Loss mitigation

Apache is functioning normally

Citi has become the latest large bank to step up its loan modification efforts, putting in place a new streamlined approach and extending a foreclosure moratorium for select borrowers.

The New York-based bank has launched its so-called “Citi Homeowner Assistance” program, which over the next six months, will reach out to 500,000 at-risk homeowners who are not currently delinquent, but may need assistance in remaining that way.

The effort is expected to result in loan workouts of approximately $20 billion in underlying mortgage balances, with the focus on borrowers in areas that are expected to “face extreme economic distress.”

Loan counselors in so-called “Borrower Relief Centers” will preemptively reach out to customers in high-risk areas, where home prices are falling and unemployment rates are high.

Citi will also put the freeze on foreclosures for an unknown number of “eligible borrowers,” defined as those with owner-occupied residences seeking to retain their homes who have sufficient income and are working in good faith with the bank to find a solution (loan must also be owned by Citi, not just serviced).

The ban and mortgage lender’s streamlined loan modification program is similar to the FDIC/Indymac model, reworking mortgages to affordable levels through mortgage rate reductions, extension of term, or forgiveness of principal.

Since early 2007, Citi has helped roughly 370,000 families avoid foreclosure, representing more than $35 billion in total underlying loan value.

And this year, the company said loss mitigation efforts have kept about four distressed borrowers in their homes for every foreclosure completed.

Shares of Citi were off 53 cents, or 4.66%, to $10.69 in midday trading on Wall Street, hitting a fresh 52-week low in the process.

Despite this, the bank is reportedly on the prowl to scoop up a regional bank after losing Wachovia to Wells Fargo last month.

Source: thetruthaboutmortgage.com

Apache is functioning normally

A record 6.99 percent of all mortgages tied to one-to-four unit residential properties were delinquent at end of the third quarter, up nearly ten percent from the second quarter and 25 percent from the same period a year ago, the Mortgage Bankers Association reported today.

That number includes home loans that are at least one mortgage payment overdue, but not yet in the foreclosure process.

Another 2.97 percent of all home loans were in some stage of foreclosure at the end of the third quarter, up eight percent from the second quarter and 75 percent from a year ago.

However, due to a number of foreclosure moratoria and other related loss mitigation programs, foreclosure starts actually decreased ever so mildly from the second quarter.

“Evidence of this can be seen in the large increase in loans 90 days or more past due but not yet in foreclosure,” said Jay Brinkmann, MBA chief economist.  “This rate jumped by 45 basis points, the highest increase in this category ever recorded in the MBA survey and far above the average 4 basis point jump we would expect to see.”

“While 20 states showed declines in the rate of foreclosure starts between the second and third quarters, every state showed an increase in the 90 days or more delinquent category with the exception of Alaska and all of the increases were greater than what we would expect due to normal seasonal factors.”

The increase in delinquencies was driven by a large number of loans 90 days or more past due, primarily in hard-hit areas like California and Florida.

These two states also accounted for 54 percent and 41 percent of prime and subprime ARM foreclosure starts, respectively.

Year-over-year, the seasonally adjusted delinquency rate increased for all types of loans aside from FHA loans, which remained unchanged.

Source: thetruthaboutmortgage.com

Apache is functioning normally

DSCR, Non-Del, CRM, Pricing Engine, Real Estate Agent Products; STRATMOR Customer Service Workshop; NAR President Resigns

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DSCR, Non-Del, CRM, Pricing Engine, Real Estate Agent Products; STRATMOR Customer Service Workshop; NAR President Resigns

By:
Rob Chrisman

3 Hours, 5 Min ago

“What did the happy real estate agent put on her sign? I have lots to be thankful for.” (Feel free to use that gem at your next presentation at Sotheby’s.) In response to yesterday’s opening paragraph comments about housing supply, from Maryland Ken Sonner sent an article about how New Zealand managed to shift its zoning to help alleviate the supply issues and lower rents. People like lists for some reason, and here is the “The 15 most in-demand ZIP codes for U.S. homebuyers, and #1 is in Ohio.” But heading back to inventory, affordable housing, and such, the topic is certainly percolating up to Capitol Hill. A bipartisan duo in the U.S. Senate introduced a bill that would address a shortage of affordable housing in rural communities by easing the process for non-profits to acquire properties with USDA rural housing loans. It would also decouple the related rental assistance so that the assistance doesn’t end when the mortgages mature. (Today’s podcast can be found here and this week’s is sponsored by Black Knight. Black Knight is an award-winning software, data and analytics company that drives innovation in the mortgage and real-estate industries, and the capital and secondary markets. Listen to an interview with Servbank’s Anthony Forsberg on default and loss mitigation.)

Lender and Broker Software and Services

Don’t discount the value of prioritizing your customers. Many servicers are adding customer-focused technology to give homeowners self-service options and more. Just take it from AimLoan, an internet-direct mortgage lender that recently implemented MSP®, Black Knight’s loan servicing system, along with several other customer-focused solutions. After recently moving its servicing portfolio in-house, AimLoan needed proven technology to enhance the customer experience of today and prepare for growth of tomorrow. Ready to join AimLoan by enhancing the way you serve your own customers? Learn more about MSP today.

Get valuable face time with real estate agents: host your own For Sale to Sold workshop. MGIC’s ready-made workshop kit makes it easy for loan officers to guide agents to a deeper understanding of the mortgage process. The benefits of hosting your own workshop? You’ll position yourself as an expert, build stronger relationships and earn more referrals. Request your For Sale to Sold workshop materials to get started.

Loan servicers are invited to attend a free webinar on the MERS® Annual Report and third-party review process next Thursday, September 7th, at 3pm ET. Hear from the experts at Falcon Capital Advisors, an experienced and trusted third-party review firm, about the Annual Report process and how your organization can ensure it remains compliant with MERS® System requirements. Click here to register.

You don’t have to accept lower profitability when loan volume is down. Instead, find efficiencies in your mortgage process that add up to cost savings and bolster your bottom line. Loan officers using Maxwell Point of Sale achieve more with less work, closing 20% more loans and moving loans to clear to close 35% faster. Maxwell POS syncs with your LOS bi-directionally, keeping real-time data in one place for easy management and seamless updates and preapprovals. Managers have visibility into the team’s entire pipeline, allowing them to identify opportunities for quick adjustments and better results. If you’re ready to maximize your mortgage operations and take advantage of every basis point, schedule a call with the Maxwell team.

In today’s low-volume, purchase-focused market, every mortgage lender’s goal is to optimize their profits and overall efficiency. The catalyst? The right product and pricing engine. In a recent article with HousingWire, industry expert Parvesh Sahi of Polly emphasizes three critical components to thrive in this ultra-competitive market environment: 1.) Speed to market, 2.) Margin management, and 3.) Loan officer experience and education. According to Sahi, creating the connective tissue between these three primary components is an enormous opportunity. Are you taking it? Learn more, here: Why the right PPE matters.

“It’s no surprise that many mortgage lenders use more than one channel to maximize loan origination opportunities. Maybe you’re a traditional retail shop with a growing consumer direct team, or you decide to shift resources to wholesale while your retail group rides out a rough patch. What is surprising is how many lenders use two or even three different CRM systems to meet their multi-channel needs, each one increasing the inefficiency and cost of their sales and marketing. Download our free guide, “How to Find the Ideal CRM” and learn how to streamline your tech stack and improve sales and marketing performance across all your channels.”

Broker and Correspondent Products

“Brokers: Are you attending NAMB National? Meet NexBank’s team at booth #12 and learn why we are a trusted investor and warehouse bank partner to brokers and correspondents nationwide. NexBank is continuously ranked as a top lender by Inside Mortgage Finance, and we continue to grow in the wholesale and correspondent space. Our wholesale and non-delegated channels offer a suite of Portfolio, Conventional, FHA and VA products. Our competitive portfolio products include Full Doc and Reduced Doc (Non-QM), available for loan amounts from $200,000 to $2 million, with ARM and Fixed Rate options, along with Interest Only. Ask about our unique 6-month ARM! Plus, portfolio loans have no LLPAs for FICO or second homes and allow cash-out to 80 on primary with no dollar cap on cash-out amount, where applicable by law. Contact us. Restrictions apply. Subject to change. For mortgage professionals. Not intended for general public. Member FDIC. Equal Housing Lender. NMLS 672886.”

Long-term Rental or Vacation Rental? Visio Lending is the nation’s leader in Non-QM Investor DSCR loans for buy and hold SFR rentals with nearly a decade of experience and over $2.5 billion in originations. No-DTI, 30-year terms, rate buy downs, free 45-day rate locks; I/O and Sub-1 DSCR options available. Through our top-notch Broker Program, brokers are able to earn up to 2 points YSP, and 5 points total. Visio Brokers can count on a designated Account Executive and in-house processing.

STRATMOR Customer Experience Workshop

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

Capital Markets

With a light day of data to open the week, investors continued to mull over Fed Chair Powell’s Jackson Hole Speech, which had a rather hawkish tone as he vowed to hike rates further, if necessary. Investors in Fed Funds futures got the message, ramping up bets that the Federal Open Market Committee will hike rates by an additional 25 basis points at the November meeting. The U.S. Treasury sold $45 billion in 2-year notes yesterday morning and $46 billion in 5-year notes in the afternoon, with both offerings meeting good demand ahead of today’s $36 billion 7-year note auction. We have a heavy week of data coming up with home prices and consumer confidence today, GDP tomorrow, the PCE Price Index on Thursday, and the jobs report on Friday.

Keeping things in perspective, two weeks ago, markets were buoyed by an upwards surprise in retail sales. However, last week’s durable goods report showed orders fell 5.2 percent in a sign that business investment is slowing. Despite potentially lower jobs gains, initial unemployment claims have remained fairly consistent throughout the year and were at a three-week low last week. Given the record over-supply of available jobs over the last year, the softening in the labor market may presently be manifesting itself in less job openings rather than increasing layoffs. There were about 14 percent fewer job openings as of August 18 than on January 1. Existing home sales fell for the second consecutive month in July as higher mortgage rates reduced demand as well as supply. Lower supply has put upwards price pressure on the limited existing homes availability. This allowed builders, armed with price and rate incentives, to insulate themselves from the housing slowdown. New home sales were up 4.4 percent in July. While recent inflation data is encouraging, hawkish talk from Fed officials has the markets split on whether another rate hike will be necessary before the end of the year.

Today’s calendar gets under way later this morning with Redbook same store sales and will be followed by home prices from S&P /Case-Shiller and the FHFA for June, July job openings from JOLTS, consumer confidence for August, Dallas Fed Texas services for August, the aforementioned Treasury auction of 7-year notes, and remarks from Fed Vice Chair of Supervision Barr. We begin Tuesday with Agency MBS prices roughly unchanged from Monday and last Friday and the 10-year yielding 4.20 after closing yesterday at 4.21 percent. The risk-free 2-year T-Bill is at, or above, 5.0 percent for the sixth straight day.

Employment, transitions, and NAR President resignation

“Citizens Wholesale Lending: If you’re an Account Executive looking for a solid Wholesale Lender, look no further than Citizens! Citizens Wholesale has been supporting the Broker and Non-Del community for the past 28 years with a commitment to delivering a best-in-class experience. As the mortgage landscape continues to evolve, Citizens remains a strong pillar for the Wholesale industry. We are currently hiring Account Executives in GA, NC, and SC to join one of the strongest bank-owned wholesale lenders in the country. If you’re interested in an opportunity to thrive and be a part of a winning team, learn more at our jobs page today!”

Allen Friedman, an industry veteran and long-time friend of this Commentary, has returned to his home of over 10 years, iServe Residential Lending. Allen joins iServe as Executive Vice President and will help to further develop and expand the company’s strategic growth and development initiatives. Co-CEO Ken Michael states “We are thrilled to have Allen back in this leadership role. He helped to create our culture and shares in our desire to ensure that iServe is a company that both MLOs and Branch Managers can join to build something extraordinary. With a can-do culture, our goal is to empower each MLO and Branch Manager with a voice in the company alongside the decision makers. Allen strengthens that platform.” iServe was established in 2007 as a multi-state residential mortgage banker and invites NMLS licensed Originators to apply. For a confidential conversation about joining iServe, contact Allen Friedman through his email or at 415-298-2500.

It’s hurricane season, and sure enough we have Hurricane Idalia forming and expected to hit Florida on Wednesday. The National Association of Realtors has its own storm: the (now ex) President, Utah’s Kenny Parcell, resigned after the New York Times reported on allegations of sexual harassment and a culture of fear at NAR.

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

Source: mortgagenewsdaily.com

Apache is functioning normally

While mortgage delinquencies inevitably continue to rise, foreclosure starts in relation to those figures have fallen, according to the FHFA September Foreclosure Prevention Report released today.

The report, which covers Fannie Mae and Freddie Mac’s 30.7 million residential mortgages, revealed that loans 60+ days delinquent (including those in BK and foreclosure) increased to 2.21 percent of the total portfolio as of the end of the third quarter.

That figure is up from 1.46 percent as of the end of the first quarter and 1.73 percent as of June 30.

Despite the rise in borrowers falling behind on their mortgage payments, foreclosure starts as a percent of loans 60+ days delinquent fell from 8.29 percent in the first quarter to 7.12 percent in the third quarter.

And loans for which foreclosure was completed stabilized at 2.55 percent between the second and third quarter after rising from 2.41 percent in the first quarter.

Fannie Mae’s Homesaver Advance Making Numbers Look Pretty?

However, loan modifications completed fell from 15,372 in the second quarter to just 13,450 in the third quarter, though loans reinstated via Fannie’s Homesaver Advance program skyrocketed, and accounted for 45 percent of all loss mitigation activity.

But it’s unclear whether an unsecured personal loan extended to an ailing borrower to temporarily cure a first lien loan will be enough to head off foreclosures over the long haul.

The number of more favorable (grain of salt) loan modifications completed in the third quarter have actually fallen from both the first and second quarter, and averaged just over 4,000 a month in the latest quarter.

Meanwhile, completed foreclosure sales averaged more than 15,500 a month in the third quarter, up about 5,000 per month from earlier this year.

So unless Homesaver Advance sees some serious long-term success, these seemingly optimistic numbers are nothing more than a false calm before a very real storm.

And the numbers look to get even more muddled thanks to the foreclosure moratorium imposed by the pair over the holidays.

Source: thetruthaboutmortgage.com

Apache is functioning normally

“The difference now is, they [the FHA] are making their loan term to 40 years, and that increases your buying power as a purchaser,” one user, who claims to be a lawyer, said in a recent video. “You can go out and get a bigger house now because you have higher borrower power at 3% down because your loan term has increased to 40 years.”

The new FHA regulation is a loss mitigation option geared toward helping homeowners retain their homes after defaulting by allowing mortgagees to further reduce the monthly payment for borrowers.

The 40-year loan modification can assist borrowers in avoiding foreclosure by spreading the outstanding mortgage balance out over a longer period. This makes the monthly payments more affordable, the FHA said in March. 

The Department of Housing and Urban Development (HUD) did not respond to HousingWire’s request for comment on the spread of inaccurate information on the FHA’s 40-year loan modification decision prior to publishing. 

Another video from a TikTok user who claims to be a financial advisor states that HUD introduced a 40-year FHA mortgage.

“Right now, a 30-year FHA loan for $500,000 at 6.7% interest would cost $3,500 a month. What if we allowed a 40 year option that would only be $3280 a month saving them $220?” the TikTok user said in a video where he plays a role of a HUD official.

But while there is content on TikTok that misrepresents the FHA’s loan modification announcement, some users have uploaded videos that warn about inaccurate information. 

“It’s not for new loans (…). The 40-year loan is going to be for people who already had an FHA loan and demonstrate they have need [the] need to modify that loan or make changes to it so they can keep their home and not foreclose,” a user, who claims to be loan originator, said. 

“This is a perfect example of why you have to be careful of clickbait content,” the user noted.

The FHA’s final rule also aligns the FHA modification option requirements available for Fannie Mae– and Freddie Mac-backed mortgages, both of which provide a 40-year loan modification option. 

Borrowers who choose a 40-year loan modification would see additional interest payments over the course of the extended term, but HUD noted that the opportunity for borrowers to retain their homes with a more sustainable payment plan outweighs the drawbacks.

“While rising interest rates may keep the 40-year loan modification from providing significant payment reduction, HUD believes that rising interest rates make the 40-year loan modification more critical in circumstances where the 30-year loan modification does not sufficiently decrease the monthly payment to an amount that the borrower could afford to retain their home,” the HUD said in its final ruling in March. 

Source: housingwire.com

Apache is functioning normally

Foreclosure prevention group Hope Now announced today it prevented 208,000 foreclosures in November and 651,000 over the past three months, the highest three-month total since it began collecting data in July 2007.

So-called “foreclosure preventions,” otherwise known as loan workouts, actually slipped from 225,000 in October, but Hope Now attributed that to five fewer working days during the month.

The alliance said roughly two million foreclosures have been prevented during the first 11 months of the year, with about 2.2 million expected by year-end.

Over one million actual loan modifications have been completed since the program began, including 950,000 this year as the group steered away from simple repayment plans.

In fact, over the past three months, loan mods have increased by nearly 29 percent, while inferior repayment plans are up just about six percent.

Nearly 30 percent of homeowners with prime loans and 62 percent of those with subprime loans who received a workout in November got a loan mod.

The total number of foreclosure starts last month was 16,000 less than the number in October, though that could probably be attributed to the many loss mitigation programs and legislative changes currently in place.

Interestingly, the number of foreclosure starts for prime loans exceeded those for subprime loans for the sixth month in a row.

Hope Now, which includes a number of the largest loan servicers, mortgage lenders, and housing counselors, expects to modify two million or more loans next year depending on unemployment and other economic conditions.

Of course, it’s hard to get too excited about an increase in loan workouts, considering the nasty re-default data floating around at the moment.

But perhaps even the most well designed loan modification is destined to fail in this market, when there is no longer an incentive (home price appreciation) for the homeowner to stick around going forward.

(photo: pokpok313)

Source: thetruthaboutmortgage.com

Apache is functioning normally

Loan modifications carried out by mortgage financiers Fannie Mae and Freddie Mac surged since their government takeover, according to the FHFA’s November Foreclosure Prevention Report released today.

“Loan modifications for October and November, which were the first two full months of the converservatorship, increased by 50 percent from the previous two months,” said James Lockhart, FHFA director.

“These data reflect the increased commitment of the servicers and the GSEs to help borrowers in trouble modify their loans to keep them in their homes.”

Which begs the question, what were they doing prior to the takeover? Answer: mainly simple repayment plans.

Loan modifications increased from a monthly average of 2,883 in 2007 to roughly 5,000 a month in linked quarters, then climbed to 5,600 in October and 8,291 in November.

Actual loan mods accounted for 24 percent of all loan workouts in November, up from 16 percent a month earlier and 13.7 percent in September, but nowhere near the 66 percent share in 2007 (that could be attributed to the sharp rise in repayment plans).

Both foreclosure starts and foreclosure sales spiked in October before falling precipitously in November, and will likely fall even further thanks to recent measures to halt such activity.

The loss mitigation ratio, which is total loss mitigation activities (loan mods, payment plans, short sales, charge-offs, etc) divided by the total of loss mitigation activities plus foreclosures completed and third-party sales increased to 61.7 percent in November.

That’s the highest level since June, when it stood at 64.8 percent, and significantly higher than the year-to-date ratio of 55.2 percent.

However, loan delinquencies show no sign of letting up, with both 60+ day and 90+ day lates nearly doubling since March 31.

Fannie Mae to Loosen Guidelines on Rate and Term Refis

Fannie Mae has also announced plans to ease underwriting and appraisal guidelines on rate and term refinances of Fannie Mae owned loans in an effort to allow more troubled borrowers to take advantage of the low mortgage rates currently on offer.

The so-called “DU Refi Plus” loan program will begin on April 4.  Hopefully interest rates will still be low…

Source: thetruthaboutmortgage.com

Apache is functioning normally

In an effort to boost loan workouts and their related effectiveness, a plan is reportedly in the works to give mortgage lenders a subsidy if they cut mortgage rates for troubled borrowers, according to the Washington Post.

The Obama Administration is apparently mulling over a proposal that would provide greater incentives for lenders to offer loan workouts to more borrowers in need, not just those close to foreclosure.

Under one possible scenario, the government would share the cost of lowering an at-risk borrower’s interest rate, which may promote the use of loan modifications as a loss mitigation tool instead of less effective repayment plans.

“For example, consider a homeowner with a $200,000 mortgage and a 9 percent interest rate who now pays about $1,700 a month, including taxes and insurance. Lowering the interest rate to 5 percent would reduce the payments to about $1,160. The government and industry would each chip in to cover the difference, about $540,” the Post reported.

The program will likely be financed with the $50 billion in Troubled Asset Relief Program (TARP) funds set aside for homeowner relief.

It’s unclear how such a program would be carried out, though sources close to the plan believe Fannie Mae and Freddie Mac will have some involvement.

Homeowners looking for such aid may be subject to an affordability test, as well as an appraisal of their home to qualify.

Of course, some critics have already argued that many homeowners are simply beyond help, and don’t belong in a mortgage.

Others question why we should subsidize mortgage lenders to do what’s in their best interest to begin with, as a loan modification is often cheaper than foreclosing.

Regardless, most seemed optimistic by the notion of the plan, which was evident in a late rally on Wall Street.

But with re-default rates expected to be in the range of 60-70 percent, it’s hard to get too excited about the initiative, especially with the giant pool of underwater borrowers left to deal with.

(photo: loopoh)

Source: thetruthaboutmortgage.com

Apache is functioning normally

At its Annual event Wednesday, Mortgage Bankers Association Chief Economist Mike Fratantoni forecast that mortgage rates could rise in the year to come, but that they will remain near all-time lows.

Fratantoni pointed out that the job losses seen in 2020 have been unprecedented, even when compared to the Great Recession.

“Yes, it’s come down to 10 million, but look at how that compares again to the peak in 2009 of 6.6 million,” he said. “This has just been a tremendous negative shock for the economy as a whole.”

However, due to the narrow industry focus of the job losses, this downturn has proved much different than what the economy saw in 2009. And the recovery will likely depend on how long the pandemic lasts.

“This distress is not going away soon,” Fratantoni said. “Many of these folks who thought they were on a temporary furlough are now reporting they have a permanent job loss. Many of the employers they thought they were returning to have gone bankrupt, and the longer this crisis lasts, the longer the restrictions are in place, and again, the public health demands that some of these restrictions remain in place, but the economic cost is real.

“And because you have so many people who are going to be displaced from what was the job they had chosen, that search for a new job in a new sector of the economy, even if it’s going to eventually be successful, is going to take more time, so we think the recovery from here is going to be a little slower than that what we have seen thus far in 2020,” he continued.

Earlier this year, the Federal Reserve ended its June two-day policy meeting  leaving rates unchanged and gave a strong indication that it will not raise interest rates for a long time. Fratantoni brought up this point, saying that short-term rates will stay at 0% at least until 2022 and said that we will see a very cautious Fed when it comes to raising rates from here.

However, he forecasted that mortgage rates will steadily rise over the next year. The chart below shows interest rates for the 30-year fixed-rate mortgage will end this year at about 3% and could hit around 3.3% in 2021.

Housing inventory and prices

Given the low interest rates that are driving demand, housing inventory has become a rising concern. MBA Associate Vice President of Industry Analysis Joel Kan explained that current inventory rests at just a three-month supply. He said as builders work to replenish the supply with new homes, the most recent census data shows a 1.1 million annualized pace for new construction — the highest level since 2007.

But while inventory is increasing, it is not happening fast enough, putting upward pressure on home prices. Kan explained estimates show an annual increase of about 4% to 5%, a trend that will continue in the year ahead.

Profitability

Before this year, 2003 was the last time a record was set for profitability on the origination side, and 2012 was the last record year for refinances. However, MBA Vice President of Industry Analysis Marina Walsh predicted 2020 could possibly set new records for profits for independent mortgage bankers.

MBA forecasts mortgage originations to total $3.18 trillion in 2020 – the closest we’ve gotten to 2003’s high of $3.81 trillion. In 2021, mortgage originations are expected to fall to around $2.49 trillion, which would still be the second-highest total in the past 15 years. At $1.54 trillion, next year’s purchase originations would eclipse the previous all-time high of $1.51 trillion in 2005.

“What’s interesting too, is look at that orange line, that’s the average production volume,” Walsh said. “Usually in our quarterly performance report, you would think that that’s an annualized number three, for 350 IMB at 1 billion. But 1 billion is the average for that particular quarter. So exceptionally high volume and exceptionally high profits as well.”

Servicing

On the servicing side of the business, elevated borrower delinquency rates – particularly for FHA borrowers – remain a concern. Top of mind for servicers will be pursuing the most appropriate loss mitigation strategies for post-forbearance borrowers and investors.

“Servicers will remain busy in 2021 helping borrowers exit mortgage forbearance and into longer-term solutions,” Walsh said. “This will likely result in the operational need for additional loss mitigation personnel and increased servicing costs.”

And while delinquencies hit all-time highs over 2020, Walsh explained the forbearance options kept foreclosures low and could continue to help borrowers into 2021.

Walsh said that as more loans fall into the seriously delinquent bucket, servicer costs could rise.

“Based on the data that we have now, productivity is actually continuing to increase, but that’s only for through the first half of 2020,” she said. “Same thing happened for those of you that were around in 2009, whereby we had very high delinquencies and our costs hadn’t quite caught up yet and as loans get more delinquent and are seriously delinquent, that’s when the real costs start to really come into play.

“We do expect in 2021 that as these loans are in the seriously delinquent stage, especially for servicers with large FHA pool — FHA loans as a percentage of their overall volume — we would expect to see the servicing costs go up and productivity drop and continued hiring of loss mitigation specialists,” Walsh said.

The pandemic effect

However, the MBA’s 2021 forecast assumes an effective vaccine will bring the COVID-19 pandemic under control, leading to a gradual economic recovery that is aided by further fiscal stimulus.

“The economy, labor market, and housing market have all seen meaningful rebounds since the onset of the pandemic, but there is still profound uncertainty,” Fratantoni said. “Additional waves of the virus could lead to further lockdowns and more job market instability.

“On the other hand, another pandemic-related stimulus package would result in faster economic growth and additional support for the housing market, albeit with slightly more upward pressure on mortgage rates,” Fratantoni added. “2021, particularly the second half, should be a year of continued purchase growth and slowing refinance activity.

“As long as the spread of the pandemic is brought under control, the economy should expand around 3% next year, allowing the job market to improve, incomes to rise, and home sales to meaningfully increase,” Fratantoni said.

Source: housingwire.com