How can brokers get ahead in a tight market?

How can brokers get ahead in a tight market?
HousingWire recently spoke with Jon Irvine, Chief Production Officer at Change Lending, about how brokers can gain a new competitive advantage in the current tight market.

HousingWire: The current inventory shortage doesn’t seem like it will let up anytime soon. What challenges does this present to brokers?

Jon Irvine: First, refinance volume has already dropped significantly from 2021 to Q1 2022. MBA estimates refinances will drop over 60%, but in my opinion, given the current trajectory, it could drop as much as 80%.

As a result, brokers will be forced to look to the purchase market to fill their volume needs. The combination of the slowing refinance market and the current inventory shortage has made fulfilling volume needs even more challenging. Since there are fewer houses on the market, naturally, there will be fewer purchase transactions as well. With that in mind, everybody is going to be working harder for their piece of a much smaller pie. Overall, it is stressful and hard on business.

HW: What are some ways brokers can gain a new competitive advantage, despite the challenges you mentioned above?

JI: The first thing brokers must focus on is their service and ability to close loans on time. Purchase-money transactions are particularly sensitive because brokers are often working with a referral partner in real estate. The ability to close loans as of the contract date is important for the customer and it serves to strengthen relationships with referral partners too. To stay ahead, brokers must find a lending partner that understands just how beneficial this is.

Another thing that can give brokers a competitive edge is the ability to align themselves with a partner that has a full suite of products that can serve a diverse set of borrowers. Not all borrowers will be able to secure a traditional mortgage. Having the ability to help various types of borrowers can really take a broker’s business to the next level.

HW: How does Change Wholesale specifically aim to provide brokers with an advantage?

JI: We have a saying at here Change Wholesale… “Close More, Close Faster.” How do we help brokers close more loans? By providing brokers with the broadest product base in the industry. Not only is Change Wholesale able to fulfill agency needs with traditional loan products supported by Fannie, Freddie and Ginnie, but we also have a suite of non-QM products too.

Additionally, as a Consumer Development Financial Institution (CDFI), we have unique products, like our Community Mortgage and EZ Prime program, that give brokers access to flexible lending options others cannot. This gives brokers a unique ability to fulfill the needs of more borrowers. Our proprietary Community Mortgage program is a unique opportunity for brokers to expand their product base. Community Mortgage loans allow amounts up to $3.5M, CLTVs up to 85%, and can be used for primary residences as well as second homes. Borrowers can even qualify for a Community Mortgage without employment or income documentation. It is a very unique product in the marketplace that gives brokers a huge competitive advantage, and that is just one of many ways a broker can successfully partner with Change Wholesale. Brokers will not have this same opportunity with other organizations.

HW: Given concerns about subprime loans and defaults, how is Change Wholesale mitigating the risks of loans like the Community Mortgage?

JI: To clarify, Change Wholesale is not a subprime lender. It feels like the non-QM or nonqualified mortgage moniker has become stigmatized by old subprime labels from the 1990s and early 2000s.

In reality, our Community Mortgage product is tailored for prime, eligible customers that have been unfairly cut out of the mortgage market. We keep a close watch on our default rates. Our average FICO scores are well into the 700s and we have great loan characteristics. Over the last two and a half years, The Community Mortgage has proven that non-QM loans can perform well and be great quality.
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The housing industry will soon be up in ARMs

The housing industry will soon be up in ARMs

If there’s a bet to be made on the future of the non-agency lending space, it’s that the adjustable-rate mortgage (ARM) will become far more popular this year as purchase mortgages increasingly dominate a housing market pivoting to an up-rate environment.

That’s the consensus forecast of a panel of non-agency industry experts who spoke at the Mortgage Bankers Association’s (MBA’s) Secondary and Capital Markets Conference & Expo in New York City this week. 

“There was too much 30-year [fixed-rate mortgage paper] out there in the market for a while because it was just so cheap, and it was the right thing for the consumer,” said Matt Tomiak, senior vice president of non-agency originations at Bayview Asset Management. 

Tomiak was one of the four MBA panel members who addressed an audience of loan originators and other industry players gathered earlier this week in a sixth-floor room at the New York Marriott Marquis hotel near Times Square. The topic of the panel discussion: “What’s New in Non-Agency?”

“I think we’ll be seeing a lot more ARMs shortly,” Tomiak added.

Another panel participant, Shelly Griffin, senior vice president of client development at non-QM lender Deephaven Mortgage, added, “When I’m talking with loan officers, I get asked about ARMs a lot. ARMs came up at almost every meeting, so it’s very relevant.”

Maria Luisa De Gaetano Polverosi, associate managing director at ratings agency Moody’s Investor Services, said ARM mortgages are not yet showing up in significant volume in the mortgage-backed securities (MBS) private-label market “because most of the deals that we’ve seen so far this year are from 2021” — when low rates were feeding the refinancing boom. When ARMs do start showing up in securitization deals, however, she said Moody’s is well-equipped to assess the risk of those offerings. 

“One thing I have to say positive about ARMs is that we’re not really concerned about them because we have a lot of data on those, and our models are built to assess that risk,” De Gaetano Polverosi added. “So, out of the many variations and new products that are going to come out of this [higher-rate] world … they [ARMs] are one that we’re not really concerned about in terms of the market’s ability to forecast the risk on this product. It’s a very well-trodden path.”

Beyond a movement toward ARMs in the nonagency space, it’s also expected to be a solid year for non-QM lending in general as the housing industry overall seeks to expand its reach in the purchase market, according to panel members.

“We’re excited to talk with you about what I think is the most pertinent topic of this conference, and that’s what the next six to 12 months are going to look like in mortgages in non-agency as we shift over to more of a purchase market,”’ said John Toohig, managing director of whole loan trading at Raymond James, and the moderator for the MBA panel. “Non-QM isn’t the 2006 product that it once was” — during the era of subprime mortgages.

Toohig stressed that the non-QM space includes a large swath of mortgage products that require more time and expertise to underwrite, compared with a standard agency loan — particularly the low-hanging fruit of refinance loans that, until recently, drove the housing market. He described today’s non-QM market as a “very large bucket.” 

Toohig added that the non-QM space ranges from mortgages originated based on bank-statements or asset depletion analysis to debt-service coverage ratios [DSCRs] and more. “There’s a lot to unpack,” he said, in terms of the guidance for the products and the underwriting involved. 

“We’ve seen it [non-QM] grow and evolve over time,” added Griffin of Deephaven, which has been lending in the non-QM space since 2012. “There’s extended prime, which is just outside the prime box; nonprime for borrowers that maybe … have more credit issues in the past; and debt-service coverage ratio.

“All of those products have features, maybe bank statement, asset utilization — you name it. There’s a lot of different reasons why someone falls outside the agency loans. … What we really focus on is meeting our customers where they are at.”

Tomiak quipped that loan officers are smart, and if given the choice between doing six streamline refinance mortgages or spending three days on one DCSR mortgage, they will, of course, focus on the higher payoff achieved with the refinance loans. As the market pivots away from the streamline refinances because of the dulling effect of higher mortgage rates, however, and moves toward purchase-mortgage products, the supply of non-QM loan products will naturally begin to expand to meet the increased borrower demand, he explained.

“We’re moving toward them [non-QM products] more aggressively at Bayview,” Tomiak added. “…Even with higher rates, moving into a mortgage loan is still a better choice than renting, and [many borrowers] have not been able to qualify, mainly because the industry has not been able to serve them,” due to the huge demand for other loan products that are popular in a low-rate climate — like streamline refinance mortgages.

“But I think it’s going to be a very good year for expanded [non-QM] products,” Tomiak said. “… It’s going to take time, and it’s going to take learning, but I think the right firms and the right loan officers are going to have a very nice year, with consumers getting houses.”

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CHLA and 41 IMBs urge the FHA to cut MI premiums

CHLA and 41 IMBs urge the FHA to cut MI premiums
The Community Home Lenders Association (CHLA) sent a letter, signed by 41 independent mortgage banks, to the Federal Housing Administration (FHA) on Wednesday urging the administration to cut mortgage insurance premiums.

The letter, which includes signatures from South Carolina-based Movement Mortgage, Cherry Creek Mortgage, Texas-based Thrive Mortgage and Draper & Kramer Mortgage, advised the FHA to get rid of its life of loan policy and reduce the annual premiums by 30 basis points to .55%.  

A spokesperson for the Department of Housing and Urban Development (HUD) said in a statement that the administration is continuing to monitor seriously delinquent loans in its portfolio as it weighs premium pricing, and that to date, they have been “pleased.”

“We are seeing positive trends that indicate the effectiveness of the options we have implemented,” the HUD spokesperson said. “We have taken the time in the first part of the current calendar year to evaluate outcomes for delinquent borrowers as a component of our review of current mortgage insurance premium pricing. We will continue to be judicious about if, when, and how we consider changes to FHA’s mortgage insurance premiums.”

The CHLA letter explained that the FHA should end its life of loan premium policy because it overcharges FHA borrowers, resulting in many borrowers refinancing out of the FHA program.

According to the trade group, since the life of loan policy went into effect in 2013, FHA’s retention of refinanced loans has plummeted. FHA’s retention rate of refinanced loans was over 50% when life of loan began and is now below 14%, the letter said.

The letter also said that FHA’s net worth is at record levels of over 8%, more than four times its statutory requirement and that FHA’s mission to rebuild its fund has “long been accomplished.”

Only by cutting premiums will the administration be able to carry out its objectives of improving racial equity and increasing homeownership, the trade group said.

The last premium reduction took place in 2015, when the Obama administration, buoyed by an improving economy, slashed the premiums from 1.35% to .85%.

The CHLA said that the premium reduction seven years ago was a “huge success” and that home purchases grew by 27% the year after premiums were cut.

But not everyone is on board.

The U.S. Mortgage Insurers, a trade group that represents mortgage insurance companies, published a statement on their website Wednesday calling for the FHA to do the opposite.

“The FHA should not reduce its mortgage insurance premiums at this time,” the USMI wrote in bold letters on its website.

The USMI said that lowering premiums will have negative consequences of further increasing demand with minimal housing supply. The trade group also said that there is too much economic uncertainty.

The conversation about premiums comes to a head following Julia Gordon’s confirmation to run the FHA last week. Industry stakeholders and fair housing advocates have predicted that after an FHA commissioner is confirmed, the HUD will move to cut premiums.

Gordon has supported a premium reduction in the past.

In 2015, Gordon, at the time a senior director at the liberal think tank Center for American Progress, testified before the Subcommittee on Housing and Insurance where she said that the cut in mortgage premiums implemented by the Obama administration would “help [ensure] that FHA continues to be available to the underserved borrowers that most need it.”

She said during her testimony that this “recalibration” would help to spur a steady supply of first-time homebuyers who could then become move-up homebuyers.
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Layoffs, again: Fairway is the latest lender to trim workforce

Layoffs, again: Fairway is the latest lender to trim workforce

Madison-based Fairway Independent Mortgage Corp. appears to be the latest mortgage lender to cut jobs due to the challenging origination market, showing that surging mortgage rates and home prices are now affecting companies with a high share of purchase loans in their portfolios. 

Fairway staff across the country received phone calls last week from their supervisors announcing they were part of a round of layoffs, a dozen former employees told HousingWire over the last few days. However, no WARN Notices were found in the states where these employees work. 

A spokesperson for Fairway would not provide any comment, including any comment on whether there were layoffs or the number of employees involved. According to its website, Fairway employs more than 9,000 team members, including more than 2,800 producers and over 750 branch and satellite locations in the U.S. 

Six months ago, Fairway was in a more comfortable position than its rivals: purchase loans accounted for almost 62% of the company’s total origination in 2021, the highest share among the top 12 lenders in the U.S, according to Inside Mortgage Finance. 

At that point, lenders focused on originating refinance loans, such as Better.com and Interfirst, announced workforce reductions as interest rates started to increase – higher rates usually reduce borrowers’ incentives to refi their mortgage.

But this year, Fairway started to feel the consequences of mortgage rates at 5.25% and surging house prices. According to the Mortgage Bankers Association (MBA), these two factors are weighing on purchase loans as some buyers put the American dream of homeownership on standby. 

Consequently, Fairway’s origination volume reached $12.6 billion from January to March, down 24% quarter over quarter and 33.5% year over- year. Still, according to the IMF data, the company was the 12th-largest mortgage lender in the country in the first quarter of 2022. 

Workforce reduction 

Fairway’s workforce reduction included the wholesale and retail channels, from analyst to senior positions such as underwriting, training, and information technology. The layoffs included professionals with more than two years working for the company as well as some that started there less than four months ago.  

The lender offered a two-week severance payment for some employees but no career transition support. Most of the employees reported the company locked up their computers on the same day they received the phone call.  

“I was given a call in the morning by my supervisor who said: ‘I’m sorry, but you are included in a list of layoffs. And it has nothing to do with your performance. It is strictly a financial decision’,” said a former employee who prefers not to be identified.

Another former employee who prefers anonymity added: “We received about three hours’ notice before our computers were locked up.” 

The former employees created a group on LinkedIn to share their experiences and are organizing Zoom meetings every morning to support each other during the transition in their careers. HousingWire attended one meeting on Wednesday, when 10 professionals participated. 

“Our goal is to help people increase their network of connections, review their resumes, practice their interview techniques, and give emotional support,” said a former employee who joined the group. 

Founded in 1996 by Steve Jacobson, Fairway has its corporate headquarters in Madison and a large office in the Dallas area – the latest is where the technology team, strongly affected by the workforce reduction, is located. 

However, over the last couple of years, the company hired people from anywhere in the country for remote work, according to the former employees. Some of the laid-off professionals had never been to a physical corporate office, they told HousingWire. They are from states such as Arizona, California and Florida. 

Fairway received attention in March 2021 when United Wholesale Mortgage (UWM), the top wholesale lender in the nation, announced that it would no longer partner with brokers working with Rocket Mortgage or Fairway, which has divided the broker community into two camps.

In a highly competitive market, lender­s are cutting costs, mainly via layoffs. California-based Owning Corp., a direct-to-consumer lender acquired by Guaranteed Rate in February 2021, cut 108 jobs in three rounds from February to April. And it intends to add another 81 layoffs to the list. Other lenders also have reduced staff, such as Interfirst, Mr. Cooper, Union Home Mortgage, Flagstar, Wells Fargo and Better. Rocket has not laid off workers but has offered a voluntary buyout to some of its staff.

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WFG Quarterly Economic Outlook webinar on May 25

WFG Quarterly Economic Outlook webinar on May 25
The second quarterly installment of WFG Insights: Quarterly Economic Outlook, a webinar featuring Williston Financial Group founder and Executive Chairman Patrick Stone and Economist and Forbes contributor Dr. Bill Conerly will take place on May 25.
Source: thetitlereport.com

Fidelity names chief innovation officer

Fidelity names chief innovation officer
Fidelity National Financial appointed the company’s chief marketing officer as executive vice president, chief innovation officer. Read on for more.
Source: thetitlereport.com

NS3 Preview: NBA Hall-of-Famer plans ‘no-holds-barred’ keynote

NS3 Preview: NBA Hall-of-Famer plans ‘no-holds-barred’ keynote
NS3 attendees are in for a real treat when NBA Hall-of-Famer and successful businessman Rick Barry takes center stage. The keynote speaker plans to conduct “no-holds-barred” Q&A session on the summit’s first day. Read on for more.
Source: thetitlereport.com

First American title revenue up 8 percent

First American title revenue up 8 percent
First American Financial Corp. reported total revenue of $2 billion in the first quarter, unchanged from a year ago, according to the company’s earnings report. In the title segment, total revenues in the first quarter were $2 billion, up 8 percent year-over-year. Read on for more.
Source: thetitlereport.com

Lighthouse Title’s new website includes AI assistant

Lighthouse Title’s new website includes AI assistant
Lighthouse Title Group (LTG) recently rolled out updates to its website. LTG partnered with Bowe Digital to improve the consumer digital experience. The company also worked with Alanna.ai to implement “Louie the Lightkeeper,” a virtual closing assistant. Read on for more.
Source: thetitlereport.com

Ocwen names new CFO to navigate challenging market

Ocwen names new CFO to navigate challenging market
Nonbank mortgage lender and servicer Ocwen Financial Corp. announced on Wednesday that Sean O’Neil is joining the company as executive vice president and chief financial officer. O’Neil will start at Ocwen on June 13 to lead the firm’s global finance organization amid a challenging mortgage origination market.

Before landing at Ocwen, the executive served as the CFO for Bayview Asset Management for six years. Prior to that, he held positions at Wells Fargo, Eastern Community Bank and Wachovia’s Wealth Management Group.

According to Glen Messina, president and CEO of Ocwen, O’Neil has a track record of driving profitable growth, optimizing liquidity and strategic planning. “That will be instrumental as we continue to navigate a challenging mortgage originations market.”

O’Neil is replacing June Campbell, who leaves the company to pursue opportunities outside of Ocwen. She arrived in March 2019, in the early stages of the Ocwen-PHH merger and integration.

In the first quarter, Ocwen reported a $58 million profit, a significant improvement over the $2 million loss in the fourth quarter of 2021. And year over year it increased its profits by a factor of six compared to the $8.5 million in net income reported in the first quarter of 2021. The fair value gains on the company mortgage servicing rights (MSRs) of $56 million more than offset a pre-tax loss in forward originations.

In light of decreasing forward origination, Ocwen is also boosting its reverse originations, with its subsidiary PHH Mortgage Corp. completing the acquisition of Reverse Mortgage Solutions in October.

Earlier this month, a U.S. Court of Appeals ruled that most complaints in the Consumer Financial Protection Bureau’s attempt to revive a mortgage servicing misconduct lawsuit against Ocwen are barred because of a 2014 consent order.
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