Whereas Thursday’s data was clearly bad for bonds/rates (ultimately creating a challenge to the 3.84 range ceiling), Friday’s key morning data is relatively inoffensive. In fact, with Core PCE being in line with expectations, bonds are starting the day by breathing a relative sigh of relief. If early trading trends hold up, this may be enough for yields to hold the prevailing range despite looking destined to depart yesterday.
The easy choices have already been made: the low performers left many moons ago, the travel budgets have been slashed, and struggling branches have been sold to competitors or unceremoniously closed.
For the mortgage industry, more often it’s about making the very hard choices these days – exiting a channel, deciding which star performer to let go, etc. After all, the average retail lender lost nearly $2,000 per loan in the first quarter, and I expect losses to be similar in Q2 and elevated in Q3.
One consequence of mortgage lenders – and LOs, for that matter – being on the ropes is the lack of investment back into their business. I get it! Money’s tight and lenders are plugging holes in the boat, not buying a new engine.
In our quarterly HousingWire LenderPulse survey, we asked retail loan officers, branch managers, C-suite execs, brokers and others how they feel about the market, where they expect rates to be in Q3, and what they’re doing to reduce costs.
Interestingly, 57% of the 166 respondents said they do not plan to invest in tech, services or solutions in the third quarter. The rest of the surveyed pros were evaluating or still planning to purchase lead generation services and keep loan originations systems, customer relationship management (CRM) platforms and services that maximize repeat and referral business for lenders.
While the respondents were split as to whether to invest or hold spending money in tech, when asked about what business cost reductions they plan to make in the future, 39% of surveyed mortgage professionals pointed to cutting their marketing spend/tools. Just under 25% of the respondents said they would cut down on production or origination-focused headcount, followed by operational software and solutions (18%); and originations software (8%). Other responses included cutting down excessive incentives, business trips, open houses and sponsorships.
Mortgage is famously an unforgiving, low-margin business. The lenders and LOs that saved their cash from the pandemic unicorn years and have been disciplined about maintaining their marketing strategy and investing in technology should see outsized returns in the years to come.
After all, as the famous Warren Buffett saying goes, “Only when the tide goes out do you learn who’s been swimming naked.”
James Kleimann Managing Editor, HW Media
In our weeklyDataDigest newsletter, HW Media Managing Editor James Kleimann breaks down the biggest stories in housing through a data lens. Sign up here! Have a subject in mind? Email him at [email protected]
Texas-based Mr. Cooper Group has extended the deadline of its tender offer to acquireHome Point Capital’s outstanding shares, the company announced on Wednesday. The offer, which was previously scheduled to end on June 27, will expire on July 21.
The tender offer is part of Mr. Cooper’s agreement to acquire Home Point Capital, which also includes the payment of $324 million in cash. In addition, Mr. Cooper is assuming $500 million in outstanding Home Point 5% senior notes due in February 2026, per the deal announced in May.
Heisman Merger Sub, a subsidiary of Mr. Cooper Group, is paying $2.33 per share net to the seller in cash, without interest thereon.
Mr. Cooper said that the depositary Equiniti Trust Company “indicated that 136,030,882 shares had been validly tendered into and not validly withdrawn from the tender offer, representing approximately 98.2% of the outstanding shares.”
According to Mr. Cooper, the offer is conditioned to certain conditions, including consent from state mortgage regulators, the Government Mortgage Association, the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association.
“The tender offer was extended to allow additional time for the satisfaction of the remaining conditions to the tender offer,” the company said in a news release.
Mr. Cooper and Home Point Capital expect the deal to close in the third quarter of 2023.
After onboarding Home Point customers, Mr. Cooper will shut down the seller operations. In April, Michigan-based Home Point sold its wholesale origination business to The Loan Store.
Mr. Cooper is acquiring Home Point’s $84 billion servicing portfolio, which will contribute to its return on equity with an estimated 10% increase to operating earnings in the first year. Mr. Cooper also estimates a tangible book value increase of about $1 per share at closing.
Mr. Cooper had 4.1 million customers and $853 billion in unpaid principal balance (UPB) at the end of March. But the servicing portfolio is expected to grow as the company has been active in acquiring MSRs.
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Alarm bells sounded yesterday after it was relieved that the Obama Administration was considering an all-out “foreclosure ban.”
But it’s probably a big ado over nothing…essentially all foreclosures would be banned until the associated mortgages were reviewed for possible inclusion in the Home Affordable Modification Program (HAMP).
Currently, mortgage lenders and servicers can initiate foreclosure proceedings on any loan that hasn’t been submitted for HAMP eligibility, and foreclosure litigation can proceed even while borrowers are in trial loan modifications.
A document detailing the proposal obtained by Bloomberg said it “prohibits referral to foreclosure until borrower is evaluated and found ineligible for HAMP or reasonable contact efforts have failed.”
But it’s not a done deal, as Treasury spokeswoman Meg Reilly pointed out in an e-mail, claiming it was one of many ideas floating around and not yet approved.
Even if it were approved, would it really cause much of a stir or just delay things further? That’s debatable, but to me it seems it would just require lenders and servicers to take an additional step before initiating the inevitable.
Clearly a large number of loans are not eligible for HAMP.
Of the roughly 5.6 million homeowners that are 60-days or more delinquent, about 1.7 million are eligible for HAMP, so there would be plenty of easy outs.
Possible exclusions range from the home being vacant or non-owner occupied, the debt-to-income ratio falling below 31 percent, or the loan amount exceeding the conforming limit (jumbo mortgages).
Additionally, 1.3 million homeowners have already received offers for trial loan modifications under the program, so it seems the proposal would do too little, too late.
But hey, if they don’t stop to consider you for HAMP inclusion, you can always bulldoze your house.
An unfinished condotel complex in Ft. Lauderdale associated with Donald Trump is facing foreclosure, according to the Sun Sentinel.
Developers reportedly defaulted on the $139 million loan tied to the 298-unit project, known as the Trump International Hotel & Tower.
A foreclosure has been filed against SB Associates LLC, which signed the sizable construction loan back in December 2006, as the mortgage wave was cresting.
It wasn’t long before South Florida became one of the hardest-hit areas in the nation, thanks to massive investor speculation and ridiculous appraised values.
Interestingly, the original lender, Corus Bankshares of Chicago, failed last year, which led to a government-arranged buyout led by Starwood Capital.
The group’s Corus Construction Venture now holds the loan on the 24-story Trump property.
The foreclosure suit, which was filed on March 11 in Broward County Circuit Court (the same one where ex-Countrywide boss Angelo Mozilo faces a civil suit), names more than 80 people who put deposits on the unfinished condos.
There are also a number of related lawsuits from disgruntled buyers who want refunds for their 20 percent deposits – studios and one to two bedroom units were originally priced from about $500,000 to more than $3 million each!
Then there’s Trump, who looked to be a developer and partner before things turned south, but now claims his group only licensed its name to the venture.
Mortgage rates are staying flat again today. They’ve stayed in a tight range all week and could remain there as we head into the weekend. It all depends on the monthly jobs report on Friday, though. We could just as easily see that report show some strong numbers and push mortgage rates higher. Read on for more details.
Where are mortgage rates going?
Rates rise after moving lower yesterday
The day is young and already we’ve seen bond yields bounce around several times. At first, we got news out of China about new tariffs against the U.S. This sparked buying in the bond market, pushing up yields.
Then, a very first jobs reading number in the ADP employment situation, which showed 241,000 jobs added in March had the opposite effect, sending yields back up. The ADP report is kind of like the appetizer for Friday’s monthly jobs report from the Labor Department.
But now, bond yields are moving lower once again. Not by much, but they are still down on the day. The yield on the 10-year Treasury note, which is the best market indicator of where mortgage rates are going, is down a little over one basis point.
That’s fairly negligible. Mortgage rates typically move in the same direction as the 10-year yield and are similarly not seeing much movement today. So far this week, rates have stayed in a contained range.
That could change, however, as we make our way to the monthly jobs report on Friday. That report is always one of the biggest market moving events of the month and this time around shouldn’t be any different.
We’ve got a lot of talk and speculation over the past several weeks and months about inflation data and what it all means for the Federal Reserve and their plan to raise the federal funds rate.
At their meeting a few weeks ago, they came out and said that a total of three rate hikes would take place in 2018. As we know with the Fed, their outlook is hardly set in stone.
Depending on what the data says we could always see an adjustment to their policy. With the monthly jobs report, investors will be looking closely at the headline reading, but more importantly, the average hourly earnings reading, to see if there are signs of an uptick in inflation.
If we get a strong headline reading and better than expected growth in wages, we will likely see investors move more into stocks and out of bonds, pushing up the Treasury yields and mortgage rates.
So if you don’t want to deal with the threat of rising rates on Friday, you’re going to want to lock in a rate right now. Mortgage rates seem as though they will remain flat on the week until Friday, so there is definitely a window of opportunity for borrowers to take advantage of.
Rate/Float Recommendation
Lock now before rates move higher
Mortgage rates are staying in a tight range. This is good news for anyone who is trying to lock in a rate on a purchase or refinance. There is a clear risk though this week with the monthly jobs report on Friday. If you want to avoid the potential for rising rates, we recommend that you lock now.
Even if you wait it out this week, the long-term trend is for rates to move higher, so we still think that taking action sooner rather than later is a smart move.
Learn what you can do to get the best interest rate possible.
Today’s economic data:
ADP Employment Report
The ADP employment report is showing 241,000 jobs were added to the U.S. economy in March. That’s a very solid number that is much higher than the 185,000 that analysts had expected.
Fedspeak
St. Louis Fed President James Bullard at 9:45am
Cleveland Fed President Loretta Mester at 11:00am
PMI Services Index
The PMI services index hit a 54.0 in March.
Factory Orders
Factory orders moved up 1.2% in February.
FOMC Minutes
ISM Non-Mfg Index
The composite index hit a 58.8 in March.
EIA Petroleum Status Report
For the week of 4/4/18:
Crude oil: -4.6 M barrels
Gasoline: -1.1 M barrels
Distillates: 0.5 M barrels
Notable events this week:
Monday:
PMI Manufacturing Index
ISM Manufacturing Index
Construction Spending
Fedspeak
Tuesday:
Wednesday:
ADP Employment Report
Fedspeak
PMI Services Index
Factory Orders
FOMC Minutes
ISM Non-Mfg Index
EIA Petroleum Status Report
Thursday:
Jobless Claims
International Trade
Fedspeak
Friday:
Monthly Jobs Report
*Terms and conditions apply.
Carter Wessman
Carter Wessman is originally from the charming town of Norfolk, Massachusetts. When he isn’t busy writing about mortgage related topics, you can find him playing table tennis, or jamming on his bass guitar.
JPMorgan Chase is expanding an effort to help close the gap in homeownership between Black and Hispanic communities and the rest of the country.
Residents of some 3,000 additional Black-majority and Hispanic-majority Census tracts in 16 U.S. markets will be eligible for up to $5,000 in grants that are designed to help with down payments and closing costs.
The program’s expansion, announced Wednesday, may help an additional 1,000 customers obtain mortgages, according to Cerita Battles, head of community and affordable lending at JPMorgan.
The bank does not expect to make a profit on the program, particularly as credit conditions worsen, she said. “At the end of the day, this is a long-term sustainable investment,” Battles said.
Chase Home Lending has already spent more than $30 million to help more than 6,000 prospective homebuyers in majority-minority neighborhoods make down payments and pay closing costs, according to the bank.
The $3.7 trillion-asset bank launched the effort in 2021 as part of a five-year racial equity commitment. The year before, nationwide protests sparked by the death of George Floyd prompted industry leaders to reconsider how they serve historically disadvantaged groups.
Following advice from regulators, JPMorgan launched a special-purpose credit program that provides mortgage assistance in majority-Black and majority-Hispanic neighborhoods. Under those programs, which are authorized under a provision of federal law, financial institutions can extend credit access to people who might otherwise be denied access to credit, or might be charged unfair rates.
When the bank rolled out the Chase Home Buyer Grant program, it looked first to provide credit access to Black Americans, who face the nation’s lowest homeownership rates. A year later, the program was extended to Hispanic Americans, a group that has the second-lowest homeownership rate.
The grants are made available to any resident of eligible majority-Black and majority-Hispanic neighborhoods — not only to members of specific racial groups — in part because residents of minority communities often fail to identify their race for fear that they may not receive a loan, Battles said.
The adoption of special-purpose credit programs has historically been stifled by criticism that they favor certain races over others. But attitudes have begun to change as regulators have assured banks that the programs do not violate the law, Battles said.
Blair Bernstein, a spokesperson for the American Bankers Association, reaffirmed the trade group’s support for special-purpose credit programs, calling them “an important tool that allows banks to expand access to credit for underserved communities.”
“Homeownership helps build wealth, and these important, responsibly managed programs provide opportunities for more borrowers, particularly as the cost of homeownership rises,” Bernstein said.
Yet, there are still some who question JPMorgan’s program, Battles said.
“There’s still a lot of education that’s still necessary, because all lenders are not participating in this space today,” she said. “I think it’s very necessary for us to be very intentional about our explanation around it — the how and why.”
JPMorgan has gotten support from nonprofit groups that focus on closing the homeownership gap.
“Homeownership is one of the most important ways to build generational wealth that families can pass down,” said Valerie Navy-Daniels, senior vice president of resource development at NeighborWorks America, a nonprofit organization that supports housing access and affordability. “We thank Chase and other banks for addressing this critical issue.”
Battles said that JPMorgan will be encouraging local market participants to support and promote the Chase Home Buyer Grant program and similar initiatives. She noted that funding from other institutions can be layered on top of the $5,000 grant.
“I would assume that we will likely expand this, expand this program again and go into some other markets, especially if we see the need in the value of going into those particular markets,” Battles said.
To those who doubt whether the grant program makes financial sense, Battles said: “There’s a cost to not being able to serve all who aspire to homeownership.”
Unlike yesterday, there is no meaningful economic data to move the needle this morning. Bonds continue biding their time, waiting for “meaningful.” Until then, technicals and tradeflows are driving what little amount of movement there is. Today’s version happens to be slightly stronger. It could just as easily have been slightly weaker.
The modest gains mean that yields are once again attacking the lower boundary of the prevailing range at 3.72. We’ll believe in a breakout when we see one that sticks. Technicians assume a friendly breakout is slightly more likely due to the positive momentum shift that’s always implied when bonds flat-line after spiking. Technicians should keep in mind that–even though
Most borrowers who had a mortgage forbearance in March 2021, including disproportionately impacted borrowers of color, were either current or closed as of March 2023. This is according to data released this week by the Consumer Financial Protection Bureau (CFPB) Office of Research.
In the immediate aftermath of the COVID-19 coronavirus pandemic’s onset, the Coronavirus Aid, Relief, and Economic Security (CARES) Act passed in March 2020 allowed millions of U.S. mortgage borrowers to enter public or private forbearance programs, which temporarily paused their mortgage payments.
Recent data from the national mortgage database compares the performance of mortgage borrowers in March 2023 to borrowers in March 2021 who had COVID-related forbearance, were delinquent but not in forbearance, and those considered current on their payments. Over the past two years, the CFPB has been vocal about its concerns regarding forbearance recovery, but the data shows generally positive outcomes.
“While we expressed concern in both 2021 and 2022 about borrowers’ ability to recover from periods of forbearance, our most recent analysis shows that the majority of borrowers in forbearance in 2021 – including Black and Hispanic borrowers – were largely able to become current on their payments by March 2023,” the report said.
In 2021, CFPB found that mortgage delinquencies were most common among Black or Hispanic borrowers; loans with a loan-to-value ratio of 60% or higher; borrowers living in majority-minority census tracts; and borrowers living in census tracts with lower relative incomes.
“[M]ortgages that were in forbearance in March 2021 are performing much better than loans that were 60 days or more delinquent in March 2021,” the CFPB found. “They’re performing, however, slightly worse than loans that were current in March 2021. Loans in forbearance in March 2021 were also less likely to be closed by March 2023 versus loans that were delinquent or current in March 2021.”
Among loans in forbearance in March 2021, more than 52% were current as of March 2023, a larger share than the 26% of loans that were 60 days or more delinquent two years prior. Generally, the positive outcomes are clear, the Bureau said.
“[T]he majority of borrowers, including Black and Hispanic borrowers, who had a mortgage forbearance in March 2021 were current as of March 2023,” the data said. “We also showed that borrowers in forbearance in March 2021 had a much lower likelihood of being delinquent or in foreclosure compared to borrowers who were 60 days or more delinquent in March 2021.”
Related research on CARES Act forbearances has illustrated that most borrowers became current either by self-curing or curing with assistance, including entering into a repayment plan, deferral or loan modification.
“The CFPB will continue to monitor how mortgage borrowers are faring as the economic recovery from the COVID-19 pandemic moves forward,” the report said.