Morgan Stanley

Apache is functioning normally

Apache is functioning normally

It’s looking more likely that there will be a government shutdown beginning October 1st, which begs the question, what happens to mortgage rates?

Do they go up even more, do they fall, or do they do nothing at all?

At first glance, you might think that they’d rise because of the uncertainty involved with a shutdown.

After all, if no one is quite sure of the outcome, or duration, banks and lenders might price their rates defensively.

That way they don’t get burned if rates shoot higher. But history seems to tell a different story.

Bond Yields Tend to Fall During Government Shutdowns

As a quick refresher, mortgage rates track 10-year bond yields pretty consistently. So if the 10-year yield falls, long-term 30-year fixed rates often fall as well.

Conversely, if 10-year yields rise, which they have quite a bit lately, mortgage rates also increase.

The 10-year yield began 2022 at around 1.80 and is around 4.60 today. Since that time, the 30-year fixed has climbed from roughly 3% to 7.5%.

So there’s a pretty strong correlation between the two, though the spread between them has widened over the past couple years as well.

Since mortgage bonds are inherently riskier than government bonds, there’s a premium, or spread that must be paid to investors.

You used to be able to price the 30-year fixed mortgage at about 170 basis points above the 10-year yield. Today it might be closer to 275 bps or even more.

Anyway, the 10-year yield seems to fall during government shutdowns because of the old flight to safety.

And here’s what Morgan Stanley had to say on the matter: “On average, during shutdowns since 1976, the 10-year Treasury yield has fallen 0.59% while its price has ticked up, suggesting that investors favor the safe-haven asset during these periods of uncertainty.”

In other words, if the 10-year yield falls during the shutdown, 30-year mortgage rates should also drift lower.

How much lower is another question, but if they continue to track the 10-year yields, a .50 drop in Treasuries might result in a .25% drop in mortgage rates.

Did Mortgage Rates Fall During Prior Government Shutdowns?

Now let’s look at some data to see if mortgage rates actually fall when the government shuts down.

The most recent government shutdown took place from December 21st, 2018 until January 25th, 2019.

It was the longest shutdown in history, lasting 34 days. There was one in early 2018, but it only lasted two days.

I did a little research using Freddie Mac mortgage rate data and found that the 30-year fixed averaged 4.62% during the week ending December 20th, 2018.

And it averaged 4.46% during the week ending January 31st, 2019.

Of course, the shutdown drama started earlier in the month of December 2018 when the 30-year fixed was priced closer to 4.75%.

So if we factor all that in, you might be looking at a 30-basis point improvement in mortgage rates.

Prior to that shutdown was the one that occurred on September 30th, 2013 and lasted 16 days.

The 30-year fixed averaged 4.32% during the week ending September 26th, 2013, and fell to 4.28% during the week ending October 17th, 2013.

Not much movement there, but it did continue to drift lower in following weeks and ended October at 4.10%.

You then need to go all the way back to December 15th, 1995 to get another shutdown, which took place under President Clinton.

It lasted 21 days, ending during the first week of 1996. During that time, the 30-year fixed fell from around 7.15% to 7.02%, per Freddie Mac.

Prior to these shutdowns, most only lasted a few days and thus probably didn’t have much of an impact, at least directly.

All in all, mortgage rates did improve each time, though not necessarily by a huge margin. Still, any .125% or .25% improvement in pricing is welcomed right now.

A Lack of Data Makes It a Guessing Game

If the government does in fact shut down this coming week, it’ll mean that certain data reports won’t get released.

This means we won’t see the Employment Situation, scheduled for next Friday, nor will we see CPI report the following week.

There are many other reports that also won’t be released between this time and beyond, depending on how long the shutdown goes on.

As such, we’ll all be flying in the dark in terms of knowing the state of the economy. And the direction of inflation, which has been top of mind lately.

The good news is the Fed’s preferred inflation gauge, the personal consumption expenditures price index (PCE), already came out.

And it was weaker than expected. Prior to that report, we were getting some signs that the economy was still running too hot.

So the timing might work here in terms of higher bond prices and lower yields, which in turn would drive mortgage rates down too.

After all, our last piece of information was that inflation and consumer spending rose less than expected, which is good for rates.

Read more: How the Government Shutdown Affects Various Types of Mortgages

Source: thetruthaboutmortgage.com

Apache is functioning normally

Apache is functioning normally

Update 9/28/23: The 125k offer has come back again now after many months of being lower. (ht USCCG)

The Offer

Direct link to offer

  • American Express is offering 125,000 points after $6,000 in purchases within the first six months of being a cardmember


Card Details

  • Annual fee of $695 is not waived the first year
    • Morgan Stanley version of the Platinum card offers one free Platinum authorized user, then $195 for each one thereafter
    • Authorized Gold cards are free
    • Full details here
  • Card earns at the following rates:
    • 5x points per $1 spent on purchases made with airlines or with American Express Travel
    • 5x points per $1 spent on hotel & airline bookings made directly from the American Express travel website
    • 1x points on all other purchases
  • $200 airline incidental credit per calendar year
  • $200 Uber credit ($15 per month and additional $20 in December)
  • Lounge access:
    • Centurion lounge access
    • International American Express lounge access
    • Delta SkyClub lounge access
    • Priority pass select membership
    • Airspace lounge access
  • $240 digital entertainment credit. This is a credit of $20 per month and can be used on Peacock, Audible, SiriusXM and The New York Times.
  • $200 hotel credit. This can be used on select prepaid bookings (Fine Hotels + Resorts® and The Hotel Collection) when using American Express Travel
  • $179 Clear credit
  • $300 Equinox credit. This is a $25 credit each month
  • Global Dining Access by Resy
  • The Global Lounge Collection

Our Verdict

You need to be a Morgan Stanley customer to be eligible for this card and you can no longer use the access investing work around unfortunately. It’s rare we see increased offers on these co-branded versions of the Platinum card, so it’s worth signing up if you are eligible and can make use of all the various credits. We will add this to our list of the best credit card bonuses.

Hat tip to FM


Source: doctorofcredit.com

Apache is functioning normally

Apache is functioning normally

Data Mining, Digital Lending, Real Estate Database, Servicing Products; Conventional Conforming Program Shifts

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Data Mining, Digital Lending, Real Estate Database, Servicing Products; Conventional Conforming Program Shifts

By:
Rob Chrisman

49 Min, 7 Secs ago

As if lenders and vendors don’t have enough other stuff to worry about, the budgetary standoff in the U.S. doesn’t look like it will abate soon, raising the likelihood of the first government shutdown since 2019. Current funding for federal operations will end on October 1 unless a deal is reached or the proverbial can kicked down the road. Thousands of federal workers might be furloughed without pay. Sure it will be temporary, and its wider impact will likely be limited, but still even talking about it is lousy. According to Morgan Stanley, the last 20 government shutdowns that occurred since 1976 “appear to have had limited impact on the economy.” As for bond prices, a shutdown may cause some “temporary instability”, but this is not a given. There is talk of a short-term Continuing Resolution (CR) providing funding until later this year, but federal agencies, including HUD and Treasury, will cease to function normally. The National Flood Insurance Program (NFIP) authorities also expire on October 1st. The Mortgage Bankers Association created a guide outlining how HUD (including FHA and Ginnie Mae), VA, and USDA would be directly affected by the furlough of government employees and the curtailment of agency operations. (Today’s podcast can be found here and this week’s is sponsored by Built. Built is powering smarter and faster money movement for the entire construction and real estate ecosystem, all while reducing risk. Hear an interview with Servbank’s Bryan Crofford on how companies can best invest in employees, promoting longevity and success.)

Lender and Broker Software, Programs, and Services

Life can change on a dime, and sometimes even the most prepared borrowers end up facing financial hardships they never would have imagined. Forward-thinking credit unions are preparing today, so they can be there for their members when they need help the most. It’s why Mission Federal Credit Union implemented the MSP® loan servicing system, to not only improve their own efficiencies, but better serve their members who are facing financial difficulty. Are you ready to join Mission Federal Credit Union by enhancing your technology to be there for homeowners in life’s most challenging moments? Learn more about MSP today.

One thing that you can always count on in the mortgage space, is that regulatory requirements are always changing. This is why it’s critical for Banks or Mortgage Servicers to stay vigilant with comprehensive Compliance Testing and Monitoring to mitigate exposure and minimize risk. At the MBA Annual in Philadelphia, PA, Servbank’s Shayna Arrington will be helping us all do exactly that. Watch her moderate the panel, “Today’s Top Regulatory Issues” on Tuesday, October 17 at 1:30 PM, on 200 Level, Exhibit Hall E. Want to dive deeper into how Servbank can partner with you? Servbank will have a meeting space at the W Philadelphia on 10/16 and 10/17. Schedule some time to meet with them here: [email protected] or learn more at www.servbank.com.

One-Time Close (OTC) Volume Soars to record highs at AFR Wholesale® (AFR)! While housing inventory is still at an all-time low, OTC loans have witnessed an unprecedented surge in volume! In August, AFR closed more One-Time Close loans in one month than at any other time in their long history of offering the product. Homebuyers are increasingly drawn to the convenience and cost-saving benefits of OTC loans, as they streamline the construction process, reduce paperwork, and offer more favorable terms. This surge in OTC loans at AFR is not just a testament to its effectiveness but also an indicator of the outstanding clients and partners of AFR. Breaking news: As a thank you to their clients, AFR has also brought back FHA OTC on site-built homes!! This long-awaited product is back for partners of AFR to utilize now. Partner Today or contact AFR, email or call 1-800-375-6071.

One of the biggest questions for LOs in a down market is “How do I find more agent partners?” The answer is MMI. To find the right agent partners, you need the right data. MMI has assembled the industry’s most comprehensive real estate and mortgage transaction database which is leveraged by thousands of mortgage professionals daily. Using MMI’s database, LOs can easily search & filter, find an agent and at the click of a button, push the info to a CRM like Bonzo. Sign up for a demo today to see why a majority of the top 25 lenders rely on MMI.

Free eBook: Market-Proof: How to Build a Flexible Lending Business Resilient in Upcycles & Downturns. The exaggerated upcycles and downturns of the past few years underscore just how crucial it is for lenders to build resilience and flexibility into their businesses. To overcome today’s challenges, lenders need to hone their lending process at each step. In this new eBook, Maxwell provides 12 tips from industry veterans to help you optimize your mortgage process from loan application to the secondary market. You’ll get insight from exclusive interviews with industry veterans on how to increase efficiency, access economic scale, and become resilient to market volatility like never before. Click here to download Maxwell’s new eBook “Market-Proof: How to Build a Flexible Lending Business Resilient in Upcycles & Downturns.”

The transformation from paper to digital processes offers substantial benefits, including cost reduction and improved borrower experiences. Most lenders are in a hybrid phase, blending paper and digital processes. To navigate this ongoing change and ongoing innovations in the digital lending space, lenders should consider embracing five best practices: create a successful strategy, prioritize borrower experience, ensure compliance, harness technology, and stay adaptable in the evolving digital landscape. Tackle the future of lending by staying informed and proactive. For deeper insights into this digital lending revolution and actionable steps, read the full article.

“Heading to Vegas? The Total Expert team is in full force at the Digital Mortgage conference in Las Vegas! There are three ways to interact with us. The first is to stop by booth #501 to get your Customer Intelligence ROI report and learn how you could increase funded loan volume by 20 percent. You can watch a LIVE demo of Total Expert on Tuesday 9/26. Lastly, catch our Founder & CEO Joe Welu for a panel discussion: The Customer Data Goldmine Goes Way Beyond Credit Triggers on Wednesday 9/27.Schedule time to meet with the Total Expert team in Vegas.”

Freddie Mac, Fannie Mae, Conventional Conforming News

The Federal Housing Finance Agency (FHFA) released its second quarter 2023 Foreclosure Prevention and Refinance Report. The report shows that Fannie Mae and Freddie Mac (the Enterprises) completed 47,370 foreclosure prevention actions during the quarter, raising the total number of homeowners who have been helped to 6,818,471 since the start of conservatorships in September 2008. View the News Release

FHFA-OIG released two reports: Within the Federal Housing Finance Agency (FHFA), the Division of Federal Home Loan Bank Regulation (DBR) is responsible for supervising the Federal Home Loan Bank (FHLBank) System to ensure the safe and sound operation of the FHLBanks. In response to market disruptions, DBR adapted the scope of its Federal Home Loan Bank Supervisory Activities in 2023.

Regulated entities have not been immune to the trends affecting the labor market over the past few years. Some of the regulated entities experienced higher attrition in 2021 and 2022, consistent with trends in the broader labor market, but one Enterprise reported that its turnover rate started declining in 2022. Read the full report, People Risk at FHFA’s Regulated Entities.

Freddie Mac will update Loan Product Advisor® (LPASM) in October to support multiple recent Single-Family Seller/Servicer Guide announcements, plus more enhancements, described in Freddie Mac October LPA Releases.

Freddie Mac Loan Selling Advisor September Updates includes the following information: Uniform Loan Delivery Dataset (ULDD) Phase 4a Updates and Phase 5 Specification, Auto Evaluate on Import Loan, New Loan Delivery Rules Supporting the Duty to Serve Credit Fee Cap, Initial Principal and Interest Payment Amount Conditionality update, Auto Re-evaluate: Improvements to Modify and Evaluate, and Enhancements to Mandatory Cash Contracting.

Leverage Fannie Mae’s new edition of Beyond the Guide to help your organization build a best-in-class quality control (QC) program. Specific examples and scenarios provided can help teams understand and apply Selling Guide concepts in a way that is most impactful to their organization. A robust QC program helps strengthen loan quality ensuring a safe, sound, and resilient mortgage industry.

Fannie Mae Appraiser Update September 2023 edition focuses on dual themes of delivering high quality appraisals and understanding recent policy changes. Topics include updates to the Appraiser Independence Requirements (AIR), new options for 1004D completion, our stance on 3D printed homes, and more.

Fannie Mae posted the September Appraiser Quality Monitoring (AQM) list. Read the AQM FAQs.

Chris Whalen writes, “Our short take on the future of the GSEs (Government Sponsored Enterprises) looks a lot like the character played by Bruce Willis in the 1995 Terry Gilliam film, ‘Twelve Monkeys.’ Imagine if the GSEs were released from conservatorship, but then were immediately designated as a ‘systemically important financial institution’ (SIFI) by the FSOC. How do you think that would work for private investors? What would happen to the guarantee fees?”

Pennymac Conventional LLPAs updates effective for Best Efforts Commitments: Pennymac Announcement 23-58 replacement of ‘Purchase Special’ LLPA Grid with new ‘Area Median Income Adjustments’ LLPA Grid. Pennymac Announcement 23-59 introduces new ‘Investment Property’ LLPA to the ‘LLPAs by Product Feature for All Eligible Loans’ LLPA Grid. Pennymac Announcement 23-60 updates values for the ‘2nd Home Additional’ LLPA on the ‘LLPAs by Product Feature for All Eligible Loans’ LLPA Grid.

Pennymac is aligning with the FHFA based updated project review and eligibility requirements announced in Fannie Mae SEL 2023-06 and Freddie Mac Bulletin 2023-15, with the exception of any reference to co-op projects. View Announcement 23-61: GSE Updated Condo Project Review Requirements

Citizens Correspondent National Bulletin 2023-16 provides updates on the following topics: Conventional Conforming Products, Review requirements for condominium eligibility – DU and LPA, Gifts and Gifts of Equity – DU, 3D printed homes, Trust Income – DU, USDA-RD Product, Fiscal Year 2024 Conditional Commitment Notice, All Products, Disaster Tax Filing Relief.

PHH Mortgage Corporation updated Conforming Product listings for both Delegated and Non-Delegated loans.

Pennymac announcement 23-62: Fannie Mae SEL 2023-06 Condo Project Manager Updates

Citi Correspondent Lending Bulletin 2023-08 provides Credit policy updates regarding Non-Agency Depreciating Markets list updated, Condo & Co-Op Critical Repairs, Shared Equity and Shared Appreciation, LPA Asset, and Income Modeler (AIM), Continuity of Obligation: Limited Cash-Out, Hazard Insurance Update: Effective Date, and Taxpayer First Act.

On September 6, 2023, Fannie Mae and Freddie Mac announced Selling Guide policy changes addressing multiple topics in Fannie Mae SEL-2023-08 and Freddie Mac Bulletin 2023-18.

AmeriHome Mortgage accepts all revisions, view Product Announcement 20230910-CL for details.

Capital Markets

Ahead of today’s $48 billion 2-year Treasury auction, headlines to open the week revolved around increases in oil prices that’s evidence of inflation’s stickiness, Chinese developer Evergrande calling off talks with creditors as it appears headed for bankruptcy, and reaction to hawkish Fed remarks which is forcing yet another reprice from markets. There is growing sentiment that central banks across the globe aren’t done hiking rates, and Treasury yields trended higher to open the week as a result. With the calendar turning to fall, the economy is facing a few headwinds such as the run up in oil prices, student loan payment resumption, an expanding auto workers strike, and a partial shutdown of the U.S. government.

Every lender knows that mortgage rates remain above 7 percent, and housing data released over the last week highlighted another decline in builder sentiment. Housing starts fell 11.3 percent to a 1.25-million-unit pace in August. Existing home sales were down 0.7 percent in August as low inventory, high prices, and high mortgage rates continue to weigh on sales. Hoping for lower interest rates? A recession would likely mean lower interest rates, but workers with stable jobs (most individuals) would want to take advantage of low interest rates, causing home prices to rise faster. Initial jobless claims fell to 201k for the week ending September 16, which was the lowest weekly reading since January. The JOLTS report indicated that the demand for new workers is moderating somewhat however, significant layoffs are not on the horizon.

Today’s calendar includes the Philadelphia Fed non-manufacturing surveys for September, Redbook same store sales, July house price indexes from S&P Case-Shiller and FHFA, September consumer confidence, August new home sales, Richmond Fed manufacturing for September, Dallas Fed Texas services for September, the aforementioned Treasury auction of $48 billion 2-year notes, and remarks from Fed Governor Bowman. We begin Tuesday with Agency MBS prices a few ticks (32nds) better and the 10-year yielding 4.50 after closing yesterday at 4.54 percent. The 2-year is up at 5.12.

Employment

“At Fairway Independent Mortgage Corporation, customer service is a way of life. #FairwayNation mortgage loan officers are dedicated to finding great rates and loan options for our customers while offering some of the fastest turn times in the industry. Our goal is to act as a trusted mortgage advisor, providing highly personalized service and helping you through every step of the loan process, from application to closing and beyond.”

Logan Finance Corporation, a national Non-QM mortgage lender, is excited to welcome Aaron Samples to Logan’s Executive Leadership Team as Chief Revenue Officer. To learn more about why Aaron joined one of the fastest Non-QM lenders in the nation, contact Randy Viars.

The FHA has a job opening for a Senior Underwriter: Job Announcement Number 23-HUD-2915-P. Job duties include assisting the Branch Chief in monitoring the status of goal accomplishment. Advise the Chief of potential problems in attainment of goals and objectives. Research required underwriting procedures and techniques. Serve as an expert-level resource within his/her Office on matters relating to Underwriting and other Direct Endorsement issues.

Don’t forget that private mortgage insurance companies are hiring: MGIC, National MI, Arch MI, Radian, Essent, and Enact (in no particular order). And while’s we’re at it, Fannie Mae and Freddie Mac. And my cat Myrtle’s friend the CFPB.

Dovenmuehle Mortgage, Inc. announced that Robert Howerton has joined the organization as Chief Information Officer where he will be maintaining and expanding Dovenmuehle’s current information technology (IT) infrastructure.

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

Source: mortgagenewsdaily.com

Apache is functioning normally

Apache is functioning normally

Home prices are set to jump 0.7% year-per-year, notching a new all-time-record, according to Morgan Stanley.Joe Raedle/Getty Images

  • Housing affordability is about to get even worse, thanks to the delayed impact of mortgage rates.

  • Morgan Stanley researchers pointed out that it takes about seven weeks to close a mortgage.

  • In addition, some housing data come out with a two-month delay, they said on a podcast.

Housing affordability is about to get even worse due to the lagging impacts of higher mortgage rates, according to Morgan Stanley.

In a podcast on Wednesday, the bank’s co-heads of US securities products research pointed out it takes around seven weeks to close a mortgage.

That means that the spike in mortgage rates last month, when they hit the highest level since 2001, will take time to show up in purchases.

In addition, housing data like the Case-Shiller Home Price index come out with a two-month delay, they noted. The result is that deals closed in October based on mortgage rates from August may not show up in data reports until December.

Mortgage rates factor into housing affordability, which also includes home prices and homebuyer incomes. While the housing market hasn’t been very affordable lately, it had not been deteriorating this year.

“That’s not the case anymore. Affordability is still very challenged and now it’s started to get worse again,” said Morgan Stanley’s Jim Egan. “By our calculations, the monthly payment on the median priced home is up 18% over the past year, and that’s the first time that deterioration has accelerated since October of 2022.”

And with housing supply remaining tight, home prices should start heading up again. The bank predicted the Case-Shiller index will rise 0.7% year over year in the next print to a new record high.

For the end of the year, Morgan Stanley had base case of home prices being flat and bull case of a 5% increase.

“The evolution of the inputs since, particularly the supply point here, continues to be tighter than what was already pretty tepid expectations on our part,” Egan said. “That has us expecting [home prices] to finish the year between these two levels, that base case and that bull case level.”

Other experts have said affordability is unlikely to improve until mortgage rates dial back more significantly, which probably won’t be happening anytime soon.

Markets are expecting the Fed to keep interest rates elevated through the rest of the year as they monitor inflation, which could influence mortgage rates to stay elevated as well.

Read the original article on Business Insider

Source: finance.yahoo.com

Apache is functioning normally

Strong household spending and a resilient labor market could help the U.S. economy avoid a recession in 2024, the American Bankers Association’s Economic Advisory Committee says.

Jamie Kelter Davis/Bloomberg

Resilient household spending and a strong labor market will likely help the U.S. economy avoid a severe recession, according to a new forecast from economists at some of the country’s biggest banks.

The economy is poised to grow at a rate of less than 1% through the second quarter of 2024, the American Bankers Association’s Economic Advisory Committee said Monday. That is low compared with the second quarter rate of 4.1% but well above the dire predictions some economists once harbored for 2024.

“The odds of a soft landing have improved quite dramatically in the near term,” said Simona Mocuta, chief economist at State Street Global Advisors and the chair of the ABA’s committee of economic advisors.

The specter of recession has weighed on banks for close to 18 months, since the Federal Reserve began its campaign of rate hikes in March 2022. The health of the U.S. economy plays a key role in the profitability of banks, so the prospect of a contraction in economic growth raised red flags for banks large and small. The likely avoidance of one of the harsher economic scenarios — a severe recession — is good news for banks, which are also contending with generally tighter profit margins and increasing competition for customers.

Robust consumer spending has helped boost the U.S. economy so far in 2023, the ABA economists noted. Low unemployment and strong wage gains mean households have been able to keep up with many of their spending habits, even as inflation has persisted.

Inflation is also expected to improve in the coming quarters. Big-bank economists anticipate inflation levels to continue to cool to an annualized rate of 2.2% by the second quarter of 2024, close to the central bank’s target rate of 2%. 

Although the overall economic picture is brighter, economists warn that there are several lingering threats that could make it more difficult for the U.S. economy and banks alike to grow. 

The economists expect businesses to invest less capital in the short term, which could weigh on loan growth at banks. Loan growth at U.S. commercial banks increased 4.5% in the second quarter from a  year earlier, according to Federal Deposit Insurance Corp. data.

About 4.4% of the labor force will be unemployed by the end of 2024, according to the economists’ forecast. A higher unemployment rate could make it more difficult for laid-off workers to make loan payments, potentially boosting the level of charge-offs at banks.

Credit quality reached historic lows during the pandemic, when many creditors offered grace periods and other breaks to struggling borrowers until the economy got back on track. Analysts expect asset quality to continue to deteriorate, with loan-loss increases spreading beyond the credit card and commercial real estate arenas.

“Investors are eager to learn how much higher net charge-offs are expected to go, especially with the student loan moratorium coming to an end,” Jason Goldberg, managing director and senior equity analyst at Barclays, wrote in a recent research note.

Certain elements of the ABA’s advisory committee’s forecast provide a strong contrast to the details issued when the last forecast was issued earlier this year, when economists believed the U.S. was on the edge of a mild recession.

“The tone of the conversation certainly feels much more positive today,” Mocuta said.

The ABA committee includes economists from some of the country’s largest banks. The group meets twice a year to discuss the economic environment and issue forecasts on economic growth, inflation and the trajectory of interest rate moves.

This year’s committee features representatives from U.S. Bank, Wells Fargo, JPMorgan Chase, State Street, Comerica Bank, BMO, TD Bank, PNC Financial Services, Deutsche Bank, First Horizon, Regions Financial, Northern Trust, Wilmington Trust and Morgan Stanley.

Source: nationalmortgagenews.com

Apache is functioning normally

On Friday, the average 30-year fixed mortgage rate jumped to 7.19%. Over the past few months, mortgage rates have climbed back up. Financial markets, which have reacted to stronger-than-expected labor market data, are now factoring in higher probabilities of the Fed maintaining higher interest rates for a prolonged period.

This 7.19% mortgage rate is the second highest recorded by Mortgage News Daily since early November. It was surpassed only by the 7.22% rate reached in July.

This surge in mortgage rates signifies another decline in U.S. housing affordability. For instance, a borrower who secured a $500,000 mortgage at a fixed rate of 5.99% in early February 2023 would have had a monthly payment of $2,995 for principal and interest. However, at the 7.19% rate (which was the average on Friday), the same borrower would face a monthly payment of $3,391 for a loan of the same size.

Looking ahead, economists emphasize three factors that can improve housing affordability: increasing incomes, decreasing home prices, and lowering mortgage rates. Among these factors, mortgage rates can exert the most substantial influence in the short term. This is due to the fact that home prices tend to be sticky, and income growth has limitations even in a robust labor market.

Where are mortgage rates heading from here? To get some clues, Fortune tracked down mortgage rate forecasts from eight leading research firms. However, it’s important to acknowledge that predicting future mortgage rates is a challenging task, and recent history has shown that mortgage rate forecasters have struggled.

The Mortgage Bankers Association: The D.C.-based trade group projects that the 30-year fixed mortgage rate will average 5.9% in Q4 2023. Beyond this year, the group expects mortgage rates to slide to 4.9% by Q4 2024.

Morningstar: Economists at Morningstar project that the average 30-year fixed mortgage rate will average 6.25% in 2023, 5.0% in 2024, and 4.0% in 2025.

Goldman Sachs: The investment bank projects that the 30-year fixed mortgage rate will end 2023 at 6.4%. In 2024, Goldman Sachs expects the 30-year fixed mortgage rate will average 5.9%.

The National Association of Realtors: Economists at NAR forecast that the 30-year fixed mortgage rate will slide to 6.4% before the end of 2023, and then to 6.0% in 2024.

Morgan Stanley: The Agency MBS strategists at Morgan Stanley project that the 30-year fixed mortgage rate will start 2024 at 6.0%.

Moody’s Analytics: The financial intelligence arm of Moody’s still projects that the 30-year fixed mortgage rate will average 6.5% through most of 2023. Moody’s Analytics chief economist Mark Zandi tells Fortune that he expects that to slide to 6.0% by the end of 2024, and then hit 5.5% in 2025.

Realtor.com: Economists at the home listing site believe the 30-year fixed mortgage rate will start 2024 at 6.1%.

Fannie Mae: Economists at Fannie Mae forecast that the 30-year fixed mortgage rate will average 6.6% in Q4 2023. Then Fannie Mae expects mortgage rates to grind down to an average of 5.9% in Q4 2024. For the calendar year, Fannie Mae expects mortgage rates to average 6.1% in 2024.

Want to stay updated on the housing market? Follow me on Twitter at @NewsLambert.

Source: fortune.com

Apache is functioning normally

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 as Rithm 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.  

Source: housingwire.com

Apache is functioning normally

With the mortgage industry in the throes of its worst era since the GFC (Great Financial Crisis), comparisons are inevitable.   If you didn’t live through the GFC as an originator, now is not like then.  The current problems are almost exclusively driven by interest rates and inflation, and there is a strong sense that the housing and mortgage markets will be just fine in the future when rates move a bit lower. 

The past problems were broadly driven by just about everything else.  And there was a strong doubt as to whether the industry or the economy was going to survive or ever be quite the same.  

So about this “everything else,” who’s to blame for the GFC?  The following list would grow into a novel if we went into detail on each line item, so for now, we’ll start with single sentence bullet points.  PLEASE NOTE: this is not intended to be a thoughtful research piece.  Those have been done to death, and in many cases quite well (e.g. even the wiki page on gov policy role in the crisis is outstanding).  This is just 27 bullet points off the top of my head on a Friday morning because I’m always telling people there are 27 things to blame for the GFC.  In truth, there are many more, but this is a decent start to a list.

The overarching theme is that “it took a village,” and it was more about group-think and brushing risk under the rug than malice.  Whether you want to use the word “greed” is up to you.  It certainly existed in many cases, but it’s simply on the darker side of a continuum that begins with something as benign as being trusting and uneducated about risks.

1. Borrowers – Some were greedy.  Some just wanted to keep up.  Many just saw housing as good investment given all the appreciation and the easy loan programs. They wanted the loans.  They wanted the house.  Many of them wanted to sell the house before it was even built because their friends just made $100k without spending a dime.  Many of them didn’t realize that was an unsustainable dynamic.”

2. Originators – In many cases, LOs sold what they were provided with from lenders and what borrowers demanded.  In other cases, LOs bordered on or committed outright fraud to slam deals through in a wild west lending environment.  This includes asking for “favors” from appraisers, title companies, realtors, and of course, from their investors.

3. Appraisers – You couldn’t hardly survive the pre-GFC era if you weren’t willing to be a bit fast and loose as an appraiser.  LOs and realtors wanted the value and if you didn’t provide it, you were replaced.  Appraisers definitely got shafted–especially the honorable ones.

4. Realtors – They’d help you buy or sell anything without regard for affordability or the sustainability of price trends.  They assured borrowers that prices only go up.  They added pressure on appraisers just like LOs.  They also pressured LOs to get things done.  

5. Non-Retail Bank Multi-Channel Lenders – This is one the layers of money between Wall Street and mortgage originators. Think Countrywide.  Multiple channels of lending, but one main entity creating products and guidelines.  These lenders got looser and looser with guidelines and underwriting in an attempt to A) keep up with the Jones and B) because there hadn’t been any obvious fallout since prices only ever went up.

6. Retail bank lenders – The history books would have you believe they were innocent, but anyone originating loans at the time knows this is far from true in most cases.  Some of the banks were relatively innocent in that they were merely providing a channel to access loan programs determined by Fannie/Freddie, but most also had “Alt-A programs with guidelines and pricing designed to compete with the likes of Countrywide’s Fast and Easy program.”

7. Wholesale Subprime lenders – Not banks.  Not multi-channel lenders that allowed mortgage companies to underwrite their own loans.  Some of them kept their loans on the books.  Many of them sold into larger wall street entities (i.e. there was no “Lehman Brothers Mortgage” subprime rate sheet).  They specialized in low credit scores and bankruptcies, but also allowed very high loan-to-value ratios.  As high as 100% in many cases.

8. Mortgage brokerages – Companies that existed exclusively to originate loans that were then brokered to wholesale lenders.  Took most of the blame for the GFC.  Many were greedy, but for most, no more so than the average mortgage company.

9. Mortgage bankers – This is a pretty broad term, but in this case, it refers to companies that existed exclusively to originate loans that COULD be brokered, but more so that could be underwritten in house and then sold to a larger investor.  In rarer cases, these lenders may have held a few loans on their books, but we’re talking very rare.  They were guilty because they thought they were walking a higher road than other originators, but in many cases, it ended up simply being another avenue to slam deals through with your own in-house underwriter.

10. Underwriters – Poor UWs!  Rock and hard place just like appraisers.  Some held firm and did the right thing.  Some turned a blind eye.  All were unknowingly participating in giving people loans that should have had them.

11. Hedge Funds – Loose term here too because many would consider Lehman to be a hedge fund by the time things got out of hand.  But this refers specifically to money managers promising their clients big returns.  They created demand for riskier and riskier products with higher returns.  They helped turn a blind eye to the risk when selling these investments to their clients.

12. Investment banks – Lehman, Bear Stearns, Morgan Stanley, Merrill Lynch, Goldman — all examples of investment banks, but the first two were particularly problematic leading up to the GFC.  Lehman, for example, bought several subprime and alt-A lenders either without understanding or caring about the inherent risks in how they were doing business.  They then sold the packages of loans/derivatives to hedge funds and others without  accounting for said risks.

13. Ratings agencies – rubber stamped the risky investments in question

14. Alt-A lenders – technically not much different than subprime, but for example, Alt-A would let you do some crazy stuff if you didn’t have a bankruptcy, whereas subprime was geared more toward super low credit scores and bankruptcy.  These are the lenders that offered programs like 100% loan-to-value with no proof of assets or income, on INVESTMENT PROPERTIES!

15. Title companies/escrow officers – many were not part of the problem.  Many were–often taking part in hurrying borrowers along through signings they didn’t understand.

16. Option ARM lenders.  Giving this its own line item even though Option ARM lenders were often simply Alt-A lenders.  World Savings was the most notable example, but other companies followed suit.  Option arms gave borrowers the option to pay less than “interest only” payments with the deficiency added back to the loan balance.  What could go wrong?

17. Talking heads – So many people got on the TV and said everything was gonna be just fine even when many of us already understood that wouldn’t be the case. While we could make the list bigger by adding categories, we’ll just include “economists” here too as some of them were cheerleaders for housing policies that arguably backfired. 

18. Ma and Pa investors – created demand for stuff they didn’t understand.  Arguably innocent in many cases.  Arguably greedy in others.

19. Builders – Churn and burn!  Builders built as much as they could, as fast as they could, as cheaply as they could because demand was just off the charts.  They really didn’t CAUSE the GFC in the same way much of the rest of this list did, but they definitely participated in it–sometimes as simply as by accepting purchase offers with little or no money down, a substantial list of upgrades upfront, often inflating a home’s base price by 20%, and simply trusting the mortgage company could get the loan done.

20. Fannie/Freddie – Their guidelines were loose enough prior to the GFC that you wouldn’t recognize them today. They bought a ton of crap loans ($trilliions) 

21. HUD – pressed Fannie/Freddie to buy more crap loans.  Also bought crap loans.

22. Legislative government– Where were you guys BEFORE the GFC?! You were making well-intentioned policy changes with unforeseen complications.  Granted, it’s debatable, but there’s no question that the push for looser lending standards has at least some influence from affordable housing legislation.  Plenty of dead horse beating after the fact.  Well done.  We will lump regulatory changes under this category as well, e.g. the SEC relaxed capital standards in 2004 (but this is debated as a cause of the GFC).  

23. Executive government – Clinton was a popular president.  But changes to housing policies are argued by some to have paved the way for the past 3 bullet points.  And let’s not forget about the Commodity Furtures Modernization Act of 2000, which de-regulated the derivatives that ended up playing a key role in the meltdown

24. The Fed – Yo Alan! I know “irrational exuberance” didn’t occur to many of the people in the housing/mortgage market, but it would have maybe saved some pain if it had occurred to the Fed.  Hindsight is 20/20, but as long as we’re sharing blame, you get some.

25. Mortgage Insurance companies – Not the baddest actors pre-GFC, but their total net risk and risk-to-capital figures were clearly surging in the run up to the GFC 

26. Mortgage Servicers – didn’t CAUSE the GFC, but made it much worse and more protracted by acting like just about the worst scum on the planet when it came to lying to people in order to keep the risk of defaulted properties on consumers’ books.  It wasn’t uncommon for someone to stop paying their mortgage during the GFC and not be foreclosed on for 4-5 years–all the while being hounded for payment or sent through a fake process that made the consumer think they were participating in some government program to hand over their property with a bit more dignity.  The other side of the coin was the “robo-signing” scandal where banks foreclosed on homes TOO quickly and without the proper documentation.

27. MERS – It’s complicated, but another entity that made things worse despite not acting as an initial catalyst.

Source: mortgagenewsdaily.com