Mortgage rates keep climbing amid rising inflation, war in Ukraine, and disruptions to the supply chain, and there’s no sign that they’ll fall anytime soon.
The latest weekly Freddie Mac PMMS mortgage survey, released Thursday, showed that the average purchase mortgage rate touched 4.67%, up 25 basis points from the week prior. That was the highest reading since December 2018, according to Freddie Mac.
The GSE’s index accounts for just purchase mortgages reported by lenders over the past three days. Black Knight‘s Optimal Blue OBMMI pricing engine, which considers refis and data from the Mortgage Bankers Association, reported that rates on Wednesday averaged 4.81%, up about 10 bps from a week prior.
And several loan officers who spoke to HousingWire this week said they had clients lock rates in the 5.1% range this week, though many homebuyers with ample cash reserves are buying down mortgage points.
The central bank has signaled that it will raise interest rates another six times this year and several more in 2023 to control inflation, which reached the highest level in 40 years in February, at 7.9%.
Normally, a period of rising mortgage rates cools housing prices. But this is no normal market. The March national median listing price for active listings was $405,000, up 13.5% compared to last year and 26.5% compared to March 2020, according to Realtor.com economist Danielle Hale. In large metros, median listing prices grew by 9.1% compared to last year, on average.
Why lenders should think about non-QM now, not later
Agency rates are on the rise and refinance volume is down. Originators who had their best year in 2021 will have to utilize something else to make up for this loss in 2022 and non-QM can be the answer.
Presented by: Angel Oak
The problem, of course, is inventory. National inventory of active listings declined by 18.9% over the last year in March, while the total inventory of unsold homes — including pending listings — declined by 12.5%, according to Realtor.com. The inventory of active listings was down 62.3% compared to 2020 at the onset of the pandemic, even though demand remains high.
The latest Mortgage Bankers Association survey this week found that while interest in refi mortgages fell 15% from the prior week, interest in purchase mortgages rose a modest 0.68%.
According to the PMMS report, the average 15-year fixed-rate mortgage averaged 3.83%, up 20 bps from the prior week. (On average homebuyers paid 0.8 mortgage points.) The 5-year Treasury-indexed ARM averaged 3.50%, up from 3.36% a week prior.
It’s good news for anyone looking to purchase a new home or refinance their current mortgage today as rates are improving. It was some comments from President Trump on China and North Korea that sent investors into a more risk-off scenario, pushing Treasury yields and mortgage rates lower. Read on for more details.
[embedded content]
Market Outlook 5.21.18 from Total Mortgage on Vimeo.
Where are mortgage rates going?
Rates move lower
It’s been a while since President Trump has been one of the main factors in where the market moves on a daily basis but that’s where we are today. First the President commented that he was not pleased with the way the trade talk between the U.S. and China has been unfolding.
He said that they have “a long way to go.” Then, more geo-politcal tensions were fanned when the President said that the summit between him and North Korea’s Kim Jong Un might not go ahead as planned.
These comments have caused the markets to adopt a more risk-off sentiment, sending investors into the safe-haven of long-term government bonds.
If we take a look at the yield on the 10-year Treasury note, which is the best market indicator of where mortgage rates are going, we can see that’s its down a little over five basis points today to 3.01%.
Mortgage rates typically move in the same direction as the 10-year yield, so rates are headed a little lower as we approach the midpoint of the week.
With geo-political concerns back in the spotlight, it’s important for potential home buyers to pay attention to the news and check in to see how the market is reacting.
Of course, we do have some significant economic reports out on Friday (Durable Goods Orders and Consumer Sentiment), and could definitely see a market reaction when those are released as well.
The takeaway here is that mortgage rates are incredibly fickle and can be influenced by a multitude of factors. That’s what makes it so difficult to predict where they will be at any given point of time.
What we can say right now, though, is that with the Federal Reserve on track to raise the nation’s benchmark interest rate at least two more times this year, it stands to reason that mortgage rates will continue to move higher and higher over the coming weeks and months.
How high will they go? Well, the average rate on the 30-year fixed rate mortgage (according to the most recent Freddie Mac Primary Mortgage Market Survey) is at 4.61%.
That’s up sixty-six basis points from the start of the year. If the Fed continues on the path that they’ve currently outlined, it’s not unfathomable to think that we’ll see the 30-year push above 5.00% in 2018.
Rate/Float Recommendation
Lock before rates move even higher
With a higher rate adjustment looming, we’ve been recommending that borrowers take action sooner rather than later in order to avoid the risk of locking in a higher rate.
There are always unique factors in each borrower’s scenario, but in general, we believe that those who are quick to act will be better off doing so. The best way to figure out your ideal course of action is to go over your situation with an experience mortgage expert.
Our mortgage bankers have seen countless scenarios and can quickly and easily identify what you need to do to best position yourself in the current market. It only takes a quick phone call or a few minutes with our online form to get started.
Learn what you can do to get the best interest rate possible.
Today’s economic data:
PMI Composite Flash
We got some strong readings in the PMI Composite Flash today. The composite, manufacturing, and services readings all came in above what analysts had predicted.
New Home Sales
New Home Sales for April came in at an annualized rate of 662,000. That’s 10,000 below what analysts had expected.
EIA Petroleum Status Report
For the week of 5/18/18:
Crude oil: 5.8 M barrels
Gasoline: 1.9 M barrels
Distillates: -1.0 M barrels
FOMC Minutes
The minutes from the Federal Open Market Committee’s previous meeting will be released this afternoon at 2:00pm.
Fedspeak
Minneapolis Fed President Neel Kashkari at 2:15pm.
Notable events this week:
Monday:
Chicago Fed National Activity Index
Fedspeak
Tuesday:
Richmond Fed Manufacturing Index
Wednesday:
PMI Composite Flash
New Home Sales
EIA Petroleum Status Report
FOMC Minutes
Fedspeak
Thursday:
Jobless Claims
FHFA House Price Index
Existing Home Sales
Kansas City Fed Manufacturing Index
Fedspeak
Friday:
Durable Goods Orders
Consumer Sentiment
Fedspeak
*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.
Today we’ll take a hard look at First Internet Bank, which is a frequent advertiser on the Zillow Mortgage Marketplace.
Their full name is actually First Internet Bank of Indiana, but seeing that they’re licensed to do business nationwide, why focus only on the Hoosier State?
Interestingly, their name is in fact factual because they are apparently the first FDIC-insured institution to operate entirely online.
Aside from offering checking, savings, and money market accounts, they also originate lots of home loans. That segment of their business will be the focus for this review.
First Internet Bank Fast Facts
Publicly traded bank founded in 1999 by David Becker
Corporate headquarters located in Fishers, Indiana
First FDIC-insured institution to operate entirely online
Offer home loans, personal loans, student loans, credit cards, depository accounts, and more
Originated about $700 million in mortgages last year
Licensed nationally but most active in Indiana, California, and Texas
First Internet Bank of Indiana was founded in 1999 by current CEO David Becker, who had a vision to conduct banking exclusively online.
He’s seemed to be on to something, because here we are 20 years later applying for home loans on our smartphones.
Anyway, you can be pretty confident they’re up to speed on technology seeing that their humble beginnings were driven by innovation and technology.
But they’re also a pretty large publicly-traded bank, so despite not having physical branches, they’ve got the soundness and security of a large financial institution.
Last year, the online mortgage lender mustered about $700 million in home loans, and may be on track for a $1 billion+ origination year in 2020.
They’re licensed to conduct business nationwide, but did the most volume in their home state of Indiana. A good chunk of business also came from California and Texas.
How to Apply for a Home Loan with First Internet Bank
Since they’re an e-bank you can apply for a mortgage directly from their website
Their digital mortgage platform is powered by fintech company Blend
It’s also possible to call them directly or chat with any of their loan officers online
Borrowers can complete most of the loan process remotely and paperlessly
You’ve got a few options to get the ball rolling with First Internet Bank. If you head over to their website, it’s possible to apply for a mortgage without any human assistance.
Simply navigate to their mortgage page, then select either “apply now” or “get pre-approved.”
Both options lead to the same place, a digital mortgage application powered by Blend.
It allows you to complete most of the application electronically, including the ability to link financial accounts, pay stubs, and employment information.
You can also eSign documents for fast delivery and once approved, you’ll be able to use their loan portal to satisfy any required conditions and to check loan status.
Those who wish to generate a pre-approval letter can do so via the same online mortgage application.
Alternatively, you can navigate to the loan officers tab and check out all the folks who work at First Internet Bank.
You can view their profile, contact information, and even chat with them immediately online if it shows they’re available.
If you’re old school, you can also simply call them up on the phone to get started.
All in all, you’ve got plenty of options when it comes to applying for a home loan, which is a nice touch.
And the fact that they use fintech company Blend for their digital mortgage process is also a big plus.
Home Loan Programs Offered by First Internet Bank
Home purchase loans
Refinance loans
Conforming loans
Jumbo home loans
FHA loans and VA loans
Construction-to-perm loans
Home equity loans
Home equity lines of credit
Fixed-rate and adjustable-rate options are available
First Internet Bank has home loan programs to suit most borrowers, including home purchase loans, refinance loans (rate and term and cash out), and construction loans.
The only big loan category they’re missing is USDA home loans.
However, they still offer conventional loans backed by Fannie Mae and Freddie Mac, jumbo home loans with just 10% down, FHA loans, and VA loans.
Additionally, you can get a home equity line of credit (HELOC) or a home equity loan, something many of the nonbank lenders can’t offer.
So if you’re in need of a second mortgage, even a piggyback mortgage, they might have the edge there.
They lend on all types of properties, including primary residences, second homes, and investment properties.
You can get a fixed-rate mortgage, such as a 30-year or 15-year mortgage, or an adjustable-rate mortgage, such as a 5/1 ARM or 7/1 ARM.
First Internet Bank Mortgage Rates
While they don’t list mortgage rates on their own website, Zillow shoppers may come across them when shopping rates via the Zillow Mortgage Marketplace.
From what I saw on Zillow, they offered competitive rates relative to other lenders listed, and often advertised lender fees under $100, or even just $1 on certain loan products (basically a no cost refinance).
They may have been an eighth of a percent higher than the cheapest lender listed, but with lower fees. So potentially still the best combination of rate and fees.
The fact that they operate entirely online means they can cut down on typical overhead costs incurred by brick-and-mortar banks. Hopefully those savings are passed onto you.
Why they don’t list mortgage rates on their own website is another question, but that’s their choice and not necessarily a bad thing.
However, you can request a free rate quote on their website, though only after providing your contact info. So calling or chatting may be best if you wish to remain anonymous at first.
All in all, they appear to be very reasonable pricing-wise on both rates and fees, so that shouldn’t be a concern for most prospective customers, but always put in the time to shop and compare with other lenders.
First Internet Bank Mortgage Reviews
First Internet Bank has a stellar 4.87-star rating on SocialSurvey based on over 1,200 customer reviews specifically regarding their mortgage division.
They’ve also got a 4.9 out of 5 rating on LendingTree with a 97% recommend rating.
On Zillow, they have a 4.7-star rating out of 5 based on over 600 customer reviews, with many reviewers indicated that both closing costs and rates were lower than expected.
Additionally, they take the time to respond to all the reviews on Zillow, so if you want feedback from your feedback, you’ll probably be in luck.
The company is also Better Business Bureau accredited and has been since 2013. They currently sport an ‘A+’ BBB rating.
So it seems clear they are a well-liked bank and mortgage lender across all the major ratings companies.
In summary, First Internet Bank is certainly worth considering if shopping for a home loan, assuming you are comfortable working remotely.
But this may make them better suited for refinances as opposed to home purchase loans.
First Internet Bank Mortgage Pros and Cons
The Pros
Offer a digital home loan process powered by Blend
Can apply for a mortgage without human assistance
Ability to chat with loan officers via their website
Excellent customer reviews from past mortgage customers
A+ BBB rating and accredited company
Appear to offer low mortgage rates with limited lender fees
Lots of different loan programs to choose from including home equity loans and lines
Mortgage rates are holding steady so far this week. It’s no surprise, really, as there’s been very little meaningful economic data out these past two days.
Tomorrow, though, we get a few notable releases so there’s definitely the chance that we’ll get a market reaction.
Long-term rates are still expected to rise, which is why we’re recommending that borrowers lock in a rate soon. Read on for more details.
[embedded content]
Market Outlook 5.21.18 from Total Mortgage on Vimeo.
Where are mortgage rates going?
Rates still holding steady
There’s not much economic data out, keeping market movement fairly muted today. The yield on the 10-year Treasury note, which is the best market indicator of where mortgage rates are going, is flat on the day at 3.06%.
That’s very close to the seven year high that it briefly hit on Thursday. Depending on who you talk to, there’s plenty of room left to run for the 10-year yield.
With the Federal Reserve getting ready to raise the nation’s benchmark interest rate, the federal funds rate, at least two more times in 2018, some analysts are saying the 10-year yield could easily hit 4.00%.
With mortgage rates closely tied to the bond market, that would put significant upward pressure on rates.
This isn’t anything new to anyone who’s been paying attention to the market this year; back in January we had many projections for the 30-year fixed rate to go as high as 5.00% by the time 2019 rolls around.
In the Freddie Mac Primary Mortgage Market Survey last week we saw the average rate on a 30-year fixed rate move up to 4.61%. That’s up sixty-six basis points from the start of the year.
We’ve still got another thirty-nine basis points to climb before 5.00%, but that could easily be covered over the next seven months.
Rate/Float Recommendation
Lock before rates move even higher
With mortgage rates on track to climb higher and high over the coming weeks and months, we believe that it makes sense to lock in a rate on a purchase or refinance sooner rather than later.
Learn what you can do to get the best interest rate possible.
Today’s economic data:
Richmond Fed Manufacturing Index
The Richmond Fed Index hit a 16 in May. That’s a strong reading that is right on the brink of escaping the high end projection.
Notable events this week:
Monday:
Chicago Fed National Activity Index
Fedspeak
Tuesday:
Richmond Fed Manufacturing Index
Wednesday:
PMI Composite Flash
New Home Sales
EIA Petroleum Status Report
FOMC Minutes
Fedspeak
Thursday:
Jobless Claims
FHFA House Price Index
Existing Home Sales
Kansas City Fed Manufacturing Index
Fedspeak
Friday:
Durable Goods Orders
Consumer Sentiment
Fedspeak
*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.
American Financial Network Inc. bills itself as one of the fastest growing mortgage bankers in the United States, and is indeed ranked in the top 50 nationally.
But they’re not satisfied with that, and believe they have what it takes to land in the top-10 one day. Of course, the competition is pretty fierce at the very top of the pile.
Aside from being a high-growth company, they are also a highly-rated one, finding themselves among the top three lenders on LendingTree based on customer reviews.
That’s pretty impressive given the fact that there are more than 800 mortgage lenders listed there.
Let’s dig into the details to learn more about this SoCal mortgage lender.
American Financial Network Quick Facts
Retail direct-to-consumer mortgage banker founded in 2001
Headquartered in Brea, CA – licensed in all 50 states and D.C
Offers home purchase loans and refinance loans
A top-50 mortgage lender nationally by loan volume
Funded more than $7 billion in home loans last year
185+ physical locations and 700+ loan officers nationwide
One of the top-rated mortgage lenders on LendingTree based on customer reviews
American Financial Network Inc. was founded in Chino Hills, California by mortgage industry veteran Jack Sherman back in 2001.
The company later relocated to nearby Brea, CA before growing rapidly and hitting its first billion-dollar funding year in 2012.
Today, it’s one of the nation’s largest mortgage lenders (top-50), having funded over $7 billion last year alone.
In 2019, they signed on New York and Vermont to achieve their goal of nationwide licensing, and recently celebrated their eighth billion-dollar origination month in a row.
That means they’re on track to fund more than $10 billion in mortgages this year, which should make 2020 a record year for loan volume.
While they have the ability to lend anywhere, including Alaska and Hawaii, the company is most active in the states of Arizona, California, Florida, Texas, and Virginia.
Nearly half of last year’s volume was made up of home purchases, with the remainder split about evenly between cash out refis and rate and term refis.
One other fun fact about the company – apparently 37 different languages are cumulatively spoken, a testament to their diversity.
How to Apply with American Financial Network
You can apply directly from their website without human assistance
They use a digital mortgage loan process known as SNAP
Allows you to scan/upload paperwork, eSign documents, and order a credit report on your own
Can check loan status 24/7 and contact your loan officer via text/phone at any time
AFN is a Fannie Mae Seller/Servicer, Ginnie Mae and Freddie Mac Issuer, and USDA & VA LAPP approved, meaning they can get things done quickly in-house.
Additionally, they provide fully underwritten mortgage pre-approvals, so you can be confident to move forward as a prospective home buyer.
If you’d like to apply for a home loan, you can do so directly from their website or via their free smartphone app.
I believe they offer a digital mortgage application powered by Ellie Mae that lets you complete most tasks electronically. It’s known as SNAP.
Once your loan is approved, you’ll get a to-do list with the ability to scan and upload conditions, eSign documents, and track loan progress 24/7.
Loan Types Offered by American Financial Network
Home purchase loans
Refinance loans (rate and term, cash out, streamline)
Home renovation loans
Conventional loans backed by Fannie Mac and Freddie Mac
Jumbo home loans up to $2 million loan amounts
Government-backed home loans: FHA, USDA, and VA
Down payment assistance programs
Fixed-rate and adjustable-rate home loan options available
American Financial Network is a mortgage banker, meaning they have correspondent relationships with lots of investors to ensure they’ve got every loan product a borrower could need in-house.
This basically allows them to resell loan products from other companies, providing a wider breadth of offerings than other lenders.
Additionally, their loan officers may have the ability to broker out loans if you have a unique loan scenario that can’t be placed in-house.
They offer tons of loan options, including home purchase loans, refinance loans, and home renovation loans. It’s unclear if they have construction loans.
You can finance a primary residence, second home, or investment property, including condos and townhomes.
With regard to loan type, you can get a conventional home loan backed by Fannie Mac or Freddie Mac, a government loan backed by the FHA/USDA/VA, or a jumbo home loan that exceeds the conforming loan limit.
They also have a variety of down payment assistance programs for those who may need a little helping hand asset-wise.
Aside from all the usual stuff, they say they’ve got bank statement programs for self-employed borrowers and real estate investors, and other specialty products to accommodate other needs.
American Financial Network Mortgage Rates
Like many others, American Financial Network doesn’t publicize their mortgage rates on their website.
This says nothing about their rates in general, but it does leave us in the dark unfortunately.
I give lenders transparency points for listing their rates on a daily basis, but I also understand the shortcomings of advertised rates, which often only fit one ideal loan scenario.
That being said, you can get a quick, free mortgage rate quote by filling out a short form on their website or by simply calling them directly.
The form is very short, though you will need to provide contact information.
AFN also doesn’t list its lender fees anywhere, so we don’t know if they charge a loan origination fee and/or other common fees like underwriting, processing, or application fees.
Be sure to speak with a loan officer to get a mortgage rate quote along with the applicable lender fees and mortgage APR so you can shop your rate with other lenders.
American Financial Network Reviews
They are a top-rated mortgage lender on LendingTree (top 3 at last glance) with a 4.9-star rating out of 5 based on nearly 23,000 customer reviews.
The company also boasts a 99% recommendation rate on LendingTree, which is clearly hard to beat.
The only two lenders that are rated above them on the LT network are New American Funding and Fairway Independent Mortgage.
On SocialSurvey, AFN has a 4.82-star rating out of 5 on a whopping 51,000 customer reviews. That’s pretty impressive given the high volume of customer feedback.
On Zillow, they’ve got a 4.94 rating out of 5 based on more than 2,100 reviews.
Lastly, they’ve got a ‘B+’ rating with the Better Business Bureau, and have been an accredited company since 2019.
In summary, American Financial Network checks all the major boxes and seems to really excel in customer satisfaction, a big plus for those seeking a mortgage.
American Financial Network Pros and Cons
The Good
Can apply for a mortgage directly from their website without speaking to anyone
Lots of different loan programs to choose from
Thousands of excellent customer reviews
Top ranked company on LendingTree
Loan officers and support staff may also speak Spanish
Brick-and-mortar locations if you prefer to work in-person
Free smartphone app to manage your loan
Mortgage calculators and mortgage glossary on their website
The 30-year fixed-rate mortgage (FRM) averaged 6.67% this week, another decline from last week’s dip to 6.69%. This is the third consecutive week of rates declining, according to the latest Primary Mortgage Market Survey® (PMMS®) from Freddie Mac released Thursday. This week’s numbers:
30-year fixed-rate mortgage averaged 6.67% as of June 22, 2023, down from last week when it averaged 6.69%. A year ago at this time, the 30-year FRM averaged 5.81%.
15-year fixed-rate mortgage averaged 6.03%, down from last week when it averaged 6.10%. A year ago at this time, the 15-year FRM averaged 4.92%.
What the experts are saying: “Mortgage rates slid down again this week but remain elevated compared to this time last year,” said Sam Khater, Freddie Mac’s chief economist. “Potential homebuyers have been watching rates closely and are waiting to come off the sidelines. However, inventory challenges persist as the number of existing homes for sale remains very low. Though, a recent rebound in single-family housing starts is an encouraging development that will hopefully extend through the summer.” Realtor.com economist, Jiayi Xu commented: “The Freddie Mac fixed rate for a 30-year mortgage declined for the third week in a row by 2 basis points to 6.67% as markets absorbed a strong uptick in new construction. While the headline CPI dropped significantly in May to 4.0%, the core CPI— which includes goods and services excluding volatile food and energy – has not retreated as much as the overall inflation in recent months, creating a troubling situation for policymakers. Meanwhile, the Fed opted not to raise short-term rates at June’s FOMC meeting, choosing to wait for additional data and see how recent rate increases are influencing price growth and the real economy. In the coming months, we may see a faster slowdown in inflation because the growth in the shelter index, the largest contributor to inflation growth, has passed its peak and started to trend down in April. “Nevertheless, as the inflation is well-above the 2% target and the labor market is still strong, FOMC signaled that the Federal Funds rate will be half a point higher than previously expected at the end of 2023, which is also half a point higher than the current rate. In other words, borrowing, including home purchases, will likely remain expensive through the remainder of the year. With the potential for additional rate hikes ahead, mortgage rates will remain elevated throughout the remainder of the year. As a result, affordability will continue to be an important factor in buyers’ home purchasing decisions. According to Realtor.com’s recent hottest markets report, home buyers continue to flock to relatively inexpensive markets below the national median price, leading to notable price growth in these otherwise affordable areas. The heightened competition in these markets may worsen the conditions faced by buyers with financial constraints, particularly due to the already limited supply of affordable homes. While the rise in new construction is encouraging, there is a pressing need to build homes catering to all income levels. Our joint research with the National Association of REALTORS confirms this urgent necessity, especially in the lowest price tier where the shortage of affordable housing is most severe.
“However, there is still some good news for home sellers. As improving homes before selling is one of the top concerns among sellers, lower prices for household furnishings and supplies may bring a sense of relief. While this improvement primarily affects sellers, buyers may also benefit, as the high cost of home repairs are often passed on to them in the end. In May, the household furnishing and supplies index increased 4.1% over the prior year while the core inflation increased 5.3%. Compared to the previous month, prices for household furnishing and supplies dropped 0.4% versus an increase of 0.4% for core prices, on a seasonally adjusted basis.”
In the two years after a notorious Surfside, Florida condo collapse, new temporary rules and increased enforcement have been instituted to ensure building safety, but these measures have also intensified the challenge involved in finding affordable financing in this market.
“There are more and more buildings that don’t meet the warrantable guidelines,” said Melissa Cohn, regional vice president, William Raveis Mortgage, referring to the standards buildings must meet for government-sponsored enterprises to back condominium unit loans.
At the same time the banking crisis reportedly reduced the supply of low-rate condo unit financing.
“You have the secondary market in the last two or three months somewhat collapsing, where you see these banks are starting to fold,” said Orest Tomaselli, president of project approval at CondoTek. “Some of these are banks that have provided residential mortgage financing to owners and purchasers in these condominium developments.”
Borrowers are still able to pay up for other options in the private market but these developments have generally limited the availability of more cost-effective loans for buyers of condo units, Cohn said.
“There are still financial institutions that will lend at market rates in nonwarrantable buildings,” said Cohen. “But they may not drop the rates below market for anyone.”
That’s a concern, because condos can be a source of scarce affordable housing in a high-cost market, and while Surfside-inspired rules as now configured are aimed at making buildings and units safer, some think they run the risk of having a counterproductive impact on financing.
“If it becomes more difficult to make those loans, it will become more difficult for people to enter into the housing system,” said Taylor Stork, chief operating officer of Developer’s Mortgage Company and president of the Community Home Lenders of America. “Most of our borrowers are first-time homebuyers in metropolitan areas and they tend to go toward the housing stock that is less expensive. In those areas, it’s more likely that a condominium will be an option.”
A growing list of “unavailable” buildings
To understand Surfside’s ripple effects in the condo market, consider the list of buildings that don’t meet Fannie Mae’s lending requirements.
The growth in the so-called unavailable list, which is constantly changing in line with the status of different buildings relative to Fannie’s requirements, has drawn attention because it’s caught an increasing number of condo associations and would-be borrowers by surprise.
“Hundreds of buildings have been added since Surfside,” said Tomaselli. “It seems like every day, there’s another one going on.”
Some of the market frustration with the list has stemmed from the fact that only Fannie, lenders and other entities with a permissible business purpose have had access to what traditionally have been called unwarrantable condos and they’ve been loath to share it outside of that.
“Approved parties that access [Condo Project Manager] for project eligibility information are not permitted to disclose Fannie Mae eligibility determination to third parties,” a Fannie Mae spokesman said in an emailed statement. (CPM will become mandatory for full reviews in July.)
The access restriction has meant some buildings have been unaware that they’re on the list until someone tries to finance a unit. The listing isn’t even always related to post Surfside rules, but the increased enforcement of other traditional condo standards in response to the collapse.
The CHLA, National Association of Realtors, and the Community Association Institute have all called for public access to the list and guidance as to how buildings can regain eligibility. (Lenders have said some fixes can be done in time to close a loan but others are more complex.) The trade groups also are asking for a minimum 60 day comment period before any condo lending rule changes.
There’s some precedent for a public list. Unlike Fannie’s technology and Freddie Mac’s platform for condo information, which provides feedback based more on discrete criteria rather than by building, the Federal Housing Administration’s list is public.
The FHA’s specific lookup tool provides information on building approvals and rejections and is designed for specific searches related to a particular property or area. While it has different criteria and costs than the GSEs (of the three, only Fannie and Freddie lend on cooperatives), some of the FHA’s feedback on buildings may mirror theirs.
CPM also is formatted as a lookup tool and its exclusive use mandate narrows the channels through which Fannie loans can get done, Stork said. Not only vendors but some originators who don’t work directly with Fannie, like aggregators or brokers, lack direct access to the system.
The situation can lead to frustration and costs for borrowers because once a loan has property-specific information, lenders tend to start worrying about time-sensitive disclosure requirements and start a more detailed application process. For borrowers in this market, that can come with the usual mortgage costs like the appraisal in addition to, for example, fees buildings charge for supplying certain condo information, said Stork.
“A borrower can easily put $1,000 to $1,500 into a transaction and then learn that it is never going to be approved, and there’s no way that the lender, or the borrower, or even the Realtor could know all of this, in many cases,” Stork said. “First-time homebuyers generally don’t have that money just laying around.”
Fannie’s spokesperson said that it considers lenders it works with to be “in the best position to have conversations with their customers about mortgage finance.”
With the advent of the banking crisis, more private lenders are increasingly likely to pile on if they become aware of Fannie’s approval status for a building, either by seeing it as signifying risks they should charge more for or that they should avoid financing it altogether.
“Being on that list, it sometimes can mean that other lending shuts down in the building as well,” Tomaselli said.
Therein lies a key dilemma in the wake of Surfside: lenders may have less tolerance for giving money to buildings with strained finances just when condos are most likely to need more cash to ensure their structures are sound.
Layers of rules and costs to navigate
Fannie and Freddie’s temporary criteria in response to Surfside have focused on restricting single-family financing for units in buildings that have deferred maintenance and public repair directives related to unsafe conditions.
The GSEs have noted that as they get a better sense of the mitigants that could be used to address the risks in aging condo buildings Surfside epitomized, they could rethink their criteria. Lenders generally would like that to result in some more leeway, but think further tightening might be more likely.
Meanwhile, even with the temporary constraints, the share of condo and co-op loan acquisitions at Fannie Mae has remained largely consistent around 9% as of year-end 2022.
And sometimes those constraints are necessary, lenders agree. As much as the market is short of housing at affordable entry-level price points and the buy-in cost for owning a condo may be lower than a traditional home, if a building’s not sound or ongoing maintenance and assessments won’t be financially manageable for a particular borrower in the future, they shouldn’t get a loan.
“The piece that Fannie Mae’s focused on…is how do we ensure sustainable homeownership,” Jake Williamson, senior vice president, single-family collateral risk management, in an online video forecast about the condo outlook. “Part of that is keeping in mind the ongoing cost.”
Adding to that concern are regional rules that have been put into place in areas where condos are concentrated. Access to this type of housing has been increasingly costly and constrained.
In Florida, June marks not only two years since Surfside, it’s also the 12-month anniversary of the state’s Building Safety Act. Because of its passage, buildings have been grappling with how to make assessments for new structure and reserve requirements affordable to their unit owners
“Each association or board president is going to have to take a damn good look at their resident constituents and figure out what their ability to pay is,” said Greg Main-Baillie, executive managing director for the Florida Development Services Group at Colliers. “Unfortunately, some board presidents could end up putting their buildings into default if they don’t.”
Baille, who acts as an owner’s representative and project consultant for condo associations facing inspections and structural repairs, said he doesn’t deal directly in unit financing, but noted building finances are inextricably linked to those of single-family owners and mortgagors.
State or regional programs that help some unit owners obtain financial assistance to help with assessments could mitigate condo default risk, Main-Baille said. Miami-Dade County has offered up to $50,000 to owners with an area median income of 140% or less.
Condo boards also might want to judiciously use a home equity loan of credit related to their multifamily building mortgage to, for example, extend the amount of time unit assessments can be spread out over, reducing monthly payments for potential future owners, he suggested.
“It may be better for the condo to actually go and leverage that debt on the behalf of their residents than the residents going and sourcing loans themselves, and it’s probably going to be cheaper too,” he said.
While the costs associated with Florida’s rules have been the most prominent so far, given the national impact of Surfside on Fannie’s temporary standards and the wide distribution of states on the unavailable list, it’s likely regional responses will grow too and become a factor in lending. New York City, for example, also has had some problems with aging infrastructure. Local rules were implemented in response to it in the past.
“Florida is really the only one that is pushing this mandate to this level and degree at this point in time…but you just have to wait to find out if more states will start following suit,” Maine-Baille said.
The total number of unavailable buildings in the Sunshine State topped several hundred at the end of May, according to lender estimates. As of May 31, every state but three had at least one building on it. The exceptions were Arkansas, North and South Dakota. The number of buildings listed per state was generally under 100 and sometimes as low as one at that time. The state with the second largest numbers of listed buildings was California, which had over 200.
Today we’ll take a deep dive into a major credit union that’s also a sizable mortgage lender, Pentagon Federal Credit Union, or PenFed for short.
While originally intended to serve the U.S. military, veterans, and various defense department government employees, today anyone can join PenFed, whether part of those groups or not.
For example, if you have no military affiliation whatsoever, it’s possible to join if your employer is eligible or if you make a small donation to an organization.
PenFed has been around since 1935, and today serves more than two million members worldwide with a whopping $25 billion in assets.
They lend in all 50 states and the District of Columbia, as well as in Guam, Puerto Rico, and Okinawa. Let’s learn more.
PenFed Mortgage Fast Facts
Members-only credit union federally insured by NCUA
Founded in 1935, headquartered in Alexandria, Virginia
Anyone free to join regardless of lack of military background
Offer checking and savings accounts, credit cards, mortgages, and HELOCs
Licensed to lend in all 50 states, D.C., Guam, Puerto Rico, and Okinawa
Funded $18.9 billion in home loans last year
Did about a fifth of total loan volume in home state or Virginia
Also operate a wholly-owned title insurance company called PenFed Title, LLC and real estate brokerage called PenFed Realty
As noted, anyone can join PenFed, though they are a members-only credit union. So once you become a member, you can take advantage of their many product offerings, including home mortgages.
Last year, the Alexandria, VA-based credit union did roughly $18.9 billion in total home loan origination volume, with about a fifth of it in its home state of Virginia.
A good chunk was also originated in the nearby states of Maryland and Florida, along with Texas and faraway California.
Home purchase loans accounted for roughly 50% of volume, with 25% rate and term refinances, almost 20% cash out refinances, and the remainder HELOCs.
And while most of their home loans were fixed-rate mortgages, they offer a variety of adjustable-rate mortgages as well.
How to Apply for a Home Loan with PenFed Mortgage
Members can submit their loan application directly from their account on PenFed Online
They ask that you call them or submit a call back request online if refinancing or inquiring about a HELOC
Those looking to generate a pre-approval can do so right away via the online portal
They offer a digital mortgage loan experience that allows you to complete most tasks electronically
Assuming you’re a PenFed member, it’s possible to get the ball rolling simply by calling them up directly or by filling out a short call back request form on their website.
If you’re looking for a mortgage pre-approval for a home purchase, you can also begin on your own via the PenFed online portal.
Speaking of real estate, PenFed operates an affiliated real estate brokerage known as PenFed Realty, which is backed by Berkshire Hathaway HomeServices.
Like many other banks and lenders, PenFed offers a digital mortgage experience where you can eSign disclosures, scan and upload documents, receive real-time status updates, and check loan progress 24/7.
PenFed also operates its own title insurance company, which might speed up the loan process and/or result in discounts on such services.
Loan Programs Available at PenFed Mortgage
Home purchase loans
Refinance loans (rate and term and cash out)
Conventional loans backed by Fannie Mae and Freddie Mac
Jumbo loans up to $5 million loan amounts
VA loans for eligible military and veterans
Home equity lines of credit (HELOCs)
Various fixed-rate and adjustable-rate options available
PenFed offers both home purchase financing and refinance loans on a variety of property types, including single-family homes and condos/townhomes, along with multi-unit properties.
It’s possible to finance a primary residence, second home, or investment property using a conventional loan backed by Fannie Mae and Freddie Mac, or a jumbo home loan that exceeds the conforming loan limit.
They also specialize in VA loans seeing that they were originally geared specifically toward military and veterans.
While they don’t offer FHA loans or USDA loans, which is a major downside for some borrowers, they do offer a home equity line of credit (HELOC) product, with the possibility to tap equity up to 90% CLTV.
PenFed pays most of the closing costs on the HELOC, and will waive the $99 annual fee if $99 in interest is paid during the preceding 12-month period.
The only caveat on that product is if you pay it off or close it within 36 months you’ll need to reimburse the full amount of the PenFed-paid closing costs for the loan.
PenFed also offers some unique proprietary loan programs like their 15/15 ARM or their 5/5 ARM if you’re looking for something a little different.
And they offer traditional ARMs like the 5/6 ARM and 7/6 ARM, along with the usual fixed-rate options like a 30-year and 15-year fixed.
PenFed Mortgage Rates
One nice thing about PenFed is the fact that they openly advertise their mortgage rates for all to see on their website.
You don’t need to sign in to see their rates – simply surf over to their site to see today’s rates on a variety of products including conventional fixed-rate loans, jumbo fixed-rate loans, and VA loans.
They don’t advertise their ARM rates so you’ll either need to click on “Get My Rate” to generate your own mortgage rate quote on their website or call in for pricing if you want an adjustable-rate mortgage.
From what I saw, their mortgage rates were competitive, especially since they say they don’t charge lender fees.
Additionally, those purchasing a home get a lender credit ranging from $500 to $2,500 depending on loan amount, which can be used to offset any third-party closing costs like the home appraisal or title insurance.
All in all, PenFed’s mortgage rates seem competitive and the lack of lender fees makes them even more desirable when you consider the mortgage APR.
PenFed Mortgage Reviews
They have a rather marginal 3.8-star rating out of 5 on Zillow, though it’s only based on about two dozen customer reviews. Still, it leaves a lot to be desired.
Similarly, they have a 3.9-star rating out of 5 on WalletHub from a much larger sample size of about 6,000 reviews, but that may include non-mortgage related products.
However, quite a few seem to focus on their mortgage or home equity products, so you’ll be able to read about relevant customer experiences.
It’s the same story over at Bankrate, a 3-star rating from eight reviews. Again, not a lot there, but still seems to be consistent with other ratings sites.
While they aren’t a Better Business Bureau accredited company, they do currently have an ‘A+’ BBB rating based on complaint history.
But their customer reviews on the BBB website are rather poor, with a 1.2-star rating on 75 reviews at last glance.
So it seems they’re struggling a bit in the customer satisfaction department, despite having a solid website, competitive mortgage rates, and no lender fees.
PenFed Mortgage Pros and Cons
The Good
They openly advertise their mortgage rates which appear to be competitive
Don’t charge lender fees
Lender credit specials on home purchase loans
Can apply for a mortgage online via digital process
Offer lots of home loan programs including home equity products
Jumbo loan amounts as high as $5 million
Free mortgage calculators on their website
They service their home loans
The Maybe Not
Limited number of branches if you don’t live by a base
The Federal Housing Finance Agency (FHFA) is sounding the alarm over a high risk-based capital shortfall for Fannie Mae and Freddie Mac, exceeding their risk-based requirements and elevated operational risks. This is according to FHFA’s 2022 Annual Report to Congress published earlier this month.
“Despite considerable growth in each Enterprise’s loss-absorbing capacity (net worth), available capital remains in deficit, in large part because the Senior Preferred Stock issued by the Enterprises is excluded from regulatory capital,” the report reads. “The Enterprises remain undercapitalized, with a combined adjusted total risk-based capital shortfall of $421 billion, which exceeds their adjusted total risk-based capital requirements and buffers due to the Enterprises’ accumulated deficits.”
Credit risk management continues to be a priority at the GSEs, particularly due to the impacts of the COVID-19 coronavirus pandemic that is partially mitigated by borrowers’ exits from forbearance programs, the report explained. High levels of home price appreciation are also helping, but exposure to nonbank mortgage companies increased in 2021 due to increased sales to the GSEs.
Operational risks to the GSEs are also “elevated” due to the persistent presence of cybersecurity threats. However, some steps have been taken to improve the positions of the GSEs, including updated minimum financial eligibility requirements for Ginnie Mae and FHFA announced last August.
The report also makes a series of legislative recommendations related to the GSE’s regulatory capital for policies that cannot be implemented legislatively, including updates to FHFA’s authorizing statute, and additional flexibilities Congress could grant that would streamline the regulation of capital.
“In 2008, Congress amended FHFA’s authorizing statute to give FHFA relatively broad authority to prescribe regulatory capital requirements for the Enterprises,” the report reads. “The 2008 amendments, however, did not update the outdated definitions of regulatory capital from the original authorizing statute.”
Unlike the U.S. banking framework, the report points out that applicable statutory definitions include, “without limits, certain capital elements that tend to have less loss-absorbing capacity during a period of financial stress, such as deferred tax assets (DTAs).”
As it currently stands, FHFA’s authorizing statute “does not expressly permit FHFA to adjust the statutory capital definitions by regulation,” the report states.
FHFA’s Enterprise Regulatory Capital Framework (ECRF) as established in 2020 and amended in 2022 does mitigate risks associated with existing statutory definitions, supplemental requirements add “additional complexity to an already complex capital framework,” the report says.
“If Congress were to give FHFA the same flexibility as the federal banking regulators by amending or removing the statutory capital definitions, FHFA could streamline the capital regulation,” the report explains.
CrossCountry Mortgage (CCM), the nation’s third-largest retail mortgage lender, unveiled its latest initiative this week that is aimed at helping first-time homebuyers overcome the financial hurdles of purchasing a home in today’s competitive housing market.
The CCM Smart Start program will provide eligible individuals with up to $4,000 in down payment assistance, granting them additional purchasing power.
“Saving for a down payment can be a huge obstacle for first-time homebuyers,” CCM Chief Operating Officer Jenn Stracensky said. “CCM Smart Start allows homebuyers to put less cash down, keep more savings intact, and have more money to build their future.”
The program covers 2% of the down payment, providing assistance of up to $4,000, and comes with certain requirements. At least one occupying borrower must be a first-time homebuyer, and the applicants must have an income at or below 80% of the county area median income (AMI).
To determine eligibility for the CCM Smart Start program or obtain further information, individuals are encouraged to reach out to a CCM loan officer.
CrossCountry Mortgage is the nation’s third-largest retail mortgage lender, with a network of nearly 600 branches across all 50 states and over 7,000 employees. The company’s growth and culture have been acknowledged nine times on the Inc. 5000 list of America’s fastest-growing private businesses.
CCM offers a range of over 120 mortgage, refinance, and home equity solutions, including conventional and jumbo mortgages, as well as government-insured programs for veterans and rural homebuyers. The company is also a direct lender and an approved seller and servicer by Freddie Mac, Fannie Mae, and Ginnie Mae.
This content was generated using AI, and was edited and fact-checked by HousingWire’s editors.