COVID-19 pandemic

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Apache is functioning normally

Federal student loan payments resuming on Oct. 1 will negatively affect consumer loan asset quality, including credit card, auto and, to a lesser extent, residential mortgages. However, the overall effect will be modest, according to a Moody’s Analytics report. 

On Oct. 1, repayments are due to restart on Department of Education (DOE) federal student loans (Direct Student Loans), which began accruing interest again on Sept. 1.

In total, 24 million borrowers whose payments were suspended since the onset of the COVID-19 pandemic will owe an average of $275 per month when federal student loan payments resume, per Moody’s Analytics estimates. 

“As the interest burden on student debt increases, we expect the additional financial obligation will modestly strain borrowers’ ability to pay,” Moody’s analysts said in a report. 

According to the analysts, job market conditions remain the primary driver of consumer loan performance. In August, the unemployment rate was 3.8%, compared to 3.5% in July. Although it’s a low rate by historical standards, unemployment is at its highest level since February 2022. 

“Although student loans are non-dischargeable in bankruptcy, their priority in a consumer’s debt repayment hierarchy is low relative to the other major consumer debt classes,” Moody’s analysts said.

They added: “Borrowers are much more likely to prioritize servicing mortgage or auto loans and even credit cards since they stand to lose their house or car or access to credit or credit card rewards if they fall behind on such consumer loans.”

The report included data showing that delinquencies in major consumer debt classes are rising but are still at low levels.

For mortgage debt, the share of performing loans that were 30 or more days delinquent went from less than 2% in Q3 2021 to about 2.5% in Q2 2023. Credit card delinquencies jumped from 4% to about 7% in the same period. Meanwhile, auto loans rose from about 5% to 7%. 

Source: housingwire.com

Apache is functioning normally

Apache is functioning normally

By the end of 2022, 27 million Americans had an outstanding personal loan balance with the average amount owed being $11,116. The interest rates of these loans are also the highest they’ve been since 2011 at 11.23 percent.

Sources: TransUnion and the St. Louis Federal Reserve

As of the second quarter in 2022, Americans owed over $192 billion in personal loans, according to TransUnion®.  This was a 31% increase from 2021 and is thought to be due to the financial hardships Americans experienced during the COVID pandemic that overwhelmed the nation in 2020.

If you’re one of the many Americans who took out a personal loan in early 2022, the good news is that interest rates were very low, according to the St. Louis Federal Reserve. Since then, rates have reached new highs, so many Americans are struggling to pay back these loans.

Understanding the current trends in personal loans can help you see where you stand financially. We’ve gathered 10 personal loan statistics that include the most common reasons people take out personal loans, delinquency rates and which states have the highest personal loan debt to help you make better financial decisions if you’re accumulating too much debt.

In This Piece

Must-know Personal Loan Statistic Findings

Millions of Americans are taking out personal loans, and the following are some of the most interesting facts on the topic.

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  • 27 million Americans have personal loan debt (TransUnion)
  • At the end of 2022, the average new loan amount was $8,018 (TransUnion)
  • The average amount owed in personal loan debt was $11,116 at the end of 2022 (TransUnion)
  • In November of 2022, personal loan interest rates were the highest they’ve been since May of 2011 (St. Louis Federal Reserve Bank)
  • New Jersey has the highest average new personal loan account balance at $13,494 (TransUnion)

Average Personal Loan Debt in America

According to TransUnion, Americans owed roughly $9,896 on average as of the first quarter in 2022, the highest it’s been in recent years. Americans took out loans at an average of $6,656 per loan, which was over $1,000 more than in the previous quarter of 2022.

The amount owed per borrower dropped significantly between Q2 and Q3 in 2022, but by the end of the fourth quarter, the average amount owed increased by over 100 percent with the new loan amount dropping to $8,018.

The increase in personal loan debt may have been due to the inflation the country experienced in 2022. TransUnion also reports that there were more loans approved to “super prime borrowers,” or those with credit scores over 720, stating, “On a percentage basis, personal loan originations for subprime and near-prime borrowers increased in the single digits [year over year] whereas super prime borrowers experienced a 33% rise in the third quarter.”

How Many Americans Have Personal Loans?

The amount of Americans taking out personal loans increased 12 percent from 23.9 million in the first quarter of 2022 to 27 million by the fourth quarter.

Prior to the beginning of the COVID-19 pandemic, the total amount of personal loan borrowers was 23.3 million at the end of 2019 and dropped to 21.2 million by the end of 2020. The number of borrowers then grew back to 22.8 million in the following fourth quarter of 2021 and continued to grow as the pandemic regressed.

Quarter

Q4 2022 Average new account balance

Q4 2019

23.3 million

Q4 2020

21.2 million

Q4 2021

22.8 million

Q4 2022

27 million

The Most Common Reasons to Take Out a Personal Loan

LendingTree conducted a survey of their users in 2022 and found that the most common reason consumers took out personal loans was to pay down other debts. Over 58 percent of borrowers used these loans to pay down debt, and the other main reasons included credit card refinancing, home improvements and other major purchases.

Rank

Reason

Percentage of respondents

1

Debt consolidation

41%

2

Other

17.3%

3

Credit card refinance

17.3%

4

Home improvements

6.2%

5

Major purchase

4.1%

6

Medical expenses

3.0%

7

Moving/relocation

2.9%

8

Everyday bills

2.9%

9

Car financing

1.7%

10

Car repair

1.1%

11

Business

0.9%

12

Vacation

0.5%

13

Homebuying

0.4%

14

Wedding expenses

0.4%

Average Personal Loan Interest Rates

During the second quarter of 2022, the Federal Reserve Bank of St. Louis reported that interest rates reached an all-time low of 8.73 percent. By the end of the year, these rates were the highest they’ve been since 2011 at over 11.2 percent.

Personal Loan Debt Compared to Other Debts

Based on TransUnion data, personal loans account for less than four percent of the total number of accounts when compared to other types of loans, such as credit cards, home and auto loans.

Account type

Number of accounts

Percentage of accounts

Credit card

518.4 million

76.3%

Auto loan

81.2 million

11.9%

Mortgage loan

52.6 million

7.83%

Personal loan

27 million

3.97%

It’s also important to note that not all credit card accounts carry a balance.

Personal Loan Delinquency Rates

Delinquent accounts are accounts 60 days or more past due and can hurt your credit score. The Q4 TransUnion report shows that the delinquency rate dropped year over year between 2019 and 2020, but was up 53 percent as of 2022, with an overall delinquency rate of 4.14 percent.

Quarter

Delinquency rate

Q4 2019

3.48%

Q4 2020

2.7%

Q4 2021

3%

Q4 2022

4.14%

TransUnion’s 2022 Credit Snapshot shows that in the last month of the report, those with the lowest credit scores have the highest delinquency rate of 23.9 percent, while super prime borrowers are only at 12 percent.

Credit score range

Percentage of delinquent borrowers

Subprime (300 to 600)

23.9%

Near prime (601 to 660)

23.7%

Prime (661 to 720)

23.3%

Prime plus (721 to 780)

17%

Super prime (781 to 850)

12%

Personal Loan Statistics by State

TransUnion’s 2022 Credit Snapshot reports that New Jersey has the highest average new account balance at over $13,000, and Oklahoma has the lowest at $3,170. Although Oklahoma has the lowest new account balance, they have the highest delinquency rate at 7.73 percent.

State

Q4 2022 Average new account balance

Q4 2022 Delinquency rate

AK

$10,296

2.9%

AL

$4,362

6.59%

AR

$7,089

5.18%

AZ

$9,343

3.78%

CA

$10,454

3.47%

CO

$12,322

2.03%

CT

$11,712

2.57%

D.C.

$9,016

6.55%

DE

$9,146

4.04%

FL

$8,379

3.94%

GA

$8,621

5.18%

HI

$12,224

2.28%

IA

$7,443

2.94%

ID

$9,072

4.38%

IL

$9,236

3.46%

IN

$7,439

2.97%

KS

$8,349

3.05%

KY

$6,875

3.36%

LA

$6,797

5.07%

MA

$12,518

2.24%

MD

$10,956

2.77%

ME

$6,651

1.67%

MI

$7,052

3.21%

MN

$10,692

3.73%

MO

$6,522

6.69%

MS

$5,179

4.96%

MT

$9,326

2.53%

NC

$10,035

3.03%

ND

$8,051

1.89%

NE

$7,755

3.65%

NH

$11,719

2.31%

NJ

$13,494

3.49%

NM

$5,418

6.31%

NV

$8,839

3.74%

NY

$11,843

2.77%

OH

$7,595

3.75%

OK

$3,170

7.73%

OR

$10,523

2.93%

PA

$10,418

3.06%

RI

$8,744

2.14%

SC

$5,924

4.89%

SD

$9,945

2.06%

TN

$5,355

5.38%

TX

$4,952

6.33%

UT

$7,966

4.23%

VA

$9,875

3.37%

VT

$6,180

0.82%

WA

$9,570

2.94%

WI

$6,489

3.95%

WV

$10,864

1.96%

WY

$7,698

2.66%

Personal Loan Statistics by Type of Lender

More and more Americans are turning to financial technology companies, also known as FinTech, for their personal loans. These are online banking services that are done via a company’s website or mobile app, and 32.9 percent of all personal loans are done through these types of companies.

Lender type

Distribution of total balances

FinTech

32.9%

Banks

20.5%

Credit unions

19.7%

Other finance companies

26.9%

Can Personal Loan Debt Affect Your Credit Score?

If you’re one of the 27 million Americans with a personal loan, you don’t have to let your debt harm your credit score. As you’ve learned from these personal loan statistics, many Americans have turned to personal loans to pay off other debts, but many people are delinquent with their payments, which can hurt their scores.

Credit.com provides a variety of credit tools and tips to help you work to repair and improve your credit. You can learn more about our services, like ExtraCredit, or click here to get your free credit report card.

Source: credit.com

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Many people were thrown into financial turmoil at the beginning of the COVID-19 pandemic. Previously secure jobs disappeared, and monthly payments went from affordable to impossible overnight. A year later, borrowers are still catching up—and some are struggling to make ends meet. So, if you can’t afford your car payment, what are your options?

We have eight solutions to an unaffordable car loan in this article. Some are easier to implement than others—and some come with long-term credit implications:

  1. Modify Your Auto Loan
  2. Refinance Your Vehicle Loan
  3. Trade in Your Car
  4. Let Someone Else Assume Your Loan
  5. Sell Your Vehicle
  6. Turn the Keys In
  7. Let Your Car Be Repossessed
  8. File for Bankruptcy

1. Modify Your Auto Loan

How can you lower your car payments without refinancing? Before you do anything else, speak to your lender about modifying your auto loan. Call your auto loan company as soon as you can, and tell them about your financial troubles. Ask if they have any relief options for borrowers, including loan modifications.

Many lenders made changes to their modification policies in response to the COVID-19 pandemic. Temporary loan forbearance and extension programs, for instance, help borrowers get back on track. 

Perhaps surprisingly, many lenders let borrowers in good standing pause their auto loans for a month once a year. Of course, you’ll have to make an extra payment at the end of your loan term to make up the difference—and you might have a little extra interest to pay.

2. Refinance Your Vehicle Loan

How do you get out of a car loan you can’t afford? The answer might be to refinance your vehicle. If you have a good payment history and a strong credit profile, use it to your advantage. Here are two ways to play the refinancing game:

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Let’s imagine you bought your car for $20,000 two years ago. Your original 60-month auto loan came with a 5.5% interest rate, and your monthly payments are $382.02. Your current loan balance is $12,600.

If you extend your loan by five years, your monthly payments will drop to $241. You’ll have $141 more spending money each month—but you’ll pay more in interest over the life of your loan, plus you’ll have to make payments for a longer time period.

3. Trade in Your Car

If you can’t afford your car payment any more, consider trading in your vehicle. Think about your automotive needs—could you get away with a smaller car, for instance? Do you need a truck, or would it be easier to park a sedan in your driveway? 

Swapping your SUV for a smaller model isn’t just environmentally friendly—it’ll also cost less to run. Switching from a new luxury vehicle to a slightly older regular brand auto, on the other hand, could cut your insurance bill significantly. Either choice will reduce your car payment.

If you do decide to trade in your car, get quotes from several dealerships. Then, negotiate a fair price with your favorite dealership and choose an alternative vehicle. If you’re not upside-down in your current loan—if you don’t owe more than it’s worth—you might even be able to trade upto a newer vehicle with better loan terms.

4. Let Someone Else Assume Your Loan

Some loans and leases are “assumable,” which means that they’re transferable from one party to the next. If you can’t make your loan payments any more but you want to avoid damaging your credit, consider passing the loan, and the vehicle, to someone else. 

Before you agree to pass your car on, talk to your lender. Most lenders have minimum credit and income requirements for buyers—and the person you transfer your vehicle to will need to meet these terms. 

5. Sell Your Vehicle

Do you need a vehicle right now, or can you use public transportation until your finances settle? If buses or trains are an option in your area, consider selling your vehicle privately and using the money to pay off the remainder of your loan. Doing so could help you escape a car payment altogether—plus private sales nearly almost generate more money than dealer trade-ins. 

6. Turn the Keys In

Can you give your car back to the finance company? You sure can! Also called “voluntary repossession” or “voluntary surrender,” walking away from your vehicle is a last-resort option if you can’t refinance or sell your car.

Unfortunately, there are consequences associated with turning in your keys. On the one hand, the repo man won’t pay you a personal visit, which can save embarrassment. On the other, the lender might still try to collect money from you if you owe more than they can get for the vehicle at auction. A voluntary repossession will also show up on your credit report.

If you do decide to turn your keys in, contact your lender and tell them your intentions. Your lender will guide you through the process and let you know when and where to hand over your car.

7. Let Your Car Be Repossessed

The alternative to voluntary surrender is straight repossession. This option is perhaps the most stressful, and it can severely affect your credit. In a nutshell, you simply wait until you’re so behind with payments that your lender decides to repossess the vehicle. Then, your car—and anything you leave inside—is towed away. You might want to consider this as a last option—carefully look at your resources and consider exhausting your other options before you decide.

8. File for Bankruptcy

If you’re in a huge financial hole and you owe a lot of money beyond your car payment, you could consider bankruptcy. Bankruptcy is complicated and can pull your credit down for a decade, so it’s not an option to consider if there are any alternatives open to you. Before proceeding, take a good look at your finances and contact a well-regarded bankruptcy attorney. 

Take Care of Your Finances with Credit.com

Whatever you decide to do, it’s important to keep track of your credit. Sign up with Credit Report Card to view your Experian VantageScore 3.0 and see a helpful credit snapshot, which you can use to create a financial plan.

Source: credit.com

Apache is functioning normally

Apache is functioning normally

Marketing, CRM, Fair Lending, HELOC, Non-QM Products; Webinars and Training Next Week; Why do People Move?

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Marketing, CRM, Fair Lending, HELOC, Non-QM Products; Webinars and Training Next Week; Why do People Move?

By:
Rob Chrisman

7 Hours, 28 Min ago

Sometimes I send this Commentary out from some pretty nice places, sometimes not. Today comes from the tarmac at the Newark Airport, in Row 22, sitting next to some hairy guy who’s snoring and apparently went with the “Garlic Lover’s Pizza” last night. You can decide which category today fits in. “What do you call a small pepper in the autumn? A little chili.” Tomorrow is the fall equinox. Autumn? Autumnal? Different ways of saying similar things? Do you know the difference between a loan, a mortgage, a lien, a note, and a deed of trust? There are differences, just like there are differences in the reasons why people move. Unlike the convicted felon that I spent some time with yesterday, wanting a newer, better, or larger house or apartment has been the most common specific reason cited for moves over the past two years. That’s followed by establishing one’s own household, evidenced by a change in marital status becoming a more common reason for moving in 2022 than in 2021. The percentage of movers reporting housing unit upgrades declined, suggesting a reversal of a boom in housing demand that happened in 2020, early in the COVID-19 pandemic. A quarter of movers reported family-related reasons for their move, the second most often-cited general reason for moving in 2022 and in several recent years. (Today’s podcast can be found here and this week’s is sponsored by the Trade-In Mortgage powered by Calque. Homeowners can buy before they sell, make non-contingent offers, and tap their home equity to fund the down payment on their next home. Lenders can help their clients negotiate a lower purchase price, reduce their interest payments, and eliminate PMI. Hear an interview with Mayer Brown LLP’s Lauren B. Pryor on M&A activity in the mortgage space and what makes for a successful transaction in the current environment.)

Lender and Broker Software, Programs, and Services

“Cheers to 20 Years! We are proud to announce the 20 Year Anniversary for Carrington Mortgage! It’s been an incredible two decades filled with trust, growth, and a commitment to serving our partners. As we celebrate this remarkable achievement, we want to express our heartfelt gratitude for your continued support. We look forward to many more years of serving our partners. We remain committed to being the industry’s leader in Non-QM solution lending. Our team of experts is ready to help you and your borrowers with a new home purchase or a refinance, all done in a timely and professional manner. Our program and product suite includes Non-QM, FHA, VA, USDA & GSE. Our Non-QM program offers you and your borrowers features and flexibility you may not find anywhere else. We’re here to help. Please contact us for more information about our products and services.”

In challenging down economic times, Loan Vision is your solution to maximizing profitability and reducing costs in your business. With Loan Vision, companies see improvements of 25% to 35% decrease in days to close the books, 20% reduction in accounting headcount, complete LOS to G/L automation, and improved reporting and visibility that allow for better business decisions. Don’t accept a competitive disadvantage or get caught flat footed in a recovering market. To improve your cash position, gain a competitive edge, and prepare your business for sustained growth, contact Carl Wooloff to schedule a call today.

From what people are saying, The Loan Store has consistently been among the “pricing leaders” and “process leaders” with agency loans, and they’ve also really been making a nice name for themselves with their Quick-Pay HELOCs. TLS is funding HELOCs 100% within 3-5 days (and paying 175 bps in comp), and that’s a great tool for LOs looking to expand their business. Plus, word on the street is that TLS will be expanding HELOCs to Texas soon, so that’s something else for Lone Star State LO’s to get excited about. Regardless of where you’ve set up shop, price out a HELOC in the TLS/Figure HELOC portal. Or, if you haven’t signed up with TLS yet, do that here.

Recent Trends in Fair Lending Compliance! When the DOJ announced its Combatting Redlining Initiative in October 2021, it was the department’s “most aggressive and coordinated” enforcement effort against financial institutions. The initiative has cost financial institutions $40 million in the first half of 2023 alone. The DOJ and regulators have not let up on enforcement actions against financial institutions (banks, credit unions, mortgage companies, and other lenders) violating fair lending compliance laws. In fact, regulatory agencies have expanded the scope of fair lending enforcement. A recent article from the experts at Ncontracts highlights the significance of recent fair lending enforcement trends and what it means for your fair lending program. Read the full article.

Earlier this month, Apple announced the 15th version of its amazing, do-everything iPhone. It’s hard to imagine, but what if Steve Jobs never invented the iPhone? What if we all carried one device to make calls, and a completely different device to send a text? This is exactly what many lenders do today with their CRM software. They have one CRM for their retail loan officers, a different CRM for their direct-to-consumer team, and another CRM for their wholesale account executives. Wouldn’t it be nice to manage all of your business channels in just one CRM? That’s what OptifiNow Flex is: a retail, wholesale, correspondent, reverse, home equity and private money CRM that can be personalized to fit your business needs. Reach out to us to learn more and see why OptifiNow is the iPhone of mortgage CRM!

Attention Mortgage Lenders! Discover the secrets to thriving in this competitive market with our FREE white paper, tailored specifically for you. Written by Seroka Brand Development, the mortgage industry’s leading marketing and public relations company, this exclusive guide reveals top marketing and PR strategies for 2023. As the industry faces its current set of challenges, effective yet cost-conscious marketing is more crucial than ever for companies like yours, competing for every opportunity. Learn six impactful ways to reach your target market and secure success through the rest of 2023 and beyond. Don’t miss out on this invaluable resource: download your FREE white paper now.

Training, Webinars, and Events Next Week

A good place to start is here, and click on “events” for conferences in the future. Next week is the last week of September already?! Wasn’t it just Labor Day? Let’s see what’s up.

According to data from Gartner, two in three companies say customer experience is the primary area where they will compete for business. Lenders, how is your business utilizing customer feedback to drive revenue growth in today’s challenging market? Need help? Join STRATMOR Group’s customer experience experts as well as peer lenders for STRATMOR’s Customer Experience Workshop on September 25, 26 and 27. This highly interactive, virtual workshop is designed to give lenders specific, actionable ideas: you’ll learn how to optimize your loan processes to maximize repeat and referral business and achieve your growth goals in challenging market conditions. Register today!

Tuesday the 26th is the next Mortgages with Millennials with Kristin Messerli and Robbie Chrisman, and sponsored by National MI. Tune in every Tuesday at 10AM PT to the weekly video show designed to empower mortgage professionals to tap into the millennial market. This show demystifies the psychology of first-time homebuyers and offers strategies to win more market share with a key segment of the market. Sign up for a weekly reminder with the link to join and a sneak peek into the next episode.

On September 26, 2-3PM ET, FHA’s free, virtual webinar will assist FHA-approved lenders (and their auditors) with their upcoming Annual Recertification and provide information on how to successfully submit an acceptable recertification package via the Lender Electronic Assessment Portal (LEAP). For detailed information, closely review the LEAP User Manual.

Free, on-site, FHA Underwriting Training in Philadelphia, PA., September 26, 9:00 AM to 11:30 AM (Eastern) will provide an overview of FHA underwriting procedures and addresses several industry-related frequently asked questions (FAQs) as outlined in FHA’s Single Family Housing Policy Handbook 4000.1. This training will also take an in-depth look at a variety of topics including credit, income, and asset (CIA) documentation; automated underwriting systems (AUS); closing; and more.

Free, on-site, FHA Appraisal Training in Philadelphia, PA., September 26, 1:00 PM – 3:30 PM (Eastern) will provide an overview of the appraisal requirements outlined in FHA’s Single Family Housing Policy Handbook 4000.1. The training topics will include property inspection requirements, appraisal validity period, manufactured homes, water and septic, attic and crawl spaces inspection, and the FHA Appraiser Roster.

If you are looking for the housing policy and fintech event of the year to watch from the comfort of your office, Housing Finance Strategies’ #HousingDC23 is it. The agenda is published, and Complimentary Registration is now available. Sign up to view the premium content offered virtually and accessible to you starting September 26th.

If your credit union’s due diligence for quality control relies only on last-minute adjustments during post-closing processes, chances are you’re spending too much time putting out fires rather than adequately serving members’ needs. Market changes demand a more comprehensive and proactive approach to due diligence, and the experts at ACES Quality Management have the wherewithal to help you make that adjustment. Tune into this Inside Track webinar on September 27th at 1 pm CST to learn the why’s and how’s of improving your QC processes.

Looking for more in-depth commentary on weekly mortgage news? Register here for “Mortgage Matters: The Weekly Roundup” presented by Lenders One. Every Wednesday at 2:00 PM EST/11:00 AM PT is a dive into a range of mortgage-related topics, including market trends, interest rate fluctuations, innovative mortgage products, and industry advancements. Listen to a unique mix of age perspective, expertise, and charisma to the screen, ensuring that the information is not only educational but also entertaining.

California MBA upcoming Mortgage Quality and Compliance Committee webinar, Navigating the Future of Work: Adapting Return to Office Policies, on Thursday September 28th at 11 A.M. PST. Expert panelists will provide valuable insight on the ever-changing work dynamics, the challenges of managing remote and in-house teams, and MLO enhanced requirements in CA (and other states).

AzAMP Annual EXPO, Luncheon, and 8-Hour NMLS CE Class, September 27–28, at the We-Ko-Pa Resort and Casino. Begin your experience on Wednesday, Sept. 27 with Part 1 of NMLS CE class. Full day of events begins on Thursday, September 28 including NMLS CE class Part 2, Luncheon with Keynote Speakers Allen Beydoun, UWM Executive Vice President and Robbie and Rob Chrisman, The Chrisman Commentary Daily Mortgage News, followed by the AzAMP Expo.

Watch on demand, at your leisure: Millennials and Gen Z’ers represent the largest group of first-time homebuyers. In less than 10 years, 3.1 million will have entered the market. Of these buyers, roughly 75 percent of them report checking social media daily. Making social media a necessary strategy for loan officers. Join Homebot’s VP of Marketing, Ashley Remstad and Mortgage Advisor Sosi Avila as they discuss key strategies and tactics for using social media to your advantage. Register for the webinar here.

The NCEO 2023 Fall Forum in Houston is September 26-28. Featuring top industry experts and thought leaders, the forum will update you on the latest trends and best practices in employee ownership. Network with other employee owners and industry professionals from across the country, sharing ideas, challenges, and successes.

Friday the 29th is The Mortgage Collaborative’s Rundown covering current events in the mortgage market for 30-45 minutes starting at noon PT in “The Rundown”.

Capital Markets

Remember when all the “smartest guys in the room” were telling us that an inverted yield curve was a nearly sure sign of a recession? I haven’t heard that one lately. Even with the Fed just signaling lower interest rate volatility going forward, in theory translating into tightening MBS spreads and lower rates, mortgage rates still jumped by over .125 percent yesterday thanks to falling bond prices and “non-trivial stack decompression.” Much of the decrease in bond prices over the past couple of days stems from the markets still trying to fight the Fed. The yield curve remains highly inverted and will only unwind once the hard landing scenario becomes less probable.

On the data front, Existing home sales decreased 0.7 percent month-over-month in August to a seasonally adjusted annual rate of 4.04 million as sales were down 15 percent from the same period a year ago due to a well-known confluence of factors: higher mortgage rates, higher prices, limited supply, a lack of mobility, and homeowners who are reluctant to give up a low-rate mortgage. Keep in mind that an economic recession could also bring about an increase in inventory, as those who lose jobs may be forced to sell their homes and those uncertain about their jobs will not have the confidence to buy a home. While the overall U.S. economy remains resilient, there are growing signs starting to show U.S. households tightening budgets or starting to reduce discretionary spending.

Today’s economic calendar includes flash PMIs for much of Europe where modest increases are expected versus the prior readings. Domestically, S&P Global PMIs will be released later this morning, though the bigger headline is the resumption of Fed speakers following Wednesday’s FOMC events. Markets will receive remarks from Governor Cook, Boston President Collins, Minneapolis President Kashkari, and San Francisco President Daly. We begin the day with Agency MBS prices unchanged, the 10-year unchanged from Thursday at 4.48 percent, and the 2-year at 5.13.

Employment

“What distinguishes a company in the mortgage lending game? For Evergreen Home LoansTM, it’s an unwavering dedication to customer experience. As Evergreen’s CMO, Haavard Sterri, puts it, “At Evergreen Home Loans, customer satisfaction isn’t just a metric; it’s our mission. We go above and beyond to ensure our clients not only receive exceptional financial solutions but also feel valued every step of the way.” Take the Security Plus program, a gem that offers clients pre-approved, underwritten loans before house hunting begins. But why should job seekers pay attention? A firm that champions customer needs typically scores high on employee satisfaction. At Evergreen, you’re not a replaceable part; you’re integral to a collective mission of transforming the homebuying process. In a crowded field, Evergreen shines by marrying excellent customer service with fulfilling career opportunities. If you’re on the job hunt and value innovation, teamwork, and a relentless focus on the customer, Evergreen beckons. To view all open Evergreen careers visit our careers page.”

In the Northwest and California, Banner Bank is searching for Mortgage Loan Officers looking to create lasting Realtor and builder relationships at a bank focused on the market today. Banner has opportunities for lenders looking for local decision making with FHA, VA, USDA, state bond and true Portfolio lending opportunities along with servicing retained Fannie and Freddie loans to assist in client retention. Additional highlighted products cover CRA lending with private label no payment down payment assistance to help assist all borrowers with the right opportunity. Banner is the right fit for an established team, or the individual looking to grow their business and take the next step in their career. Please send resumes to Aaron Miller.

As a mortgage sales professional have you ever thought, “What if I could focus on only the things that actually grow my business, flipping the hourglass and spending 80 percent of my time on what I do best: building relationships?” Or “What if I could surround myself with sales support that is truly team inspired, results driven marketing and customer obsessed headache-free process?” Welcome to radius financial group! They started radius with one main focus: to offer a better value proposition than any other bank or mortgage company in the country for you, your borrowers and your referral partners. radius can help you grow your business, have a better quality of life, and make more money. For confidential inquires please contact Carla Herrera.

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Source: mortgagenewsdaily.com

Apache is functioning normally

Apache is functioning normally

If you decide to file for bankruptcy, you must next decide which type of bankruptcy is right for you. Most individuals have three options, and understanding Chapter 11 vs. Chapter 13 vs. Chapter 7 is important in making the right decision. 

Bankruptcy can be complex, and even a small mistake in how you file can substantially change the outcome of your case. It’s typically a good idea to consult an experienced bankruptcy lawyer before you file a bankruptcy petition. However, we’ve provided some basic answers below to the question, “What is the difference between Chapter 7, 11, and 13 when it comes to bankruptcy?”

In This Piece

Understand the Types of Bankruptcy

Bankruptcy is a way to reorganize your debts or get your debts dismissed because you’re insolvent. “Insolvent” is simply a financial state where you can’t pay your bills—usually because your debts outpace your income. 

People can end up in this situation for a number of reasons. It may be that you lost your job or had reduced income—job losses due to the COVID-19 pandemic are just one example of when this can happen. In other cases, people have unplanned expenses such as medical bills that can put them over the edge financially. Bankruptcy does have some benefits, such as potentially putting a stop to wage garnishments or foreclosures. 

Regardless of how you ended up in this position, it’s important not to jump immediately to bankruptcy. Consider all of your options and speak with an experienced bankruptcy attorney to understand whether bankruptcy will help you.

How Do You Know Which Bankruptcy Type is Right for You?

This is a complex personal or business finance question. Consider talking to an attorney to understand your financial and legal situation. An experienced attorney can quickly apply means tests and other information to your case to help you understand what your options are.

What Is Chapter 11 Bankruptcy?

According to the United States Courts, individuals and business entities can enter into Chapter 11 bankruptcy. Typically, this type of bankruptcy is a reorganization of a business. Through the bankruptcy, the debtor restructures and then creates and implements a plan to pay back creditors.

The plan must be approved by a Trustee appointed by the court. The Trustee is typically in charge of implementing and overseeing the plan, ensuring that the business has the income and resources to follow through with it. Once the plan is completed and confirmed, any remaining debts under the bankruptcy are discharged.

This is an extremely simple summary of how a Chapter 11 bankruptcy works. In reality, they can take years and involve numerous legal proceedings on behalf of the person or business filing as well as the Trustee and creditors. 

What Is Chapter 7 Bankruptcy?

The main difference when it comes to Chapter 7 vs. Chapter 11 bankruptcy is that Chapter 7 is a liquidation plan. That means there’s no repayment plan associated with a Chapter 7 bankruptcy.

When you file Chapter 7, you typically agree to liquidate your assets to pay off as much of your debt as you can. The remaining debts that are part of your bankruptcy are dismissed. 

Whether or not you can file for this type of bankruptcy is determined by income. If your income is below the median for the state you’re filing in, you can probably choose Chapter 7 bankruptcy. If your income is above the state minimum, you must pass a “means test.” A bankruptcy attorney can quickly apply these tests to help you understand whether you meet eligibility for Chapter 7. 

You don’t have to give up everything you own in a Chapter 7 bankruptcy, though. You may be able to keep exempt assets, which can include certain personal belongings. You may also be able to keep your home, a car, and other items, even if you owe money on them, if you can continue to make timely payments on those debts. 

Again, bankruptcy is a complex process and what you can keep and how your proceeding goes is based on a variety of factors. Consult an experienced bankruptcy attorney to find out more about your individual situation.

What Is Chapter 13 Bankruptcy?

Chapter 13 bankruptcy may sound similar to Chapter 11 because these both involve repayment plans. But when it comes to Chapter 11 vs. Chapter 13, the biggest difference is that Chapter 13 allows someone with regular income to make an adjustment to how they pay back some debts.

Chapter 13 may be an option for individuals who fail the means test for Chapter 7. Typically, Chapter 13 bankruptcy works for people who have stable income to make some payments on debts but they don’t have enough income to pay all the debts as currently structured.

The individual submits a repayment plan to the court. This plan must be approved by a bankruptcy court Trustee. The Trustee is also typically tasked with making payments under the plan, so the individual pays the Trustee. The Trustee’s office then pays various creditors.

Usually during a Chapter 13 you only pay off part of your debts. Priority and secured debts, such as taxes or auto loans, are paid in full. But unsecured, nonpriority debts, such as medical bills and credit card debt, are only partially paid. If you work through your Chapter 13 repayment plan successfully, the remaining debts are dismissed at the end of the repayment plan. That can take three to five years. 

Should You File for Bankruptcy?

Only you can decide if bankruptcy is the right choice for you. In most cases, you should consider all your other options and ensure there really is no way to feasibly pay your debts as you agreed. Consider the factors below to determine which type of bankruptcy might be right for you. Then, talk to an attorney to find out more about each option.

Should You File for Chapter 7 Bankruptcy?

  • What is your income? Not everyone qualifies for Chapter 7 bankruptcy. You have to pass what’s called a “means” test, and you usually don’t pass it if you make more than the median income of same-size households in your state. 
  • Have you filed for bankruptcy before? If it hasn’t been long enough since the last time, you may not be able to file.
  • What type of debt are you dealing with? Most, but not all, debt can be discharged in a Chapter 7 bankruptcy. If you’re trying to deal with debt that isn’t dischargeable, it may not be worth filing Chapter 7.
  • Do you want to keep your property? Some property may be exempt, such as your home or a car you need, but you may not be able to keep the same property in a Chapter 7 that you could keep in a Chapter 13, for example. Definitely talk to your bankruptcy lawyer about which property you want to keep and whether it’s possible.

Should You File for Chapter 13 Bankruptcy?

You’ll need to ask all the same questions you’d ask when considering Chapter 7 bankruptcy to find out if Chapter 13 is right for you. You also need to consider whether you have enough income to make some repayment toward your debt. In a Chapter 13 bankruptcy, you restructure your debts and pay some of them over 3 to 5 years before the rest are discharged.

You should also ask yourself if you have the discipline to make the monthly payments to the trustee and follow other rules set by the court. You typically can’t apply for most types of credit, including a mortgage, auto loan or significant personal loan, without getting the court’s approval if you’re in the middle of a Chapter 13 bankruptcy, for example.

Should You File for Chapter 11 Bankruptcy?

Do you have your own business and need to include business debts in your bankruptcy? You might want to consider a Chapter 11 over a Chapter 13. Chapter 11 may also be an option for individuals or couples who have too much debt to qualify for a Chapter 13. Otherwise, all the other questions above apply here, too.

The Main Differences Between the Types of Bankruptcy

To better understand the main differences between Chapter 7, 11, and 13 bankruptcy, consider the table below.

Chapter 7 Chapter 13 Chapter 11
Type of bankruptcy Liquidation Reorganization Reorganization
Income requirements Yes — can’t make above the median for same-size households within the state Yes — must have enough income to make the repayment plan viable Yes — must have enough income to make the repayment plan viable
Can individuals file? Yes Yes Yes
Can businesses file? No Only sole proprietors Yes
How long does it take? A few months 3 to 5 years 1.5 to 5 years
Debt limitations n/a Combined secured and unsecured debts must be less than $2,750,000 n/a

Who Can File for Each Type of Bankruptcy?

In addition to income and debt requirements, each type of bankruptcy has limitations on which individuals or entities can file. 

Chapter 7 Chapter 13 Chapter 11
– Individuals
– Married couples		 – Individuals
– Married couples
– Sole proprietors		 – Individuals
– Married couples
– Sole proprietors
– LLCs
– Partnerships
– Corporations

What Happens After You File for Bankruptcy

The first thing that happens when you file for bankruptcy is that the automatic stay goes into place. This is a protection that requires creditors to cease all collection efforts until the bankruptcy process can be completed. It’s a powerful protection. For example, even if you’re in the middle of a home foreclosure, the automatic stay can stop that process so you can work through bankruptcy to keep your home.

Once the petition is filed with the court, hearings are set and all creditors included in the bankruptcy are notified. They do have the option of responding to the bankruptcy if desired. You’ll also need to attend the first hearing in your case to testify, under oath, to the truth of everything documented in your petition.

If you’re filing a Chapter 11 or Chapter 13 bankruptcy, you’ll need to file a repayment plan, get approval for it and follow through on it. Once the bankruptcy process is completed successfully, your remaining debts can be discharged. 

How Does Bankruptcy Impact Your Credit?

Any type of bankruptcy can impact your credit. It’s a negative item that stays on your credit report and drop your credit score for up to 10 years, depending on which type of bankruptcy you file.

But the truth is that by the time most people get to bankruptcy, they’ve already missed numerous payments and may be in collections with one or more accounts. If this is the case, bankruptcy doesn’t usually drive your credit score much lower than it already is. And there’s a chance that you may see your credit score begin to climb again after bankruptcy as you make timely payments on debts and are better able to manage your finances.

Chapter 11, Chapter 7, or Chapter 13—these are all huge financial and legal decisions. Each comes with its own pros and cons, and it’s important to handle a bankruptcy correctly if you do decide this is the way you want to go. So, talk to a lawyer and get the information you need to make the best decision in your case.

  • Chapter 7 is removed 10 years after the date the petition was filed.
  • Chapter 13 is removed 7 years after the date the petition was filed.
  • Chapter 11 is removed 10 years after the date the petition was filed.

Want to keep an eye on your credit report to understand when negative items fall off it as you’re working to rebuild? Consider signing up for ExtraCredit.

Options Other Than Bankruptcy

Before considering bankruptcy, research other options to help manage your debt. You might find other avenues that are less complex and not as impactful to your credit reports. They can include:

  • Debt consolidation that reduces how many bills you deal with each month and may create a monthly payment situation that works better for your budget
  • Debt counseling that brings in professionals who can help you negotiate with your creditors for better terms and manage your money better to make ends meet
  • Selling property so you can pay off debts that are beyond your current budget
  • Increasing your income with a second job or side hustles so you have more money to pay your debts

Ultimately, whether bankruptcy is right for you is a decision you must make yourself. Start with the information above to gain a brief understanding of your options, and reach out to an attorney to help you understand how these details might apply to your case.

The Impact of COVID-19 on Bankruptcies

Bankruptcies are still proceeding in the wake of the coronavirus pandemic. You may find that hearings related to cases are being handled via phone or web conferencing and not in person.

If you’re making payments on a Chapter 11 or Chapter 13 case and have been impacted financially by the pandemic, you should contact your attorney as soon as possible. They can help you understand the best next steps, which might include filing motions in your case to alter your payments temporarily.

The CARES Act also provides some modifications to how certain elements of bankruptcies are handled. It ensures federal stimulus payments aren’t considered disposable income, for example, and provides Chapter 13 debtors a path to seek modified payment plans if their income is impacted. 

Source: credit.com

Apache is functioning normally

Apache is functioning normally

According to the latest report by IMARC Group, titled “Japan Home Decor Market: Industry Trends, Share, Size, Growth, Opportunity and Forecast 2023-2028,” provides an extensive analysis of the industry, including Japan home decor market size, share, trends, and growth opportunities. The report also covers competitor and regional analysis and the latest advancements in the market. The Japan home decor market is projected to exhibit a growth rate (CAGR) of 4% during 2023-2028.

Japan Home Decor Market Overview:

Home decor encompasses the art of enhancing the interior of a living space to create a visually pleasing and functional environment. It involves many elements, including furniture, color schemes, lighting, textiles, and decorative accessories. It reflects personal style, culture, and lifestyle preferences, transforming a house into a welcoming and comfortable home. It allows individuals to express their creativity and individuality while influencing the atmosphere and mood of each room. Whether minimalist and modern, cozy and rustic, or eclectic and vibrant, home decor plays a pivotal role in shaping the ambiance and character of living spaces, making them uniquely tailored to the needs and tastes of the inhabitants.

Get Sample Copy of Report at – https://www.imarcgroup.com/japan-home-decor-market/requestsample

Japan Home Decor Market Growth:

The market in Japan is majorly driven by the increasing importance of aesthetics and personalization in interior design. In line with this, the rising desire to create comfortable and stylish homes has become a significant driver of market growth. Furthermore, the rise of e-commerce and online interior design platforms has made home decor more accessible, allowing consumers to explore a vast range of options and styles conveniently. Besides, the changing lifestyles, such as remote work and the desire for versatile living spaces, have spurred demand for functional and adaptable home decor solutions. Moreover, sustainability is gaining prominence in the home decor industry, with eco-friendly and ethically sourced products becoming more appealing to environmentally conscious consumers. Additionally, the COVID-19 pandemic increased time spent at home, prompting many individuals to reevaluate and upgrade their living spaces, further boosting the market.

Explore the Full Report with Charts, Table of Contents, and List of Figures: https://www.imarcgroup.com/japan-home-decor-market

Key Market Segmentation:

Product Type Insights:

  • Home Furniture
  • Home Textiles
  • Flooring
  • Wall Decor
  • Lighting
  • Others

Distribution Channel Insights:

  • Home Decor Stores
  • Supermarkets and Hypermarkets
  • Online Store
  • Gift Shops
  • Others

Breakup by Region:

  • Kanto Region
  • Kinki Region
  • Central/ Chubu Region
  • Kyushu-Okinawa Region
  • Tohoku Region
  • Chugoku Region
  • Hokkaido Region
  • Shikoku Region

Competitive Landscape:

The report also examines the competitive landscape within the market and offers comprehensive profiles of major key players.

Key Highlights of the Report:

  • Market Performance
  • Market Outlook
  • Porter’s Five Forces Analysis
  • Market Drivers and Success Factors
  • SWOT Analysis
  • Value Chain
  • Comprehensive Mapping of the Competitive Landscape

Note: If you need specific information that is not currently within the scope of the report, we can provide it to you as a part of the customization.

About Us:

IMARC Group is a leading market research company that offers management strategy and market research worldwide. We partner with clients in all sectors and regions to identify their highest-value opportunities, address their most critical challenges, and transform their businesses.

IMARC’s information products include major market, scientific, economic and technological developments for business leaders in pharmaceutical, industrial, and high technology organizations. Market forecasts and industry analysis for biotechnology, advanced materials, pharmaceuticals, food and beverage, travel and tourism, nanotechnology and novel processing methods are at the top of the company’s expertise.

Contact Us:
IMARC Group
134 N 4th St. Brooklyn, NY 11249, USA
Email: [email protected]
Tel No:(D) +91 120 433 0800
Americas:- +1 631 791 1145 | Africa and Europe :- +44-702-409-7331 | Asia: +91-120-433-0800, +91-120-433-0800

The post Japan Home Decor Market Size, Share, Price, Current Trends, Growth Factors, Analysis & Forecast Report [2023-2028] appeared first on Super Market Research.

COMTEX_440427738/2607/2023-09-18T05:48:36

Source: benzinga.com

Apache is functioning normally

Apache is functioning normally

For example, bank regulators in July released a plan to increase capital requirements for residential mortgages, the Basel III Endgame rules. Redwood executives are positioning the company to acquire mortgage loans in the market, mainly jumbos, with the expectation that banks will have a reduced appetite. 

Abate doesn’t think “banks are going to necessarily exit the mortgage market,” but they will “be heavily disincentivized from growing mortgage portfolios.” Ultimately, “the real shift is going to be all those jumbos that were going to banks will come back out, hopefully to non-banks like us.”

Another opportunity is in the home equity space. Redwood launched in September its in-house home equity investment (HEI) origination platform called Aspire. Through Aspire, Redwood plans to directly originate HEIs by leveraging the company’s nationwide correspondent network of loan officers and establishing direct-to-consumer origination channels, the company said. 

“The interesting thing about HEIs is instead of a homeowner taking out equity in the form of cash and paying a mortgage on it, there is no monthly payment within HEI,” Abate said. “The way the investor gets paid is that you share in the upside of the home.” 

Abate explained the impacts of the Basel III Endgame rules on the market, the rationale behind the home equity investment product, and more about Redwood strategies in an interview with HousingWire from a company’s office in New York last week. 

This interview has been condensed and edited for clarity.

Flávia Nunes: How has Redwood strategically positioned itself in the residential mortgage space amid all of these potential regulatory changes?

Christopher Abate: Redwood is almost a 30-year-old company. The company was originally built to serve banks and others with the thought that there was no private sector [to invest in mortgage assets], only Fannie Mae and Freddie Mac. We would partner with banks to buy their loans and securitize them so the banks could recycle their capital. We don’t originate residential mortgages. We don’t service them. We’re very similar to the GSEs. We modeled the business to serve that role in the private sector. The mortgage market has changed over the decades. We’ve seen a few cycles. We’ve got the Great Financial Crisis, the Covid-19 pandemic, and now we’ve had a lot of interest rate volatility. Along the way, there have been many regulatory changes that have impacted the market; the CFPB has been created, and there’s the Dodd-Frank Act. Then there are the Basel rules, the regulatory capital rules for banks. And that’s what’s really in play today. 

We’ve positioned the company, from a strategic perspective, with the thought that banks will be heavily disincentivized from growing mortgage portfolios as an earning asset class. The banks are not going to necessarily exit the mortgage market because the mortgage asset is the biggest that a client takes out, and you want to be there for all the cross-selling in all the other consumer products. Banks will always serve their best clients. But viewing the mortgage portfolio as an investment class, that’s where the posture will shift because the capital required to hold against it [residential mortgages] is going to go up. And just based on the rapidly rising rate of deposits, just given where interest rates are at, the net interest income that they earn is getting squeezed. Banks move slowly. This will be an evolutionary shift, not an overnight shift. 

Nunes: As you noted, bank regulators released a plan to increase capital requirements for mortgages through the Basel III Endgame rules. Can we expect changes to what was proposed?

Abate: Yes, it will change. In particular, some of the sliding scale capital charges are based on things like LTV [loan-to-value]; there’s a fair likelihood that that changes because of the way it disproportionately impacts first-time homebuyers and underserved communities. But the rule is not going away. Bank regulators are paid to keep things safe. And the idea that regulators are going to allow banks to continue to do what a First Republic or Silicon Valley Bank did, I don’t see that in the cards. 

We saw significant changes after the Great Financial Crisis, which was more of a credit crisis. We saw banks getting out of risky credit mortgages like option ARMs and some subprime lending happening back then. There will be changes. Banks will not wait for the rule to be finalized to start implementing it. There will be some evolution to the rule itself. But the thrust of the rule is that it’s going to be more expensive for banks to hold mortgages.

Nunes: If banks won’t wait for the Basel III Endgame to be finalized, how are they anticipating the rules?

Abate: A year ago, banks were very happy to hold mortgages, deposit rates were sticky, and the cost of deposits was still very low. Now, all of them are looking for a capital partner, at least an option to have liquidity. The tone has changed dramatically amongst bank executives. Some banks move more slowly than others.

I like to remind people that independent mortgage banks live and die by liquidity. They care about the basis point. Banks don’t operate that close to the ground. Things take longer to develop, but the relationships are also typically stickier. Once you forge a strong partnership with a bank partner, the likelihood of them shopping for that liquidity is much less than an independent mortgage bank that is trying to optimize every dollar.

Nunes: In your recent 2Q 2023 earnings report, you mentioned acquiring three bulk pools of loans from depositories, primarily with seasoned underlying loans at attractive discounts. How is the secondary market now for these trades in terms of volumes and prices?

Abate: I certainly expect RMBS volumes to go up significantly over time. It’s not something that happens overnight. We’ve been active. We just completed a deal in August. I would expect us to continue using securitization. 

Right now, we’re in this hybrid phase where loans that are getting securitized are partially seasoned loans, and some of the loans have gone down in value–the lower coupon mortgages. The banks have been slowly selling some of those, and Wall Street dealers have quite a bit in inventory. We’re still seeing a lot of that aged collateral coming out through securitization. Issuers like Redwood have been combining current coupon mortgages. We saw this last year in the private sector securitization market, where we had all of this aged inventory. It was hard to get investors to focus on the collateral because there was so much sitting in inventory that they could price it wherever they wanted to. The pricing now is probably the best it’s been in a year, maybe two years. So, the market is finally starting to cross back into more current coupon on-the-run production, which is what we’re focused on.

We’ve completed well over 100 residential securitizations, close to 140 If we factor CoreVest. There’s been years we’ve done 12-15 securitizations. There’s been years where we’ve done none or one. So, we very much want to get volume going again to the extent we could be in the market with certainly a deal a quarter, but if not two or three, that would feel the base to me.

Nunes: In terms of products, what the current landscape brings in terms of opportunities? 

Abate: Right now, the biggest opportunity, ironically, is in the regular prime jumbo market because that was the product banks were most focused on. And they weren’t wrong to focus on it from a credit standpoint because when the banks got through the Great Financial Crisis, all the big regulatory shifts were to get them out of taking risky mortgages on the balance sheet. Then, they started taking less risky mortgages, which are jumbos. The real shift is going to be all those jumbos that were going to banks will come back out, hopefully to non-banks like us. 

Nunes: Redwood also launched a home equity platform. What is the strategy here? 

Abate: When you look at prime rates in the high single digits and add a credit spread to that, even for the most well-qualified borrowers, you are looking at a 10% to 12% interest rate on a second mortgage. For a well-qualified borrower, 750 FICO or above, and a low-LTV first mortgage, you might be comfortable paying 10% to 12%. But that’s the best-case scenario. For everybody else, unlocking that equity is even more expensive. We’re seeing that for the traditional second mortgage products, there’s way more investor demand than consumer demand.

We’ve rolled out the traditional products and a newer product called home equity investment [HEI] options. The interesting thing about HEIs is instead of a homeowner taking out equity in the form of cash and paying a mortgage on it, there is no monthly payment within HEI. The way the investor gets paid is that you share in the upside of the home, so the home price appreciation. There are a lot of use cases for HEI over traditional products. If you think about somebody with a lot of student debt or lower FICO, they’re going to qualify for a very expensive second mortgage. So, this is a good option. It doesn’t add to their monthly payment obligation. You can do what you want with the cash, just like with a home equity line of credit, but not having the payment. It’s a bridge until the second mortgage is cheaper.

Nunes: To invest in this product, investors must believe home prices will keep rising, right?

Abate: There are a couple of things investors care about. You have to believe in a HPA [home price appreciation] story. But one way we mitigate that is we strike the price of the home at a discount to its current appraised value. So that, even if the home is sold next week, the investor will make money. If you believe that interest rates are nearing the top, as far as the Fed’s rate hike cycle, HPA should start to realign. If rates are going down, HPAs are going up. Investors are starting to get comfortable with this huge move in rates, hopefully, this fall is gonna pause. 

Then, ultimately, the investors want to understand if we give you $100,000 with this HEI, when do they get their money back? Because it’s a 30-year product. And that’s where we’ve designed the product, which is unique to Redwood, that creates strong incentives for the homeowner to refi.

Nunes: How did you get the property at a discount? 

Abate: The product is for people in their homes that are not moving out. There isn’t an actual transaction on the property. It’s somebody that wants to stay in their home. And if it’s a $1 million home, and we offer you $150,000 HEI, we might strike that HEI at $900,000. Let’s say it’s a $1 million home, and for purposes of coming up with the investor return, we’re going to call it a home at $850,000. Even if they sold the home at a $50,000 loss, the investor would still generate a return, and that’s what gets investor capital into the asset class. But what the homeowner gets is all of the proceeds, the cash and no monthly payments

The investors are institutional investors, well-known institutions, firms, pension funds, and life companies; they’re all just to varying degrees focused on HEI now. And the big reason is that nobody’s been able to tap this massive home equity opportunity. We are going to give it a try. 

Nunes: Residential mortgages are just one facet of the business. What are your plans for commercial real estate, which has had a challenging year?

Abate: What we do here in New York is our business-purpose lending platform. We realized a number of years ago that investors are becoming a much bigger participant in the real estate markets. Serving them and providing bridge loans to investors who want to flip homes or provide turned-out financing for investors who want to rent homes, that’s an entire other residential business that we run under the flag of CoreVest. In residential, we’ve more or less stuck to our knitting of non-agency. We’ve had opportunities to enter the agency space in the past and participated in certain instances, but mostly, what we do is non-agency. 

Nunes: You mentioned banks, but what are the business opportunities with IMBs?

Abate: We’ve had a great long-term relationship with the IMBs. The IMBs have a big opportunity to pick up some [market] share. Since the Great Financial Crisis, most of our business has been with the IMBs. We have a network of between 150 to 200 [partners], predominantly non-banks that we will buy mortgages from. We expect that to rebalance in the next few years. But the IMBs are also a big opportunity to take clients from the banks.

Nunes: And what are the plans for servicing mortgage rights? 

Abate: Servicing will continue to move out of the banks. That’s another big opportunity that we’ll focus on. We don’t plan to operate as a servicer, but we might own servicing rights. What we’ve done typically is when we own servicing rights, we will subservice. We want to hire somebody with a call center. And we’ll pay them a monthly fee. But when you balance out the revenue potential with the servicing asset, with the cost of service, there are still good opportunities. There’s a lot of competition for servicing. For some mortgage REITs, that’s their primary asset class, just not for us.

Nunes: Can you shed some light on your partnership with Oaktree and Riverbend?

Abate: Both of those are related to the business-purpose lender space. Oaktree is a great example of us expanding our capital partnerships into the private credit sector. Redwood is a publicly traded company, and historically, when we needed to raise money, we would do a common stock offering or a public market deal. When rates started going up, things got pretty ugly for the mortgage REIT space and the public markets. We and all other mortgage REITs started trading at discounts. Raising money in that environment hasn’t been overly attractive. So, building partnerships with private credit firms like Oaktree to focus on specific asset classes is a big part of what we want to do. One aspect that’s attractive to us is we can earn asset management fees.

The Oaktree model is something that we want to replicate on the residential side as the jumbo opportunity picks up. We’ve been in discussions with other private credit investors and institutional investors who see the same opportunity as in jumbo and non-QM.  

Nunes: With a reported cash and cash equivalents of $357 million as of June 2023, can we anticipate any M&A activities, especially considering the challenges faced by many lenders in the industry?

Abate: M&A activity has picked up in the space and based on our track record, we are a logical call. Part of our strategy is: to be active in M&A, you have to be active. It’s not efficient to call on at eight, seven different firms. You start with the ones that have shown interest in actually transacting. We have seen some opportunities, and nothing I can share in this interview, but it’s safe to say we’ve been active in M&As and we’ll continue to focus on that as part of our growth strategy.

We haven’t been open to it [acquiring a lender]. For many years, we’ve wanted to keep the business sort of regulator-light. The best way to do that is not to directly face consumers with products. We’re comfortable originating to investors, that’s what CoreWest does. But investors are sophisticated business-run ventures and not homeowners who may or may not be sophisticated in the financial markets. We have tended to not originate, but I think where we’re at as a company is from a strategic standpoint, we’d be much more open to it through M&A.

Nunes: What do you expect for the macro landscape in the coming year?

Abate: There’s such a vast shortage of supply of homes in many parts of the country, which is supporting home prices. The Fed consciously inflated home prices, particularly during the COVID years. These high asset values prevented normal credit losses you might see through a cycle. The combination of QE-fueled asset prices with an economy that hasn’t dropped off too much has created a strong housing market. 

But credit in residential housing should perform immensely better than many facets of the commercial real estate market. There’s so much vacancy in these central business districts. These buildings are valued based on cash flows– not like a residential home, which is an appraisal. If it’s 50% full, it’s worth half as much. From a credit standpoint, certain facets of the commercial real estate sector will have a rough road ahead.

I’m probably supposed to say this, but I feel better about my sector. The technical supporting housing will continue to be strong. The big challenge with residential today is just transaction activity. If you own a home with a 3% mortgage, you don’t want to sell it. If your home suits your needs, the prospect of doubling your monthly payment to move is very unappealing. The real challenge in residential has been a lot of capacity to make loans, but there’s not much demand. If rates do stabilize, that will change quickly. When the market thought in January that rates were stabilizing, we saw a pickup in loan activity, and then they started going up again; we’ll see what happens this fall. 

 Nunes: Do you see a crisis on the commercial side of the market? If so, how could it impact the residential side?

Abate: It’s hard to say. The only real obvious driver for a crisis is what could be a permanent impairment of occupancy in these commercial office buildings. The way that can affect our markets is there’s a trickle-down effect. If the buildings aren’t full, the restaurants aren’t full, the delis aren’t full, the subways are not full, and the hotels aren’t full because people aren’t traveling to see people in the office. That could have an effect on the economy in general, which would impact housing indirectly. As far as the economy goes, the airports seem more full than ever, and hotels seem to be doing fine. Overall, [the problem] is probably mostly office. But if it keeps getting worse, it certainly could have downstream effects.

Source: housingwire.com