HELOCs

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It’s almost mid-December, which means it is time for another round of mortgage and real estate predictions for the upcoming year.

I think it’s safe to say that 2021 has been another stellar year for both the mortgage industry and the housing market.

But it’s going to be hard to top or even match what we’ve experienced this year in terms of mortgage origination volume and home price gains.

However, the party might not be over yet, with additional home price gains on the horizon due to similar factors in play.

Let’s see what 2022 might have in store as we once again look into the crystal ball.

1. Mortgage rates will go up, but only slightly.

Experts have been calling this for years to no avail. We have been told year in and year out that the low mortgage rates are leaving the station.

But year after year, they remain. In 2022, I do expect them to rise somewhat, but not by a meaningful amount.

Sure, your 30-year fixed rate may go from 3% to 3.5%, but that’s not a huge jump. And any 30-year fixed in the 3s is generally very favorable.

It will put pressure on prospective home buyers who also have to grapple with rising home prices and a lack of inventory.

And it will certainly dent mortgage refinance demand, as most existing homeowners have already locked in a lower rate.

However, as I said in my 2022 mortgage rate predictions post, there will likely be opportunities during the year to snag a very low mortgage rate.

Why? Because the economy continues to be a bit of a mess and we’re still sorting out COVID. Until we put that stuff behind us, interest rates could swing in both directions.

2. Home prices will continue to rise a lot

Don’t be fooled by the old mortgage rates up, home prices down fallacy. There’s not a negative correlation, despite what everyone plainly assumes.

Both can go up at the same time, and that’s exactly what I expect to happen in 2022. Granted, mortgage rates will probably only rise slightly, while home prices will continue to surge.

For some reason, a new year gives folks new hope that a trend will simply come to an end.

But why would home prices just stop going up because it’s a new calendar year? The answer is they won’t.

As I’ve said before, the same fundamentals that have been at play for some time, continue to be in play.

There’s a severe lack of inventory and a surplus of would-be home buyers out there. It doesn’t take a genius to figure out what happens with prices.

When there’s a shortage of something people want/need, a premium must be paid until production ramps up.

Unfortunately, production (new home building) is still way behind and won’t catch up for a while.

In the meantime, expect more of the same, and higher 2022 home prices across the board.

The only difference is that estimates are all over the place, with some calling for just a 2.5% increase (CoreLogic) and others saying 11% (Zillow) or even 16% (Goldman Sachs) .

Personally, I’m bullish and going with the higher figures out there, but recognize gains will probably be lower in 2022 than they were this year.

3. Cash out refinances will finally get hot

cash out share

Housing pundits have been talking about the massive pile of collective home equity we’ve been sitting on for years now.

And it has only grown even larger since then, with equity levels the highest on record.

In short, American homeowners have a ton of equity in their properties that is ripe for tapping via a cash out refinance or a second mortgage, such as a HELOC.

But we have yet to see a massive cash out boom like the one experienced in the early 2000s housing market.

I expect cash out refis and HELOCs to have their day in the sun in 2022 as more and more homeowners realize how much their properties have appreciated.

Per Freddie Mac, about 42% of refinances resulted in cash out this year, which is up a bit from prior years, but nowhere close to the 80%+ share seen in 2006 and 2007.

Despite slightly higher mortgage rates, it may still be worth unlocking this valuable equity to pay for upgrades, college tuition, and other expenses.

After all, a 3% 30-year fixed rate is still phenomenal, and many homeowners can take out a large sum of money while keeping their loan-to-value (LTV) ratio very low.

And you can expect mortgage lenders to aggressively pitch this product now that rate and term refinances have mostly been exhausted.

4. The bidding wars will remain (and may even worsen)

It won’t get any easier buying a home next year. Even if mortgage rates are slightly higher, this won’t “bring prices down to earth.”

I keep hearing that line and it just doesn’t make any sense. Financing has never been the problem here. It’s always been a lack of supply.

And there will continue to be a lack of supply well into 2022, so why should competition be any less?

If anything, I could see more desperation fueled by these expected higher interest rates as buyers won’t want to miss out on their low rate too.

If you think about the last few years, at least mortgage rates were rock bottom. Now that you’ve got to worry about a rising rate and finding a home, the panic could be even more pronounced.

As always, prepare yourself adequately, start looking for a home immediately, and be aggressive if you want to win the bidding war.

Oh, and make sure you use an experienced real estate agent who knows how to get the job done.

5. Home sales volume will be flat or even lower next year

2022 home sales

While Redfin believes new listings will hit a 10-year high next year, I’m not so sure.

As much as there is motivation to sell a home due to sky-high asking prices, there remains the dilemma of where to go next.

Sure, you might be able to move to a different state, but those “cheap states” aren’t so cheap anymore.

At the same time, supply chain issues and a lack of workers is making it hard for home builders to ramp up supply of new homes.

Collectively, this will make it difficult for home sales to increase next year, as much as we all want to make a mint selling our homes.

This also reinforces the idea that home prices will continue to go up, and that the housing market will remain super competitive.

That being said, it will be a very lively housing market in 2022, just not one that necessarily sees a lot of growth.

6. Home buyers will continue to flock to new states

2022 hot housing markets

Yes, the cheap states aren’t so cheap anymore. But that won’t stop people from getting out of town.

Many young, prospective home buyers have been priced out of their local markets in California and other hot spots.

This, combined with the work-from-home new normal (sprinkle in some politics), will fuel a continuation of migration seen in recent years.

This means more folks from the Golden State will make the move to nearby states such as Arizona, Idaho, Nevada, Texas, and Utah.

While more affordable for them, it will exacerbate those local markets and make them more expensive for the people who already rent there.

Some of the hottest housing markets of 2022 include Salt Lake City, Utah, Boise, Idaho, Spokane, Washington, Indianapolis, Indiana, and Columbus, Ohio.

Basically any metropolitan area that was/is considered cheap and desirable will be less so next year as the out-of-state home buyers storm in.

So no matter where you happen to be, expect a fierce seller’s market.

7. First-time home buyers will purchase a second home or investment property (first)

This is an interesting one that I’m borrowing from Zillow because it’s seemingly odd, yet kind of savvy. And so 2021 and beyond.

Typically, a first-time home buyer will purchase a home to live in nearby where they work.

But because the real estate market is so hot and in such short supply, high-earning, cash-rich Millennials and Gen Zers may actually buy a second home or investment property instead.

The thinking is that they can get in on the real estate market by making an investment, even if it’s not in their overpriced backyard.

For example, a well-earning Gen Zer who lives in Santa Monica that may be priced out there could purchase a more affordable second home in Phoenix, Arizona, or an investment property in Las Vegas, Nevada.

Of course, this isn’t necessarily for the faint of heart, and this is exactly the type of thing that leads to trouble down the road.

But as long as mortgage lenders don’t get too careless with underwriting standards, it doesn’t signal the start of a housing crisis.

It does tell you just how crazy real estate has gotten though.

8. Home buyers will return to the city

condo search

While the suburbs have been hot in our post-COVID-19 world, I do believe more buyers will start to consider the city life again.

We will get through this pandemic, and once life returns to mostly normal, lots of folks will wish they owned in an urban center.

Prices in many once-hot areas close to lots of cool restaurants, bars, etc. have been deflated, but I expect that to reverse course in 2022.

The urban living trend isn’t going to disappear, even if more people work from home, or desire abundant outdoor space.

So look out for condo prices to see more price gains in 2022 and beyond, and play catch up with single-family residence gains.

There’s already proof in data here – Redfin noted that users filtered searches to single-family homes only (excluding condos/townhomes) in just 28% of searches in September.

That was down from a high of 37% in July 2020, when living in a city seemed unthinkable.

Condos also tend to appreciate the most at the tail end of a housing boom, which we could be approaching, so it all kind of makes sense.

9. There will be more layoffs, closures, and mergers

While there is some hope that cash out refis and home purchase loans will keep mortgage volumes afloat, it won’t be enough for all mortgage lenders out there.

For example, Freddie Mac is forecasting $2.1 trillion in home purchase origination in 2022, up from $1.9 trillion this year.

But also expects refinance origination volume to fall from $2.5 trillion to $995 billion. That’s gonna be a problem for the shops that specialize in refinances.

Ultimately, total volume dropping from $4.5 billion to $3 billion will be an issue and there’s no way around it.

As a result, you can expect more mortgage layoffs, similar to the Better.com layoffs, along with some outright closures.

I also believe there will be more consolidation in the fragmented mortgage market, with bigger banks and lenders swallowing up smaller ones.

10. The housing market won’t crash in 2022

I already said home prices will go up, but I’ll reiterate that the housing market won’t crash in 2022, either.

There is a large group of people who believe the housing market is due for a correction, mostly just because home prices have gone up a ton.

Sure, it’s easy to raise eyebrows these days when looking up what your house is worth, or your neighbor’s.

But that alone isn’t enough to make them reverse course, especially when there is a continued, historic lack of supply.

Additionally, mortgage lenders have yet to return to the loose underwriting that dominated the space in the early 2000s, and ultimately created the mortgage crisis.

For me, that means another year of strong housing appreciation, and another year without a housing market crash.

At the same time, it does mean we will be one year closer to a crash, which as history tells us, is inevitable.

(photo: Quinn Dombrowski)

Source: thetruthaboutmortgage.com

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Webinars and Training, Construction Tracking, MERS Certification, 100% Financing, HELOC Products; Jumbo, DSCR Program News

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Webinars and Training, Construction Tracking, MERS Certification, 100% Financing, HELOC Products; Jumbo, DSCR Program News

By:
Rob Chrisman

2 Hours, 59 Min ago

The United States has about 336 million people. Did you know that 1/3 of them live within a 500-mile radius of Nashville? This is a cool site for anyone putting together a sales presentation for a real estate agent or a borrower. Speaking of geography, Wyoming has 23 counties, not 58 as the Commentary mentioned yesterday, further proof that this is, and always will be, produced by human hands! (Thank you to everyone who corrected me on that.) While we’re on selling, from a sales perspective, some LOs advocate adding value by subtracting complexity for clients. They are asking themselves, “How do I add value? How am I any different?” They are looking at their sales pitch, comparing bringing up pain (minimizing pain through minimizing paperwork) versus bringing up pleasure (“You’ll save time by working with me.”) And most are doing what they say they’re going to do: If you tell a potential client you’re going to call in two days, call in two days. Simple. Now go get ‘em! (Today’s podcast can be found here and this week’s is sponsored by Lenders One, one of the largest mortgage co-ops in the country with a diverse mix of 250+ member companies and providers of an end-to-end solution independent mortgage professionals trust to drive profitability and growth. Listen to an interview with Lenders One’s Justin Demola on the member benefits of joining a national alliance of independent mortgage banks, banks, and credit unions.)

Lender and Broker Products, Software, and Services

Ever feel like you can’t keep up with the latest tech trends? Having trouble separating hype from reality? Black Knight’s Dana Federspiel, SVP of servicing technologies and product innovation, knows these struggles and is helping lenders, servicers and mortgage industry professionals navigate the future. Dana is participating in a panel discussion during the USFNdustry Forum in Charlotte, North Carolina on the emerging trends in technology to help make more sound business decisions to support your business. Special focus will be given to artificial intelligence, machine learning, robotic process automation and more. Panelists will also evaluate options within the cloud computing universe that are becoming increasingly prevalent and affordable. If you need help cutting through buzz words to identify what really matters so you can remain successful both today and in the future, contact Black Knight.

As lenders adapt to volatile mortgage rates, many are stopping to reconsider their servicing strategy. Do inconsistent mortgage origination volumes have you questioning what makes more sense: retaining servicing or selling servicing released? Seth Sprague, CMB, Richey May’s Director of Mortgage Banking Consulting Services (aka, resident servicing expert), outlines the 13 key trends and strategies in servicing including recommendations on how to make the right decisions for your business. Want more help defining the optimal strategy? You know where to find us.

Thinking about boosting volume with construction loans? Think outsourcing. Homebuilder confidence is slowly improving, with sales of newly built single-family homes rising 4.1 percent in April, according to the NAHB’s latest numbers. If that’s piquing your interest in launching a construction loan program or scaling your existing offerings, CFSI Loan Management can provide the foundation you need to excel. “We’ve seen it time and time again,” says CFSI CEO Brian Mingham. “Outsourcing the trickiest aspects of construction lending, like budgeting, inspections, funding draws and disbursements, can reduce costs and unleash new business opportunities.” Imagine having all the complexities seamlessly handled by a team of seasoned experts, so you close more deals. CFSI has helped hundreds of lenders do exactly that for the past 10 years. To find out how they can help you, contact Brian Mingham (855-344-3052).

We know the current market can be stressful. But fortunately, there’s a bright side: home equity. These products have been around for decades but in recent years have taken a back seat to cash-out refinances. Now this is changing as borrowers with historically low first mortgage rates and generationally high levels of tappable equity rediscover HELOCs and home equity loans. Leverage this historic opportunity with FirstClose Equity, the rapid end-to-end digital technology that processes HELOCs and home equity loans in days instead of weeks. FirstClose Equity is designed to enable lenders to dramatically elevate the experience they deliver to existing or potential customers while providing a streamlined workflow for processors. Learn more.

“Looking for 100 percent financing with competitive pricing? All roads lead to ESSEX CORRESPONDENT and our Down Payment Assistance (DPA) product. Become a fully delegated and underwrite/fund your own 100 percent LTV purchase product. FHA 1st 96.5 percent LTV with two 3.5 percent 2nd mortgage options; 0 percent Forgivable or a 10 year Fully Amortized. No DTI limit, AUS approval required. FICOS as low as 600. One set of guidelines is available in 47 states. No first-time home buyer requirement. No 3rd party underwrite allows you to close as quickly as your team can originate. Email Kim Schenck or contact your Account Executive today and get signed up!”

While the mortgage industry is flooded with rules, there is no rule prohibiting you from celebrating National Donut Day a day earlier! Plus, we Donut want you to miss an opportunity for a free Krispy Cream. Among other things we don’t want you to miss, MERS season is officially here, and early-bird pricing is available now! If your organization had more than 1,000 MINs [on the MERS® System] on March 31st, you must have the annual review completed by an “authorized MERS third-party reviewer. Donut fret, MQMR aced the MERS certification with flying colors! Donut miss this opportunity to save, pricing will increase through the end of the year. Donut wait until the last minute, as your annual audit report may be submitted anytime between now and December 31, 2023. Schedule a call to discuss your MERS Annual Audit requirement and lock-in the sweetest deal of the season!

Sponsored Webinars and Training

Join MCT today, June 1st at 10am PT, for its webinar discussing Strategies to Improve Profitability in the Current Market. In this webinar, MCT’s Phil Rasori and Paul Yarbrough will provide a current market overview and include actionable insights to improve profitability for lenders. Attendees will receive key hedging, trading, best execution, and MSR recommendations, as well as how to leverage technology to improve profitability and efficiency. MCT also recently released a new whitepaper on Mortgage Pipeline Hedging 101. The whitepaper reviews information on moving to mandatory, the strategy of hedging, the benefits of hedging, and how to determine if you are ready. Read the whitepaper to learn how you can use hedging as a tactic to mitigate risk and optimize profitability when selling mortgage loans.

Lenders that support down payment assistance (DPA) are in high demand as a multitude of market conditions put a strain on affordability. To help more lenders win business by supporting consumers with DPA, the Mortgage Bankers Association is hosting the webinar Profit & Succeed with DPA on June 8 at 2 pm EDT. Best practice approaches to DPA lending will be shared by panelists Mark Hasson of Lennar Mortgage, Kate McDougall of Lake Michigan Credit Union and Down Payment Resource’s Veronica Khandelwal and Sean Moss. Registration is FREE for MBA members! Register now to turn up the heat with DPA programs this summer

Investors and Lenders: Jumbo, Non-QM, and DSCR News

Newfi Wholesale’s newly expanded Non-QM product suite offers 90 percent LTV up to $1.5M, loan amounts up to $4M, 2-1 buydowns, DSCR (no minimum ratio) 1-8 units, and alt-doc solutions that make sense for your borrowers. (For more information contact SVP, Non-QM Development & Strategy Dan Bayer or 925-584-0579.)

Effective 5/15/2023, updates to Kind Lending’s Choice Jumbo Program are now live. See UW guide for full program requirements located in Kwikie. Additionally, based on FHFA’s announcement that it would rescind controversial loan-level pricing adjustments (LLPAs) for conventional borrowers with debt-to-income (DTI) levels at or above 40 percent, as of May 14th,

Kind Lending will no longer be charging for a DTI >=40 percent on any FNMA or FHLMC loans. If you have an affected loan that is in process now, Kind Lending will automatically remove this price adjustment and will send out a new lock confirmation.

United Wholesale Mortgage (UWM) is rolling out a suite of six fixed-rate jumbo products. “Brokers now have access to more competitive jumbo pricing, along with transparent investor guidelines and loan qualifications, giving them a leg up on big banks and retail lenders. This will give loan officers the flexibility to tailor a fixed jumbo loan to each borrower’s situation, helping them get into their homes faster, cheaper, and easier.”

As a leader in Non-QM lending, Carrington Correspondent is working hard to deliver top-notch products to trusted partners. Nearly 2 dozen changes took effect on March 23, 2023, which hopefully will have a positive impact on your business and borrowers. Highlights include reduced FICO at which cash-out may be considered for reserves from 700 to 620 for all Non-QM loans. Investor Advantage (DSCR) changes include Resales within 6 months ok, Cash-out FICO requirement down from 640 to 620 and updated “1st-time investor” definition to no investment ownership within 36 months (was 12) – LTV benefit. Prime Advantage (FICO 660+) Now permits primary residences of 3-4 units (was 1-2).

Carrington Prime Advantage for borrowers who just miss qualifying for traditional or jumbo financing. Carrington Flexible Advantage Plus for borrowers who have recently re-established credit scores above 620. Carrington Flexible Advantage for borrowers with recent credit events and FICO down to 550. Carrington Investor Advantage for seasoned property investors with no income documentation.

Did you know there is no State Licensing Required in 20 States & DC? These states consider DSCR loans as commercial loans, so they are generally not subject to licensing requirements.

Carrington Mortgage Services Investor Advantage (DSCR) loan may be the answer for your borrowers.

Champions Funding recently announced an expanded business loan product to increase your offerings to real estate investors. Champs Accelerator Expanded (DSCR < .75) / No Ratio, part of its robust suite of DSCR loan options to fit your borrowers’ needs. Champs accepts transferred appraisals on DSCR and can get your loans closed quickly.

Looking for more options for your borrowers? American Heritage Lending offers CondoTels & Non-Warrantable Condos programs.

Angel Oak Mortgage Solution’s Investor Cash Flow mortgage (DSCR Loan) program now allows you to offer your clients financing for condotels. In addition to this new program enhancement, Angel Oak has implemented rate reductions across all loan programs. If you haven’t ran a loan scenario recently, today is the day to Get Started!

Angel Oak Mortgage Solutions shared great news regarding lending services, now offering its DSCR loans to non-permanent residents. Angel Oak believes in the importance of helping everyone achieve their dreams of homeownership, regardless of residency status. If you have clients who are non-permanent residents seeking financing options, Angel Oak Mortgage Solutions would be honored to assist.

Capital Markets

What will we talk about without the periodic debt ceiling negotiations to consume the press? There’s always the Fed. The Federal Reserve’s Beige Book for May described overall economic activity as little changed in April and early May with four Districts reporting small increases and two reporting slight-to-moderate declines. Consumer expenditures remained resilient while manufacturing activity was flat or up in most Districts. Residential real estate activity improved, and employment increased in most Districts, while prices rose at a slowing pace.

For LOs watching prequals stack up on desks across the country, we had a second consecutive bond price rally (rates down) yesterday due to both a sense that the House of Representatives would pass the debt limit bill and dovish Fed speak. Expectations for a June rate hike flipped from over 70 percent to below 30 percent after Fed Governor Jefferson said that a potential decision to hold the fed funds rate range steady at the June meeting should not be viewed as a signal that the hiking cycle is over. Philadelphia Fed President Harker said that he supports holding steady in June, but also acknowledged that more tightening could be done at subsequent meetings.

Today’s economic calendar includes a series of labor market indicators ahead of tomorrow’s payrolls report. First up were job cuts from Challenger, Gray & Christmas for May: U.S.-based employers announced 80,089 cuts in May, a 20 percent increase from the 66,995 cuts announced one month prior, 287 percent higher than the 20,712 cuts announced in the same month in 2022. Next was ADP employment for May (278k, a huge jump). Weekly jobless claims were 232k with the back month revised higher, while Q1 productivity and unit labor costs were -2.1 percent and 4.2 percent, respectively. Later today brings S&P Global manufacturing PMI and ISM manufacturing PMI for May, April construction spending, Freddie Mac’s Primary Mortgage Markets Survey, and remarks from Philadelphia Fed President Harker. We begin the day with Agency MBS prices roughly unchanged from Wednesday’s close, the 10-year yielding 3.62 after closing yesterday at 3.64 percent, and the 2-year stubbornly high at 4.40 after the spate of jobs news.

Employment

“Button Finance, an industry-leading Home Equity mortgage lender, is seeking a dynamic and experienced Marketing Specialist to build out our correspondent lending program. The ideal candidate will have a strong background in creating innovative marketing strategies and a deep understanding of the mortgage industry. You’ll lead campaigns, drive customer acquisition, and enhance our brand visibility. Join a growing company that is constantly delivering top-quality customer service with HELOCs/HELOANs closing in under 12 days and 24-hour review times. Strong skills in digital marketing, data analysis, and exceptional communication are required. Join our team and contribute to shaping the future of mortgage lending. Please send resumes to Rose King.”

Hey, did you hear that Planet is acquiring right-sized, financially solid distributed retail companies to expand its geographic footprint? This month’s acquisition of Platinum Home Mortgage Corporation brought 20+ branches and 100+ Professionals to Planet. After three decades together, Platinum’s producers were confident in their choice to join Planet because of its financial stability, competitive pricing, and strong leadership. Planet has solidified its position as a leading mortgage industry player by gaining the #9 spot on Inside Mortgage Finance’s overall lender leaderboard and the #4 spot among government loan producers. With the additional volume from Platinum’s power players, Planet expects to continue gaining market share (especially for government, where it’s at 5.2 percent now). To find out how you can profit from working with people who think bigger, work smarter, and perform better, contact Planet’s VP, Talent Acquisition Peter Briggs (435-709-6278).

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Source: mortgagenewsdaily.com

Apache is functioning normally

Now that tapping home equity is back in fashion, I figured it’d be helpful to see who the top HELOC lenders are.

Last year, banks and mortgage lenders doled out nearly one million home equity lines of credit (HELOCs), per HMDA data.

A total of 962,000 HELOCs were opened in 2021, up 10.7% from the 869,000 originated in 2020, the first annual increase in three years.

I expect HELOC originations to rise again in 2022 now that mortgage rates on existing first mortgages are so low relative to what’s available today.

Read on to see who the top HELOC originators were last year.

Top HELOC Lenders

Ranking Company Name 2021 Loan Count
1. Citizens Bank 48,992
2. PNC Bank 40,566
3. Truist 40,088
4. U.S. Bank 34,470
5. Bank of America 31,375
6. Huntington Bank 27,783
7. Third Federal 16,449
8. Figure Lending 14,726
9. Regions Bank 13,266
10. Boeing Employees CU 13,202
11. Mountain America CU 12,241
12. Zions Bank 11,127
13. State Employees CU 11,053
14. PenFed 10,362
15. KeyBank 10,238
16. Fifth Third 10,194
17. TD Bank 9,536
18. First Citizens 9,518
19. M&T Bank 9,287
20. America First CU 9,065
21. BMO Bank 8,870
22. Bank of the West 8,395
23. Alliant CU 7,992
24. Idaho Central CU 7,413
25. Ent CU 7,399

Last year, Citizens Bank led all HELOC lenders with nearly 50,000 lines of credit originated (48,992), representing a solid 5.1% market share, per HMDA data from the CFPB.

They were followed by PNC Bank with 40,566 HELOCs originated for a 4.2% share.

A similar total was generated by Truist Bank (40,088) for a market share of 4.2%.

U.S. Bank took third with 34,470 HELOCs opened and a 3.6% market share, followed by Bank of America with 31,375 lines of credit opened for a 3.3% market share.

In 2020, Bank of America had been the #1 HELOC lender with a 5.6% market share before falling to fifth in 2021.

Huntington Bank took sixth with a 2.9% market share, Third Federal came in seventh with a 1.7% share of the market, and newcomer Figure Lending took eighth with a 1.5% market share.

Regions Bank and Boeing Employees Credit Union rounded out the top 10 with 1.4% of the market, each.

You can see the top 25 HELOC lenders in the above table for more details. These 25 institutions alone accounted for 44% of the overall HELOC market.

Looking for a HELOC? Try a Depository Institution

If you’re in need of a HELOC, know that they’re mostly offered by depository institutions, also known as DIs.

In 2021, 809 DIs, including 271 banks and 538 credit unions, originated 934,000 HELOCs, per the HMDA data.

That represented 97.1% of all HELOC originations reported. In other words, practically every HELOC was opened by a bank or a credit union.

This differs from first mortgages, which have been dominated by nonbank lenders over the past several years.

These nonbank lenders, or non-DIs, accounted for just 2.9% of the HELOC market.

For the record, just one of the top 25 HELOC lenders was an independent mortgage company, Figure Lending.

It’s unclear if that will change in 2022 and beyond, though these companies are looking to get in on the action by offering HELOCs and home equity loans.

For example, Rocket Mortgage launched a closed-end home equity loan (HEL) in early August.

Meanwhile, wholesale lender United Wholesale Mortgage (UWM) released two HELOCs, including a standalone and a piggyback.

Regardless, there’s a good chance a local credit union (or the bank you already do business with) will offer HELOCs.

Who Are the Best HELOC Lenders?

So we know it’s mostly banks and credit unions that offer HELOCs. The question is which one is the best of the bunch?

That’s hard to quantify because banks and credit unions offer lots of different products, not just HELOCs.

As such, reading their reviews probably won’t give us a lot to chew on. Sure, we can see how they are rated on the whole.

But that might mean nothing with regard to their home equity lending.

You still want them to have favorable ratings, but that aside, I would look at the interest rate and loan term offered.

HELOC rates can range quite a bit from bank to bank, so put in the time to see who is offering what.

And pay attention to the margin (which is added to the prime rate), the loan term (how many years to draw and pay it off), and the starting interest rate.

Also take note of any perks such as the ability to lock in your rate so it’s no longer adjustable.

Though the way things are going, HELOC rates might peak in 2023 before beginning to flatten or fall as the Fed stops raising rates (and maybe even lowers them).

Either way, be sure to exhaust all your options in your HELOC search to ensure you don’t miss out on a better deal.

Source: thetruthaboutmortgage.com

Apache is functioning normally

Recent home price declines are leading to decreased tappable equity, but there are still opportunities in home equity lending, according to a report published by Home Equity Lending News. 

While 30-year fixed rates on first mortgages are far from the 4% range – which many existing first mortgages were refinanced to during the pandemic – the number of transactions where a second mortgage makes more sense than a first mortgage diminishes each time first-mortgage rates decline another 100 bps, according to the second mortgage market insights Q2 2023 report.

“Tappable home equity is expected to decrease to a forecasted $18.1 trillion as of the fourth quarter of 2023 from an expected $19.4 trillion at the end of this year. With home prices continuing to erode, tappable equity will also deflate. However, given that home-equity originations were less than $0.5 trillion last year, the decrease in tappable equity still leaves plenty of room for additional opportunity,” the report states. 

The report also notes a pickup in home equity activity, citing the Federal Reserve’s April Beige Book. 

“Consumer loan demand was mixed, with home-equity and used auto loans showing some increased demand over the last few months,” the Federal Reserve Board of Governors noted.

When Q4 2022 data is broken down by home equity transaction type, home equity line of credits (HELOCs) accounted for 53% percent of originations, while closed-end home equity loans (HELs), also known as HELOANs, made up 47%.  

When it comes to dollar volume, there were an estimated $251 billion in HELOC originations during all of 2022, soaring from $182 billion the year prior. This suggest about $200 billion in HEL production last year.

Delinquency on home equity products has also remained low. 

There was no change in the HELOC 90-day delinquency rate from the third quarter to the fourth quarter of 2022, standing at around 0.24%. It was the same story for HEL 90-day delinquency rate, which ended 2022 at 0.83%, unchanged from the third quarter of last year.

But concern is growing over the lower-credit lower-income product, the report notes. Another area to watch is the performance of loans approved through automated processes.

“Utilizing automated valuation models instead of full-blown appraisals or title searches in lieu of title policies makes loan production less expensive and more rapid,” according to the report.

The faster and cheaper replacements haven’t yet been tested in a down market, and these lesser versions might not be managing the risk well, John Toohig, president of whole-loan trading group at Raymond James, said.

“If you make it easy, that usually means you’re skipping a few things in credit,” Toohig said.

And as instant online automated approval and closing continues to elude home equity lending, attention has turned to artificial intelligence.

While several technology providers recently announced advancements with their platforms, the automation used by fintechs has been described as less than full documentation.

Non-bank lenders and government agencies are also competing with banks for their standings on search engine results, the report notes.

Source: housingwire.com

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Appraiser, ECOA, Video Marketing Products; Conventional Conforming News; What Has Driven Rates Higher?

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Appraiser, ECOA, Video Marketing Products; Conventional Conforming News; What Has Driven Rates Higher?

By:
Rob Chrisman

Fri, May 26 2023, 11:12 AM

Did you know that wheat futures prices are at a 2-year low? And lumber prices continue to drop? Those numbers should help reduce inflation. During the conference in NY there was plenty of talk about external influences such as price increases on residential lending. But there are also plenty of issues within our biz that face lenders daily. For example, signing bonuses continue, albeit at a slower rate. Perhaps some of the economic bloom is off the bonus rose? Big signing bonuses come with big handcuffs. It stinks when a competitor takes your production but not your overhead, right? With the help of technology and tracking, a lender’s management can, more than ever, determine whether a given branch or LO is making money for the company, or is merely a source of concessions and extensions. Recruiters sometimes talk of the “greater fool” theory when bad LOs or branches move on to another lender. (Today’s podcast can be found here and this week’s is sponsored by Black Knight. From point-of-sale through post-closing, the company’s trusted loan origination system, Empower, as well as its integrated, end-to-end origination solutions deliver unmatched capabilities, functionality, and support to increase processing efficiencies and lower operational costs for lenders. Hear an interview with Polunsky Beitel Green’s Stacey Maisano on women in the mortgage industry and getting the younger generation involved.)

Lender and Broker Products, Software, and Services

Loan officers, if there was an easy button for creating incredible video marketing content on social media, would you press it? Now you can thanks to Video Catalyst by SocialCoach. Say goodbye to the days of wondering what to say, what equipment you’ll need, and how you’ll edit. With Video Catalyst, we’ve made it easy to create compliant, scroll-stopping, professional-grade videos in record time. Here’s how: We write four fresh, relevant (and compliant) scripts for you every month. You simply read the scripts while recording the video from your smartphone and then send it back to us for professional editing, which includes the addition of music, dynamic captions, gifs, and emojis. We then post it to your account for seamless sharing. That’s it. You press record, we do the rest. Want to see how Video Catalyst can unlock the power of video marketing for your business? Check it out here.

Calling all compliance managers! Imagine if you could complete your ECOA/Reg-B Process in the time it takes you to read this blurb. Imagine saving thousands of dollars and hundreds of hours by not working on your ECOA process. Sounds like a dream, right? Well imagine no more! Velma Connector is here to make your compliance dreams come true. Connector automates the whole ECOA process and can do the work of multiple team members, making sure you never miss another NOIA notice, which means never having to worry about a costly fine ever again! If you’re ready to start saving all that time and money, contact Velma today and ask us how we can get you a 300 percent ROI in just the first year!

Is your appraisal vendor performance below average? Book a complimentary appraisal vendor performance consultation with Reggora’s Chief Operations Officer, Alek Roberts, to see how your vendors stack up. You’ll see how your vendors perform relative to industry average turn times, revision rates and fee escalation rates. You’ll also see data on how that impacts your overall origination process, including if and how your operating costs are higher than they need to be. Book now

Investors and Lenders Adjust Their Conforming Conventional Offerings

United Wholesale Mortgage announced enhancements to its Conventional 1 percent Down product, allowing borrowers with less than 80 percent of the area median income (AMI) to qualify. Those who qualify will put down 1 percent of the loan towards their down payment and UWM will then pay a 2 percent grant up to $4,000, for a total down payment of 3 percent.

Rocket Mortgage and Rocket Pro TPO have introduced ONE+ by Rocket Mortgage, a 1 percent down home loan program that is available for qualifying homebuyers whose income is equal to or less than 80 percent of their area median income (AMI) for single-family homes, including manufactured homes. Rocket Mortgage provides a 2 percent grant towards the down payment. ONE+ completely covers the monthly mortgage insurance fee for the client. Partner with Rocket Pro TPO to take advantage of ONE+ today!

Pennymac updated Conventional LLPAs effective for all Best-Efforts Commitments taken on or after Monday, May 15. Details are available in Announcement 23-34.

The Federal Housing Finance Agency (FHFA) announced the rescission of the DTI ratio-based fee. As a result, Pennymac updated the Best Effort rate sheet effective for all Best Effort Commitments taken on or after Thursday, May 11th. Details were posted in Announcement 23-23: Updates to Conventional LLPAs.

Pennymac is aligning with Freddie Mac’s credit underwriting update, announced in Bulletin 2023-6, adding a requirement that a non-occupant borrower may not be an interested party to the transaction (i.e., the builder, property seller, real estate agent or broker, etc.) This new requirement is effective with loan deliveries on or after 7/3/23. View the Penny Mac Announcement 23-32 for additional information.

Citi Correspondent Lending Bulletin 2023-04 includes credit policy updates on Agency loans appraisal waivers, life insurance net cash value on Non-Agency Jumbo loans and clarifies subordinate financing applicable to Non-Agency Jumbo.

PRMG Product Update 23-26 includes clarification on multiple products. Conventional Products requirements regarding use of business funds in the transaction a cash flow analysis, underwriting review requirements when obtaining prior approval from VA, Alternative AUS Jumbo clarification for properties in a declining market, program fee requirements on CA CalHFA Products, and mortgage insurance coverage requirements on CO CHFA Preferred Plus Conventional.

Many banks are stressed and are not lending. Flagstar Bank has money, is lending and actively looking for SBA 504 loans now. This includes General Purpose Properties, Conventional portion minimum $750,000, 2 years tax return debt service. CA, NV, NY with more states to come, Small Construction work is acceptable with no more than 20 percent of the project including the interim loan and permanent loan, 51 percent or more owner-user commercial. With Prime now at 8.25 percent, it is time to look at a long-term fixed 504 purchase or refinance. You can now refinance a 7(a) loan (or conventional) with an SBA 504 and maybe even get some additional cash out for business purposes.

Citizens Correspondent National Bulletin 2023-12 includes information on Condo Project Manager Update – DU.

Freddie Mac Bulletin 2023-9 announced multiple Selling Guide changes, including updated requirements related to property appraisals and condominium projects. For impacts on AmeriHome guidelines, see Product Announcement 20230504-CL for details.

With Guide Bulletin 2023-11, Freddie Mac announced multiple Selling Guide changes, including updated requirements related to IRS installment agreements and real estate tax abatements and exemptions. For impacts on guidelines, see AmeriHome Product Announcement 20230508-CL for details

Capital Markets

Keep two things in mind. The markets, and individuals, don’t like uncertainty. But the future is always uncertain. Second, economic doldrums lead to lower rates. But rates rose again yesterday as the clock wound down on the window for debt ceiling negotiations, with a potential U.S. default looming on the horizon. If the U.S. defaults on its debt, higher mortgage rates are a potential risk facing the economy.

How quickly we’ve moved on from the banking crisis, though loan officers should keep credit tightening in mind. Most banks, including those that failed, own 30-year fixed rate mortgage-backed securities. Those MBS prices have fallen the most with the Fed’s sharp run-up in rates, making it likely that banks will buy far fewer MBS (and jumbos) going forward, decreasing demand, widening spreads further, and generally causing mortgage rates to go higher. Rates have been on the rise as of late, and while some of the movement can be attributed to “hawkish” comments from the Fed, the shift higher appears to be global: The German Bund, Japanese Government Bond, and UK Gilt have all moved higher in lockstep.

Investors see the Fed cutting rates this year, even with Chair Powell and his fellow FOMC members doing their best to convince Wall Street that they’re serious about inflation and that no such thing will happen. In fact, recent Fed messaging has been that we may not be done with rate hikes just yet. After 500 basis points of interest rate hikes over the past year, it’s true that the Fed is close to the end of this hiking cycle, at least for the short-term. However, we could see a major sell-off in stocks and bonds if investors succumb to the Fed in this “tug of war” over the central bank’s monetary policy moves in the second half of this year and admit that multiple rate cuts in 2023 aren’t in the cards.

Chatter out of the MBA’s conference in Manhattan (in addition to more companies shuttering and frustration over repurchases) included delinquencies picking up for various credit types, volatility driving spreads wider, MSR valuations pricing the impact of buyer burnout, and mortgage credit availability continuing to decline. The collapse of three mid-size US banks and the forced marriage of Credit Suisse to UBS pushed lending standards to tighten across the board, especially for commercial real estate and residential lending.

For residential, the tightening was more pronounced in jumbo and non-QM as opposed to GSE and government loans. Banks becoming more cautious on risk has also led to standards tightening on multi-family, by increasing spreads, raising covenants, and lowering LTVs. Loan demand is also falling (including for HELOCs and other residential real estate loans), while the lending standards are getting tighter, typical for an economy that is poised to enter a recession.

These tighter lending standards exist at a time when there are few homes for sale. The reasons for the scarcity of existing home sales are well known at this point: Lack of inventory, elevated home prices, and half of all mortgaged homes having first-lien interest rates at or below 3.5 percent while rates continue to rise. Those elements are unlikely to change anytime soon. Supply constraints are a familiar topic of discussion with millions of Americans content to keep their rate and not sell anytime soon, and, coupled with today’s homebuyers being exceptionally interest rate sensitive, as most won’t accept a rate higher than 5.5 percent, and it’s not a good recipe for lenders.

If mortgage rates fall somewhat, we still have an affordability problem, even with rising wages. Homebuilding will eventually rebound and help this issue, but the rate of decreases in the backlog reported by the builders and elevated cancellation rates don’t bode well for an imminent change.

Shifting to the intra-day price moves, despite today’s early close ahead of the long Memorial Day weekend, several key economic releases will be out and could sway the Fed’s thinking regarding further rate increases. We’ve already received personal income and spending for April (+.4 and +.8 percent, respectively, core PCE +4.7 percent year over year), and durable goods orders (+1.1 percent, ex-transportation -.2 percent). Expectations were for income and spending increasing 0.5 percent and 0.4 percent month-over-month, respectively, with the Core PCE Price Index increasing 0.3 percent month-over-month and 4.6 percent year-over-year. Later today brings Michigan sentiment before fixed income futures settle at 1pm ET and cash markets close at 2pm per SIFMA’s recommendation. We begin the day with Agency MBS prices worse by a few ticks (32nds), the 10-year yielding 3.82 after closing yesterday at 3.81 percent, and the 2-year is at 4.56 after the strong, anti-recessionary, data this morning.

Employment

A Louisiana based full-service, independent mortgage banker averaging $1 billion in production annually is searching for a proven retail sales leader to run all business development initiatives. The Sales, Recruiting, and Marketing departments will report directly to this head of business development role, and the role will report directly to the CEO. The ideal candidate will have a demonstrated track record of hiring and managing multiple production offices across several states. The IMB is well capitalized, has agency direct approvals, offers niche products, significant technology advancements and a world-class operations team with experienced, tenured sales and fulfillment employees. For confidential consideration, please email resume to Chrisman LLC’s Anjelica Nixt.

“Logan Finance is blessed to see such incredible growth recently. As we keep count of all the units that drive our business, it’s easy to lose sight of all the military units and those individuals who served throughout history to help afford us all the possibilities we have today. As we think of Memorial Day, we should celebrate it as a day that honors all these great opportunities and focus on those who have made the ultimate sacrifice to protect the freedoms we should never lose count of. From the Logan family to yours, ‘Happy Memorial Day.’”

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.

 Download our mobile app to get alerts for Rob Chrisman’s Commentary.

Source: mortgagenewsdaily.com

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It’s nearly 2023, which means it’s time for a fresh batch of mortgage and real estate predictions for the new year.

My assumption is everyone wants 2022 to come to an end as quickly as possible, as it hasn’t been kind to anyone.

Much higher mortgage rates have completely derailed the housing market, leading to lots of layoffs and closures across the industry.

And there remains a lot of uncertainty about what next year will bring, though I’m somewhat optimistic.

Read on to see what I think 2023 has in store for the housing market and the mortgage industry.

1. Mortgage rates will move lower in 2023

Let’s start with the elephant in the room; mortgage rates.

They’ve been the story of 2022, without question. Sadly, because they increased at an unprecedented clip and derailed the hot housing market’s decade-long bull run.

Of course, this was by design as the Fed believed the U.S. housing market was in bubble territory and unsustainable.

However, I believe interest rates overshot the mark and are due to see some relief in 2023.

The 30-year fixed has already fallen from its 2022-highs, and could continue to drop back in the 5% range and even the high-4% range.

So that’s something to look forward to. See my 2023 mortgage rate predictions for more details on that.

2. The housing market won’t crash in 2023

Related to lower mortgage rates is the health of the housing market. Ultimately, the housing market only really stalled because of much higher mortgage rates.

It’s not struggling due to questionable mortgage underwriting, dubious loan programs, or massive unemployment.

Ultimately, the Fed saw that demand for housing was too strong and took measures to address it.

If you remove the mortgage rate piece from the equation, we don’t have a big drop in home prices.

So if mortgage rates continue to improve, or even stay flat, home prices don’t plummet and there isn’t a housing crash in 2023.

At the same time, areas of the country that saw massive home price increases may be more susceptible to price declines.

The good news is home prices increased so much in the past couple years that even a 20% decline is just a paper loss for most homeowners.

In other words, your home is still worth way more than you bought it for, but perhaps not as much as it once was.

3. But we’ll see more consolidation in the mortgage market

Sadly, there have been tons of mortgage layoffs and lender closures in 2022, pretty much all thanks to the sharp rise in mortgage rates.

It was the perfect storm of record low mortgage rates meeting the highest mortgage rates in decades, all within half a year.

Simply put, lenders hired and hired to deal with unprecedented refinance demand, but once that ran dry, had to let a lot of staff go to cut costs.

Demand is down so much that many lenders have had to close down permanently, especially those focused solely on mortgage refinances versus purchases.

While more companies exit the mortgage space, we’ll see consolidation at the top as the big players get bigger and gobble up market share.

This means fewer lenders to choose from and a more commoditized product.

4. Home prices will be mostly flat in 2023

While there’s been a lot of doom and gloom lately, there have been bright spots, like a positive CPI report and an easing in inflation.

Perhaps home price declines will also slow as we enter the new year. If the damage already done is enough to re-balance the housing market, we could see falling home prices steady.

After all, we’ve already experienced a big drop in prices from spring until now, so the ice-cold housing market could warm if rates drop and prospective buyers renew their interest.

While I’m not convinced of the NAR (Realtor) prediction of a 5.4% increase in home prices next year, I do believe flat or nearly positive prices is a possibility.

Zillow’s prediction of home values posting 0.8% growth by the end of October 2023 sounds right. The MBA also puts YOY home prices up 0.7%.

Of course, price movements will be local, as they always are, with some markets faring better (or worse) than others.

Get to know your local market to determine the temperature if you’re in the market to buy or sell.

5. The spring home buying market will actually be decent

Despite a lot of recent headwinds, the 2023 spring home buying season will be alright.

No, it’s not going to be riddled with bidding wars and offers above asking. Nor will total home sales be as high as they were in 2022, and certainly not 2021.

But I do think a combination of lower asking prices and improved interest rates will bolster the market.

Remember, there are a ton of prospective, coming-of-age home buyers out there who want and need a house.

If mortgage rates were 7% in 2022, and fall to the high-5% range, that, coupled with a 20% haircut on price could re-energize the stalled housing market.

So much so that home prices could steady in 2023 after seeing some pretty big markdowns in the second half of 2022.

6. Buy downs and ARMs will become more common

As mortgage rates remain elevated, mortgage buydowns and adjustable-rate mortgages will gain in popularity.

The ARM share is already around 9%, but there’s a lot of room for it to grow if lenders continue to offer products like the 5/1 ARM or 7/1 ARM.

That’s the rub though – if lenders don’t offer ARMs, or don’t extend a significant discount on the ARM, most borrowers will be forced to go with more expensive fixed-rate mortgages.

To offset some of the pain related to higher-rate 30-year fixed mortgages, buydowns will become more and more commonplace.

A lot of home builders are already offering buydowns, and even big lenders like Rocket Mortgage have their so-called Inflation Buster.

These buydowns provide payment relief for the first year or two before reverting to the higher note rate.

The question remains whether that’ll be enough time to bridge the gap to lower interest rates.

7. The underwater share of mortgage holders will rise

Because home prices have been under intense pressure lately, there will inevitably be more underwater homeowners soon.

Black Knight recently noted that 8% of those who purchased a home in 2022 “are now at least marginally underwater.”

And nearly 40% of these home buyers have less than 10% equity in their home, which if property values fall a bit more would plunge these folks into negative equity positions.

It’s most pronounced with FHA and VA borrowers, with more than 20% of 2022 of home buyers in negative equity positions, and nearly two-thirds having less than 10% equity.

This illustrates one of the problems with ARMs, buydowns, and other ostensibly temporary financing solutions. They work until they don’t.

If these homeowners are underwater, it’ll be difficult to refinance aside from leaning on streamline refinance programs that allow high loan-to-value (LTV) ratios.

8. Foreclosures and other distressed sales will continue to be rare

mortgage delinquency

Those looking to snap up a bargain will need to be patient. Despite decelerating appreciation and markdowns on existing inventory, prices remain historically high.

At the same time, mortgage defaults and foreclosure starts remain very low, despite recent increases.

Per Black Knight, the national delinquency rate rose to 2.91% in October, well below the 4.54% average seen between 2000-2005.

And the 19,600 foreclosure starts in October were a full 55% below “pre-pandemic norms.”

It’s not to say homes won’t be lost, especially if home prices plummet and unemployment worsens, but it’s not 2008 all over again.

In short, today’s homeowner has a lot more equity to work with and there are better loss mitigation options that were born out of the prior mortgage crisis.

They may also have the option to rent out their property and cash flow positive.

9. Home equity lending and the home improvement trend will stay hot

One bright spot in the mortgage financing space might be home equity lending, including home equity loans and lines of credit (HELOCs).

This plays into the trend of keeping the property instead of selling it, since selling isn’t nearly as sweet as it once was.

There’s also the issue of where to go next if you sell. And because first mortgage rates are so high relative to levels a year ago, most will opt to finance improvements with a second mortgage.

While not a 2-3% interest rate, home equity rates will still be better than most other options, and allow homeowners to freshen things up while enjoying their ultra-low first mortgage rate.

This should be a boon to banks, mortgage companies, and fintechs that are able to sell a compelling product.

It may also benefit the likes of Home Depot and Lowe’s as more folks stick with what they’ve got and make improvements.

Of course, it’ll mean fewer home sales, which is a clear negative for real estate agents.

10. iBuyers will offer you lowball prices for your home

In case you’re not aware, your home isn’t worth quite as much as it was.

Of course, you may have never noticed if you didn’t attempt to sell earlier this year. Or obsess over your Zestimate or Redfin Estimate.

What you might see in 2023 is more bargain hunters, especially iBuyers trying to make up for perhaps paying too much in 2022 and earlier.

These companies will give you a cash offer on the spot (basically) for your home without having to jump through hoops or use an agent.

The tradeoff is that the price will likely be a lot lower than what you might fetch on the open market.

This is probably how these types of businesses should operate in theory, but we didn’t see that in a rising home price environment.

You might see more realistic offers from iBuyers and other companies/agents that approach you to buy your home in 2023.

It’s ultimately a reinforcement of the new reality in the housing market. There’s more of an equilibrium where neither buyer or seller have much of an upper hand.

But those who must sell in 2023 might get a raw deal with uncertainty in terms of which way the housing market is headed.

Source: thetruthaboutmortgage.com