DSCR, DPA, Corresp. Broker Programs, Conv. Conforming News; MBA's Eye on the FHFA; Ginnie's Growth
When I board an airplane, it is to go from point A to point B, like today from Denver to San Francisco. As long as it’s on time and somewhat economical, put me in whatever seat in steerage. But others, apparently, want to savor the experience in comfort. Swiss Air has taken this to an extreme, and now must re-balance their jets due to the weight of first class seats! The Federal Reserve’s Open Market Committee is fully expected to “take some weight off” of rates next week. For those of you playing along at home, the FOMC meets three more times in 2024: September 17-18, November 6-7, and December 17-18. So, beware anyone saying that the Fed is going to cut rate five times in 2024. Interest rates are one thing, but everywhere I go originators are doing things to help their clients and stay relevant, like educating them, hosting classes with real estate agents for people in the area and studying up on their company’s products and services. (Today’s podcast is found here and Sponsored by Richey May. Richey May’s consulting, cybersecurity, business intelligence, and automation services are designed by mortgage experts to help you continue to drive growth and increase profitability. Hear an interview with Mace Innovations Chris Mace on the best ways for companies to approach change management.)
Lender and Broker Software, Services, and Loan Programs
“Yep, we're seeing it too. App volume, credit report volume… It's all trending upward, so get ready. At Service 1st, we're prepping for the fall conference season. That includes the MBA Annual in Denver. We've never had more near instant IRS transcript pilots, opportunities with ICE Mortgage, reductions in credit reporting spend, and much more to announce. We've been busy during the slowdown, and we're stoked to show what we've been up to. Saddle up, Partner! Let's get those meetings scheduled now for Denver. Book here.”
Maxwell’s newly released Q2 2024 Mortgage Lending Report sheds light on current lender challenges and the home buyers driving volume in today’s market. In Q2, industry loan volume fell 4% YoY, and rates remained elevated at 7.2%. As homeowners looked for other ways to access their equity, HELOCs more than doubled compared to their historical average. Maxwell data also found that many average income earners were edged out of the market as median home buyer income rose to $8,000 per month, or $96,000 per year. Want to gain exclusive lending data, including a deep dive into the home buyers driving market activity? Click here to download Maxwell’s Q2 2024 Mortgage Lending Report and gather takeaways from Q2’s performance that will help you optimize your mortgage volume in the second half of 2024.
The NAR settlement imposed practice changes on buyer agreements and compensation offers have been in effect for a few weeks. Each day, Realtors are learning how it will impact home transactions now and in the future. The question from Justin Messer is, in what way can lenders educate homeowners now on the importance of finding and using the right buyer's agent? In the latest episode of Expert Insights, Joe Welu, CEO of Total Expert, sat down with Justin Messer, President and CEO of Prosperity Home Mortgage, LLC to discuss humanizing the homebuying journey. Listen now.
Broker and Correspondent Product News
“All DPA roads lead to Essex! Essex Mortgage is pleased to announce that we now offer a new 5% Down Payment Assistance program, along with improved pricing on our 3.5% DPA forgivable option. But that’s not all! We’re also proud to be the master servicer for an innovative FHA loan program. This unique product allows a Government Entity to purchase a property and offer a lease option to consumers who may not qualify for traditional financing. Now your clients can secure equitable title after 18 months, opening new doors for homeownership. An added benefit of this program is it allows your realtor partners to close their sale as part of the process. Don’t miss out on these exciting opportunities-reach out to your Account Executive today.”
“Chase Correspondent Lending invites our current clients, as well as other interested Correspondent lenders, to join us on September 19, 2:00 – 3:00 ET, for a Non-Agency Amortizing Jumbo AUS webinar. During our time together, we’ll provide an overview of our Jumbo AUS product, discuss guideline and delivery requirements and answer frequently asked questions. We hope you’ll be able to join us for this informative event. Click here to RSVP.”
When it comes to correspondent lending, Western Alliance Bank and its wholly owned subsidiary AmeriHome Mortgage stand out as leaders in the field. Whether you’re exploring Warehouse Financing or MSR Financing or utilizing their cutting-edge correspondent acquisition platform, AmeriHome Mortgage provides the tools you need to succeed. And as the nation’s largest bank-owned correspondent investor*, AmeriHome Mortgage offers more than just superior products. They also provide a seamless connection to Western Alliance Bank’s Specialized Mortgage Services Group for tailored cash management tools, corporate credit cards and more, all designed to optimize your operations. These synergies mean you benefit from expert advice, innovative technology, and the financial stability of Western Alliance Bank, giving you the competitive edge to drive your success. Reach out to the Western Alliance team or the AmeriHome sales team and discover how this partnership can enhance your business’ growth and efficiency. Western Alliance Bank, Member FDIC. *According to Inside Mortgage Finance, 6/7/2024
“Visio Lending is breaking records with a relentless focus on improving our Broker Experience. We are the nation’s leader in Non-QM Investor DSCR loans for buy and hold SFR rentals with nearly a decade of experience and over $3 billion in originations. No-DTI, 30-year terms, rate buy downs, free 45-day rate locks; I/O and Sub-1 DSCR options available. New broker processing fee and now choose your own title company (including on refinances). 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.”
Conventional Conforming Changes
Often/usually, when Freddie or Fannie make changes, investors across the nation fall into line. Who’s doing what out there?
Pennymac announcement 24-82 released August 16, 2024, announced alignment to Freddie Mac’s bulletin 2024-7 requirements to use the full risk premium, when reflected, on a flood insurance policy: to calculate the housing expense-to-income (HTI) and debt payment-to-income ratios (DTI); and for qualification. The change was effective with note dates on or after September 5, 2024. In the Freddie Mac bulletin 2024-12, Freddie Mac announced additional time to implement the change and requirements. Lenders are encouraged to implement them immediately but must comply for mortgages with note dates on or after April 1, 2025. Pennymac is aligning with this change.
AmeriHome Mortgage General Announcement 20240815-CL summarizes previously published changes made during August 2024, additional changes made with the announcement, and recent Agency and regulatory news.
Pennymac 24-90 announced an update to Conventional LLPAs effective for all Best-Efforts Commitments taken on or after Friday, August 30, 2024.
Pennymac will update Conventional & Government LLPAs effective for all Best Efforts Commitments taken on or after Tuesday, August 27, 2024 as stated in Announcement 24-88: Updates to Conventional & Government LLPAs.
Effective with loans triggering for Early Payment Default at the end of July 2024, Pennymac announced in 24-87: Early Payment Default Seller Guide Update, it may offer options in lieu of repurchase.
Newrez Correspondent Bulletin 2024-053 contains underwriting guideline updates on Conforming Loans.
Newrez Approved Correspondent Clients should note that The Office of Native American Programs has announced the start of HUD’s Fiscal Year 2024 financial closeout for the Section 184 Indian Home Loan program. Lenders must submit all requests for a Cohort Number by the following deadline of September 22, 2024. At the end of every fiscal year, HUD suspends activity for the Section 184 program to reconcile financial accounts and set up accounting codes for the next fiscal year. During this time, the Section 184 program is shut down, so no new financial obligations can be made. These programs will resume normal operations as soon as possible in the beginning of the new fiscal year.
Capital Markets
People in the industry often wonder what capital markets groups are looking at around the nation. Our MBA summed it up nicely, putting the FHFA's newly released Housing Goals and MBA's planned response. “As you know, the housing goals help drive the GSEs' efforts to achieve their mission of supporting liquidity for affordable homeownership. However, when those goals are misaligned with market conditions, as has happened in recent years, the GSEs force those goals down on individual lenders in ways that significantly distort the market, an issue that MBA has frequently raised in meetings with the GSEs and FHFA. Based on the MBA's engagement with the FHFA, the proposed rule would establish a new process for evaluating compliance with the housing goals that considers the uncertainty and time lags associated with forecasting the market years in advance and retroactively determining actual market levels.”
Nearly every FHA or VA loan ends up in a Ginnie Mae security. With limited manpower, Ginnie Mae’s mortgage-backed securities (MBS) portfolio outstanding grew to $2.63 trillion in August, including $41.2 billion of total MBS issuance, resulting in $13.7 billion of net growth. August’s new MBS issuance supports the financing of more than 124,000 households, including over 61,000 first-time homebuyers. Approximately 72 percent of the August MBS issuance reflects new mortgages that support home purchases because refinance activity remained low due to higher interest rates. The August issuance includes $40.1 billion of Ginnie Mae II MBS and $1 billion of Ginnie Mae I MBS, including $921 million in multifamily housing loans.
For the 2024 calendar year to date, Ginnie Mae has supported the pooling and securitization of more than 429k first-time homebuyer loans. For more information on monthly MBS issuance, Unpaid Principal Balance (UPB), real estate mortgage investment conduit (REMIC) monthly issuance, and global market analysis, visit Ginnie Mae Disclosure.
Looking at bonds, and therefore rates, markets were a little on edge ahead of last night’s presidential debate and this morning’s Consumer Price Index release. The jitters are somewhat warranted, as there is concern that the weakening jobs landscape means the Fed will struggle to avoid a hard landing. We learned yesterday that Small Business Optimism fell in August, according to the NFIB Small Business Optimism Index. The report showed declining sales, indicative of an economic slowdown, and cost pressures remain (inflation is still the biggest concern).
Before CPI and of interest to the MBS market is mortgage applications from the MBA. Mortgage applications increased 1.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Applications Survey for the week ending September 6, 2024. This week’s results include an adjustment for the Labor Day Holiday. During the reporting period, the 10-year yield plunged 20 basis points to 3.71 percent amid slowing growth and stagflation concerns, while mortgage rates largely followed suit (Mortgage News Daily’s 30-year rate slid 16 basis points to 6.27 percent, the lowest since April 2023).
For the same week, FNMA’s Refinance Application-Level Index showed that the dollar volume of refinanced applications remains 114.6 percent higher than a year ago. For those thinking rates trending lower will materialize a wave of refinances, I would remind you that of the $5.1 trillion unpaid principal balance (UPB) for the UMBS 30-year universe, only $513 billion, or roughly 10 percent of the total, is in the 6.0 percent through 7.0 percent coupons. Fortunately, the refi “famine” delivered by the aftermath of the Fed’s latest quantitative easing cycle is behind us.
August consumer prices showed the headline increasing .2 percent month-over-month versus 0.1 percent expectations. It was +2.5 percent year-over-year, as expected and +2.9 percent previously. Core (ex-food and energy) was up .3 percent versus 0.2 percent month-over-month and 3.1 year-over-year expectations. Later today brings a couple of Treasury auctions that will be headlined by $39 billion reopened 10-year notes. After the inflation data Agency MBS prices are roughly unchanged and the 10-year is yielding 3.66 after closing yesterday at 3.65 percent; the 2-year is at 3.63.