Are you interested in the intersection of housing and technology, want to see demonstrations of emerging solutions from startup companies, and meet people from throughout the housing value chain?
A Geek Estate Mastermind member, Matt Hoffman from InnovationVentures, has curated a great event, HousingTech Interactive, taking place in Washington DC on November 7th.
5:30-7:30pm 421 7th Street, NW, Washington, DC 20004
There will be presentations from six cutting edge startup companies with new business models and tech-driven solutions changing the housing market:
CityBldr: unlocking trapped land value through machine learning.
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Module – modular infill that transforms to meet occupants’ changing needs.
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Common: co-housing to meet new living needs.
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Arrived: enabling renters to earn equity in a REIT-like entity.
New Story: ending homelessness through 3D-printed homes.
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Urbaneer: mobile wall systems and furniture for denser living.
Today’s mortgage rates remain at levels that are much higher than most of the past few decades, but refreshingly lower than most of the past 3 weeks. The average lender was just a hair higher, officially, but the average borrower will not see any difference in today’s vs yesterday’s rate quotes.
As for culprits behind the bigger picture surge and the smaller picture recovery, most of the measurable blame falls on data. Sure, we can talk about Fed stimulus and fiscal issues as root causes, but ultimately it’s the measurable increase in inflation and the measurable resilience in the economy that is keeping rates high.
It’s also been the measurable cooling in the same data that has allowed rates to ease off those highs in recent weeks. This began most noticeably with last week’s PMI data (“purchasing managers indices,” which are like mini GDP readings that come out every month), but it has continued this week due to several important economic reports.
The most important report is yet to come. Tomorrow morning brings the big jobs report at 8:30am ET. That’s before the time that mortgage lenders set rates for the day, and the data has the power to drastically change trading levels in the bond market. Bottom line, rates could be significantly higher or lower tomorrow, depending on the outcome of the data, and this particular data has a long history of surprising outcomes in both directions.
Mortgage rates rose from a record low this week, increasing above the 3% threshold, as a resurgence in COVID-19 infections in the U.S. caused lenders to worry about the jobs market.
The average rate for a 30-year fixed mortgage is 3.01%, Freddie Mac said on Thursday, up from 2.98% last week, which marked the first time the rate fell below 3%. The 15-year rate averaged 2.54%, up from last week when it was 2.48%, the lowest in a data series going back almost 30 years, according to the mortgage financier.
Mortgage rates rose as lenders reacted to news of record-setting COVID-19 infections in some of the nation’s biggest states. The resurgence of the pandemic caused jobless claims to rise this week for the first time since late March, the Labor Department said in a report on Thursday.
“The concern is that the pause in economic activity will cause unemployment to remain elevated, which will lead to longer-term labor market distress,” said Sam Khater, Freddie Mac’s chief economist.
If the rate had tracked the 10-year Treasury yield this week, as it normally does, it likely would have set a new record low. Investors are piling into the bond markets because of concerns about the impact on the economy of the worsening pandemic.
But lenders are letting that difference, known as a margin or a spread, widen as they keep a buffer called a “risk premium,” said Keith Gumbinger, vice president at HSH.com, a mortgage data firm.
The higher rate may also reflect that lenders are overwhelmed by applications to refinance mortgages and don’t want to worsen the flood of new borrowers, he said.
“In the last couple of weeks we’ve seen a flare of refinancing activity,” Gumbinger said. “Lenders are thinly staffed, so this could be a little metering of the flow of inbound business.”
In the long-term, rates likely are heading lower, he said.
“I still think rates are going to go lower as we go forward because of the slow economy, and we probably will see risk premiums easing going forward,” Gumbinger.
Mortgage rates eased back down this week, but remain above 7%, which is prohibitively high for many homebuyers.
The average rate on the 30-year fixed mortgage declined to 7.18% this week from 7.23% the week before, according to Freddie Mac. This marks the third straight week rates have been above 7%, the first time that’s happened since April 2002.
Elevated rates are colliding with the end of the traditional homebuying season, but the environment remains a major headwind for those buyers left in the market and further cements many homeowners’ decisions to not sell now.
“The impact of mortgage rates on activity right now might not be all that big because activity is expected to slow down,” Zillow senior economist Orphe Divounguy told Yahoo Finance. “The housing market is very seasonal so it’s expected to slow down right now and pick back up in the spring.”
Buyer demand still low
Buyers still in the market took advantage of the somewhat softer rate.
Mortgage application volume for purchases picked up 2% last week on a seasonally adjusted basis, compared with the previous week, the Mortgage Bankers Association (MBA) survey for the week ending Aug. 25 found.
“Treasury yields peaked early in the week and did move lower by the end, which may have spurred some activity,” MBA deputy chief economist Joel Kan said in a statement. Fixed mortgage rates tend to follow the direction of the 10-year Treasury yield.
Still, demand remains low, Kan said, with volumes off 27% from the same time last year.
Adding to the affordability concerns are home prices, which have been pushed up by solid demand and sparse inventory.
In June, home prices rose for the fifth consecutive month, according to the S&P Case-Shiller US National Composite home price index, which is off just 0.02% from its all-time peak a year ago.
Reluctant homeowners
Mortgage rates are also to blame for the shortage in homes for sale.
Most homeowners have a mortgage rate far below the prevailing rate. According to the Bureau of Economic Analysis, the average rate on all outstanding mortgage debt was 3.59% in the second quarter, nearly half the 7.18% rate recorded this week.
“For the bulk of those who already have a mortgage, a new mortgage at current rates would incur significantly higher costs,” Jake Gordon, research analyst at Bespoke Investment Group, wrote in a note following the BEA’s revised data release on Wednesday.
“That gives them little reason to enter the housing market, and thus, is part of the reason for the dearth in housing inventories,” the analyst added.
New homes to the rescue
With little on the resale market, some buyers have turned to new homes.
New construction now made up nearly 31% of the for-sale inventory pie in July, up from around 20% in the years from 2000 until the pandemic, according to analysis from Odeta Kushi, First American’s deputy chief economist.
As a result, builders have ramped up construction and incentives. A prevalent perk is paying for mortgage rate buydowns for prospective buyers.
For instance, some new buyers are getting mortgage rates below 6% as builders allocate 4%-6% of the home sale proceeds toward buying down the mortgage rate, data from John Burns Research & Consulting shows.
“As mortgage rates swing between the low- and mid-7% range, we could see this uncertainty around rates have more of a cooling effect on sales,” Eric Finnigan, vice president of research and demographics at John Burns Research and Consulting, told Yahoo Finance.
Mortgage rate forecast
Where mortgage rates go from here remains to be seen.
“Recent volatility makes it difficult to forecast where rates will go next, but we should have a better gauge in September as the Federal Reserve determines their next steps regarding interest rate hikes,” Sam Khater, Freddie Mac’s chief economist, said in a statement.
The increase in rates is largely because the yield on the 10-year Treasury has skyrocketed over the past 18 months as the Federal Reserve tries to tamp down inflation to its 2% goal.
Read more: What the latest Fed rate hike plan means for mortgage rates and loans
The Fed’s preferred inflation reading slightly ticked up on annual basis in July, according to a government release on Thursday, overturning some of the prior month’s drop as the battle to bring down inflation could be slower.
Last week, Federal Reserve Chairman Jerome Powell warned in his Jackson Hole speech that inflation still remains too high, suggesting that the central bank isn’t done.
“Additional evidence of persistently above-trend growth could put further progress on inflation at risk and could warrant further tightening of monetary policy,” Powell said, also noting that home prices are still going up, even after 11 rate hikes.
“In addition, after decelerating sharply over the past 18 months, the housing sector is showing signs of picking back up.”
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Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv.
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New York-based investment firm Cerberus Capital Management has entered into a definitive agreement to acquire home equity lender Spring EQ, the companies announced on Friday. The terms of the deal were not disclosed.
The transaction will allow Cerberus executives to realize new opportunities as demand for home equity solutions in the U.S. accelerates. Meanwhile, Spring EQ will be able enhance its platform through further investments in technology, new commercial opportunities and growth-based operational initiatives, the company said.
Founded in 1996, Pennsylvania-based Spring EQ offers home equity, HELOCs, refis and purchase loans. It gives customers access to 95% of their home equity, at a maximum of $500,000, with terms from five to 30 years.
Like its peers, however, higher rates put pressure on Spring EQ’s business model. According to mortgage tech platform Modex, the company originated $480 million over the last 12 months, with its monthly volume declining from about $60 million in 2022 to $28 million in 2023. The company has 76 active loan officers in four branches, according to Modex.
Mortgage industry veteran Jerry Schiano, Spring EQ founder and CEO, and the current management team, will lead the company following the completion of the transaction, which is expected to happen in the fourth quarter of 2023. The deal is subject to customary closing conditions and regulatory approvals.
Schiano has more than 30 years of entrepreneurial experience in the mortgage industry. Before Spring EQ, he founded New Penn Financial, which was sold to Shellpoint Partners and later acquired by New Residential Investment Corp., which was rebranded asRithm Capital.
“The Cerberus team’s mortgage expertise, technology capabilities, and operational resources will help propel our growth, better positioning us to make an even greater impact,” Schiano said in a news release.
Joe Steffa, managing director of Cerberus Residential Opportunities, said demand is rapidly increasing for home equity solutions “amid higher interest rates and record levels of untapped residential home equity in the United States.”
Morgan Stanley & Co served as financial advisor to Cerberus and GreensLedge Capital Markets to Spring EQ.
A lot rides on a home appraisal, whether you’re trying to sell a house, refinance your mortgage or tap into your home equity.
An appraisal may come in lower than you expected because property values dropped or because you’ve overestimated your home’s market value. But the appraisal process isn’t foolproof, and there are options if you think the appraiser got it wrong, or you suspect that you’ve been subject to appraisal discrimination.
Here’s what to do if your home appraises for less than you think it should.
Understand how an appraisal affects home equity
A home appraisal is a licensed appraiser’s opinion of home value, based on research, analysis and professional judgment. Lenders require an appraisal for most kinds of home loans because the property serves as collateral for the loan — they don’t want to lend more than the property is worth. Lenders plug the appraised value into a formula called the loan-to-value ratio (LTV) — the loan balance divided by the home value. A combined LTV includes the balance of the mortgage plus the amount of a home equity loan or line of credit. The ratio affects the amount you can extract in home equity and whether you can refinance.
Here’s an example of how the appraised value would affect borrowing from your home equity. Say, for instance, a lender’s maximum combined LTV is 85%. You’d like to borrow $100,000 through a home equity loan and currently owe $200,000 on your mortgage.
If your home appraised for $375,000, your combined loan-to-value ratio (300,000 divided by 375,000) would be 80%, and you might qualify. But if the home appraised for $325,000, the LTV (300,000 divided by 325,000) would be 92%, too high to meet the lender’s requirement.
Check the appraisal report for accuracy
The lender is required to send a free copy of the appraisal report to the loan applicant at least three days before the loan closes. So you’ll get one if you’re refinancing or applying for a home equity loan. But in a home sale, the buyer will receive it as part of the mortgage process. If you’re the seller, work with your real estate agent to get a copy of the report from the buyer.
The appraisal report documents a slew of property details that the appraiser considered in the valuation. Even the best appraisers can make mistakes, so scour the report to make sure all the particulars are correct, such as:
Number of bedrooms and bathrooms.
Square footage.
Amenities, including fireplaces, patios and pools.
Garage type and condition.
Condition of roof, furnace or other major systems listed on the report.
Additional features, such as energy-efficient systems.
Evaluate the ‘comps’
To help determine home value, appraisers consider prices of comparable homes that were recently sold in the area, known as real estate comps.
Check which homes were used. Were they truly comparable? How nearby are the homes, and how recently were they sold?
You may want to ask a friendly real estate agent familiar with your neighborhood — or your agent, if you’re working with one — for a list of recent comparable sales.
🤓Nerdy Tip
Understand that appraisals are different from online home value estimates. The appraisal isn’t wrong just because it’s lower than the ballpark figure you saw online. Home appraisals take more details into account than home-search algorithms can, so use online estimates as guidelines only.
Submit a ‘Reconsideration of Value’
Promptly document any mistakes or missing information from the appraisal report, as well as any additional information about comparable sales that you think should be considered. If you’re the loan applicant, then submit that written information as part of a “reconsideration of value” to your lender.
If you’re the home seller, ask your real estate agent to communicate those issues to the buyer and ask the buyer to submit the information to their lender.
Although the loan applicant ultimately pays for the appraisal, the appraiser actually works for the lender. So any feedback about the appraisal should go to the lender, not the appraiser.
The lender will pass along the information to the appraiser. The information you provide could prompt the appraiser to revise the valuation, but only if the additional details are relevant and significant enough to move the needle.
A loan applicant could also ask for a second appraisal or start over with a different lender. But appraisals typically cost at least a few hundred dollars, and there’s no guarantee the next appraisal will come in higher.
File a complaint if you suspect discrimination
Under the U.S. Fair Housing Act of 1968, home appraisers aren’t allowed to discriminate based on someone’s race, color, religion, sex, disability, family status or national origin. Yet many media reports in recent years have highlighted instances in which properties appraised for more when Black homeowners hid evidence of their race. Although the stories were new, the concept of “white-washing” a home to get a fair value has a long and painful history in the Black community.
Another option is to file a fair housing complaint. You can do that directly with the Department of Housing and Urban Development’s Office of Fair Housing and Equal Opportunity or get help through your local fair housing center. Funded through HUD’s Fair Housing Initiatives Program, fair housing centers do preliminary investigations and help people navigate the complaint process. You can find a fair housing organization near you on the HUD website.
Refinance programs that don’t require appraisals
If you have a mortgage backed by the Federal Housing Administration or the Department of Veterans Affairs, you may be able to refinance without getting an appraisal. These programs, however, don’t let you cash out any of your home equity:
Earlier this week, the Labor Department’s Job Openings and Labor Turnover Survey (JOLTS report) showed that job openings in the US fell by 338,000 in July to just over 8.8 million, with the number of Americans quitting their jobs slipping by 253,000 and the frequency of layoffs remaining largely unchanged. That figure for job openings … [Read more…]
A mortgage banker represents a lending institution, helping homebuyers explore their mortgage options and, ideally, close on a home loan.
A mortgage banker differs from a broker in that they’re tied to a specific lender (usually, the financial institution employing the banker).
To find a mortgage banker that’s right for you, set your home budget and shop around with multiple lenders.
There are many roles involved in the lending process, and you might work with different people from the time you get preapproved for a mortgage to closing. As a result, understanding who does what and when can make your life easier. Here, we explore what a mortgage banker does in the process of getting a home loan while differentiating their role from other mortgage pros (namely, mortgage brokers).
What is a mortgage banker?
A mortgage banker is a person or entity that originates, or initiates, home loans, and typically provides the funding for them. The home loan banker could be an individual or a large company, but in either case, they function in the same capacity. To give you a relatively simple mortgage banker definition, this is the entity that approves you for a loan and cuts a check to the home seller so you can get your keys to the house.
Many mortgage bankers generate revenue by charging borrowers an origination fee.
Once a mortgage banker originates a loan, the banker can keep the loan in its portfolio (in other words, on its books) and service it. Alternatively, they can sell it on the secondary market, sell the servicing rights to another party or a combination of the two.
What does a mortgage banker do?
The most important thing a mortgage banker does is determine whether to approve a borrower for a loan, which is usually accomplished through the banker’s underwriting department. A mortgage banker’s services might include:
Originating loans: Mortgage bankers have a variety of loans to offer, but some can specialize in particular types of loans, such as jumbo loans, VA loans or unusual financing options.
Servicing loans: Once the loan closes, your mortgage banker might also service your loan, meaning they manage the repayment process and assist you if you need help with repayment.
Selling loans: Mortgage bankers can also sell your mortgage or the rights to service your mortgage on the secondary market. Mortgage bankers do this to free up more capital to make more loans to more borrowers.
Mortgage banker vs. other mortgage professionals
The mortgage banker may not be the only home loan pro you work with to get financing for your house. You might also work with a mortgage broker or a loan officer, both of which have certain distinctions from a mortgage banker.
Mortgage banker vs. mortgage broker
Mortgage bankers are often confused with mortgage brokers, but they’re very different. A mortgage banker is tied to one financial institution, while a mortgage broker works independently of lenders. As a result, mortgage brokers can help you compare options from various lending institutions.
The broker helps you shop around for a good deal from multiple lenders or bankers, generally at no cost to you as the borrower. But their role maxes out at a certain point. Unlike bankers, brokers don’t fund loans — they simply guide you through the process of finding the best loan for your situation.
“A banker uses their own money for funding while a broker only facilitates between a borrower and a lender,” says Paul Sundin, CPA, CEO at Emparion, based in Chandler, Arizona.
Although the funding source might not seem too important to you as the borrower, it is useful to know as you navigate the homebuying process. Ultimately, the mortgage banker, not a broker, will be the one to make the decision about your loan. In fact, some people who get a mortgage never work with a broker at all, instead working straight with the mortgage banker from the get-go.
Mortgage banker vs. loan officer
The difference between a mortgage banker versus a loan officer might not be as obvious. All mortgage bankers are loan officers, but not all loan officers are mortgage bankers. A loan officer typically works for a single financial institution and can only offer products and rates set by that institution.
Mortgage bankers, on the other hand, might have more flexibility. Mortgage bankers may be able to get multiple offers from institutions they work with, and they can also originate all types of loans, giving you flexibility in the type of loan you can apply for.
Which type of mortgage professional is right for you?
To find the right mortgage professional for you, compare offers from multiple sources. That can include mortgage bankers from a few different lenders and a mortgage broker, who can help you cast your net even wider to find the best deal.
You may be tempted to choose the first professional you talked to, but that could end up costing you thousands of dollars.
Compare several offers within a span of a few days so you can get an accurate snapshot of current rates. Mortgage rates change frequently, so it’s important to compare offers within a short time.
How to find a mortgage banker
Are you looking for a mortgage to buy a home, or do you want to refinance your loan to a new one? Here are some quick tips on getting the best mortgage and finding the right mortgage lender:
Boost your credit: A good credit score can help you secure the best loan rate and terms from mortgage bankers. As you start to consider different lenders, take action to improve your credit, if needed.
Set your own budget: Although a bank might approve you for a larger loan, it can be wise to only go with what you can reasonably afford. You can use Bankrate’s home affordability calculator to find out where you’d be most comfortable based on your budget.
Compare rates from multiple lenders: Look for the lender that offers you the best rate and good terms to match. Get loan estimates from multiple lenders—including banks—so you can compare offers and find the right mortgage for you. While a mortgage banker at each institution can help, you can also compare mortgage rates easily through Bankrate.
Banks serve two main purposes. They provide loans to consumers who need a helping hand, and they provide a place to store cash, also known as a deposit.
The two actions aren’t independent of each other, and are actually very much interconnected.
For example, banks lend money out a certain rate and pay customers a certain return if they keep their money at the bank.
The two rates rely on one another to ensure the bank makes money. The short version of the story is that the bank must pay depositors less than what it charges to lend.
That’s why we see mortgage rates on the 30-year fixed around 4%, and savings accounts paying closer to 1% APY. This spread allows banks to make money and continue lending to consumers.
Low Mortgage Rates Are Bad News for Those Who Don’t Have a Mortgage
While everyone has been banging on about low mortgage rates for years now, many fail to mention that savers (and really anyone without a mortgage) are getting the short end of the stick.
As noted, when interest rates on loans move lower, as they have over the past several years, savings rates must drop as well, seeing that the two tend to move in tandem.
Before the financial crisis, it was actually quite common to see savings rates in the 3-4% APY range, which certainly wasn’t bad from a saver’s point of view.
Banks were offering great savings rates because they needed more money in the coffers to lend out to consumers, who were especially hungry for loans.
Remember, banks were going haywire making new loans during the housing boom, so they also had to attract depositors to ensure they had collateral.
Interestingly, the gap between savings and mortgage rates wasn’t all that wide back then, with the 30-year fixed ranging between 5-6%, compared to around 4% today.
Meanwhile, savings accounts were commonly in the 3% or higher range if you went with a bank that offered a more aggressive return.
Today, the gap between one-month CD rates (0.06%) and the 30-year fixed (4.5%ish) is the highest it has been since mid-2011, according to MoneyRates.com, which releases the so-called “Consumer’s Lost Interest Percentage (CLIP) Index.”
The company noted that the gap widened to 4.43% in September, up three basis points from August. It has increased by a staggering 1.15% so far this year thanks to rising mortgage rates and savings rates that “haven’t budged.”
The average gap between CD rates and 30-year fixed mortgage rates since 1971 has been 2.83%, meaning today’s gap is 1.6% above the norm.
So What Do You Do with Your Money?
With the gap so wide, it’s clear that those with the bulk of their assets in low-paying savings accounts are losing out.
At the same time, mortgage rates are at near-record lows, so one has to scratch their head a little.
Do you pay down the mortgage early, which has an ultra-low rate that will probably never be lower? Or do you throw your money into a savings account that is paying next to nothing?
Or, do you say to heck with savings accounts and try your luck in the stock market, which also happens to be sky-high currently?
It’s certainly not an easy decision, and it’s clearly not good news for renters and those who have already paid off their mortgages.
But perhaps the best option is to tackle other high-APR debt, such as credit cards, which tend to have interest rates in the teens and higher.
If the only debt you have is mortgage debt, there are plenty of ways to pay down your mortgage a little quicker, including going with a shorter-term mortgage, such as the 15-year fixed. That will reduce the gap as well, seeing that rates on 15-year loans are lower than those on 30-year mortgages.
But you might regret locking that money up a few years down the line if both savings and mortgage rates go up, especially if inflation rears its ugly head.
Payrolls at nondepository mortgage bankers and brokers inched down as spring homebuying ended, according to the latest estimates from the Bureau of Labor Statistics.
The slight drop in representative payroll estimates to 340,000 from a downwardly revised 341,500 the previous month suggests some seasonality has returned to the market.
Spring homebuying this year boosted second-quarter volumes markedly above those seen in the previous fiscal period for the first time in two years, according to a report that Attom, a curator of land, property and real estate data, released Thursday.
The number of mortgages originated rose 21% on a consecutive-quarter basis to 1.56 million but was still 38% lower than a year ago.
“It looks like owners took advantage of the small rate drop to refinance existing loans, while a jump in mortgages for purchasers was likely fueled by a number of forces,” Attom CEO Rob Barber said in the report.
May appears to have been the strongest month for industry hiring this year, when job numbers peaked at an upwardly revised 343,900.
Meanwhile, in broader employment data that the BLS reports with less of a lag than industry estimates, the United States added 187,000 jobs in August as compared to a downwardly revised 157,000 the previous month.
“With the markdowns in the rate of job growth for June and July noted in this report, the cumulative effect is a noticeable slowdown in the job market,” said Mike Fratantoni, chief economist, Mortgage Bankers Association, in a report issued Friday.
Unemployment rose to 3.8% from 3.5%, as more people that left the job market returned to it but found it difficult to obtain work. The annualized rate of wage growth was a little slower at 4.3%.
The rate of wage growth is still likely above the level monetary policymakers would like to see given their 2% inflation target, but other employment numbers might deter further rate hikes, according to Fratantoni.
“This report should be enough for the Fed to keep the federal funds target rate on hold at its next meeting,” he said.
Some relief from rate pressure would be welcome in the mortgage market given a rise in financing costs since spring that’s likely contributed to the dip in industry hiring.
“With mortgage rates near 7%, consumers are feeling the pinch,” said Odeta Kushi, deputy chief economist at First American, in a report issued Friday.
However, there’s still enough household formation in the market to compel builders, who have shown a willingness to make selective price concessions, to provide additional supply.
“Demographic tailwinds from millennials aging into their prime homebuying years and a lack of existing-home inventory means new home construction is essential in meeting shelter demand,” Kushi said.
Residential construction jobs increased by 2,400 in August, Kushi noted.
“You need more hammers at work to build more homes. That’s why residential building jobs are still up more than 10% compared with prepandemic levels, despite the rate environment,” she said.