sale has decreased. But home prices have increased. To make homeownership a possibility for everyone, there needs to be a higher supply of affordable homes.

Presented by: Fannie Mae

Overall, January’s housing market confidence jump was largely driven by renewed optimism for prospective home sellers, after December’s increasing home prices and tight inventory left homeowners weary that 2020’s record sales may not roll in to the new year. However, the percentage of respondents who say it is a good time to sell a home increased from 50% to 57% in January, while those who believe it is a good time to buy remained unchanged at 52%.

Even though buying sentiment stood idle in the first month of 2021, mortgage applications jumped 8.15% from the week ending Jan. 29, breaking a two-week streak of decreases, according to the Mortgage Bankers Association.

And borrowers are still relatively unsure of how long elevated home prices will hold. The HPSI reported 41% of respondents expect home prices will go up in the next 12 months – unchanged from the month prior – while those who believe it will go down increased from 16% to 17%.

But even if those prices do rise, borrowers can still save on the record low rates the industry has become accustomed to. The percentage of respondents who say mortgage rates will go down in the next 12 months increased from 8% to 9%, while the percentage who expect mortgage rates to go up increased from 43% to 45%.

Though economists are fairly certain all signs indicate to rising mortgage rates, experts said it won’t be a sudden jerk reaction but rather a slow build that will force its way over 3% later in the year. Regardless, LO’s made insane money in 2020 thanks to record low rates, with the jury still out on whether they can swing it again in 2021 if refi’s begin to fall with rising rates.

But rising rates are a sign of a recovering economy, and though that recovery may look slow, the housing market is showing signs its already occurring.

The percentage of respondents who say they are not concerned about losing their job in the next 12 months remained unchanged at 75%, while those who are concerned fell from 25% to 24%. And the percentage of respondents who say their household income is significantly higher than it was 12 months ago increased from 20% to 21%, while the percentage who say theirs is significantly lower decreased from 18% to 14%.

January’s unemployment numbers weren’t overly impressive to economists, with the unemployment situation virtually unchanged for the month.

“The number of people on temporary layoff fell slightly in January, while the number of permanent job losers rose, a troubling sign. On the other hand, the number of people working part time but who would prefer full time employment also fell slightly, a positive indicator of labor demand,” Duncan said.

Source: housingwire.com

Understanding the seasonal patterns of mortgage rates

Much like the changing of the calendar, buying and selling homes follows a seasonality that that those in mortgage and real estate have grown accustomed to. But a recent study from tech startup Haus found that mortgage rates can also be seasonal, and borrowers can benefit from understanding that rhythm.

Analyzing over 8.5 million mortgage originations between 2012 and 2018 from Freddie Mac’s Single-Family Loan-Level dataset, Haus found that the sweet spot for rates is typically in January, when mortgage originations also typically slump.

Ralph McLaughlin, chief economist at Haus, explained the correlation. “So, what do lenders have to do to be competitive? They lower their rates. But let’s look at when Treasury rates were dropping like crazy early in 2020. What that usually means is that mortgage rates would also drop like crazy. But at first, mortgage rates didn’t drop. And it’s because there was such a flood of people looking to refinance that lenders couldn’t keep up.

“They couldn’t keep up with demand and so if they couldn’t keep up with demand that allows them to keep their prices relatively high,” McLaughlin said.

2020 was an outlier, with mortgage rates dropping to record lows on 16 different occasions. However, many economists expect as the economy begins its post-pandemic recovery, rates will also begin to stabilize to a more predictable pattern.

“We forecast rates to remain relatively low this year as the Federal Reserve keeps interest rates anchored near zero for a longer period of time, if needed until the economy rebounds,” said Sam Khater, Freddie Mac’s chief economist.

If rates stay low, the Haus study estimates that borrowers buying houses between $400,000 and $500,000 are going to reap the greatest reward – averaging a discount of 23 basis points compared to cheaper loans. That’s because it costs the same to originate a loan that is half a million dollars as it does $200,000, but the latter doesn’t involve as much return.

“You’re not making as much as you would on that more expensive mortgage, obviously, in order to cover some of those fixed costs, so lenders actually increase rates on the lower end of mortgage originations.” McLaughlin said.

An updated market outlook from Zillow expects seasonally adjusted home values to increase by 3.7% from December 2020 to March 2021, and by 10.5% through December 2021.

But even if lenders do inflate prices on a lower mortgage, borrowers can gain an advantage by playing the field. Across the largest lenders in the country (the 100 largest by volume of originations), Haus found on average a 75-basis point spread between the most expensive and least expensive lender. Taking into account size of down payment, existing debt and credit score, the study found that for the same borrower, a potential mortgage rate could, for example, average anywhere from 3.25% to 4%.

So how do lenders retain a potential borrower if they can’t match the price? McLaughlin said they are speculating that the convenience and experience borrowers play may be a leading factor. Those lenders who invest in digital technology and digital documentation are going to have the upper hand.

“It’s like, how much are you willing to pay for a hotel? I don’t think there’s a Ritz Carlton of mortgages or a Motel 6 of mortgages, but nonetheless there is variation and even if a rate is cheaper, a lot borrowers are thinking about quality,” McLaughlin said.

Surprisingly, a borrower who lowers their debt to income ratio doesn’t move the needle much on rates. According to the study, borrowers with a DTI below 36% (considered a “good” DTI), on average have mortgage rates that are just 3-6 basis points lower than borrowers with a DTI above 43% (considered “high”).

That said, recent changes implemented by the Consumer Finance Protection Bureau have removed DTI requirements from qualified mortgages. Haus estimates the ongoing impact that DTI will have on mortgage pricing is also likely to fall.

Source: housingwire.com

Mortgage rates drop even lower to new record of 2.65%

The average U.S. mortgage rate for a 30-year fixed loan fell two basis points this week to 2.65% – the lowest rate in the Freddie Mac’s Primary Mortgage Market Survey’s near 50-year history. This week’s mortgage rate broke the previous record set on Dec. 24.

With this week’s record drop, there have now been 22 consecutive weeks when average mortgage rates have been below 3%, and this is the 17th time this year rates have broken a record.

The average fixed rate for a 15-year mortgage also fell last week to 2.16% from 2.17%. A year ago at this time, the 15-year FRM averaged 3.07%.

Despite a full percentage point decline in rates over the past year, housing affordability is slipping as these low rates have been offset by rising home prices, according to Sam Khater, Freddie Mac’s chief economist.

“The forces behind the drop in rates have been shifting over the last few months and rates are poised to rise modestly this year. The combination of rising mortgage rates and increasing home prices will accelerate the decline in affordability and further squeeze potential homebuyers during the spring home sales season,” Khater said.


Low mortgage rates fuel the demand for valuation and settlement services  

VRM Mortgage Services CEO shares how the company is navigating a difficult year, and how its services are impacted by the different national, state and local directives on foreclosure.

Presented by: VRM Mortgage Services


This year’s record low rates may be setting a new norm.

Len Kiefer, Freddie Mac‘s deputy chief economist, noted every decade since the 1980s experienced a 2% drop decade-over-decade. With rates sitting at close to 12% nearly 50 years ago, declining patterns may mean 30-year mortgage rates could average 2% the rest of the 2020s.

“Even just a year ago, that didn’t seem probable, and it’s certainly not my baseline forecast, but we’d have to acknowledge that there is a chance rates could continue their secular decline,” Kiefer said.

However, news of Democrats having won control of the Senate on Tuesday has some economists shifting gears.

The prospects of increased spending and deficits will likely put upward pressure on mortgage rates as the year progresses, said Mortgage Bankers Association Chief Economist Mike Fratantoni. In turn, Fratantoni estimates the massive refinance wave lenders have been riding may be cut short.

Source: housingwire.com

Mortgage rates hold steady at 2.77%

The average mortgage rate for a 30-year fixed loan fell two basis points last week to 2.77%, according to Freddie Mac’s Primary Mortgage Market Survey. Now 12 basis points above the record low set Jan. 7, rates more closely resemble those seen over two months ago.

The 15-year fixed mortgage rate also shifted downward to 2.21 from 2.23 the week prior.

With last week’s data in, mortgage rates have now managed to hover below 3% for nearly six months and have fueled purchase and refinance activity to record-setting levels amid a global health crisis.

But political and economic factors are causing some fluctuation in those rates, putting upward pressure on Treasury yields, said Sam Khater, Freddie Mac’s chief economist.

“However, we forecast rates to remain relatively low this year as the Federal Reserve keeps interest rates anchored near zero for a longer period of time, if needed until the economy rebounds,” Khater said.


Leveraging eClosings to effectively manage increased loan volumes

With no end in sight to record low rates and the increased loan volume, lenders must streamline workflows and accelerate time to close. Evolving from traditional closings to hybrid closings to full eClosings can help lenders process more loans at a faster pace without overwhelming their resources.

Presented by: SimpleNexus

Freddie Mac’s quarterly forecast estimates that the average 30-year fixed-rate mortgage will be 2.9% in 2021 and 3.2% in 2022. However, some economists believe a slow upward path for rates is inevitable in 2021.

Despite the Fed’s vow to keep interest rates low until 2022, Mike Fratantoni, chief economist at the Mortgage Bankers Association, said recent Fed speeches revealed they are less committed to asset purchases, and wouldn’t be surprised if said purchases were reduced by the end of year.

“While for some time people thought that mortgage rates might be less impacted than Treasury rates, the spread between mortgage rates and Treasury rates has narrowed substantially. Going forward, any increases in Treasury rates are really going to be matched by increases in mortgage rates,” Fratantoni said.

The Treasury is now expected to auction close to $3 trillion worth of bonds this year, and with that amount of supply hitting the market, a historically inverse relationship will see bond prices dropping and yields on the rise.

Source: housingwire.com