Point-of-Sale Solutions Special Report

Point-of-Sale Solutions Special Report
In today’s market, lenders are looking to differentiate themselves from the competition by providing a superior experience for the borrower. At the same time, they want to improve the experience for loan officers by streamlining as much as they can and providing valuable efficiencies. 

The two companies featured in this section offer point of sale solutions that leverage technology and connectivity to ease the mortgage process for both LOs and borrowers.

Black Knight

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Cloudvirga’s POS platform provides loan officers with everything they need to prepare a loan in minutes

Cloudvirga’s POS platform provides loan officers with everything they need to prepare a loan in minutes
One pain point affecting lenders today is around how they can differentiate themselves from the competition and increase efficiencies. Cloudvirga’s platform solves for both by creating the best experience for borrowers and loan officers. 

Cloudvirga’s POS is an experience-driven platform that gives lenders access to the tools they need in an easy-to-use, responsive UI. It focuses on more than just task management and automation. 

The Cloudvirga team has been able to dramatically improve the experience of the borrower and the loan officer. They’ve introduced tools such as a full PPE suite, government center and a unique loan comparison report, combined with a loan officer UI that allows users to complete all necessary work and tasks within the Cloudvirga platform. All of this is wrapped in an experience as simple and easy to manage as the borrower’s. 

“A key differentiator of ours (and something missing from the market at large) is a focus on the loan officer’s experience,” said Jason Smith, SVP Sales and Marketing. “We give LOs the tools they need to prepare an underwriter-ready loan in minutes, with the experience they deserve through a UI as friendly as the borrower’s, all while keeping them out of the LOS completely – that’s right, out of the LOS.” 

For borrowers, a point-of-sale system is typically their first physical interaction with a lender’s brand. Because of this, Cloudvirga has created a five-star experience from the very beginning, carrying that throughout the entire process. Use of CV’s platform helps a lender differentiate their brand and create a happy, lifelong customer. 

“We have designed a borrower experience that allows them to complete the application and live within our portal throughout the entire process,” CEO Maria Moskver said. “Cloudvirga is here to help capture and retain the market you need and deserve.” 

The Cloudvirga platform streamlines the user experience by keeping both the borrower and loan officer in one place with the tools they need to create an underwriter-ready file in minutes, all with an experience that is easy and efficient. The borrower and loan officer can clearly see the next required action, where they are in the application, conditions management and closing phases. 

Cloudvirga aims to keep the implementation process as simple and efficient as possible. The team closely coordinates with the client upfront on things like branding, robust PPE screens, layering of loan product details and risk management. Clients work closely with an account manager, customer success team and product development as well as the implementation team. 

From a brand perspective, the platform is completely white-labeled and has all the tools users would expect to capture and retain the client base they need to be successful. 

“We believe the right technology empowers loan officers, creating more business, more efficiently, as well as directly helping the lender acquire and retain the best LO talent in the industry – something that is even more critical in a down market,” Moskver said.

Jason Smith, SVP Sales and Marketing

Jason Smith is responsible for expanding market initiatives, maintaining relationships, and selling Cloudvirga’s products and solutions. 

Raman Iyer, Head of Engineering

Raman Iyer is responsible for Cloudvirga’s digital innovation and technology strategy.

Maria Moskver, CEO

Maria Moskver is responsible for all aspects of Cloudvirga’s initiatives, while instilling a culture of transparency, appreciation and respect.

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Black Knight’s Borrower Digital leverages connectivity with Empower to give lenders a competitive edge

Black Knight’s Borrower Digital leverages connectivity with Empower to give lenders a competitive edge
Borrower Digital is Black Knight’s point-of-sale (POS) solution that is built using responsive-design to be used easily from any web-enabled device. The solution leverages the power of innovative, integrated technologies to not only simplify the mortgage application and approval process for borrowers, but also to improve the backend process for loan officers. Featuring pre-configured connectivity with Empower, Black Knight’s powerful loan origination system (LOS), Borrower Digital helps lenders gain a competitive edge by providing a superior mortgage experience for their customers. 

When a lender implements a third-party POS system, the number of features offered by the provider which can be used depends upon the quality and depth of the integration with the LOS. Borrower Digital helps mortgage lenders optimize the POS and LOS interaction using the LOS database for transactional data. 

For clients using Empower, all data is stored in Empower and accessed using APIs. This means data captured in Borrower Digital is readily available to lender users.  

Borrower Digital also helps the borrower track progress throughout the origination process by notifying them immediately of any changes, and by using artificial intelligence and machine learning document classification to manage documents provided by borrowers to clear conditions. 

Borrower Digital is further enhanced with Black Knight’s companion solution Loan Officer Digital. Loan Officer Digital is an intuitive dashboard that allows loan officers to easily follow borrowers throughout the loan approval process from a single, mobile-friendly location and by allowing all involved parties to view similar workflow dashboards. Using this dynamic, configurable and responsive-web solution, loan officers can access the tools they need to help the consumer whether on the go, at home or in the office. These tandem solutions enable loan officers to deliver enhanced customer service and significantly improve the overall customer experience.

“Black Knight is continually pushing the frontiers of mortgage technology and Borrower Digital is no exception,” said Rich Gagliano, president of origination technologies. “Both Borrower Digital, and its companion solution Loan Officer Digital, are a comprehensive rethinking of the loan application process for both loan officers and borrowers, and the ease-of-use and the enhanced experience for users on both sides of the process are testaments to Black Knight’s commitment to innovation.” 

Borrower Digital creates a simple, intuitive Q&A process that guides borrowers through prequalification, preapproval, full application and refinance. It validates both data and documents and alerts the borrower of immediate next steps, which helps reduce cycle times and back-and-forth between the borrower and the loan officer. 

“Borrower Digital offers significant configurability to allow lenders to tailor the experience to their client,” said Craig Rebmann, managing director of origination technologies product management. “Borrower Digital’s robust self-service functionality, advanced automation capabilities and deep integrations result in an unmatched borrower experience from start to finish.”

Joe Nackashi, Chairman and CEO  

Joe Nackashi leads the company’s vision and direction for Black Knight to provide premier solutions and services for many of the nation’s largest lenders and servicers.

Rich Gagliano, President, Origination Technologies 

Rich Gagliano is responsible for the strategy and product direction of Black Knight’s origination technologies.

Craig Rebmann, Managing Director Origination Technologies Product Management, Black Knight

Craig Rebmann is responsible for building and enhancing Black Knight’s loan origination system, Empower.

Source: https://www.housingwire.com/rss

Mortgage group asks regulators to stop FICO’s price hikes of up to 400%

Mortgage group asks regulators to stop FICO’s price hikes of up to 400%
Credit reports are getting a lot pricier, and some mortgage lenders are none too pleased about it.

In a letter dated Nov. 22, the National Consumer Reporting Agency told its members that the “vast majority” of mortgage lenders would see price increases between 10% and 400% from Fair Isaac Corp. (FICO).

The letter, signed by NCRA Executive Director Terry Clemans, said there would be “a wholesale price increase of less than 10% for the top tier of approximately 46 lenders, about 200% for approximately 6 lenders in the middle tier, and more than 400% for all other mortgage lenders in the nation.”

“A pricing scheme where a few lenders receive small price increases, while prices are quadruped for most lenders (and the borrowers they serve) is arbitrary and raises questions about whether it is a proxy for volume discounts or done for other unjustifiable reasons,” the Community Home Lenders of America, which represents small and mid-sized lenders, wrote in a letter to Federal Housing Finance Agency Director Sandra Thompson and Federal Housing Administration Commissioner Julia Gordon.

The trade organization called on Thompson and Gordon to stop the price hikes, which it described as a violation of “basic principles of transparency.”

FICO’s explanation

In a statement to HousingWire on Wednesday, FICO said that by Sept. 1 it informed the three credit rating agencies that it had adopted a tier-based royalty structure for mortgage, generally based on the volume of FICO scores delivered to lenders.

Such a royalty structure was already in place for auto loans, credit cards, personal loans, and other products, but FICO has historically charged each CRA the exact same royalty per-score in the mortgage market. Before this change, FICO said the royalty per score has been approximately 60 cents, the company said.

With the new royalty system, “FICO will now collect approximately 60 cents to approximately $2.75 per FICO Score,” the company said in a statement. “That means FICO will collect approximately $2-8 total for all three scores out of a $40 to $50 (or more) tri-merge report and score bundle, and out of an average $3,800 in closing costs. All amounts for the tri-merge report and score bundle above this $2-8 are collected by others. Accordingly, the total FICO increase for any given tri-merge report this year is no more than approximately $6, and for many, less.”

The company said its pricing remains “exceedingly low compared to the value that the FICO Score provides as one of the most important components in facilitating approximately $2 trillion in mortgage originations every year, and disproportionately low when compared to its royalty rates for other markets.”

FICO said its royalty for the highest volume tier – it did not disclose which lenders were in that tier – will remain at the current level, apart from an adjustment to account for inflation.

“The royalty for lower-volume tiers will increase, although this will be only the second increase in FICO’s 25+ year history (apart from nominal adjustments to account for inflation over the last few years) of providing credit scores to the mortgage market,” FICO said in the statement.

Because mortgage lenders and brokers typically pay for credit reports upfront and are often stuck with the bill if the loan is denied or canceled, such a policy will likely have an outsized impact on smaller lenders. (Lenders are permitted to charge borrowers upfront for credit reports, but most do not.)

Hikes on smaller lenders are “unjustified,” CHLA argues

In its letter, the CHLA argued that a “pricing scheme where a few lenders receive small price increases, while prices are quadruped for most lenders (and the borrowers they serve) is arbitrary and raises questions about whether it is a proxy for volume discounts or done for other unjustifiable reasons.”

Such a pricing structure arguably creates discriminatory pricing against minorities and underserved borrowers who are more likely to apply for FHA loans, the CHLA said.

“While we don’t know who the 52 preferential lenders are, our impression is that smaller IMBs (and smaller banks) are generally excluded from this category, and therefore the underserved borrowers they serve will be significantly and adversely affected,” the trade group wrote in its letter.

For agency-eligible loan applications, the CHLA said the price hikes violate “the spirit of the FHFA’s G fee parity policy, disproportionately harming smaller lenders and their borrowers.

Last month, the FHFA approved VantageScore as another credit scoring system for mortgage originators, giving FICO its first actual competitor in decades. The regulator, however, said it would be a “multiyear” effort to get VantageScore 4.0 up and running.
Source: https://www.housingwire.com/rss

The mortgage market right-sizing is well underway. When will normalcy return?

The mortgage market right-sizing is well underway. When will normalcy return?

Relief from the rate-driven volume reduction afflicting both the primary and secondary mortgage markets is expected to be elusive for some time to come, at least in terms of any renewed refinancing boost.

That’s according to David Petrosinelli, a New York-based senior trader with InsphereX, a tech-driven underwriter and distributor of securities that operates multiple trading desks around the country.

“We’re going to have a Fed-induced consumer slowdown,” Petrosinelli said. “We’re going to have a housing correction.”

That correction, well underway, has already taken a hammer to the performance of the private-label and agency mortgage-backed securities (MBS) markets, which are tied closely to lenders’ success in growing mortgage originations. The Federal Reserve’s rate-hiking campaign to combat inflation has greatly chilled originations in the primary mortgage market, with some lenders’ origination volume down as much as 75% year over year.

Consequently, the collateral available to support securitizations in both the agency and nonagency secondary markets has also fallen.

We’ll have a lag in when people refi because even if there is a rate incentive to do it, there may not be the price incentive to do it.David Petrosinelli managing director at InsphereX

Petrosinelli said that even if the Fed takes its foot off the accelerator on the rate front sometime during the first quarter of next year, as some market experts predict could happen in the best-case scenario, there will still be a lag effect before conditions improve for the housing industry. 

“The Fed on average … over the last two decades, usually cuts rates about four or five months after the Fed funds rate has peaked,” he said. “The Fed could begin cutting rates by June [of next year], in the summertime, by that metric.

“But it’s not just rates, because property values will probably also have continued to drift lower, so ultimately, if you want to refi, I don’t imagine that it would be very easy to do that if you’re off 5% to 10% in prices. We’ll have a lag in when people refi because even if there is a rate incentive to do it, there may not be the price incentive to do it.”

HousingWire spoke to a half-dozen industry pros in the primary and secondary markets for their takes on when normalcy might return.

Dour outlook

A recent report on the private-label residential mortgage-backed securities (RMBS) sector by the Kroll Bond Rating Agency (KBRA) reveals that a dour outlook for the mortgage-origination market also reverberates in the secondary market.

“Unsurprisingly, 30-year mortgage rates are near 7%, up almost 5 points this year, a level virtually unfathomable during the past decade,” the KBRA report states. “The magnitude and speed of this change has contributed to an unfavorable spread environment that has continued to negatively affect issuance across all sectors of RMBS in [the second half of] 2022.”

KBRA defines RMBS as all nonagency prime, nonprime (including non-QM) and credit-risk transfer issuance.

We project Q4 2022 to be the lowest RMBS securitization issuance volume in any quarter since 2016, closing at less than $6 billion.Analysts at Kroll Bond Rating Agency

“KBRA now expects full-year 2022 RMBS issuance to top out under $102 billion,” the report continues, “down from a heady $122 billion [in 2021]. Such an outcome would equal an almost 17% decline relative to 2021 volume.” 

On the bright side, KBRA also notes that 2022 will still be the second highest RMBS issuance year since the global finance crisis some 15 years ago and nearly double the $55 billion issuance mark in 2020. Still, much of that good news for 2022 is front loaded.

“In terms of quarterly issuance, it tapered quickly in Q3 2022 and did not reach our projected issuance expectations of $20 billion, instead closing at almost $17 billion,” the report states. “Similarly, we project Q4 2022 to be the lowest RMBS securitization issuance volume in any quarter since 2016, closing at less than $6 billion.”

For 2023, KBRA expects the mortgage interest-rate environment to remain elevated “as will other sector headwinds, including home-price declines, high inflation and potential volatility owing to changing economic conditions and geopolitics.” 

Those factors will contribute to a 40% decline in RMBS volume in 2023, down to $61 billion, according to KBRA’s projections.

The outlook for agency MBS issuance — securities issued by government-sponsored enterprises such as Fannie Mae or Freddie Mac — is equally grim, according to Robbie Chrisman, head of content at Mortgage Capital Trading (MCT).

“Gross issuance of all agency mortgage bonds has declined for eight straight months to now sit at its lowest level since April 2019, below $100 billion a month and about one-third of what we were experiencing at this point last year,” Chrisman wrote in a November market-outlook report. “That trend likely won’t change going into the new year, as December, especially its latter half, sports the lowest average daily trade volume for any period of the year.”

Agency mortgage-bond gross issuance, Chrisman notes, is projected to end 2022 at around $1.8 trillion, compared with the $3.3 trillion average posted during the boom years of 2020 and 2021.

The drop-off in agency and nonagency MBS issuance makes sense when you consider the most recent origination forecast by the Mortgage Bankers Association, which shows overall loan production declining from $4.43 trillion in 2022, to $2.24 trillion for this year and $1.97 for 2023. The bulk of that decline is on the highly rate-sensitive refinancing side.

MBS challenges

From the point of view of investors and broker-dealers, Petrosinelli said, the current MBS market is not all that attractive, given the volatile rate environment. 

“I remember the first few bonds I bought [decades ago],” he recalled. “My boss kind of looked at me and scratched his head. I said, ‘Look at the yield on this bond.’ And he said, ‘Well, the coupon is 200 basis points below Fed funds.’”

If the bond’s coupon rate is lower than prevailing interest rates, then the bond’s price is discounted. That can be a problem for the holder of the bond in a rising rate environment.

“… Particularly if you’re a broker-dealer, owning that kind of coupon, you’re upside down to start because there’s a carry cost with that,” Petrosinelli added. “So, you have to make all of your profit on price appreciation.”

“It’s just a tough scenario to get really excited about, and it’s probably one of the reasons why you see the Street is really not flush with [RMBS] inventory now, which is an understatement.”

Until the Fed concludes their hiking cycle, volatility and illiquidity in the secondary market will continue,” he said. “Once the Fed stops raising rates, the market could be expected to normalize.Andrew Rhodes, senior director and head of trading at MCT

Thomas Yoon, president and CEO of non-QM lender Excelerate Capital, said the lender postponed plans to conduct its first private-label securitization offering this year “because the last thing we want to do is go to market for the first time and get crushed.” He added that “the premium goes away [on a securitization deal] if rates jump too fast.”

“In the worst-case scenario, [some lenders] may securitize to get the assets off their balance sheet, but they might lose money doing it,” he explained.

Andrew Rhodes, senior director and head of trading at MCT, stressed that persistent inflation is “the major headwind” confronting the housing market.

“Until the Fed concludes their hiking cycle, volatility and illiquidity in the secondary market will continue,” he said. “Once the Fed stops raising rates, the market could be expected to normalize.”

John Toohig, head of whole-loan trading at Raymond James, said as rates continue to rise, “that’s just going to continue to put pressure on supply.”

“There’ll be fewer loans originated [going forward], so there will be fewer loans able to go into a bond issue,” he added.

Keep hope alive

Sean Banerjee, co-founder and CEO of ORSNN, a Seattle-based fintech start-up that offers lenders and private-equity funds access to a cloud-based electronic whole-loan trading platform with embedded quantitative analytics capabilities, sees the dropoff in mortgage originations due to rising rates as the main driver of “the shrinking securitization market.” 

Over the longer term, however, especially if we face a recession in 2023, resulting in a more stable to declining-rate environment, Banerjee says the reduced mortgage production could create favorable pricing conditions for the both the agency and private-label securitization markets.

“Based on lower volumes, the market could become more efficient,” he said. “If [loan] issuance is slow to recover, which it may be due to tightened lending [standards], a possible recession [next year] and associated unemployment, an intriguing supply-demand dynamic can occur.”

A substantial secondary infrastructure was built to accommodate the behemoth agency MBS issuance during 2020 and 2021, and now those operations — as well as whole-loan trading businesses — need to be right-sized for the new normal.Miki Adams, president of CBC Mortgage

He added that such a “recession scenario” could bode well for the MBS market in 2023 — even as the nonbank lender market undergoes a major restructuring. That in turn, would make the MBS market a more attractive liquidity outlet for the surviving lenders.

“If there are fewer [quality loan] pools to choose from, [sellers] are going to be able to command a higher price than they would in today’s current market just because of the lack of supply,” he explained. “That same dynamic holds true for agency MBS as well as nonagency.”

Miki Adams, president of CBC Mortgage, a provider of down-payment assistance and one of the largest nonbank second-mortgage lenders in the country, summed it up this way: 

“A substantial secondary infrastructure was built to accommodate the behemoth agency MBS issuance during 2020 and 2021, and now those operations — as well as whole-loan trading businesses — need to be right-sized for the new normal.”
Source: https://www.housingwire.com/rss

NAMB launches roadshow with Freddie Mac and Rocket

NAMB launches roadshow with Freddie Mac and Rocket
The National Association of Mortgage Brokers (NAMB) announced a series of roadshows in partnership with Freddie Mac and Rocket Pro TPO, starting Dec. 8 in St. Louis, Missouri.

The events will feature speakers focused on professional development for loan originators to grow their business and what is likely to happen in the next Congress that could impact the mortgage industry in 2023, according to a statement from NAMB.

Speakers include Mike Fawaz, senior vice president of sales at Rocket Pro TPO, and Freddie Mac representatives Nora Guerra, single-family affordable lending manager, and Tom Smith, technology project manager of single-family strategic delivery.

“NAMB is dedicated to offering the finest professional development tools throughout the entire marketplace,” NAMB board president Ernest Jones Jr. said in a release. “We are fulfilling this promise to our colleagues by offering a full calendar of events throughout 2023 and beyond and are extremely grateful for our partnerships with both Freddie Mac and Rocket Mortgage as our first of many roadshow events in St. Louis is bound to help professionals gain new tools that will assist consumers across the nation.”

Earlier this month, NAMB announced its 2023 agenda at its national conference, where it pledged to advocate for The Trigger Leads Prohibition Act, removing the 3% cap on mortgage broker company payments in collaboration with lawmakers, and the 2017 Tax Cuts and Jobs Act.

NAMB has partnered with Freddie Mac for a professional development program for young mortgage industry leaders over the next year.
Source: https://www.housingwire.com/rss

Mortgage demand dropped last week despite a decline in rates

Mortgage demand dropped last week despite a decline in rates
Mortgage rates dropped last week, but it wasn’t enough to spur mortgage demand.

The market composite index, a measure of mortgage loan application volume, declined 0.8% for the week ending November 25 after rising 2.2% from the previous week, according to the Mortgage Bankers Association. The index fell by a whopping 67.8% compared to the same week in 2021.

Purchase applications were up 4% last week compared to the previous week, but were down by 41% year over year. Meanwhile, the demand for refinances dropped 13% last week and plummeted 86% on an annual basis.

“Mortgage rates declined again last week, following bond yields lower,” said Joel Kan, MBA’s vice president and deputy chief economist. “The 30-year fixed mortgage rate decreased to 6.49% and has now fallen 57 basis points over the past four weeks. Additionally, mortgage rates for most other loan types declined,” he said.

MBA estimates the average contract 30-year fixed-rate mortgage for conforming loans ($647,200 or less) fell to 6.49% from the previous week’s 6.67%. At its recent peak about a month ago, rates reached 7.16%.

Jumbo mortgage loans (greater than $647,200) marginally rose last week to 6.35% from 6.30% the week prior, the MBA said. The average contract interest rate for 5/1 ARMs decreased to 5.48% from 5.78% the previous week. The ARM share of activity rose to 9% of total applications.

Mortgage rates, which have been trending up with the Federal Reserve‘s interest rate hike, started falling following a lower-than-expected consumer price growth in October. The consumer price index (CPI) rose by 7.7% year over year, marking the smallest 12-month increase since the year ending in January 2022.

“The economy here and abroad is weakening, which should lead to slower inflation and allow the Fed to slow the pace of rate hikes,” Kan said. 

The report shows the share of refis decreased to 26.1% of total applications from 28.4% from the previous week.

The Federal Housing Administration share of total applications declined to 12.2% from 13.4% the week prior. The Veterans Affairs (VA) share of total applications rose to 11.2% from 10.5%, and the United States Department of Agriculture (USDA) share marginally decreased to 0.5% from 0.6% during the same period. 

The survey, conducted weekly since 1990, covers 75% of all U.S. retail residential mortgage applications.
Source: https://www.housingwire.com/rss

$1 million conforming loan limit reignites affordability debate

million conforming loan limit reignites affordability debate
The conforming loan limit for mortgages backed by Fannie Mae and Freddie Mac will pass the $1 million mark for the first time in 2023, reigniting a debate about the government’s role in the mortgage market and its persistent affordability challenges. 

Meanwhile, desperate for volume in a high-rate environment that’s pushed borrowers to the sidelines, some of the top U.S. nonbank lenders are wasting no time. They’ll adopt the 2023 FHFA rates effective Tuesday, even though the official loan limits won’t take effect until January 1.

The Federal Housing Finance Agency (FHFA), the regulator of Fannie Mae and Freddie Mac, announced that the baseline conforming loan limit in 2023 will increase by 12.21%, or $79,000, compared to 2022, to $726,200. 

The new ceiling for one-unit properties in designated high-cost areas will reach $1,089,300 — or 150% of $726,200. That’s the same limit for Alaska, Hawaii, Guam, and the U.S. Virgin Islands, based on special statutory provisions. 

As early as September, months ahead of the FHFA announcement, a group of mortgage lenders raised their ceilings to $715,000 (baseline) and $970,800 (high-cost areas), lower compared to the loan limits announced.  

However, Rocket Mortgage said it will offer the new ceiling within 24 hours. Homepoint will begin lending at the FHFA 2023 loan limits for conventional products starting Wednesday, November 30. Pennymac said the new FHFA conforming loan limits for its borrowers increased immediately following the announcement. United Wholesale Mortgage will honor the new limits starting November 30 for conventional and VA loans.  

That the conforming loan limit will eclipse $1 million in designated counties next year raises alarm for some housing groups. The Housing Policy Council, which represents large mortgage lenders and servicers, said the new loan limits exacerbate the current affordability crisis. 

“Taxpayer backing of ever-increasing loan sizes provides a subsidy that results in slightly lower mortgage rates which, in turn, encourages people to buy more expensive homes,” the trade group said in a statement. 

They added, “Ultimately, such backing feeds the runup in house prices, exacerbating the affordability challenges we face in today’s supply-constrained marketplace.” 

The mortgage market relies upon government and taxpayer backing, meaning it shifted away from private companies to assess and manage mortgage credit risk, the group argued. 

“The housing finance system is more resilient when private capital shares the risk of loss,” HPC argued. “With appropriate reforms and transition, there is no reason to believe that private capital cannot serve a greater role than it does today.”    

Raise the (conforming loan) roof

The Housing and Economic Recovery Act in 2008 established a formula based on home prices for increasing conforming loan limits for Fannie Mae and Freddie Mac. 

It mandated that the baseline could only rise after home prices returned to pre-recession levels. That condition was finally met in 2016 when the FHFA increased conforming limits for the first time in a decade.

House prices increased 12.21% on average between the third quarters of 2021 and 2022, thus increasing the baseline conforming loan limit in 2023 by the same percentage, the FHFA said in a statement Tuesday.

The ceiling doesn’t drop even if home prices fall, but it does rise if home prices are up year over year. And, over the last couple of years, home appreciation was significantly higher in the U.S. market due to lower rates and supply constraints.  

“The idea is that the conforming loan limit increases over time, with the increase in average home prices. So, it’s not as if Fannie and Freddie’s footprint is going to grow. If this is done correctly, their footprint should remain roughly the same,” Mike Fratantoni, Mortgage Bankers Association’s (MBA) senior vice president and chief economist, said.

Data from the Urban Institute shows that Fannie Mae and Freddie Mac were responsible for 48.2% of the first lien origination volume in the second quarter, compared to around 60% in 2020 and 2021. 

According to the nonprofit group, the decline reflects a substantial slowdown in refinancing business. During 2009 and 2013, the GSEs’ share was about 60%, but fell to about 40% between 2014 to 2019, the data shows. 

According to Fratantoni, the conforming loan limit rule is functioning as intended. “I think what was unexpected was having a couple of years of nearly 20% home price growth, and that’s impacting affordability,” he said. 

Due to the recent spike in mortgage rates, among other reasons, the MBA does not expect the same level of home appreciation in the next couple of years. The trade group expects home prices to remain flat in 2023 and 2024. 

When asked if the Housing and Economic Recovery Act in 2008 needs to be updated, Fratantoni said that MBA has been advocating for GSE reform. 

Regarding the impact of the GSEs footprint on the market, Fratantoni noted that rates on jumbo loans are much lower than conforming loans. 

“There’s a lot of banks and credit unions and other depositories that are very interested in holding jumbo loans. And this (the new loan limit) isn’t going to change that. A loan eligible for the GSEs does not guarantee it’s going to end up with one of the GSEs.” 

The market has been particularly tough on non-agency jumbo lenders of late. Originations of non-agency jumbo mortgages fell 34.8% in the third quarter from the prior quarter to $88 billion, according to data from Inside Mortgage Finance. That was a greater decline than the overall market saw. By contrast, first-lien lending overall fell 22.3% to $505 billion in the third quarter.

Mortgage rates were 6.65% for 30-year fixed conventional loans on Tuesday afternoon, compared to 5.95% for the 30-year fixed jumbo loans, according to Mortgage News Daily.  
Source: https://www.housingwire.com/rss

The war for top talent and why LOs move shops

The war for top talent and why LOs move shops
Given the market contraction and numerous layoffs in the industry, it may be surprising to think that loan officer recruitment and retention could be a focus for some lenders and independent mortgage banks right now. 

But due to the reduction of volume, it’s extremely important for lenders and IMBs to be able to replace that lost volume – and the quickest way to do so is to bring money in through revenue. Rather than cutting costs and reducing expenses, some shops are instead choosing to grow.

The battle for LO talent is even more prevalent among IMBs, as mortgage is their single revenue stream. 

“Yes, there is a war for top talent,” said Robert Lipston, EVP of Loan Production at Evergreen. “We’re not looking for everyone – we’re looking for the right ones.” 

Why do LOs move shops?

In an environment laden with rate changes and layoffs, you’d think LOs would stick with their current shop and hope to come out of the storm intact. But that’s not necessarily true. 

Loan officers tend to move shops for one of two primary reasons: pain or gain. 

“LOs seem to start looking when they struggle to effectively close loans,” said Dianne Crosby, Regional Manager/SVP of Mortgage Lending at Guaranteed Rate. “LOs who are happy do not want to take on the hurdle of a transition even if there might be better rates or a wider array of loan programs with the new employer.” 

Those struggles can be attributed to a few factors. One that’s often cited is a lack of tools, product mix or support. 

“So many companies have done so many layoffs that some of the pain is they don’t have enough staff to support the existing talent they have today,” said Ryan Hills, Regional Director at Movement Mortgage. “It’s hard for [LOs] to produce when they’re stuck in the office because they don’t have support.”

LOs may also look to transition to a new shop if they fall out of alignment with their current leadership. A big part of why some LOs are leaving their current shops today is because the leaders of those companies – and to be fair, the LOs themselves – are operating from a place of fear. 

Hills called it a security or longevity play – lenders want to make sure that they’re on a safe ship to “weather the storm.”

“They get the sense that with all of the organizations struggling through this, ‘maybe my organization won’t make it through, I need to find a plan B,’” he said.

Some companies aren’t seeking opportunities in the market; instead, they’re having the “knee-jerk reaction” of “cutting bottom-line expenses,” Lipston said. 

“A lot of loan officers today are moving because companies are in a fear base and they’re not using this as an opportunity; they’re shrinking down and making their companies smaller to try to navigate through the storm versus adding good talent and good people,” he said. 

On the flip side, some LOs are motivated to move to a new shop, rather than away from their current organization. These LOs see an opportunity to “gain” by working with lenders that are willing to lean into the market, find opportunity among adversity and create products for LOs and their customers to win with. 

What are LOs looking for in a new shop?

“To upset your current system and agree to leave people you know and an organization that has been basically working for you, there has to be a compelling reason,” Crosby said. 

Many people would cite products, pricing and compensation. But those aren’t always the deciding factor, according to Hills.

“They’re very comparable, if you stacked us all up, and most people aren’t honest enough to say, the comp is very comparable, the pricing and the rates are very comparable,” Hills said. “We all kind of have very similar offerings in that.”

He said these are important factors, but, “it does come down to the culture and the value alignment of the leadership and the team that you’re working with.”

“I believe that people work for people first, organizations second,” Hills said. 

That leadership factor is crucial, and often what drives the culture at a shop. 

“Culture is the No. 1 stickiness that you provide your team to win every day,” Lipston said. “Culture is not a word; it’s a tangible executive strategy that allows your company to set itself apart.” 

Technology does play its own role in LO recruitment and retention, however. 

One way shops can retain LOs is by leveraging tech to help them build, manage and pull more loans out of their pipelines. Some tech now can even predict when a borrower is getting ready to refinance or move, adding value to an LO’s existing pipeline. 

“If you can, arm your loan officers with that technology,” Hills said. “That will obviously help the retention because they’re not going to want to leave if the organization is helping them retain their business and even growing it.”

What should leadership be focused on for LO retention?

Lender shop leadership should be offering opportunities to add volume to their salesforce, including creative products, additional marketing opportunities and investing in their LOs with new ideas and tips on how to win more business.

“You better have a force field around your people today, because if you don’t take care of them, they’re exiting your company,” Lipston said.

Leadership should also be transparent with their LOs and offer support. Many LOs are dealing with low morale after two good years of volume amid a pandemic, followed by a huge drop in volume. 

“One of the ways that you can keep people positive is addressing that every week, every month, having your CEO come on board and speak to that,” Hills said. “And also giving them vision, being transparent with the financials, letting them know they’re on the strong ship right now.”

And leadership can always turn to LOs to ask what they can provide.

“Ask the talent what they need, carve out resources and follow up to make sure they feel supported, valued and heard,” Crosby said. 

Ultimately, investing in your LOs is an investment in your company’s future. 

“We’re planting seeds for the next market, for the next year, for the next year after that,” Lipston said. “It’s all about looking forward and vision, and getting the right people on the team today to build the winning platform for the future.” 
Source: https://www.housingwire.com/rss

Study reveals alarming inequality trend for Black, Native American borrowers

Study reveals alarming inequality trend for Black, Native American borrowers
Mortgage fairness for Black and Native Americans is no better today than it was 30 years ago, according to a new mortgage fairness report.

The report, issued by “fairness-as-a-service” solution firm FairPlay AI, was based on a study of more than 350 million mortgage applications from 1990 to 2021. The applications were obtained from public data in the Home Mortgage Disclosure Act (HDMA). 

Fairplay used the industry standard metric Adverse Impact Ratio (AIR), which compares the rate of approval for protected status applicants to a control group. For instance, if protected class applicants had a 60% approval rate and the control group had a 90% approval rate, the AIR would be 60/90, or 67%. An AIR of less than 80% is considered a statistically significant disparity.

According to the report, Native American mortgage applicants’ loan approvals dropped by more than 10 percentage points, to 81.9% in 2021 from 1990. 

AIR for Black homebuyers rose modestly to 84.4% in 2020 and 2021, up from 78.4% in 1990. This was “likely attributable to massive government stimulus and other support programs designed to stabilize the housing market during the COVID-19 pandemic,” according to the report. The ratio remained unchanged in 2019 compared to 29 years ago, the report showed.

“Despite decades of government intervention and the growth of high-priced consultancies devoted to fair lending practices, there is clearly much work to be done,” said FairPlay CEO and report co-author Kareem Saleh. 

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Black homebuyers endure deep and persistent disparities in loan approvals in five states, including California, Alabama and South Carolina, according to the report. In 2021, Black homebuyers in these states were approved at 69% of white mortgage applicants.

Mortgage fairness for rural Black populations had an AIR of 74% in 2021, lagging behind the fairness of the urban population, which had an AIR of 83% in 2021. 

Bias in lending is a challenge that the mortgage industry has been struggling with, as seen from a handful of suits. Appraisal firm 20/20 Valuations and appraiser and mortgage lender loanDepot were sued by a Maryland couple earlier this year who claimed their home was appraised at a far lower value than it was a few months later when they removed indications that a Black family lived there.

In July 2022, Movement Mortgage paid $75,000 to resolve allegations of racial discrimination against Black and Hispanic borrowers seeking mortgages in the Seattle-Tacoma area. Undercover testers from the National Community Reinvestment Coalition filed a complaint claiming that the South Carolina-based lender had significantly higher application withdrawals and lower approvals in majority-minority census tracts compared with majority White census tracts, which it said amounted to redlining.

On a positive note, mortgage fairness for Black women improved to 86.3% in 2021 from 69.8% in 1990. Hispanic Americans have seen a steady increase in mortgage approval fairness, increasing to 87.7% in 2021 from 77.7% in 2008. HDMA data on Hispanic applicants only dates back to 2008.

Asian Americans have consistently maintained comparable levels of mortgage approvals to White applicants since 1990, according to the report. 

Saleh urged policymakers, regulators and lending institutions to look into ways to encourage lending fairness.

“If we want to extend the American dream to historically underrepresented groups, we must start encouraging new approaches to lending fairness,” Saleh said.
Source: https://www.housingwire.com/rss