Jumbo Mortgage Trends And The Declining Middle Class - Billionaires' Cash Reserves
There are two and a half weeks before Labor Day, the traditional end of summer. For those out and about, and who like ice cream, MM sent along a list of the best ice cream in each state." This proves many things, two of which are that a) Baby Boomers like lists, and b) ice cream preference is very, very subjective. What's that you say? You don't have time to read through an ice cream list? Maybe you'd rather spend your time watching the 1+ hour video put out by the CFPB on HMDA implementation. Don't want to do that either? Is that because "someone else" in your company will watch it?
Hey, what if your company caters to high net worth people...and that is where all your lending takes place? First Republic discusses how FRC has built a niche business focused on wealthy customers although this strategy has brought criticism given 91% of its mortgage approvals in 2014 went to high-income individuals.
High net worth people tend to have pretty nice houses. What's going on in jumbo-land?
ditech has discontinued the Jumbo AA High LTV Fixed Rate product. As a result, it has eliminated this Jumbo product from its product menu and will no longer accept new applications or lock requests.
Effective August 2nd, NewLeaf Wholesale began offering Jumbo Core Fixed / Hybrids and Jumbo Plus. The overview shows that all loans must be locked prior to submitting for Investor approval, Self Employed Income section has been updated and New section has been added for Profit & Loss Statement and Balance Sheet requirements. View the product matrices here.
Fifth Third Correspondent posted the following information: All Conforming and Non-Energy State Non-Agency Jumbo Products, Restructured Mortgages are now eligible for refinancing. Freddie Mac has reduced documentation for proof of receipt from most recent 2-months bank statements to 1 month. The updated Appraiser Do Not Use list is available in the Correspondent Connect Online Guides and Forms.
Plaza's Program Guidelines have been updated. The following updates are effective for loans locked on or after August 16: Elite Jumbo Fixed and ARM: Sections 12 & 15. FHA 203(k): Section 23. VA Fixed and ARM: Sections 8 & 11. Home Possible: Section 13.
Plenty of LOs around the nation don't focus on jumbo loans, and the .01% of the U.S. population. There is no disagreement that the gap between the haves and have-nots is widening by the year. Middle class Americans comprise less than half (49.9 percent) of the nation's population, down from 61 percent in 1971, according to Pew Research Center. PRC defines "Middle class Americans" as households earning between two-thirds to two times the nation's median income. In 2014, that income range for middle class households was from $41,900 to $125,600 for a three-person family.)
The national income disparity has contributed to the growing gap between the lower and upper class, as more Americans begin to shift into the higher ranges of the upper class and lower ranges of the lower class. Pew's research has found that while the middle class has been declining, the ranks of the upper class are growing more quickly. Since 1971, the share of senior citizens in the upper class has increased roughly 27 percent, and married couples with no children and black Americans have also realized a large gain during that same time period.
What is upper class? Upper households saw their median income increase 47 percent to $174,600 from 1970 to 2014, while the middle class only experienced a 34 percent increase to $73,400 and the lower class received a 28 percent growth to $24,074. The upper class also now controls 49 percent of the nation's aggregate income, increasing from 29 percent in 1970. The middle class once held 62 percent of the nation's income in 1970 but that share has dropped to 43 percent.
Pacific Coast Bankers Bank observed that, "The median net worth of upper class families also doubled from 1983 to 2013 reaching $650,100, the median net worth of the middle class increased 2 percent to $98,100 and the lower class saw their wealth drop 18 percent to $9,500. The middle class used to be the core of America, but recently, more households have struggled due to a combination of stagnant wage growth and increased living expenses. This economic polarization has contributed to a wider gab between the rich and poor, and a dwindling middle class."
And part of the increase in wealth obviously has to do with owning real estate. CoreLogic reports home prices climbed 5.7% year-over-year in June. By state, Oregon saw the biggest rebound at 10.9%.
Are we in danger of living in a new housing bubble? Not really. As the article notes, housing is expensive because inventory is tight, not because of loose lending standards. Housing is not a big part of either presidential campaign although each candidate has discussed housing.
Of course some disagree, like Tom Barrack, the billionaire chairman of Colony Capital Inc. Barrack Says U.S. Real Estate Market Is Getting 'Bubblicious'. "It looks a little bubblicious," Barrack said of the real estate market. "We're printing money. More debt is available. But amateurs are playing in it."
Going forward, where is housing going to be next year? That's the question Zillow posed to more than a 100 U.S. economists, real estate experts and academics recently. The answer? "expect home values to grow steadily in the 3 percent to 4 percent range over the next few years. But those expectations could take a hit if Republican nominee Donald Trump (or Sen. Bernie Sanders, who's been eliminated) is elected president." On average, the panelists surveyed said they expected home values to end 2016 up 4 percent year-over-year, a slight bump in expectations of 3.7 percent annual growth for this year the last time the survey was conducted. The election of Hillary Clinton was likely to have a more positive impact on panelists' expectations for home value growth going forward. A third of those with an opinion (33%) said the election of Clinton would have a somewhat or very positive effect on their home value forecast, compared to 16 percent saying her election would have a somewhat or very negative impact. Don't shoot the messenger.
Looking at the markets, people have to put their money somewhere, right? Real estate, stocks, bonds, small businesses, precious metals...Analysis of holdings of the world's 2,473 billionaires by Wealth-X Billionaire Census finds 22% of total net worth ($1.7 trillion) held in cash. This is the highest level of cash since 2010. Cash doesn't do much, and with no inflation it doesn't lose too much value. Despite terrorism and global concerns, American equities are surging because "consumer spending is strong, inflation and wages are rising but pleasantly slowly, bank lending is up, energy prices seem to have bottomed, industrial production is rising and while the global economy isn't booming, it's not falling apart. In short, investors are worried but know many central banks will provide additional monetary stimulus and the Fed will raise rates slowly" per economist Elliot Eisenberg.
But the curiosity among folks whose businesses involved the fixed-income markets are negative interest rates. JPMorgan reports total debt of government bonds trading with negative yields is about $11.5T. By maturity it is < 1Y (27%), 1-5Y (37%), 5-10Y (23%) and 10Y+ (12%).
In this country rates are still positive. The bond market didn't do a whole heckuva lot Wednesday despite the Federal Open Market Committee meeting minutes. The verbiage didn't budge the odds of a September short-term rate hike. As ThomsonReuters put it, "The yield curve which was flatter most of the session, initially steepened as the headlines were digested, only to flatten into the close to end modestly flatter on the day with the long bond outperforming on the curve." By the time the proverbial dust settled Wednesday, the 10-year note improved .125 to yield 1.56%, the 5-year note, a better approximation of the duration of agency MBS, improved a tick or two as did agency MBS prices.
This morning we've already had the news from Europe (the minutes from the European Central Bank - no surprises, the fallout from the UK's Brexit vote had so far been muted), weekly initial jobless claims (-4k to 262k), and the August Philadelphia Fed Manufacturing Index (+2.0 as expected). Coming up is the July Leading Economic Indicators, expected +.5% - probably not a market mover. And after the early helping of numbers the 10-year's yield is nearly unchanged at 1.56% as are agency MBS prices - steady as she goes.
Jobs and Announcements
If you are an experienced wholesale or correspondent Account Executive and you are looking for the opportunity to sell in both the wholesale and correspondent channels, then Banc Home Loans TPO may be the right fit for you! "Banc Home Loans provides you with the opportunity to work with one of the fastest-growing home lenders in the country. Backed by a financially secure, publicly owned Bank, Banc Home Loans will give you all the tools to take your career to the next level." We are currently interviewing experienced, successful AEs in the following territories: Colorado; Arizona; Illinois; Florida; New England and the Northwest. If you are interested in learning more, please forward your resume to Greg Armstrong, Senior Vice President of Third Party Originations.
Anyone subservicing should be interested in this. As evidenced by the CFPB's Mortgage Servicing Supervisory Highlights Special Edition released in June 2016, the expectations and emphasis placed on adequate loan subservicer oversight by the regulators and agencies has not lessened. For those companies using LoanCare as their subservicer, Richey May & Co., LLP will once again be conducting a review overLoanCare starting on September 6th to assist companies with their monitoring and oversight responsibilities. To learn more about the comprehensive oversight review program of Richey May (an accounting and advisory firm specializing in the mortgage industry) and the upcoming review over LoanCare, or to participate in the oversight reviews already conducted earlier this year over Dovenmuehle and Cenlar, please contact Kurt Blohm.
In ops job news, "A rare opportunity for industry underwriting veterans to help others achieve growth and success! If you enjoy sharing knowledge and coaching others we have a great work from home job for you! Great pay and flexible hours for product experts that are experienced with Agency and FHA - VA and USDA a plus. We are vendor and want the best partners to be part of our innovative knowledge sharing technology. Inquire about part time or full time positions. Send resume to me at rchrisman@robchrisman. com and specify opportunity.
Under the "getting the name out there" heading, here is something with a different twist. New American Funding is proud to announce they have won nine Stevie Awards, mostly for marketing with its videos. This includes one Grand Stevie which they won with the likes of Cisco, Cigna, AT&T, Accenture, John Hancock and more for their What's Our Secret video. To celebrate, their marketing team put together a fun Marketing Sizzle Reel to share what they do. CEO Rick Arvielo observed, "It's amazing what you get when you bring a bunch of talented people together and give them the tools and freedom to create. They continue to amaze and are no doubt why so many top producing loan originators have decided to join our growing family. I want to personally thank Jennette Landrum our EVP, Marketing for she does and congratulate her for winning a Gold Stevie for Marketing Executive of the Year. This stuff is really fun."
While we're on the media, there's a live video broadcast today. Live on Mortgage News Network today at 2PM EDT sponsored by REMN Wholesale and National Mortgage Professional Magazine, get inside the minds of three leading loan officers to learn how they develop their business strategies, who they market to and how they market differently than the competitors in their area, and why their lender partners help them take their business to the next level. This complimentary live video broadcast (this is not a webinar) is titled Masters of the Mortgage Industry: Tips of the Trade from Industry Leaders and you can join them live TODAY by reserving your space here.
Join Plaza Home Mortgage to uncover the "9 new rules of customer service" via its free webinar on August 22nd.