Mortgage apps flat even as refis tick up

Mortgage apps flat even as refis tick up
A drop in mortgage rates led refinancing applications to increase slightly last week, back to a 30% share of the total, according to the latest Mortgage Bankers Association (MBA) survey for the week ending June 24.

Overall, mortgage apps increased 0.7% on a seasonally adjusted basis from one week earlier, though they came in 49.4% lower than the same week in 2021.

“Mortgage rates continue to experience large swings. After increasing 65 basis points during the past three weeks, the 30-year fixed rate declined 14 basis points last week,” Joel Kan, associate vice president of economic and industry forecasting for the trade group, said in a statement. “The decline in mortgage rates led to a slight increase in refinancing, driven by an uptick in conventional loans.”

Refis rose 1.9% from the prior week and declined 74.5% year-over-year. Meanwhile, the seasonally adjusted purchase index was relatively flat, increasing only 0.12% from the prior week, but 4.7% down from the same week a year ago.

“Purchase activity has weakened in recent months due to the quick jump in mortgage rates, high home prices, and growing economic uncertainty,” Kan said. “Purchase applications were essentially flat last week but were supported by a 6% increase in government loans.”

Kan noted that the average purchase loan amount, after reaching the $460,000 record in March 2022, declined to $413,500 last week.

On Tuesday, another index, Black Knight‘s Optimal Blue OBMMI had rates for a 30-year fixed-rate mortgage at around 5.93%.

Refis were 30.3% of total applications last week, increasing from 29.7% the previous week, the survey shows. The adjustable-rate mortgages (ARM) share of applications declined from 10.6% to 10.1%, still demonstrating continued popularity among borrowers. The average interest rate for a 5/1 ARM fell to 4.64% from 4.78% a week prior, according to the MBA.

The FHA share of total applications remained unchanged at 12%. Meanwhile, the VA share went from 10.7% to 11.2%. The USDA share of total applications increased to 0.6% from 0.5% the week prior. 

The trade group estimates the average contract 30-year fixed-rate mortgage for conforming loans ($647,200 or less) decreased to 5.84%, from 5.98% the previous week. For jumbo mortgage loans (greater than $647,200), it went to 5.42% from 5.49%.
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The obstacles to a digital mortgage are changing – Here’s what lenders need to know

The obstacles to a digital mortgage are changing – Here’s what lenders need to know
There’s no question that a digital-first way of doing business is becoming the norm and the demand for digital in the mortgage industry is only growing. HousingWire recently spoke with Armando Falcon, CEO of Falcon Capital Advisors, about the continued growth of digital mortgage solutions such as eClosings and what lenders can do to implement eMortgages into their business models. 

HousingWire: Is this the year that digital mortgages and eClosings really accelerate? Or was the recent interest more of a COVID-19 workaround?

Armando Falcon: There’s no question that digital mortgages and eClosings certainly got a lot of attention during COVID-19, but they are not a “fix” or a “fad”—they’re the future. The momentum was there pre-COVID and, if anything, it is accelerating as COVID recedes.

Lenders realize the value of giving their customers the same kind of convenient digital experience that they receive in other aspects of their lives (e.g., banking, shopping, transportation). They also realize that if they don’t provide this experience, larger national retail lenders will. This is why I believe these initiatives will continue even in the smaller, more competitive environment that the industry is now facing.

In addition to customer acquisition and retention, the creation of digital assets provides greater capital market efficiencies and reduces costs and errors. Recently there have been a handful of ROI studies that have shown that eClosings and eNotes can save originators approximately $400 per loan and settlement service providers about $100 per loan.

The investment side is ready for the securitization of digital assets. Fannie Mae and Freddie Mac have been buying eNotes for years, and now Ginnie Mae has just reopened its Digital Collateral Program. We have been working closely with Ginnie Mae on this program and are very excited that as of June 20 the program began accepting new applications from eIssuers, eCustodians, and subservicers, opening up the government market to eNotes.

In addition to the momentum and the economics, digital lending just makes sense. Why would our industry keep churning out paper, when the rest of the financial world is rapidly doing as much as possible digitally?

HW: What are the biggest obstacles that lenders face in a true digital transformation?

AF: In my opinion, the obstacles are changing. Three years ago, the mortgage industry wasn’t entirely ready for digitalization. Title and settlement companies were hesitant to embrace eClosings, most states did not permit RON and, even where RON was available, most lenders were not yet comfortable with it. As for investors, the GSEs were pretty much the only ones accepting eNotes. There was not yet a program for securitizing government loans. But this is all changing.

Today, the vast majority of title and settlement companies are ready and willing to support hybrid and, in many cases, full eClosings. There are 39 states that have passed RON laws. The landscape of investors accepting eClosed loans and eMortgages has grown exponentially. And as I mentioned, Ginnie Mae is expanding its Digital Collateral Program.

Companies that are moving forward with digital transformation tend to have strong executive backing of their programs and other advocates in their organization who see the immediate benefits in terms of customer experience, operations, and capital markets efficiency. They are willing to drive change across their operations and work with advisors, like Falcon, to develop a roadmap to integrate digitalization into policies, processes, and training.

A notable challenge for the industry at the moment is the decline in overall market volume and reemphasis on purchase transactions. For the past two years, lenders were so busy booking refinance business that they were reluctant to spare resources for digital transformation initiatives.

 Now, lenders that have not yet implemented eClosings will need to seriously consider how the cost savings and operational benefits from digital mortgages offset the economic pressure experienced in a down market. For lenders that have implemented eClosings, they may need to build out new workflows and procedures for their purchase channel to meet the shifting market.

Purchase transactions involve more moving parts, and the lender has less control over certain aspects, such as where settlement occurs. Still, with purchases just as with refinances it’s the lender who drives eSignature of its documents, chief among them being the promissory note. 

Digitalizing even just this piece of the closing package creates process efficiencies, reduces costs, and shortens the time spent at closing. With more purchase transactions occurring, we expect there could also be an increase in the use of IPEN (In-Person Electronic Notarization) to notarize the security instrument if the borrower prefers to have an in-person ceremony. 

HW: In terms of implementation, how long should an end-to-end transformation project take?

AF: The scope of these projects can vary considerably from one lender to another. Factors that may impact the complexity and time of implementation include: Are they a multi-channel lender? What resources have they committed to their implementation project? Where does the project fit within their list of priorities? How advanced are their counterparties and partners?

Also, what are their goals? Providing a customer experience to rival the mega lenders? Taking time and cost out of closings? Being able to move assets more quickly into the secondary market?

Some clients want to do all of these things and want them done yesterday. Others are content to take a more gradual approach.

The end goal is to be entirely digital, but not every lender needs to be fully digital on day one. There is incremental value in each step in the transformation process. Hybrid closings, for example, are more efficient in most cases than traditional closings and enhance the customer experience. They are often a good interim step prior to full eClosings. 

As a rule of thumb, a relatively large lender can go from paper to hybrid closings in three to five months. A fully digital, enterprise-wide eClosing/eNote transformation probably takes between eight and 12 months. Some of the key activities for a lender to successfully implement an eMortgage program include: 

Standing up a dedicated Project Team augmented with eMortgage expertiseConducting an impact analysis across the organizationDeveloping a roadmap and plan andEnsuring organizational buy-in at all levels through communications and training

In our experience, it is also important to train, train, train, and roll out quickly from the pilot so that your staff embraces digital as the new norm and not a “one-off.”

HW: What are you telling your clients who are on the fence about moving to eClosings and eMortgages?

AF: You cannot afford not to be digital. Your customers expect it, and if you don’t provide it, they will go to other lenders who are more advanced in this area and who aggressively promote a superior digital experience for consumers. 

You cannot afford to be an inefficient, slow or high-cost lender. The market is already too competitive. eClosings can cut your origination costs by $400 or more per loan. How can you ignore this?

If your business model is to originate to sell or securitize, why wouldn’t you want to do it faster… get your capital and GOS sooner and pay less on warehouse lines?

Finally, if you are going to be in the mortgage business long term, you’re going to have to be digital sooner or later. Why not make it sooner to keep pace with your competitors?
The post The obstacles to a digital mortgage are changing – Here’s what lenders need to know appeared first on HousingWire.

As FGMC shuts down, lender partners question fate of loans in pipeline

As FGMC shuts down, lender partners question fate of loans in pipeline

Tech-fueled mortgage lender UpEquity just wants answers.  

Roughly a year ago, the Austin-based fintech began to sell its loans to First Guaranty Mortgage Corporation (FGMC), a lender and investor that specializes in non-qualified mortgage loans and is controlled by behemoth investment management firm Pacific Investment Management Company (PIMCO). 

UpEquity sent between 30 and 40 loans per month to FGMC, worth about $60 million in total volume, executives said. Depending on the month, FGMC bought between one-fourth and one-third of the loans UpEquity sold to investors through the correspondent channel.

One week ago, problems emerged: FGMC’s loan approval, which usually took one business day after due diligence was completed, was taking four days. Questioned by UpEquity, FGMC answered that nothing was wrong; they would approve and buy the loans. 

Then, without apparent notice to its correspondent partners, FGMC on Friday cut most of its workforce, and former high-level employees said the company has essentially shuttered.

It’s caused frustration for FGMC’s lending partners.

“We have about 14 loans, $5 million worth of loans, in the process of being purchased by them,” said Louis Wilson, co-founder and chief operating officer at UpEquity. “On Friday, we stopped getting responses via email. Then, we read about the layoffs. On Monday, no one responded to my email.” 

He added: “We’re sitting here wondering what will happen to those loans. We’ll probably sell to another investor. For us, it’s nowhere near life-threatening, but it’s a painful day.”  

A West Coast-based lending executive told HousingWire that FGMC said it can’t or won’t honor locks in its correspondent pipeline, even loans that were cleared for funding and underwritten by FGMC.

“I have done this 30 years and not seen it done this poorly,” he said.

A spokesperson for FGMC, which stopped taking mortgage applications late last week ahead of the mass layoff, declined to answer HousingWire’s questions. However, the spokesperson said that the company is continuing to fund loans, engaging proactively with its customers and “working closely with financial stakeholders to navigate this challenging moment.” 

Mispricing at FGMC? 

Two mortgage executives whose companies sold loans to FGMC said the firm often paid 20 basis points higher than other investors on 30-year fixed-rate mortgages.

However, mortgage rates rose sharply in the last few weeks, largely due to news of higher-than-expected inflation and the anxiety leading up to the Federal Reserve‘s 75 basis point hike. 

FGMC approved loans to purchase at a rate of 5.3%, locked 20 days ago, according to Wilson, but now rates are around 6%. And investors are asking for higher premiums to invest in these assets amid a flight to quality caused by the expectation of higher U.S. Treasury rates.  

Days before the layoffs, FGMC was negotiating to purchase loans with more lenders, and all seemed business as usual, multiple sources told HousingWire. 

“We signed up with them as a correspondent; we signed the paperwork on Monday, June 20. Then, on Friday, the 24th, they went out of business,” said Rich Weidel, the CEO of multichannel lender Princeton Mortgage. “This happens when companies get desperate, and they try to win loans by mispricing.”

According to Weidel, Princeton signed the papers but did not sell loans to FGMC. 

Funding falls through 

FGMC sent a WARN Notice to the Texas Workforce Commission on Friday, explaining the company has decided to terminate the employment of 428 of its 565 employees on June 24, 76% of the total workforce. 

“FGMC has experienced significant operating losses and cash flow challenges due to unforeseen historical adverse market conditions for the mortgage lending industry, including unanticipated market volatility,” Cassie Vacante, senior vice-president of Human Resources, wrote in the document. 

Vacante added that “in addition, FGMC’s recent efforts to obtain funding that could have prevented this layoff have proven unsuccessful.”   

Former employees told HousingWire on Friday that they were laid off without severance pay. A spokesperson wrote that FGMC has paid salaries, accrued paid time off, and commissions that have come due. However, the spokesperson said, the company is in the process of making severance payments to those who are eligible.
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Two more MSR deals valued in total at $2.5B hit the market 

Two more MSR deals valued in total at .5B hit the market 
The Prestwick Mortgage Group, an Alexandria, Virginia-based advisory and brokerage firm, has unveiled an offering for a $1.6 billion package of Fannie Mae, Freddie Mac and Ginnie Mae mortgage-servicing rights (MSRs).

The bulk of the 7,189 loans in the MSR offering put out to bid this week were originated in Florida and the Midwest, according to the offering documents — which list Prestwick as the exclusive broker and indicate bids are due July 12. The seller is identified only as an “independent mortgage banker.”

By volume, the loans included $583 million from Fannie Mae; $322 million in Freddie Mac loans and $737 million in loans backed by Ginnie Mae, according to the offering documents.

Prestwick’s offering comes on the heels of a separate bulk offering announced recently by Denver-based Incenter Mortgage Advisors that involves a $915.8 billion package of Fannie Mae and Freddie Mac MSRs. Bids on that package were due on June 23, with an anticipated sales execution date of July 31. The seller was not identified.

The bulk of the nearly 4,000 loans in that MSR package by volume ($686.1 million in Fannie Mae loans and $229.7 million in Freddie Mac loans) were originated in the Northeast and California.

Denver-based Incenter has been staying extremely busy with MSR offerings, even if many of its deals are off the public radar. Tom Piercy managing director of Incenter, said the firm “is currently working on multiple deals totaling in excess of $60 billion that are not out for public auction.” 

The weighted average interest rate for the $1.6 billion MSR offering being marketed by Prestwick is 3.175%. For Incenter’s $915.8 billion deal, the average interest rate is 3.148%. 

For the Prestwick offering, the average net servicing fee (a slice of the overall interest rate) is 0.2927%; for the Incenter deal, it’s 0.2505.

As interest rates rise — with the Federal Reserve on June 15, adding a 75 basis-point accelerant to the mix — loan-prepayment speeds drop for lower-rate loans due to diminished refinancing activity. That, in turn, amplifies the value of MSRs because they pay out over a longer period. 

Those dynamics sparked some major MSR bulk offerings over the first quarter of the year, as HousingWire reported previously. That trend continued in the second quarter as well.

In addition to the latest MSR deals announced by Prestwick and Incenter in late June, three MSR sales offerings were announced earlier in the month by Prestwick and a separate advisory firm, New York-based Mortgage Industry Advisory Group (MIAC) that together are valued at more than $1.4 billion. 

The Prestwick Mortgage Group served as the exclusive broker for a $618 million offering of Fannie Mae and Freddie MAC MSRs with bids due June 2. 

In addition, MIAC came out with two large MSR offerings earlier this month involving a $4.8 billion loan pool and a separate $816.7 million package, both composed of Fannie Mae and Freddie Mac loans. 
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Fix-and-flip lender Kiavi finalizes $218M private-label offering

Fix-and-flip lender Kiavi finalizes 8M private-label offering
Kiavi, formerly LendingHome, recently closed a $218 million private-label securitization of unrated short-term mortgages — described as “residential transition loans” (RTLs) by the lender, which serves the fix-and-flip market.

The deal represents Kiavi‘s ninth such securitization under its LHOME shelf since launching its revolving securitization program in 2019, according to the company. The offering includes a two-year revolving term during which principal payoffs on the underlying loans can be reinvested in purchasing additional newly originated loans.

“The transaction is estimated to provide capital to support approximately $750 million in loan originations over the life of the deal and will help real estate investors revitalize aged homes across the country,” Kiavi said in announcing the deal. “The $218 million total deal size includes $207 million in offered notes in three classes, A1, A2 and M, all of which were sold.”

Nomura Securities International Inc. served as the sole structuring agent of the securitization. Nomura, Barclays Capital Inc. and Performance Trust Capital Partners, LLC acted as the joint bookrunners and co-lead managers. 

“Executing in today’s challenging market environment demonstrates our investors’ continued confidence in our products and performance, and it extends our position as a leading issuer of RTL products,” said Arvind Mohan, chief operating officer at Kiavi. “This enables us to continue to be a dependable partner to real estate investors as they rehabilitate America’s aging housing stock at a time when over two-thirds of U.S. homes are over 30 years old.” 

Kiavi ranked as the top short-term lender in the fix-and-flip space in 2021, with $2.7 billion in originations, up nearly 78% from 2020, according to a recent report by Inside Mortgage Finance (IMF). After a slowdown in lending due to the pandemic, fix-and-flip lenders came roaring back in 2021, boosting originations by more than 73% year over year, to $18.5 billion, according to IMF.

Could renovated foreclosure resales help solve the nation’s increasingly complex affordable housing puzzle?

An estimated 140,000 renovated properties purchased at foreclosure auction or bank-owned auction were resold to owner-occupant buyers between January 2020 and December 2021

Presented by: 

Since it was launched in 2013, Kiavi has funded more than $10 billion in loans to real estate investors, according to the company. This past April, Kiavi completed a $271 million securitization of RTLs — its eighth deal at the time — that also is expected to support some $750 million in loan originations over the life of the deal.
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Federal Title & Escrow recognized by WFG

Federal Title & Escrow recognized by WFG
Federal Title & Escrow Co. recently accepted the Mid-Atlantic Region’s “3E Remitter Award” from WFG National Title Insurance Co.

The Title Team acquires DCA Title

The Title Team acquires DCA Title
The Title Team expanded its service area through the acquisition of Minnesota-based DCA Title. The DCA Title president and executive vice president will join The Title Team’s operations. Read on for more.

OrangeGrid partners with Timios

OrangeGrid partners with Timios
OrangeGrid entered a strategic partnership with Timios, making Timios the preferred provider of title, escrow, valuation and asset management services within OrangeGrid’s default management ecosystem. Read on for more.

AM Best affirms credit ratings of Old Republic subsidiaries

AM Best affirms credit ratings of Old Republic subsidiaries
AM Best affirmed the financial strength rating and the long-term issuer credit ratings of members of Old Republic insurance companies and the Old Republic Title Insurance Group. Read on for more.

Bowe Digital boosts team

Bowe Digital boosts team
Indiana-based Bowe Digital recently added two members to its team. The company hired a social media manager and content marketing manager. Read on for more about the new hires.