Time to close on mortgages growing amid soaring volume

Time to close on mortgages growing amid soaring volume
Ellie Mae’s Origination Insight report for October demonstrates some of the side effects of the historically low mortgage rates we’ve seen in 2020: incredibly high volume and an increase in time-to-close.

Across the board, 30-year mortgage rates decreased on average from 3% in September to 2.99% in October, continuing this year’s trend of low rates. The 30-year conventional dropped from 3.02% to 3.01%, and VA fell from 2.78% to 2.75%. FHA loans remained the same, holding steady at 3.01% in October. 

From September to October, the average time to close all loans increased from 51 to 54 days, with the average time to close a refinance increasing from 54 to 57 days and average time for a purchase climbing one day to 48 days. That’s a little more than 6 weeks for people trying to move into a house.

Time to close has been creeping up since the lows seen in March when shut-downs started happening. Refis now take 22 days longer in October than they did back March.

The number of closed loans increased 7.1% over September, per Ellie Mae. Seasonally, October over September for 2019, 2018, 2017 were up 4.8%, up 9.9%,  and up 5.6% respectively.

The number of conventional loans increased in October to 82% – up from 80% in September. Overall loan applications are down 9.3% from September.  FHA loans held steady at 10% between the two months, while VA loan numbers dropped from 6% to 5%. 

Numbers throughout the industry are favorable for buyers, though, when compared to the months before the COVID-19 pandemic forced an economic shutdown. In February, 30-year rates sat at an average of 3.86%.

The average FICO score on all closed loans remained at 753 in October, unchanged from the month prior. LTV stayed at 73 and DTI decreased to 23/35.

FHA refinance FICO scores held at 679 for the second consecutive month, and conventional refinance FICO scores decreased one point to 766 in October. VA refinance FICO scores decreased to 736 in October, down from 738 in September. 
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Housing Tech Rundown: Quantarium, Equifax and Ellie Mae

Housing Tech Rundown: Quantarium, Equifax and Ellie Mae
Artificial Intelligence company Quantarium announced on Thursday its partnership with Valligent Technologies to launch a condition adjusted “Quantarium Valuation Model” for equity lending, broker price opinions and real estate owned valuations.

The latest tech, coined QVM-Insights, leverages Quantariums AI power to incorporate real-time updates of a property’s condition to provide users with an automated valuation model.

It does so by prompting the AI to run hundreds of thousands of generations to understand and optimize information on micro-markets at the neighborhood, ZIP code or county level. Coupled with Valligent’s real-time streaming data and virtual inspection, the AI can then validate and learn what is most valuable in the data itself. It can also factor in the effects of local events like foreclosures and recent sales.

“QVM relies on a cascade of proprietary solutions, including machine learning techniques such as evolutionary programming, neural networks and genetic modeling that mimic biological processes, to get the most accurate results,” said John Smintina, Quantarium’s chief analytics officer.

For Quantarium, AI integration in the mortgage process has been a longterm goal – and something chef marketing and revenue officer, Romi Mahajan, said servicers should be prepared for.

“Servicing is very much about knowing your customer not only in the present state but being able to predict where they are going in future states, based on intelligent guessing, otherwise known as analytics,” Mahajan explained. “AI, especially ground-up, explainable AI, is perfectly suited to this task of knowing the customer.”

A Wednesday announcement from Zest AI, formally known as ZestFinance, revealed mortgage giant Freddie Mac is also planning to utilize AI for borrower solutions. According to the release, Zest’s machine learning tools will partner with Freddie Macs credit decisioning models for managing risk.

Appropriately named the Zest Model Management System, the tech enables lenders to analyze large amounts of credit data that Zest says will help increase approval rates and reduce the risk of faulty credit decisions.

The platform also provides the ability to explain data modeling results to measure business impact and help comply with regulatory requirements.

“Freddie Mac is always evaluating technology solutions that meet our high standards and support our continued commitment to expanding homeownership opportunities responsibly, especially among first-time homebuyers, communities of color, and those living in underserved markets,” said Michael Bradley, Freddie Mac’s senior vice president of modeling, econometrics, data science and analytics for its single-family business.

“Zest allows us to do our machine-learning modeling work more efficiently and with less operational risk,” Bradley said.

Credit reporting agency Equifax also announced on Thursday its latest effort to expedite the borrowing process with its launch of Mortgage Duo – a platform that allows credentialed mortgage lenders to return instant verifications of employment and income for joint applicants.

The tech works through a single transaction via The Work Number database – a centralized commercial repository of income and employment information in the U.S. Users then eliminate the need for a lender to place individual orders for each borrower’s report.

“We recognize that people often apply for mortgages with a co-borrower, such as a spouse,” said Joel Rickman, senior vice president of verification services for Equifax. “The breadth of The Work Number database, with more than 111 million active records, allows us to deliver a new verification solution that helps lenders continue to build efficiency into their digital originations.

“With Mortgage Duo, they can instantly verify employment and income for both borrowers through a single automated transaction which helps decrease duplicative tasks and further reduces friction in the loan origination process,” Rickman said.

Lastly, cloud-based platform provider Ellie Mae released its latest updates to the Encompass platform on Monday. The 20.2 version arrived just over six months after the 20.1 Major Release in May, and boasts enhancements for lenders that support an omni-channel approach and the ability to design around business process terms and workflows.

The latest updates include:

Updated functionality that provides a more flexible, lender-configurable model that can support omni-channel business modelsOffering enhanced administrative tools to manage condition templatesSupporting more granular options for condition management controlsExtending APIs to support external workflow engines

According to the release, a new document viewer is an added perk that utilizes cloud storage for automatic document conversion. The document viewer leverages v3 of Ellie Mae’s Encompass Developer Connect eFolder Attachment APIs which are backward compatible to Encompass.

In September, Ellie Mae was officially acquired by Intercontinental Exchange. With the release of its latest Encompass enhancements, ICE President Joe Tyrrell said that ICE is constantly working to innovate and deliver more automation of digital mortgages on behalf of its lenders.

“With this major release of Encompass, we are providing new levels of automated service ordering, efficient and collaborative workflows and the foundation for our hybrid eClosing which we are launching in just a few weeks. This is mission-critical for lenders, especially when they are experiencing peak volumes, remote workforces and homebuyers seeking high tech capabilities with human touch availability,” Tyrrell said.
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Case Study: How Sierra Pacific Mortgage increased underwriting capacity

Case Study: How Sierra Pacific Mortgage increased underwriting capacity
Recent tech innovations have targeted point of sale or specific underwriting tasks to improve operational efficiencies, leaving the manual review of appraisals as an underexplored area ripe for digitization and automation. Collateral underwriting turn times in particular have been slowing for years as new guidelines, overlays and documentation processes have added to the already-long appraisal review process.

In a case study published with HousingWire, Sierra Pacific Mortgage outlines the pain points that led them to look for an automated appraisal review solution, how it worked with Mercury Network to configure RealView to its needs and the improvements it has seen since implementing RealView.

The Pain Point

Sierra Pacific Mortgage, a California-based nationwide direct lender licensed in 49 states, wanted to increase its underwriter productivity and improve collateral underwriting turn times. In 2018, Sierra Pacific conducted its own internal analysis and found that its 82 underwriters were spending an average of 45 minutes to an hour reviewing the details of each appraisal, which limited each underwriter’s productivity to 1.5 to two loan files per day. 

The firm began its initiative to expand underwriting capacity by centralizing the appraisal review under one team so its underwriters could focus on borrower qualification and improve turn times. After developing an Appraisal Review Team, stakeholders also looked for efficiencies in how saleable loans were handled, identifying opportunities to automate manual steps and eliminate “stare-and-compare” tasks. 

Todd Knowles, appraisal review lead at Sierra Pacific Mortgage, was instrumental in the firm’s search for a solution. “…We needed to equip our underwriters with a tool that could work in conjunction with the CU score to help us perform a risk-based review. It would need to analyze the appraisal based on risk factors like quality, complexity and value,” he said. “But just as important for a successful implementation was getting buy-in from our teams who would be using the tool.”

Key Requirements for The Tech

Sierra Pacific Mortgage was already using Mercury Network’s collateral platform, which included the fully integrated RealView automated appraisal review solution. After deciding to move forward with RealView, the decision-makers at Sierra Pacific had five key requirements as they worked with CoreLogic to configure the solution to its needs. They wanted to ensure that RealView would:

Run appraisal reviews automaticallyScore quality, complexity and valueProvide trustworthy and credible resultsIncrease underwriters’ capacity and consistencyShorten overall loan underwriting turn times

CoreLogic’s RealView team worked closely with Sierra Pacific to set up configurable review rule sets to meet the firm’s needs. Rick Bargioni, vice president of National Underwriting Manager at Sierra Pacific Mortgage, called working with CoreLogic on RealView a “very easy and accommodating process.” 

Find out more about how Sierra Pacific Mortgage worked with CoreLogic’s Mercury Network to configure RealView and the results Sierra Pacific has seen since by reading the full case study here. 
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Mnuchin moves to end emergency programs. How would it affect housing?

Mnuchin moves to end emergency programs. How would it affect housing?
On Thursday, Treasury Secretary Steven Mnuchin rolled grenades down Wall Street and Main Street: he said he would not extend several emergency lending programs beyond Dec. 31, and also asked the Federal Reserve to return a portion of $195 billion in unspent funds.

In doing so, Mnuchin would be removing liquidity for corporate bonds, municipal debt and loan programs geared to help midsized businesses. The backstop helped calm nervy markets in the spring and propped up tens of thousands of businesses. Mnuchin said they’ve done their job, and it’s time to end the initiatives.

“The Federal Reserve facilities…have clearly achieved their objective,” Mnuchin said in his letter. “Banks have the lending capacity to meet the borrowing needs of their corporate, municipal, and nonprofit clients.”

Specifically, Mnuchin would be letting the Primary Market and Secondary Market Corporate Credit Facilities (PMCCF and SMCCF), the Municipal Liquidity Facility (MLF), the Main Street Lending Program (MSLP), and the Term Asset-Backed Securities Loan Facility (TALF) expire on Dec. 31. Those programs hold $195 billion in capital that the Treasury provided as part of the larger $454 billion appropriation by Congress in March, which was directed to the Treasury’s Exchange Stabilization Fund (ESF). Mnuchin in his letter indicated all but $25 billion of the $195 billion in unused funds should be returned.

In response to the Treasury’s request, the Fed released a statement stating that it “would prefer that the full suite of emergency facilities established during the coronavirus pandemic continue to serve their important role as a backstop for our still-strained and vulnerable economy.”

The decision would make life more difficult for President-elect Joe Biden’s ability to mitigate economic fallout from the coronavirus.

Though Wall Street as well as local and state governments will be watching Mnuchin’s proposal to end emergency programs closely, there doesn’t appear to be a significant and direct impact on residential lending, largely because it wasn’t injected with liquidity in March in the first place.

“There’s some facilities for CMBS, but not for residential mortgages,” said Tim Rood, head of industry relations at SitusAMC. “Quite frankly, it was the most conspicuous thing that they made a market for practically every conceivable financial asset except for mortgage servicing rights. At the time where the burden’s put on mortgage servicers, it was unthinkable, if not unconscionable, without having some advanced facility for them. So you can take that to mean that there’s probably not a whole lot of tears spilt for mortgage bankers around D.C. Nothing speaks louder than silence.”

Because the housing market is a proxy for the overall economy, Rood said Mnuchin’s plan could have some indirect affect on the residential market.

“You take away those other governments lending facilities or making a market for those things, and at a minimum, there will be less lending, less velocity of cash, and therefore the economy will be depressed,” he said. “So it’s not good for housing.”

In a note, Goldman Sachs chief U.S. political economist Alec Phillips said that Mnuchin’s request “is likely to mean that those facilities will no longer undertake new transactions until after the end of the year.

“That said, the incoming Biden Administration might be more sympathetic to restoring those facilities and could restart them,” Phillips said. “It is unclear whether the Fed will retain the full $195 billion in capital the Treasury provided earlier this year for those facilities, but it is very likely that the Treasury would have at least some available funds to capitalize those facilities next year, even if the Fed returns the unused capital as the Treasury has requested.”
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Here’s what to expect from a Biden administration regarding housing

Here’s what to expect from a Biden administration regarding housing
We are now under 60 days remaining until we have President Biden and Vice President Harris leading a new administration in D.C. Beyond any political views of the election and the ensuing drama, industry is asking: What will a Biden regime mean to housing and mortgages? How should we think about regulation, the GSEs, HUD and more?

Here are a few thoughts to consider as to what the next four years may look like.

In a general sense, Democratic regimes tend to be more bullish for government support to housing, while Republican ones are more bullish for lowering the aggressiveness of regulators and oversight. While not a universal truth, we can all remember the eight years under President Obama and the impact of a new, aggressive, regulator tasked under congressional legal mandate to implement the required rules set forth in Dodd Frank.

Those were challenging years, and while the implementation was hard and every rule has imperfections, today we are past those statutory obligations as all the rules required are now in place. For that reason, I do not expect the aggressive regulatory posture overseeing mortgage lenders to be like it was under Obama.

So how should we think about a Biden regime? Here are some key elements:

Transition: At this point the transition team has assigned ‘Agency Review Teams’ to each regulator and, not surprisingly, there are many familiar names on these teams that will affect housing. The HUD team is headed by a former political from the Obama years, Erica Poethig, and the team consists of several others from that administration, as well as names like Julia Gordan, a long-time credible consumer advocate for housing policy in Washington.

Treasury, NEC, CFPB, and more have known similar members. Treasury, for example, has Helen Kanovsky. Kanovsky was the general counsel at HUD during both Secretary Donovan and Castro’s tenure. She then joined the Mortgage Bankers Association as the general counsel there until her recent retirement.

Key Takeaway: There are two. First is the noticeable absence of a transition team for FHFA. Second, there is a deep bench of knowledgeable experts who will help bring experience to the task of filling key positions, evaluating policies made and proposed, and more.

Treasury: The pick of the Treasury secretary is critical along multiple fronts. From the future of the GSEs to the role of non banks in mortgage financing, the Treasury secretary plays a key role. Hamilton’s genius in establishing a central bank and the geographic location just steps away from the White House make this the most powerful regulator in regard to our housing and housing finance system.

I only have one Key Takeaway: Do not expect a progressive Elizabeth Warren-type to be the pick. President Elect Biden is far too practical and centrist to entrust this most powerful department to someone who would create excessive dissent among partisan political leadership in Washington. The ability for this secretary to work both sides of the aisle will be simply too important with a challenging economic agenda ahead.

CFPB and FHFA: As stated above, there is a noted absence of a review team for the FHFA, while there is one at CFPB. This would indicate a clear intent of the Biden Administration to implement the Supreme Court ruling and terminate CFPB Director Kathy Kraninger early into the new year.

The FHFA is trickier, however.

First, the Supreme Court ruling on the single director role at the CFPB did not include the FHFA and the president would have to extend a precedent to the SCOTUS ruling if he were to attempt to remove FHFA Director Mark Calabria. This could embroil the new administration in potential litigation and would likely offend the preference of a Republican-led Senate Banking Committee who are supportive of Calabria’s role there.

With home sales being a bright spot in the U.S. economy, this is likely one of the last things the new administration wants to get tied up with. So unless the FHFA becomes too acerbic in its policies and actions, something that frankly might be happening with a series of recent questionable actions, expect Calabria to stay put for the time being.

The Supreme Court is hearing a case early in 2021 about FHFA that includes, in part, a question about the single directorship. If they rule as they did on the CFPB, then Biden and team would have a clear path to removing Calabria.

Key Takeaway: The CFPB is a priority for a Biden team and expect a new director nominee with strong legal chops. The good news here is that the focus is likely not to be on prime mortgage lenders. Payday, student, and consumer lending should take the spotlight.

HUD: Biden comes in with many talented political leaders who supported the campaign and have earned seats in a new administration. For HUD, expect a political pick that satisfies one of the “thank you’s.”

There are many mayors, even perhaps a former candidate for President during the primaries, who could be options for the role. But HUD is a perfect spot for a leader who represents the diversity of housing as well as urban communities.

As to the Federal Housing Administration and Ginnie Mae, those decisions are typically decided after the secretary comes in. Depending on the outcome in Georgia in January, the control of the Senate and the stature they take in regard to working with the Biden team will tell us how long it might take to fill some of the less important roles. The HUD secretary is on the lower end of the priority list for cabinet positions and consequently the under secretary positions will be even more removed.

Key Takeaway: A new HUD regime will focus on bringing key rules back that the Trump regime removed such as the Affirmatively Furthering Fair Housing rule. But don’t expect any significant changes beyond that at HUD.

GSE Reform: Expect a Biden administration to freeze the exit strategy that the FHFA director has been working on for Freddie and Fannie. Nothing formal on recap and release can be completed without the Treasury secretary agreeing to an amended PSPA (Preferred Stock Purchase Agreement).

In a new administration, the Treasury secretary is typically among the first, if not the first, confirmation to a president’s cabinet. As such, Director Calabria will find himself isolated on a policy island. While he can continue to trim away at the GSEs’ footprint as he has been doing with the new multifamily caps, the refinance fee, and the newly released capital rule, permanent change will be stopped in its tracks.

Expect a Biden regime to be focused on keeping the GSEs in conservatorship, leveraging the value they can provide in supporting housing needs in the years forward, and likely favoring more of a utility model over the long run.

Key Takeaway: The clock is ticking on Calabria’s ability to accomplish his goal of releasing a much smaller pair of GSEs in these final two months, as reported in the Wall Street Journal this week, and a Biden team will likely have a very different view about the path forward.

Final Thoughts: There are many other key roles to fill that impact our industry including NEC, CEA, OMB, SEC, and many other acronyms. These are actually really important roles. For example, the head of the NEC (National Economic Council) plays a key role in leading things like the housing team that directly advises the President. Jared Bernstein, a well-known policy expert and an active advisor on the transition team would be an easy pick for this role.

There will be many moves ahead as we see the entire transition develop. From my vantage point, I expect to see many more jobs filled, nominees set forth, and a more robust group of experts in the new administration than what we have seen in the exiting one.

Times like these are where key leaders inside the beltway show their value. The MBA, ABA, NAR, NAHB, ICBA, and other voices will need strength and engagement to help ensure the interests of all stakeholders are considered in the months ahead. In other words, stay tuned, there is more to come.

This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.

To contact the author of this story:Dave Stevens at dave@davidhstevens.com

To contact the editor responsible for this story:Sarah Wheeler at swheeler@housingwire.com
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ALTA urges Congress to streamline PPP forgiveness process

ALTA urges Congress to streamline PPP forgiveness process
The American Land Title Association joined with more than 100 businesses and financial trades in urging the leaders of Congress to immediately pass legislation to streamline the forgiveness process for the Paycheck Protection Program.
Source: thetitlereport.com

CATIC begins Ohio operations

CATIC begins Ohio operations
CATIC recently announced it had expanded its operations into Ohio, adding the Buckeye State to Connecticut, Florida, Maine, Georgia, Massachusetts, New Hampshire, Rhode Island, and Vermont as states in which it is licensed to operate.
Source: thetitlereport.com

Zoom, FTC settle

Zoom, FTC settle
The Federal Trade Commission announced a settlement with Zoom Video Communications, Inc. requiring the company to implement a robust information security program to settle allegations the video conferencing provider engaged in a series of deceptive and unfair practices that undermined the security of its users.
Source: thetitlereport.com

NotaryCam completes MISMO’s RON certification

NotaryCam completes MISMO’s RON certification
NotaryCam announced it has completed the Mortgage Industry Standard Maintenance Organization Remote Online Notarization Software Compliance Certification Program. Read on for more details.
Source: thetitlereport.com