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The steep increase in interest rates over the past year has obviously lifted housing mortgage finance rates as well. For most people who bought their homes when interest rates were at historically low levels over the last 15 years, refinancing their mortgages at today’s higher rates is a losing proposition. Those homeowners are caught in a so-called “mortgage lock-in,” according to a new paper titled “Mortgage Lock-In, Mobility, and Labor Reallocation” by University of Illinois at Urbana-Champaign finance professor Julia Fonseca and Wharton finance professor Lu Liu.

Typically in the U.S., a homeowner with a mortgage can move to a different home only after paying off the existing mortgage and refinancing their home with a new mortgage. But homeowners who find themselves in a mortgage lock-in cannot move to a different location unless they buy a cheaper home or earn more, in addition to covering the costs of moving and refinancing. In such conditions, Liu said “the housing market is gridlocked,” where homeowners have a “strong incentive to stay put” in their current homes.

The paper’s authors build their case around the metric of the mortgage rate differential (or “mortgage rate delta”) which is the difference between the mortgage rate locked in at purchase and the current market rate. Their study covered the period between 2010 and 2018, with about four million observations (or households) of data on consumer credit records. The average mortgage loan balance was $205,480, the average remaining loan term was 21 years, and the average mortgage rate was 5.1%. The moving rate was measured as a change in a homeowner’s primary residence that has been reported to a credit bureau or bank.

How Rising Mortgage Rates Impact Moving

The paper has three main sets of findings. First, it studied interest rate increases over the past few years and projected rates and predicted a worsening mortgage rate differential (the gap between the rate at which a homeowner financed a mortgage and the current market rate). It estimated the average mortgage rate delta would decline by 1.9% since 2018.

“As interest rates go up, the [mortgage rate] differential becomes more negative, meaning people are getting more locked-in.”— Lu Liu

Liu explained the impact of that declining mortgage rate differentials on moving rates: A one percentage point decline in mortgage rate deltas reduces moving rates by 0.68 percentage points, or 9%. “As interest rates go up, the [mortgage rate] differential becomes more negative, meaning people are getting more locked in,” she said. Considering rate increases over the last few years and projected rates, this can explain a decline in moving by around 25% between 2018 and the next 10 years, she added.

Lock-in Can Happen Even When Mortgage Rates Don’t Rise

The second main finding is the discovery of a non-linear effect between mortgage rate differentials and moving. If households didn’t have a mortgage, moving would only be driven by moving considerations such as a better-paid job opportunity. Once households have a mortgage, they need to remortgage and hence pay the mortgage rate differential as well as a remortgaging cost to move. But once the mortgage differential is sufficiently positive, and it is higher than the cost of refinancing, “the probability of moving no longer depends on the mortgage rate delta,” Liu said.

One surprising finding of their study, Liu continued, was that mortgage lock-in occurs before the mortgage delta turns zero and heads into negative territory, meaning even if rates don’t rise. “That is because refinancing is costly; if you want to move, you have to pay that cost,” she explained. “You’re only going to move once that net difference is big enough.”

The third finding is that mortgage lock-in discourages labor mobility. “This is important from a welfare perspective and from a real economy perspective,” Liu said. The study used a “moving shock” like higher-wage employment opportunities as a proxy to gauge the effects on labor mobility.

“A shock to wage increases within the broader metropolitan area where you live means that you have better employment opportunities and so you should move,” Liu said. The study found that people who find higher-wage jobs do move, but those with a high delta are much more sensitive to these moving shocks than those with a low delta.

“You would move if you had a fantastic job opportunity that pays you 50% more than your current job, and that’s enough to cover the cost of a more expensive mortgage.”— Lu Liu

“You would move if you had a fantastic job opportunity that pays you 50% more than your current job, and that’s enough to cover the cost of a more expensive mortgage,” Liu said. “That would be an example where the moving shock was large enough to overcome the cost of mortgage lock-in.”

Takeaways for Policymakers

According to Liu, their paper offered some takeaways for policymakers. She pointed out that when homeowners in the U.S. want to move, they have to settle their existing mortgage and take out a fresh mortgage for their new home. In that, they have less flexibility in moving home than those in the U.K. or Canada, which allow portability (taking your mortgage to a new house) or assumability of mortgages (taking over the mortgage on an existing house), respectively. (Some mortgages in the U.S. are assumable, such as those insured by the Federal Housing Administration for low-income people, she clarified.)

“When policymakers raise interest rates, we need to think about mortgage market policies that alleviate lock-in, otherwise there will be knock-on effects on mobility and labor reallocation,” Liu continued. It would be helpful if homeowners can keep their existing mortgages and take it to their new houses; policymakers should evaluate these policies with mortgage lenders, she added.

Source: knowledge.wharton.upenn.edu

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There are more than a million reasons why I love my wife. She’s hot, she’s a great mom, she cooks (every once in a while), and she does the laundry — although my jeans are always wrinkled–love ya baba! 🙂

Another BIG reason why I love her, is that she handles all the insurance stuff with our household. She’s on the phone for hours deliberating with the insurance companies about what we owe and what we’ve already paid that they never seem to have the record on.

Recently, we decided it was time to switch insurance companies and she, being the awesome wife that she is, took on the task. Here’s her experience on the whole ordeal of changing insurance companies and firing our agent. Take it away sweetie…..

There are several reasons why a person might consider switching insurance companies. I assure you that doing it for fun is not one of them. Perhaps the company you are currently insured by is going out of business or maybe the rates from other insurance companies are more affordable. We had been with our insurance company for over five years. We personally knew our insurance agent, as he was a friend of mine from high school. I trusted him and I knew that we were in good hands. Earlier this year, our agent decided to switch jobs, leaving us with a new agent that we did not know. This was the triggering factor in our situation to start shopping for new insurance. I knew we were paying a little higher premiums than other people I had talked to, but since we knew our agent and felt comfortable with him, we were okay with that. However, when he left, it was a prime opportunity for us to take a look at some different options and reevaluate our situation. And WOW, what I found out was… I should have been comparing rates and coverage WAY before my agent had left.  We were paying substantially higher rates than we needed to be. Doing business with a friend can be tricky like that. You want to be loyal, but you also want to make sure you are getting the best bang for your buck. Be careful.

It can be time-consuming to compare insurance rates…trust me. I spent more than a few hours doing my research and talking to different insurance companies to get quotes. I assure you that if you end up saving a substantial amount of money then it’s totally worth every second.

Whatever your reason there are a few things you should consider before actually making the switch from one insurance company or agent to another. Here are some things that I considered when I was comparing companies to ensure we were getting the best coverage at a reasonable rate.

1. Multiple policy discounts

If you are switching insurance companies and you have more than one policy at your current provider, consider the discounts that may be applied to your policies for having multiple policies with one provider. It may make sense to move not one but all of your policies to the new provider to continue receiving the multiple policy discount. We had our Homeowners, auto, and umbrella policies all with the same company. We saved over $250 a year by switching our auto insurance company just for having a multiple policy discount.

2. Research the company as well as rates

With various tools available on the Internet you can shop for insurance rates from the convenience of your home. You can compare rates and get quotes from dozens of companies. While comparison shopping for the best rates is one of the first steps in saving money, it is also important to research the insurance provider as well. There are many new companies that are starting that might not have the experience nor resources to provide the coverage you will need should an accident or disaster strike. It doesn’t make sense to pay for insurance policies backed by a company that is unable to provide the protection you need at the time you need it.

Guess I need to call my insurance agent

In 2009 we experienced an “inland hurricane” and had the chance to really “test” out just how good our insurance provider was. Luckily, they covered all of the damage and then some, without any fuss. This is where it comes in handy to trust your agent. However, we had several neighbors that spent months fighting their insurance company trying to get money for their home repairs. Do your homework and make sure that your company is not a bust! After all, what’s the point in paying for insurance if the company isn’t willing to honor your claims? Cheaper is not always better.

3. Switch companies at the right time

Whenever possible, try to switch companies when your current policy is set to renew. Insurance companies usually send out important details regarding your policy a few weeks before it is due to renew. You can use this information to get current details and rate information that can be used when comparison shopping. This is what I used to compare our current rates with the competition. In addition, you will avoid any cancellation fees that might be attached to your policy by switching before the term is up or prorated amounts for switching in the middle of a policy period.

Our previous insurance company charged a $75 fee for canceling our policies before the policy end date. However, we were willing to pay the charge since, by switching companies, we were saving over $300 a year. Weigh your options.

4. Compare coverage between insurance companies

Before making the switch to a new insurance company you must take the time to compare the coverage provided to ensure you are not getting a great new rate but substantially less coverage. It doesn’t make sense to save a few hundred dollars in premiums if it costs you several thousand in the long run. Make sure you compare apples to apples. Any insurance company can “get you a cheaper rate”, but can they get you a cheaper rate with the same amount of coverage? I had numerous insurance companies try and tell me that they could beat my current rate, but when it came down to it, most of them were providing less coverage.

The insurance company that we ended up dealing with was not only able to beat our current rate, but they were able to provide MORE coverage than our current policies.

5. Accessibility of your insurance agent

Make sure that you are choosing a trustworthy insurance company that is available when you need them. Have you ever tried to get a hold of your insurance agent? I have waited longer than a week for my insurance agent to call me back and we are friends. Now think about it, what if you needed something important, you were in an accident or your house burnt down, would you want to wait a week before your insurance company got back to you. Not likely. When calling to compare rates, make sure that the agent is accessible and willing to take the time to speak with you within a reasonable time frame. It will be a foreshadowing of your future relationship with them.

6. Policy cancellation

Making the switch

Once you have done all of your homework, researched company history, rates and coverage and picked a new insurance provider, don’t forget to cancel your old policy. Do this in writing and request an official cancellation notice to keep with your records. This proof may be needed in the future if there are questions regarding payments or coverage. Everyone wants to save money and changing insurance companies can save hundreds or even thousands of dollars per year. It took me over two weeks before we finally settled on a new insurance company. The whole process was a pain, but I know it will save us thousands over the years. I just hope I don’t have to do it again any time soon. 🙂

This is a guest post from my awesome wife Mandy Rose. She can check out more about her and our fam at her blog House of Rose.

Source: goodfinancialcents.com

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It’s a relatively new business, but like any other, it’s been infiltrated by fraud and scams in no time at all.

That’s a good thing for companies like MFI-Mod Squad, which investigates loan modification fraud.

Yesterday, the company put out a list of the twenty worst loan modification companies, though I don’t think it was an April fool’s joke.

“Many people have been asking me to post a list of unreliable loan modification companies,” said Steve Dibert, President of MFI-Mod Squad, in a release. “I’m happy to do so because it can help homeowners avoid scams.”

The companies that made the list below haven’t been approved to charge an upfront fee and claim to offer a money-back guarantee, big red flags in the loan mod world.

They’ve either failed to come through with the promised loan modification or refused to offer a refund to homeowners.

All but Samaritan Financial and Mortgage Mitigation Clearing House are located in California, a state that requires loan modification companies to be approved by the Department of Real Estate (DRE) to charge upfront fees (law firms are exempt).

Last week, the FTC cracked down on two loan modification companies, “Hope Now Modifications” and “New Hope Modifications”, which posed as affiliates of foreclosure alliance Hope Now.

The List:

•    Green Credit Solutions – (now approved by MFI-Mod Squad)
•    Peoples First Financial
•    United Law Group
•    Excel Loss Mitigation
•    Nations Choice
•    USA Mortgage Aid
•    Mortgage Assistance Center
•    Bank Modifications, Inc
•    Apply2Save
•    AmeRestart aka Equinaire
•    Choice Loans Consulting
•    Samaritan Financial
•    Resolutions Mortgage Group
•    Federal Loan Modifications
•    Mortgage Mitigation Clearing House
•    Woosh.com aka Manhattan Mortgage
•    Coastal Pacific
•    New Beginnings Loan Modification Services
•    North American Relief
•    US Justice Foundation

(photo: jantik)

Source: thetruthaboutmortgage.com

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It sounds like Christmas came early this year…borrowers who already received loan modifications via the Home Affordable Modification Program (HAMP) are now eligible for expanded benefits.

As it stands, borrowers taking part in HAMP who stay good on monthly payments can earn up to $5,000 in principal balance reduction over the first five years of their modification.

But now HUD and the Treasury are sweetening the deal. Under revised guidelines announced today, roughly one million borrowers are eligible to receive another $5,000, which will also be applied toward the principal loan balance in the sixth year of their loan mod.

This means borrowers can shed a total of $10,000 off their outstanding loan balance, which will certainly help them get their heads above water, assuming they aren’t already.

Additionally, borrowers will be given the opportunity to re-amortize the reduced mortgage balance, which will lower their monthly payment going forward.

Under normal circumstances, making extra payments to the principal balance reduces the overall interest expense, but it doesn’t lower subsequent monthly payments.

So this change will help borrowers build equity and lower payments even further.

Changes Coincide with HAMP Payment Resets

This change happens to come at a time when interest rates on HAMP loan mods are scheduled to increase.

After five years of monthly payments via a HAMP loan mod, the interest rate will increase one percent or less per year for three or four years until it reaches the market rate at the time of the modification.

Secretary of the Treasury Jacob J. Lew noted that scores of homeowners continue to struggle with their mortgage payments in spite of the strengthening housing market.

After all, just because a home is worth more doesn’t mean the payment is more affordable, there’s just more incentive to pay it.

He added that the changes are “meaningful incentives for borrowers to stay current in their modifications,” while also giving them an opportunity to build equity in their homes.

Borrowers with HAMP Tier 2 loan mods, which provide a low fixed rate for the life of the loan to those who don’t qualify for HAMP, will see their interest rates get slashed by another 50 basis points.

They will also be eligible for the $5,000 pay-for-performance incentive if they are in good standing at the end of the sixth year of their loan modification.

Lastly, borrowers receiving benefits under the Home Affordable Foreclosure Alternatives (HAFA) program will see relocation assistance bumped up to $10,000 from $3,000 to “better reflect increased rents and the cost of moving in many parts of the country.”

HAMP was launched back in 2009 to help delinquent homeowners (or those in danger of falling behind) keep up with mortgage payments.

The program has reduced monthly mortgage payments for over a million borrowers via interest rate reductions, extended mortgage terms, and in some cases, principal balance reductions.

Despite this, many borrowers have been unable to make even the modified payments, with re-default rates on loan mods often remarkably high, though they seem to have improved along with the housing market as a whole.  It seems HUD and Treasury want to keep it that way.

If you’re currently making mortgage payments under HAMP, you might want to get in touch with your loan servicer to see how you can take advantage of these new incentives.

Source: thetruthaboutmortgage.com

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Lenders may have one last quarter to ride the market’s massive mortgage refinance wave after Monday data from Black Knight’s Mortgage Monitor Report revealed that despite rising interest rates, Q1 2021 refinance lending volumes are poised to remain near last quarter’s meteoric high.

“Roughly 2.8 million homeowners refinanced their mortgages in the last quarter of 2020, which saw a record-breaking $869 billion in refinance lending,” said Ben Graboske, Black Knight’s president of data and analytics.

A whopping $4.3 trillion in mortgages were originated in 2020, with $2.8 trillion in refinances, and Black Knight is confident lenders should still be able to cash in on that steady refi volume given that daily rate locks through mid-February were elevated.

That rise in refi locks suggests that increases in 30-year rates over the first 45 days of the year may have spurred formerly procrastinating borrowers to act while rates were still near historic lows.

But companies need to act fast, as Graboske noted that activity is already beginning to curtail. As of Feb. 11, there were still some 18.1 million high-quality mortgage refinance candidates, but with news of interest rates breaking 3% starting March 4, Black Knight estimates 12.9 million remain – the lowest such volume since May 2020 and down 30% in just three weeks.

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

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

Presented by: Angel Oak

Plus, retention is at historic record lows – just 18% of mortgage holders are retained by their servicers.

“Approximately 2.3 million borrowers were not retained in Q4 2020 alone,” Graboske said. “The current rate volatility serves to underscore the critical nature of both accurate and strategic pricing and advanced retention analytics to help identify borrowers who still have incentive and are out there transacting in the market.”

According to Black Knight, among higher-credit quality rate/term GSE mortgage refinances, borrowers who shopped the market received more than an eighth of a percent lower rate than those who refinanced with their current servicer.

Despite 3% still being a great rate for millions of borrowers, a one-eighth to a quarter turn in mortgage rates (high or low) can move the market substantially, said Logan Mohtashami, HousingWire‘s lead analyst.

“There are people who had a 4.00% rate that refinanced to 3.25% and then said, ‘Oh well now that rates are low, I’ll refinance again to 2.75%.’ But if that rate sneaks up a quarter it’s no longer ideal and its lost its appeal. They are going to wait for it to come back down, right? And then it doesn’t,” Mohtashami told HousingWire in late February.

If the mortgage refinance wave does indeed begin to level off in Q2 though, data suggests the purchase market is ready to resurge given rising economic resilience in employment and vaccine distribution. With those factors climbing, the Mortgage Bankers Association is forecasting that the Freddie Mac survey rate will reach about 3.5% by the end of 2021. And with it, a wave of young homebuyers that will support the purchase market for at least the next few years.

According to Mike Fratantoni, MBA’s chief economist, the trade organization is predicting that the mortgage industry will originate just shy of $3 trillion in total volume or 2021, with the majority – $1.57 trillion – in home purchases.

Source: housingwire.com

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TPO Programs, Broker Locking, New Media Company, CRM Products; Investor News; Capital Markets

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TPO Programs, Broker Locking, New Media Company, CRM Products; Investor News; Capital Markets

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Rob Chrisman

13 Min, 13 Secs ago

Planet Home’s Michael B. reminds me, “I miss every shot I don’t take.” The topics here in Orlando at the FAMP convention include not only prospecting, prospecting, and… prospecting, but also not missing a shot by offering clients more than a couple products. Freddie, Fannie, FHA, and VA are fine, but every client and referral source is precious, and what happens if someone walks through the door and needs a loan for a renovation (remodel), or a condotel, or a non-warrantable condo, or qualifies for a bond program, or… the list goes on. In the category of leads, have you looked into any local real estate investment clubs as a source of business? What about going after leads from divorce attorneys or local hard money lenders? Persistence! Another big topic at the FAMP conference is saving money, and STRATMOR’s current blog is titled, “Improving Revenue Might Be Right Under Your Nose.” (Today’s podcast can be found here and is sponsored by Candor. Candor’s patented automated underwriting decision engine, CogniTech, is a state-of-the-art, 100 percent machine platform that can handle infinite loan scenarios. Listen to an interview with Ally Home’s Glenn Brunker on the homebuyer affordability issue and potential ways to alleviate it.)

Lender and Broker Software, Products, and Services

School is back in session for the majority of America’s youth. But just because you are an adult doesn’t mean you should pass up on opportunities to polish your professional skillset. Surefire℠, Black Knight’s CRM and Mortgage Marketing Engine, has created Mortgage Marketing University (MMU) with free 101, 201 and 301-level courses designed to help brokers, LOs, LOAs and your marketing team get up to speed on best mortgage marketing practices and stay on top of their game. The MMU companion eBook is an ideal resource for your team to keep at its fingertips. Download the MMU eBook today.

Debuting Rebel Chics Media! “We understand the needs of the real estate industry and are here to help you engage, “edutain” and inspire homebuyers with branded social content. Our agency-quality subscription content, along with writing prompts, allows you to address the questions and concerns of potential homeowners. This content is ideal for LOs, banks, credit unions, and Realtors looking to build a strong social brand. Benefit from 50+ years of combined industry experience of our founders, Jillian Sorensen & Dana Trajcevski. Move beyond generic posts like Spring Cleaning tips and Pumpkin Pie recipes, and instead, unlock the power of storytelling. Now is the perfect time to build your brand, and Rebel Chics Media is here to support you. We understand that you’re busy and don’t have the time, energy, or tools to create content yourself. Leave that to us and focus on growing your brand and connecting with your audience.”

Brokers can now shop, lock, and deliver on one platform that seamlessly connects brokers, lenders, and originators. In this market, hustle is everything. You can’t afford to waste a single deal… or a single minute. That’s why ReadyPrice has launched its innovative new Shop, Lock & Deliver loan exchange platform, designed to help independent mortgage brokers like you save time and money. Now you can shop competitive loan offerings from multiple lenders, get rate lock guarantees in real time, receive underwriting findings, and deliver the borrower’s complete loan file to lenders, and all on a single platform, at no cost to brokers. It’s the industry’s most powerful universal delivery portal, and it’s already helping thousands of brokers around the country thrive and compete in even the toughest market environments. Multiple lenders. One platform. Zero b.s. Come check ReadyPrice out today.

TPO Programs for Brokers and Correspondents

Profitable mortgage companies are focused on the long-term value of the customer relationship. Essex Mortgage’s partners enjoy greater customer retention, GNMA pass-thru pricing, no overlays, no LLPAs, NO EPOs, and NO EPDs. They also receive Tax Deferred asset growth and a long-term cash flow stream without having to be a GNMA issuer themselves. Please contact us to discuss how the Essex GNMA Excess MSR program can help retain and enhance your customer relationship, broaden guidelines, and expand into new markets. Please contact Kimberly Schenck.

Push strongly through the summer buying season with Luxury Mortgage Corp. (“LMC”). LMC is offering a 100-bps price special for newly locked Full and Alt Doc (Bank Statement, 1099 Only, Asset Qualifier) purchase loans until August 31st. LMC’s elite team isn’t stopping there; they are also offering a 50-bps pricing improvement on DSCR purchase loans! Click here for full details of the specials. Are you, not an approved broker? It’s time to align with true partners who will be here for you and execute at the highest levels. Take your business to sustainable new heights with the elite team. Click here to become an approved wholesale broker.

Investor and Agency News

Ginnie Mae launched a New Environmental, Social, and Governance (ESG) Composite and Webpage, view the Press Release.

USDA Rural Development issued Updated HB-1-3555, Chapter 3, Lender Approval bulletin on 07/24/2023.

On 7/26/2023, with Amendment No. 6 to DR-4720, FEMA declared federal disaster aid with individual assistance made available to Vermont’s Orleans County affected by severe storms, flooding, landslides, & mudslides from 7/7/2023 and continuing. See AmeriHome Mortgage Disaster Announcement 20230706-CL for inspection requirements.

AmeriHome Correspondent 20230702-CL Disaster Announcement. On 7/14/2023, with DR-4720, FEMA declared federal disaster aid with individual assistance has been made available to 6 Vermont Counties; Chittenden, Lamoille, Rutland, Washington, Windham and Windsor affected by severe flooding from 7/7/2023, and continuing. See the attached announcement for inspection requirements.

PHH Mortgage had a Disaster Alert for Vermont and California. “The following disaster declaration is being issued or modified today pertaining to: Vermont DR-4720: New Disaster declared 07/14/23, and California DR-4699: Update to End Date of Occurrence.

Citi Correspondent Lending Bulletin 2023-06 includes credit policy updates on mortgage assumptions, public assistance & Section 8 income, and unplanned buydowns. Mandated screening – submitting non-obligated party detail notification, and clarifications on restricted stock & non-vested stock, and Chinese assets.

Collectively, average older homeowners sit on over $9 trillion in equity and have an average retirement savings is less than $60,000. But through a reverse mortgage, senior homeowners can maximize their financial stability by unlocking the accumulated equity without selling their property, allowing them to access the increased value of their homes and provide a financial cushion in a rising housing market. The time is now to build your reverse mortgage business with Plaza Home Mortgage®. We have the programs, including FHA HECM. Plus, we offer training and dedicated reverse mortgage staff to get you rolling into this right. Email [email protected] to get in touch or submit your details for a full reverse pre-qual.

In Pennymac announcement-23-49, the go-live date of Extended Lock Commitments was revised to “TBD,” and the updated schedule will be communicated through a future announcement.

American Heritage Lending Wholesale offers DSCR No Doc Loans including Non-Warrantable Condos.

On June 27, 2023, FHA published ML-2023-13 announcing that it is adopting the Fannie Mae/Freddie Mac Form 1103, Supplemental Consumer Information Form (SCIF) for mortgage applications dated on or after August 28, 2023. See AmeriHome Mortgage Product Announcement 20230705-CL.

Fairway Wholesale Lending Client Announcement 2022-07-27 issued a reminder about its new Admin Fee schedule that went into effect for all applications dated on or after 7/26. They will work through a transition period with the Admin Fee as this change becomes effective with applications taken & loans disclosed on & after Wednesday, 7/26. Fairway will begin using the new fee schedule for all loans we issue initial disclosures effective Wednesday, 7/26.

Capital Markets

Call it whatever you want, or believe whatever you want, in the rating agency Fitch’s downgrade of U.S. Treasury debt, one of things highlighted was the Jan. 6 insurrection. Once again, a reminder that politics, interest rates, and mortgage banking are intertwined. But overall, despite the increased hikes by the Federal Reserve, for the most part the U.S. economy continues to chug along.

Today we saw the “first Friday of the month” jobs situation figures. But it seems that the unemployment rate is not a leading economic indicator. Looking back at changes in U.S. unemployment rate data since 1953, a period including 10 recessions, on average the unemployment rate has not noticeably changed during the 12 months leading up to a recession. Dr. Elliot Eisenberg, Ph.D. points out that, “But once the recession begins, the unemployment rate slowly rises and peaks 12 months later at a level three percentage points higher than when the recession began.”

Yesterday began with the Bank of England raising UK rates to a 15-year high, though investors domestically continued to react to the U.S. credit downgrade by Fitch Ratings, which led to another “bear steepener” in the bond markets. “Risk-off” themes were present, and Wednesday’s route in U.S. Treasuries spilled over into yesterday’s session. The 10-year yield rose to a 9-month high as market participants took a closer look at rising debt-service levels.

The downgrade of U.S. government debt to AA+ from AAA by Fitch on Tuesday won’t affect the U.S. economy much and puts the Fitch rating at the same level as S&P, which made the downgrade in 2011. A couple other reasons not to worry include debt ratings mattering much more for emerging economies, most bond traders will keep buying U.S. debt at the same level, and the Fed can essentially set the interest rates on U.S. debt, anyway.

On the data front, weekly jobless claims increased by 6k to 227k while the ISM Non-Manufacturing Index and the Manufacturing PMI report showed a deceleration in growth consistent with reports from other major economies. Services sector activity continued to expand in July, but at a slower pace than the prior month. Even so, the report said that the majority of respondents remain cautiously optimistic about business conditions and the economy. Finally, productivity increased 3.7 percent in the second quarter, well above 1.7 percent expectations, with output up 2.4 percent and hours worked down 1.3 percent. Unit labor costs, meanwhile, were up 1.6 percent, lower than expected and which reflected a 5.5 percent increase in hourly compensation and a 3.7 percent increase in productivity. The pickup in productivity and the deceleration in unit labor costs is a good combination for the soft-landing view. After one of the better-than-expected releases this week was the ADP report which reported 324k in private jobs creation versus 189k expected, risks for an upside surprise in nonfarm payrolls were raised.

As for that BLS report, nonfarm payrolls increased 187k versus 200k expectations and back months were revised down 49k jobs. The unemployment rate dropped to 3.5 percent, and average earnings are still solid versus 0.3 percent month-over-month and 4.2 percent year-over-year expectations. After any knee jerk reaction, the Treasury market will begin setting up for next week’s $103 billion Quarterly Refunding beginning Tuesday with $42 billion 3-year notes followed on Wednesday and Thursday by $38 billion 10-year notes and $23 billion 30-year bonds. Both 3-years and 30-years were increased by $2 billion and 10-years by $3 billion versus the prior Quarterly Refunding. We begin the day with Agency MBS prices unchanged from Thursday, the 10-year yielding 4.19 after closing yesterday at 4.19 percent, and the 2-year up to 4.89.

Jobs and Transitions

William “Bill” Sohan, an industry veteran and former Senior Vice President with Academy Mortgage, has joined employee-owned USA Mortgage as a regional Vice President. Sohan will oversee USA’s Maryland operations and work to expand its national footprint. “I found USA’s loan-officer-first mentality, freedom for their regional leaders, and transparent work environment very attractive,” he said. “I am in business for myself, but not by myself. It’s a huge advantage that USA is run by former high-producing loan officers who understand the needs of their salespeople. I’m excited to give my sales team access to some great new resources, while still maintaining their access to Fannie and Freddie direct and dozens of loan programs.” Founded in St. Louis in 2001, USA has offices in 34 states and is licensed in 49 states plus the District of Columbia. For a confidential conversation about joining USA, contact Brooke Anderson at 609-500-1520.

Presidential Bank Mortgage is expanding into the Southeast! John Pruitt, former Director of Fidelity Bank Mortgage in Atlanta, has joined the senior management team of the Bethesda, Maryland-based Community Bank as SVP of Production and Strategic Initiatives. “I’m so excited to join Presidential at this opportune time in the industry to help grow a best-in-class mortgage lending platform,” Pruitt said. “The combination of a solid Community Bank and entrepreneurial mortgage lending model is truly unique in our industry.” Expansion plans are underway to open full-service lending markets in Georgia and the Carolinas. Leadership, Sales, and Operations positions are available throughout the region. Please send your confidential inquiry to John Pruitt.

Academy Mortgage is proud to be among the small number of lenders who have been selected to offer the Freddie Mac BorrowSmart Access℠ program. This equitable housing program allows qualified first-time homebuyers looking to purchase a home within one of 10 eligible metropolitan markets to obtain a credit for their down payment and/or closing costs through combined contributions from Freddie Mac and Academy Mortgage. Through this assistance, borrowers can fund 100 percent of the cash required to close; prepare for long-term sustainability through homeownership; and receive pre-purchase homebuyer counseling through the Freddie Mac BorrowSmart Access program. Academy is proud to support this initiative to bring equitable housing opportunities to traditionally underserved communities. Academy is committed to fulfilling its Vision to Inspire Hope, Deliver Dreams, and Build Prosperity in all communities by helping its clients build generational prosperity through homeownership. Join a team with the loan products and the Vision to advance housing for underserved communities: contact Scott Starr to explore the possibilities that await at Academy.

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Source: mortgagenewsdaily.com

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Source: pressherald.com

Apache is functioning normally

Slightly more than 10 percent of borrowers who took out FHA loans in the first quarter of 2008 were at least two months behind within the first 10 months, according to data analyzed by the WSJ.

That’s up from the 9.4 percent rate seen a year earlier, indicating that more recent vintages of mortgages are performing increasingly poorly.

And about 12.3 percent of FHA loans made in 2007 were at least 90 days late, including four percent that were in foreclosure or bankruptcy.

That’s contributed to the overall delinquency rate, which rose to 7.5 percent at the end of February, up from 6.2 percent a year earlier.

On the bright side, the FHA said only about 10 percent of the 60-day delinquencies actually end up in foreclosure, compared to a rate of 27 percent for private-sector loans, thanks to so-called “robust loss-mitigation programs.”  I hope they’re not talking about Hope for Homeowners…

While it may be true, the agency is teetering on the brink of insolvency and inching closer to needing government assistance to operate, a first in its 75-year history.

Perhaps because FHA lending has accounted for more than one-third of all residential mortgage originations recently, up sharply from the two-percent level seen two years earlier.

Meanwhile, higher loan limits have exposed the agency to riskier parts of the country, such as Florida, where 14 of the 50 markets with the highest FHA default rates are located.

Luckily, lower loan limits helped the FHA avoid big losses in places like California over the past few years, but that may change as newer vintages with larger loan amounts mature.

Apparently HUD officials are evaluating loan performance in some of these previously untapped areas to determine credit risk.

The FHA also stamped out seller downpayment assistance loans and slashed the maximum cash-out loan-to-value to 85 percent recently to mitigate risk.

Source: thetruthaboutmortgage.com

Apache is functioning normally

Nearly a quarter-of-a-million loan workouts were carried out by foreclosure prevention alliance Hope Now last month as modifications finally accounted for more than half.

Completed loan workouts totaled 244,000 in February, down ever so slightly from January, but more favorable loan modifications increased nine percent.

The combination of 134,000 loan mods and 110,000 repayment plans made February the sixth straight month where workouts surpassed the 200,000 mark, a 30 percent increase over the previous six months.

“We expect the trend to continue as many companies expand their offerings to include the administration’s Making Home Affordable refinance and modification programs,” said Faith Schwartz, Hope Now’s executive director, in a release.

“The mortgage lending industry is responding to the needs of its customers and offering solutions that are appropriate to the current market and economic conditions.”

Unfortunately, Hope Now’s efforts are being tested by rising foreclosure sales, which totaled 87,000 in February, up from 68,000 a month earlier.

Nearly two-thirds were tied to prime loans, a huge swing from last month, marking the first time such loans have outnumbered subprime-related foreclosures (could it be a lack of home equity thing?).

However, workout plans for subprime loans continued to outpace those directed towards prime borrowers.

“Currently 5.5 percent of the total mortgage market is 60 days or more delinquent,” Schwartz added.

“Because of this, HOPE NOW members are working hard to help the administration implement its recently-announced foreclosure prevention initiative as well as working on additional ways we can be more efficient in helping at-risk homeowners.”

Perhaps a greater reliance on more sustainable loan modifications will lead to a lower re-default rate, which ranged between 30 and 40 percent in 2008.

Source: thetruthaboutmortgage.com

Apache is functioning normally

Roughly half of all performing first mortgages will experience a monthly payment increases over the next five years, according to a new report from Fitch Ratings.

The mortgages in question back private-label residential mortgage-backed securities (RMBS), meaning they aren’t guaranteed by Fannie Mae, Freddie Mac, or the FHA/VA.

As a result, many of these loans haven’t qualified for interest rate relief via programs such as HARP.

Unsurprisingly, mortgage payment increases have historically led to higher default rates, which could spell trouble for the housing recovery that seems to have slowed in recent months.

The larger the payment increase, the higher the chance the borrower will fall behind. Fitch estimates that loans with the biggest increase in payment are about three times more likely to default than loans with no payment increase.

Fitch Ratings director Sean Nelson pointed out that borrowers with interest-only loans are expected to see the largest monthly payment increases.

Monthly Payments Could More Than Double

As I’ve said before, these borrowers get hit twice; aside from having to make the fully-amortized payment, they also have a shorter repayment period to pay off the mortgage after deferring principal payments for the first 10 years of the loan.

Nelson said many homeowners could see their payments more than double as a wave of 10-year interest-only recasts hits.

Many of these loans were taken out in 2004-2006 at a time when home prices also happened to be peaking. That means we could see a new wave of defaults, especially if home prices slip from current levels.

Despite the gains, there are still millions of underwater homeowners, so it could be the final nail in the coffin for some.

But it’s not just IO loans that are a problem – modified loans and adjustable-rate mortgages are also at risk, though Fitch said the magnitude of payment increases should be smaller.

Those who took part in the Home Affordable Modification Program (HAMP) will see payment resets from 2014 until 2021, with incremental 1% increases annually until rates reach the national average for a conforming 30-year fixed-rate mortgage on the date of the original modification.

ARMs will rise as short-term interest rates increase, though with the LIBOR still super low, many borrowers might be better off letting their loans reset to current fully-indexed rates.

The good news is that prime jumbo loans are the most exposed to future payment increases thanks to their large composition of ARM and IO loans. About two-thirds are “at risk,” per Fitch.

Meanwhile, less than half of subprime mortgages are expected to see payment increases, which is good because these homeowners tend not to have many alternative financing options.

The prime bunch should be able to refinance fairly freely, assuming they’ve got the required equity from recent home price gains.

And this whole wave of resets could actually save the flagging refinance market, which has been pretty lackluster after a few really strong years.

Most borrowers already took advantage of the low interest rates on offer, but those facing a payment reset might look to lock-in a long-term fixed rate.

Source: thetruthaboutmortgage.com